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 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.

Article | Notes de l'Ifri | January 23, 2020

Sanctions and the End of Trans-Atlanticism: Iran, Russia, and the Unintended Division of the West

Rawi Abdelal and Aurélie Bros

Sanctions have become the dominant tool of statecraft in the United States and other Western states, especially the European Union, since the end of the Cold War. But the systematic use of this instrument may produce unintended and somewhat paradoxical geopolitical consequences. The sanctions imposed on the Islamic Republic of Iran and the Russian Federation in the field of energy are particularly illustrative of this phenomenon.
Firstly, Iran and Russia demonstrated their resilience and a real ability to adapt, thus transforming the perspective to European companies. One of Tehran's responses to sanctions was to establish the so-called "resistance economy" in order to make Iran resistant to all kinds of economic shocks and reduce the reliance on a single commodity. For its part, Russia has adapted and offered new perspective to European and Asian businesses by creating a precedent with the case of Total. Some European companies are not ready to operate according to these rules—at least in the gas sector, as oil is too risky relative to U.S. policy and law.
Secondly, differences in the approach of the United States and Europe over the type and intensity of economic statecraft against both Iran and Russia have increasingly undermined trans-Atlanticism. The so-called secondary sanctions imposed on both Iran and Russia have become the primary vehicle for signaling and even implementing a decoupling of U.S. and European political objectives. On the one hand, the costs of complying with U.S. secondary sanctions is perceived as too high for European companies. On the other, Europeans are not ready to bear the consequences of internal U.S. divisions.
All of this might even have reinvigorated the European project, by triggering a debate on the need for European countries to protect their economic sovereignty. The European Green Deal might become the emerging unifying theme that might relaunch the European project and make Europe a fully-fledged geopolitical actor.

Keywords: geopolitics; economic sanctions; International Relations; United States; Russia; Iran; Europe;

Citation:

Abdelal, Rawi, and Aurélie Bros. "Sanctions and the End of Trans-Atlanticism: Iran, Russia, and the Unintended Division of the West." Notes de l'Ifri (January 23, 2020). View Details

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The United States and Russia: Gas Rivals in Europe?

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