ABSTRACT
This chapter suggests a way to quantify mutual gas dependency between the European Union (EU) and Russia. As South Stream would bring more of Russian gas to Europe, while Nabucco is expected to lower the EU's Russian gas exposure, one might think that SDI would increase for South Stream and decrease for Nabucco. The EU and Russia's objectives in this relationship do not necessarily coincide each party can be driven both by economic and by geopolitical considerations. The Balance of Power Principle: a dependency index should reflect the allocation of bargaining power between Russia and the EU member states served by a particular gas route. The chapter presents the Supply Dependency Index (SDI) which evaluates the EU's dependency on Russian gas exports, and the Demand Dependency Index (DDI) which assesses Russia's gas dependency on the EU. However, our dependency indexes do not account for the investment costs which, in the case of South Stream, are largely borne by Russia.
