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Analysis of Establishing a Coalition between Iran and Russia and Its Effect on Iran’s Bargaining Power in Europe’s Natural Gas Market: A Network Game Approach

Author

Listed:
  • Fayazi, Alireza

    (Ph.D. Candidate of Economics, Semnan University)

  • Abdoli, Ghahreman

    (Associate professor of Economics, Tehran University)

  • Abounoori, Esmaiel

    (Professor of Economics, Semnan University)

Abstract

According to the BP statistics, The Middle East with almost 40 percent of natural gas reserves is the richest region all over the world and Iran with more than 18 percent is the richest country. It means that Iran can become a great supplier in international natural gas markets. Transferring natural gas through the pipeline or transporting it in the liquefied form are the main options for natural gas trades in international markets. The geographical location of Iran in the Middle East makes it possible for Iran to export natural gas to Europe through the pipeline. In this trade two main issues should be considered. The pipeline should pass through Turkey and Russia as the main supplier has great bargaining power in the market. Trades in the natural gas market are restricted by the pipeline structure. So these markets can be considered a network and pipelines as the links of the network. Jackson (2005) introduced the link-based flexible networks method that can be used for the analysis of cooperative network games. In this paper, the effect of a coalition between Russia and Iran on the relative bargaining power of Iran, Russia, and Turkey have been studied. According to the results, Turkey, as the only available path to Europe, has considerable bargaining power and the coalition between Iran and Russia will have no effect on it. As Iran has no other choice to export natural gas to Europe through the pipeline, the coalition will have no effect on Iran’s bargaining power.

Suggested Citation

  • Fayazi, Alireza & Abdoli, Ghahreman & Abounoori, Esmaiel, 2019. "Analysis of Establishing a Coalition between Iran and Russia and Its Effect on Iran’s Bargaining Power in Europe’s Natural Gas Market: A Network Game Approach," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 6(3), pages 103-134, October.
    • Handle: RePEc:ris:qjatoe:0160
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    More about this item

    Keywords

    Natural gas; Iran; Russia; Turkey; Europe; Network game;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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