Power in the Pipeline Quentin Gallea12Massimo Morelli3456 Dominic Rohner126

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Power in the Pipeline*

Quentin Gallea,1,2Massimo Morelli3,4,5,6,

Dominic Rohner1,2,6

1Department of Economics, University of Lausanne.

2Enterprise for Society (E4S) Center.

3Department of Economics, Bocconi University.

4IGIER.

5Bafﬁ CAREFIN.

6CEPR.

October 10, 2022

Abstract

This paper provides the ﬁrst comprehensive empirical analysis of the role of natural

gas for the domestic and international distribution of power. The crucial role of pipelines

for the trade of natural gas determines a set of network effects that are absent for other

natural resources such as oil and minerals. Gas rents are not limited to producers but also

accrue to key players occupying central nodes in the gas network. Drawing on our new

gas pipeline data, this paper shows that gas betweenness-centrality of a country increases

substantially the ruler’s grip on power as measured by leader turnover. A main mechanism

at work is the reluctance of connected gas trade partners to impose sanctions, meaning that

bad behavior of gas-central leaders is tolerated for longer before being sanctioned. Overall,

this reinforces the notion that fossil fuels are not just poison for the environment but also

for political pluralism and healthy regime turnover.

Keywords: Natural gas network, betweenness-centrality, asymmetries, pipelines, regime

durability, sanctions, democracy.

JEL codes: C33, D74, F51, Q34

*We wish to thank Chris Blattman, Ruben Durante, Bj¨

orn Gehrmann, Gabriele Gratton, Bard Harstad, Matthew

O. Jackson, Melika Liporace, Maria Petrova, Marina Petrova, Paolo Pin, Michael Porcellacchia, Fernando Vega

Redondo, Camille Terrier, and seminar participants at Bocconi University, University of Padova, Monash Univer-

sity webinar, Oslo workshop on sanctions, University of Lausanne, the CEPR RPN workshop and the Kiel CEPR

geopolitics and economics workshop for very useful comments. We gratefully acknowledge support from the

European Research Council grants 694583 and 677595. The usual disclaimer applies.

arXiv:2210.03572v1 [econ.GN] 7 Oct 2022

1 Introduction

Gas markets and their political consequences could not be more topical and timely in current

geopolitics and international relations. Yet, the political consequences of the natural gas trade

network have not been adequately studied by political economists. While there exists quite some

empirical evidence on political side effects of oil extraction (see e.g. Cotet and Tsui (2013); Lei

and Michaels (2014); Caselli et al. (2015); Morelli and Rohner (2015)), the political impact

of natural gas abundance and trade is likely to be extremely different. A key characteristic of

natural gas is that it is much cheaper to transport through pipelines than with any alternative

technology. This gives key strategic power to central nodes in the pipeline network, whereas for

oil it is easier to substitute suppliers and intermediaries.1This is well illustrated by the discus-

sion inside the European Union on sanctions against Russia following its invasion of Ukraine

in Spring 2022: While rarely anyone is concerned about the costs for Europe of sanctioning

Russian oil (for which several substitutes exist), boycotting Russian gas is generally considered

much more painful for European economies, given the great difﬁculties to substitute it in the

short-run.

This paper aims to study whether the particular dependence or asymmetry implicit in gas

trade has determined greater survival in ofﬁce of leaders within countries that have been cen-

tral in the network. There are various reasons to think that in countries occupying a central

node in the network of international gas pipelines it is easier for a given regime to cling to

power. First of all, key players on the gas market may be able to escape some types of inter-

national sanctions, and lower international scrutiny may fuel regime survival. Second, being

a key intermediary in the world gas trade is lucrative and may allow politicians to corrupt or

weaken oppositions and hollow out institutions. In this paper we investigate these conjectures

1While oil is primarily transported via tankers, most natural gas is transported through gas pipelines (British

Petroleum (2010), Rodrigue (2016)).

empirically. To the best of our knowledge, our paper contains the ﬁrst statistical analysis of the

impact of arguably exogenous changes in gas centrality on regime survival. We draw on our

novel data set on gas pipeline locations, covering Africa, Asia, Europe and Oceania with 265

different pipelines spread out over 67 countries. As far as we know, our dataset contains every

international natural gas pipeline connection built over those four continents from 1963 (ﬁrst

international connection recorded) to 2018. A crucial feature of this novel dataset is that we

have also collected information on construction years, which other datasets typically lack (see

detailed discussion of data collection below). Controlling for batteries of ﬁxed effects and for

local degree centrality, we exploit far away changes to the overall network structure that lead

to exogenous changes in the (betweenness) centrality of a given node. For example, with the

construction of the European southern corridor (pipeline network from Azerbaijan to Italy), the

centrality of Belarus and Ukraine has changed.

