Pipeline Power: A Case Study of Strategic Network Investments

摘要

We analyze the impact of three controversial pipeline projects on thernpower structure in the Eurasian network for natural gas. Two pipelines, “NordrnStream” and “South Stream,” allow Russian gas to bypass transit countries,rnUkraine and Belarus. The third project, “Nabucco,” aims at diversifying Europe’srngas imports by accessing producers in Middle East and Central Asia. If networkrnpower is measured with the Shapley Value we obtain a clear ranking of the projectsrnwhich corresponds to the observed investment patterns. Nord Stream’s strategicrnvalue is huge, easily justifying the high investment cost for Germany andrnRussia. The additional leverage obtained through South Stream is much smallerrnand Nabucco is not viable. For the nucleolus in contrast, none of the pipelinesrnhas any strategic relevance at all, which contradicts the empirical evidence onrninvestment.