The Geoeconomics of the Russian – EU Gas Trade: Drawing Lessons from the South Stream Pipeline Project

Umut Turksen, Antto Vihma

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Abstract

Energy trade has developed into one of the most contentious and divisive issues between Russia and EU in the postCold
War era. It reflects a broader geoeconomic struggle in which economic means are used to advocate geopolitical
goals. This Working Paper argues that the case of the South Stream Pipeline Project (SSPP) – a grand project abruptly
cancelled by President Putin in December 2014 – epitomizes these broader power politics involved in the energy
relations between the two powers. In 2014 the Russian leadership advanced both traditional geopolitical and
contemporary geoeconomic strategies, pursuing the former by conducting a military campaign in Crimea and Eastern
Ukraine, and utilizing the latter by pushing the construction of South Stream in spite of the EU’s legal and political
objections. The EU was able to harden its line on SSPP. The global energy context, including cheap coal prices,
expansion of renewable energies, more liquefied natural gas and spot trading, cannot fully account for the assertiveness
of the EU Commission and the allegiance of Member States in the SSPP case. The results of the process tracing
conducted in this Working Paper confirm that in the case of the SSPP, Russian traditional geopolitics greatly hindered
its geoeconomic power towards the EU. Furthermore, the Working Paper suggests that the strategic choices of
geoeconomics vs. geopolitics may be more generally incompatible, even mutually exclusive. Russian geoeconomic
activity has long been successful as a centrifugal, dividing power within the EU. The geopolitical campaign in Ukraine,
in stark contrast, has been a centripetal force, causing increasing EU unity, eventually also seen in the SSPP case. It
seems that claims of geoeconomics being a continuation of war by other means are potentially misleading. The means
of geopolitical power projection and tools of geoeconomic power have notably different effects in the contemporary,
interconnected world
Original languageEnglish
Number of pages26
JournalMIT Centre for Energy and Environmental Policy Research
Publication statusPublished - Nov 2015

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EU
geopolitics
campaign
energy
power politics
natural gas
renewable energy
Ukraine
coal
projection
president
Russia
Military
leadership
economics

Cite this

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title = "The Geoeconomics of the Russian – EU Gas Trade: Drawing Lessons from the South Stream Pipeline Project",
abstract = "Energy trade has developed into one of the most contentious and divisive issues between Russia and EU in the postColdWar era. It reflects a broader geoeconomic struggle in which economic means are used to advocate geopoliticalgoals. This Working Paper argues that the case of the South Stream Pipeline Project (SSPP) – a grand project abruptlycancelled by President Putin in December 2014 – epitomizes these broader power politics involved in the energyrelations between the two powers. In 2014 the Russian leadership advanced both traditional geopolitical andcontemporary geoeconomic strategies, pursuing the former by conducting a military campaign in Crimea and EasternUkraine, and utilizing the latter by pushing the construction of South Stream in spite of the EU’s legal and politicalobjections. The EU was able to harden its line on SSPP. The global energy context, including cheap coal prices,expansion of renewable energies, more liquefied natural gas and spot trading, cannot fully account for the assertivenessof the EU Commission and the allegiance of Member States in the SSPP case. The results of the process tracingconducted in this Working Paper confirm that in the case of the SSPP, Russian traditional geopolitics greatly hinderedits geoeconomic power towards the EU. Furthermore, the Working Paper suggests that the strategic choices ofgeoeconomics vs. geopolitics may be more generally incompatible, even mutually exclusive. Russian geoeconomicactivity has long been successful as a centrifugal, dividing power within the EU. The geopolitical campaign in Ukraine,in stark contrast, has been a centripetal force, causing increasing EU unity, eventually also seen in the SSPP case. Itseems that claims of geoeconomics being a continuation of war by other means are potentially misleading. The meansof geopolitical power projection and tools of geoeconomic power have notably different effects in the contemporary,interconnected world",
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