The United States and Russia: Gas Rivals in Europe?

Rawi  Abdelal; Galit  Goldstein; Paul  Apostolicas

Case | HBS Case Collection | August 2019

The United States and Russia: Gas Rivals in Europe?

by Rawi Abdelal, Galit Goldstein and Paul Apostolicas

Abstract

Though the shale revolution transformed the U.S. into the largest producer of petroleum products, it was unclear how much success American exporters would find selling liquefied natural gas on the European energy market. Gazprom, the state-controlled Russian energy company, provided Europe with the majority of its natural gas. Many voices discussed European energy needs in terms of security or politics, but buyers and sellers of natural gas in the private sector approached the question from a somewhat different angle. This case, built around unique calculations that model the prices different European customers pay for gas, analyzes the strategic considerations and pricing decisions of Russian and American natural gas suppliers, and pushes students to consider the broader political context of energy in Europe.

Keywords: Gas Pipelines; Natural Gas; LNG; Strategic Analysis; strategic behavior; energy markets; entrepreneurial financing; Entrepreneurial risk; entrepreneurial ventures; entrepreneurial selling; Energy; Energy Sources; Entrepreneurship; Market Entry and Exit; Marketing Strategy; Price; Energy Industry; Russia; United States; Europe; European Union;

Language: English

Format: Print

20 pages

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Citation:

Abdelal, Rawi, Galit Goldstein, and Paul Apostolicas. "The United States and Russia: Gas Rivals in Europe?" Harvard Business School Case 720-006, August 2019.

The prevalence of online platforms opens new doors to traditional businesses for customer reach and revenue growth. This research investigates platform choice in a setting where prices are determined by negotiations between platforms and businesses. We compile a unique and comprehensive dataset from the U.S. daily deal market, where merchants offer deals to generate revenues and attract new customers. We specify and estimate a two-stage supply-side model in which platforms and merchants bargain on the wholesale price of deals. Based on Nash bargaining solutions, our model generates insights into how bargaining and competition jointly determine the price and firm profits. Our results show that there is systematic variation in bargaining power between platforms and merchants with different characteristics. By working with a bigger platform, merchants enjoy a larger customer base, but they are subject to lower margins due to less bargaining power during negotiations. Our counterfactual results quantify the value of platforms for merchants and show that merchants with lower bargaining power benefit more by working with a smaller platform. Regarding the impact of price negotiations on platform competition, we estimate that roughly 11% of the deals on a smaller platform are attributable to the platform’s lower level of revenue sharing.

Working Paper | HBS Working Paper Series | 2020

Of Learning and Forgetting: Centrism, Populism, and the Legitimacy Crisis of Globalization

Rawi Abdelal

Every order is a bargain with disappointments and trade-offs. Thus is every order an unstable equilibrium. The first era of globalization, circa 1870–1914, created both international prosperity and domestic instability. That instability was fully realized during the interwar years, which were characterized by financial chaos, virulent populist movements, and war. European and American political leaders learned hard lessons from those decades: that the international order must tolerate a diversity of national capitalisms; and that capitalisms within nations must be tamed in order to be made compatible with democracy. A generation later, both scholars and policy makers seemed to have forgotten how important the post-war bargains were for maintaining economic and social stability. Instead, preoccupied by the disappointments of the 1970s, a new pro-market, pro-capital consensus emerged between the center-Left and center-Right. A second post-war international order emerged as a result: a new era of globalization made possible by this “neoliberal” political consensus. The new order was more trans-Atlantic than American, for European political transformations made it possible. This era of globalization created both prosperity and instability, just as the first era had done. Instability took the form again of virulent populism, driven by economic inequality, financial volatility, and a crisis of dignity among those who felt left behind by it. Although we are learning that neither national societies nor the international system can manage the trade-offs of globalization and neoliberalism well enough to avoid a backlash, in fact those lessons were learned once before. The cycle continues: learning, forgetting, and re-learning why these equilibria are unstable.

Keywords: centrism; populism; Globalization; History; Balance and Stability; Economic Systems; Government and Politics; Learning;

Citation:

Abdelal, Rawi. "Of Learning and Forgetting: Centrism, Populism, and the Legitimacy Crisis of Globalization." Harvard Business School Working Paper, No. 21-008, July 2020. View Details

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The collapse of central authority in the Soviet Union in 1991 ushered in a period of revolutionary transformations for the states that emerged in its wake. The leaders of Russia, the USSR's successor, struggled to reestablish central authority while also seeking to avoid further disintegration, establish a democratic polity, and institute a market economy across the next several years. Russia would navigate further economic crisis and a swiftly evolving geopolitical order as it returned to the world stage. The case examines the different governance approaches adopted by Presidents Boris Yeltsin, Dmitry Medvedev and Vladimir Putin, and concludes with a discussion of Russia’s strategic challenges and opportunities in 2020. The case focuses on problems of state authority; fiscal capacity; institutionalization of political parties; relations between the federal center and provincial governments; relations between the state and big business; economic policy; international relations; and models of economic development.

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The United States and Russia: Gas Rivals in Europe?

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