Our main result is that an increase in gas centrality of a country consolidates internal power,

manifested by a higher leader survival probability. Our overall statistical ﬁndings for a panel

data set with a large number of countries are well illustrated by the example of gas-central Be-

larus, where President Lukashenko has been in ofﬁce since 1994, making him the longest-sitting

European president. In our econometric analysis we show that this case is not an exception, but

rather symptomatic of a general pattern present for a large number of countries and years.

Importantly, we ﬁnd evidence for a key mechanism behind power consolidation: increases

in gas centrality have led on average to a lower frequency of sanctions against such more central

countries (in particular sanctions to restrict arms trade and to prevent war). This is well illus-

trated for example by the fact that after the Russia-Ukraine crisis in 2014 it took a full-blown

large scale invasion in 2022 by Russian forces to make European countries (who are large

consumers of Russian gas) willing to step up the scale of the sanctions. The comprehensive

statistical analysis demonstrates that this example is the rule and not an exception, and allows

us to assess also the role of other potential mechanisms, which we ﬁnd to not play a crucial role.

In terms of related literature, ﬁrst and foremost the work on various facets of the so-called

”natural resource curse” is relevant (see the survey of Van der Ploeg (2011)). Fossil fuels, and

in particular oil abundance, have been linked to various political ills such as corruption and mis-

management (Caselli and Michaels (2013)), civil conﬂicts (Lei and Michaels (2014); Morelli

and Rohner (2015)), mass killings (Esteban et al. (2015)), military spending and aggressive

behavior in petro-states (Cotet and Tsui (2013); Hendrix (2017)), and militarized interstate

disputes and wars (Acemoglu et al. (2012); Colgan (2013); Koubi et al. (2014); Caselli et al.

(2015)). The nexus between democracy and natural resources is less clear-cut, with various

articles ﬁnding that resource abundance threatens democracy (Ross (2001); Andersen and Ross

(2014)), while some work ﬁnds countervailing results (Haber and Menaldo (2011)).

A second related literature is the economics of networks, where military alliance and enmity

networks have been linked to civil and interstate conﬂicts (Dziubi´

nski et al. (2016); K¨

onig

et al. (2017); Fearon and Hansen (2018); Gallea (2019)). Positions in geographical and trade

networks have been related to conﬂict (Polachek (1980); Martin et al. (2008); Rohner et al.

(2013); Gallea and Rohner (2021); Mueller et al. (2022)) but not to internal and external power

dynamics within and across countries.

The third and most related literature to our paper is the one linking natural resources and

regime durability. As far as the link between oil and regime durability is concerned, an increased

regime longevity for oil producers has been documented for 26 African states (Omgba (2009))

and for a sample of 106 dictators (Crespo Cuaresma et al. (2011)). Also Brausmann and Grieg

(2020) show that large hydrocarbon discoveries lower the loss of power hazard faced by an au-

tocrat. Several studies point out that the relationship is not clear-cut, and depends very much

on the type of natural resource in question: De Mesquita and Smith (2010) ﬁnd contrasting ef-

fects in countries with autocratic versus democratic leaders. Similarly, Andersen and Aslaksen

(2013) ﬁnd that wealth derived from natural resources affects political survival in intermedi-

ate and autocratic, but not in democratic, countries. While oil and non-lootable diamonds are

associated with positive effects on the duration in political ofﬁce, minerals are associated with

negative duration effects. Further, as shown by Nordvik (2019), oil price shocks fuel coups in

onshore-intensive oil countries, while deterring them in offshore-intensive oil countries.2

Our paper contributes to this existing literature in several respects. First, while existing work

overall focuses on oil, we study natural gas which has received much less attention. Second, the

key importance of gas transport through pipelines allows us to study a new type of exogenous

shock – namely sharp changes to betweenness centrality of intermediary countries (arising due

to the addition of far away nodes, when controlling for local degree centrality). Third, the key

salience of international gas trade networks allows for a subtle investigation of mechanisms at

work.

The remainder of the paper is structured as follows. The next Section 2 presents the context,

data and methods. In particular, Subsection 2.1 provides a short overview of the basics of gas

trade and interstate disputes. In Subsection 2.2 we describe the data used, with a special focus

on our novel data set on gas pipelines. Next, Subsection 2.3 outlines the identiﬁcation strategy

and presents the speciﬁcation that we run. Section 3 is dedicated to displaying our main results.

Finally, Section 4 concludes. Supplementary material is provided in several Appendices.

2 Method

2.1 Gas trade context

In order to motivate the empirical approach followed, we shall start by brieﬂy discussing the

particularities of the gas trade and transport. While the trade of oil mostly takes place using

tanker ships crossing the oceans, gas trade in contrast relies predominantly on a network of gas

2For a recent survey covering outside interventions and sanctions, see Rohner (2022).

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