Faber van der Meulen believes analysis of the gas market is often incomplete or misleading, because the market "cannot be fully understood by the neoclassical economic model".
In his view, better answers come from New Institutional Economics (NIE), which considers the role of institutions and sociological factors in the market and includes "common property, locational specificity, dedicated assets and the public good" as market-influencing factors.
Faber van der Meulen remarks that the EU and Russia have very different institutions and histories which influence their gas policies, stating: "The EU suffers from an inherent embedded liberal bias." This leads to a situation where "the EU sees market liberalisation as automatically contributing to its energy policy objectives of sustainability, competitiveness and security of supply".
The problem with this bias, he believes, is that the Commission has "limited competences" when it comes to security of supply, "arguably the most important energy objective".
The Union's liberal bias drives its attempts to "liberalise the Russian market by exporting aspects of the EU internal energy market" and to block "Russian entry into the EU market," pitting the two sides against each other.
In contrast to the EU, the author describes Russia as "a society based on social networks and suffering from a lack of institutional trust," and in which trust or certainty originates from "a single player […] the presidential administration".
The issues of "asset specificity and opportunism" in Russia lead the market to be "dominated by uncertainty," the author explains. This dissuades all parties from investing and causes "investment delays on the market, potentially damaging both security of supply and demand".
In strategic terms, Russia's main objective is "guaranteeing security of demand, by controlling its natural resources and its export market and entering the lucrative EU market," van der Meulen explains. Meanwhile, the EU sees this as "a threat to its energy policy objectives".
As member states are responsible for their own energy security, some take a "more pragmatic approach" and "diverge from the Commission policy" when negotiating with Russia, noticing "synergies between EU security of supply and Russian security of demand," Faber van der Meulen concludes.
Market liberalisation can only be "a long-term goal" in such a scenario, he adds.
