Geo-economics and geopolitics: the notion of dependence

29 July 2015

Vladimir Gligorov illustrates the difference between economic and political geography, between geo-economics and geopolitics on the examples of the Turkish and now defunct South Stream.

South Stream

South Stream was supposed to be owned by firms and states, with the dominant role of Gazprom, the Russian state company. The owners or investors were to control the pipeline, even in terms of security in some countries, and to be the main distributors. So, Gazprom, which means the Russian state, was to control the market in the end by the fact that it controlled the territory, the pipeline that is. That would create dependency by the states through which the pipeline was to run not only in terms of the prices, but also in terms of security because the costs for the new entrants would tend to be prohibitively high. In essence, South Steam would have created a natural monopoly that would keep in check potential competition and by its transnational character endow the Russian government with political power over the countries through which the pipeline was to run.

So, that is geopolitics: the use of direct or indirect control of territory to gain power over other countries and set up the relationship of dependency. Put differently, markets are controlled because territory is controlled and the relationship of economic and political dependence is created between, in this case, Russia and the countries along the route of the South Stream.

Turkish Stream

Compare that to the Turkish Stream. From the Turkish border with Greece, the pipeline is to be owned by investors that do not include Gazprom. And distribution will be opened to competition. So, with the Turkish Stream, unlike with the previous South Stream, Gazprom and its owner, the Russian state, is looking for the best way, the geographically most convenient route, in terms e.g. of costs of transportation, including tariff and nontariff and nontrade barriers, to access the European market. In that, the possible influence on the national and EU regulators is slim.

It will be slimmer yet because no natural monopoly can be created even after the pipeline is actually laid down. The reason is that new entrants are not deterred due to the fact that those who are going to use the Turkish Stream will have to compete with alternative suppliers of the relevant market – as there is no control of the territory, there will be no control of the market.

So, that is geo-economics: the influence of the access to markets on the use of territory.

Markets and Territories

This distinction is important because if it is not made wrong model will be used to interpret e.g. Gazprom’s or Russian actions in these two cases. Turkish Stream does not lend itself to significant geopolitical aims. It is not, to put it differently, an instrument of geopolitics. So, the analogy with the South Stream is misleading, which could have been an instrument of geopolitics. Though Russian foreign policy behaviour has apparently not changed (witness the statements by Lavrov), its aim now is to secure for Gazprom an access to the European markets. It is not to use the monopoly power over the supply of gas, as via the South Stream, to control the market and gain political power.

So, by moving from South Stream to Turkish Stream we have moved from geopolitics to geo-economics: from an attempt to control territory in order to control the market, to an attempt to secure passage through territory to access the market.



Note: Theoretical ancestor of the underlying notion of dependence is the study by A. Hirschman, National Power and the Structure of Foreign Trade, originally published in 1945.