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Baltic Sea Pipeline: The Profits Will Be Distributed Differently


  • Franz Hubert
  • Irina Suleymanova


In late 2005, the German energy companies E.ON and Wintershall and Russian Gazprom reached an agreement to build a new huge pipeline Nord Stream through the Baltic Sea. This pipeline will provide Russia for the first time ever with the direct access to its Western European customers. This pipeline will contribute to the security of the Western Europe's energy supply through creating an alternative supply opportunity for the case when conflicts with the current transit states lead to disruptions in supply. The realization of the project will also shift the bargaining power from the transit states to the benefit of both Russia and the Western European natural gas importers. Particularly, White Russia as well as the Ukraine will have to accept lower transit fees in the future and have fewer means left to enforce special conditions for their own natural gas imports. The decision to construct the pipeline can be viewed as a consequence of institutional and political weaknesses in the transit states.

Suggested Citation

  • Franz Hubert & Irina Suleymanova, 2009. "Baltic Sea Pipeline: The Profits Will Be Distributed Differently," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 5(12), pages 81-86.
  • Handle: RePEc:diw:diwwrp:wr5-12

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    Multilateral bargaining; Hold-up; Irreversible investment; Collusion;

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games


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