Andrei V. Belyi on the complex interrelation of states and markets in the hydrocarbon sector

Dr Andrei V. Belyi

On the 13th of February 2015, CEU’s Energy Policy Research Group welcomed Dr Andrei V. Belyi, Senior Researcher at the Centre for EU Russia Studies of the University of Tartu in Estonia, to talk on ‘Market Power on the Rise or Return of the State? International Political Economy of Hydrocarbon Sectors’. The public lecture was jointly organized with the Political Economy Research Group (PERG) and the Department of Public Policy.

Belyi, who co-edited the recently published book States and Markets in Hydrocarbon Sectors (2015, Palgrave Macmillan), highlighted their complex interplay. Drawing upon insights from International Political Economy, in his analysis he treats both as institutions that impact on one another through the diffusion of norms and processes.

The first part of the lecture was dedicated to global trends of state-market interrelations in the oil and gas sector. Belyi showed how the dominance of states in the oil sector was gradually broken in the second half of the previous century. Major change occurred from the 1980s as the demand side began to play a more important role. Rigid long-term supply contracts were substituted by short-term transaction initiated by an armada of traders that became the new dominant actors on the oil market. Similar historical trends were presented from the gas sector.  Here, the transformation was facilitated through the gradual move towards hubs that increased the liquidity of the markets.

According to Belyi, the developments in the oil and gas sectors were coupled with a significant rise of the paper markets. Traded volumes of energy commodities gradually exceeded the amounts produced. The transnationalization of contracts diffused distinct norms that turned into globally accepted standards.

These trends go hand in hand with a changing role of the nation state, on which Belyi elaborated in the seconed part of the lecture. He argued that on global average, states lost some leverage vis-à-vis markets. Nevertheless they remain important in shaping the hydrocarbon sectors through state ownership of companies, regulatory regimes and incentivization. Their impact stretches widely: while some states adopt transnational norms through their national companies, others resist this norm convergence and even go as far as to use energy as a political tool. Accordingly, Belyi could draw upon a wide spectrum of regional variation, referring amongst others to South America, the US, Russia and Ukraine.

Philipp Thaler