Can the US and Europe contain Russian power in the European energy market? A game theoretic approach

The Russian history of politicization of natural gas supplies led Europe to seek alternatives. US LNG is considered to be a viable alternative for Europe, which positioned the US as a strong competitor against Russia. In a game theoretic approach, we model this strategic decision-making process in simultaneous-move and sequential games. Our findings indicate a mixed strategy equilibrium: Europe cannot commit to diversify in the face of Russian advantages, and Russia cannot fully resist the temptation to politicize its supplies to Europe. The US might attempt to intervene in the European commitment problem through implementing sanctions on Russian gas sales. We find that in any case episodic Russian politicization remains likely in equilibrium. •Implications of US LNG exports on European natural gas markets are discussed.•Three main scenarios are analyzed according to relative prices of Russian gas.•Commitment problem leads partially politicizing and partially diversifying.•Findings indicate difficulties of fully containing Russian politicization.