Central Asian Gas in Eurasian Power Game

Onur Cobanli

2014

Abstract

Following the dissolution of the Soviet Union, various gas pipeline projects have been proposed to diversify transit routes and export markets of the landlocked Central Asian states. To evaluate the pipeline project's impact on the players' bargaining power, I apply the cooperate game theory to a quantitative model of the Eurasian gas trade and quantify the bargaining power structure via the Shapley value. Due to ample production capacities in Central Asia, I observe little strategic interaction between the West and China. Thus, demand competition with China is not necessarily a disadvantage for the West, and the Turkmenistan–China pipeline does not affect the impact of the westbound projects aiming Europe and Turkey. For Turkmenistan, i.e., the main supplier in the region, a link via the Caspian Sea to Turkey is the most beneficial westbound option. Although the projects carrying gas from Azerbaijan and Turkmenistan to Europe enjoy the European Commission's political support, they yield marginal benefits to the European consumers. Thanks to its transit position, Turkey collects a large share of the benefits in the East–West gas trade.

download paper | Material