Hold-Up Problems in International Gas Trade: A Case Study

The infrastructure required for international natural gas trade is considerable, which often leads to hold-up problems and supply disruptions. This study discusses disruptions of gas supply from Algeria, Indonesia, Russia, and Turkmenistan since the early 1980s. The novelty of this study is its focus on the issues related to transit countries, which are rarely considered in the literature. The results of the study classify supply disruptions into six types, show the evolution of supply disruptions over time, and discuss mitigation strategies. The six types of disruptions include political change, price demands, debts, technical issues, transit fees, theft of gas. The evolution of the disruptions shows that the issues related to transit countries have become more frequent in the last two decades. Mitigation strategies tailored to transit countries include using an international organisation, designing contracts with price mechanisms that might reduce the possibility of disputes and reducing the number of parties involved in the trade.