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Trust and European-Russian Energy Trade: The Case of Natural Gas Partnerships

Mark Ozawa

Much academic attention has recently focused on the causes of conflict plaguing energy trade between European and Russian partners. The question usually posed is whether Russia aims to use its oil and gas resources as a tool to exert political influence or maximise profits. Does politics precede economics or vice versa? There is, however, a critical determinant missing from the discussion, one that, along with political and economic factors, influences outcomes, trust. Drawing on selected cases of European-Russian natural gas partnerships, the proposed paper examines the role of trust in energy trade and informal network barriers to market liberalisation in Central and Eastern Europe. The findings are the following. First, trust mitigated suspicion and encouraged cooperation between the commercial and political actors. Second, when trust was present, conflicts of interest were more easily overcome while in its absence, a spiral of litigation and attempts at political coercion ensued. Third, the development of trust was partially determined by pre-existing political and economic conditions. At the same time, actors had the option to make decisions that either contributed to building trust. Finally, the paper posits two implications. The first concerns a pattern from the cases that may apply to other natural gas partnerships. Once trust was established, economic and political relations appeared to become stable. Actors would prefer to cooperate rather than defect from the relationship despite economic and political pressure to do so. The second relates to Central and East European energy security and the prospects for a common E.U. energy policy. Because the current approach of the E.U. Energy Commission targets market regulation and company structures, it is likely to face obstacles from legacy trade networks. This study points to the need for a more sophisticated approach that incorporates the individual energy trade circumstances of each state.

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