Conflict and the Cross-Border Pipeline: Revisiting the "Commercial Peace"

Cross-border pipelines are pipelines that cross at least one international boundary in order to transport natural gas or crude oil from one state to another. States and multinational enterprises are planning and building new cross-border pipelines to prepare for rising long-term energy demand, to facilitate oil and natural gas production in reserves located in landlocked countries, and to integrate regional energy markets. To build and operate a cross-border pipeline, states and firms must agree upon a breadth of terms, including ownership, operation, financing, right-of-way, contracted volumes, arbitration processes, and transit fees. Therefore, cross-border pipeline projects involve significant interaction among the participating states.

This thesis seeks to determine whether the interaction that enables cross-border pipelines to exist and operate increases or decreases conflict among the participating states. This thesis uses brief case studies to demonstrate that two opposite trends from existing literature may explain the effect of cross-border pipelines on interstate conflict. First, cross-border pipelines introduce additional economic interdependence between states, which empirical studies have already shown to decrease interstate conflict. Second, cross-border pipelines exhibit high asset specificity and are thus vulnerable to the hold-up problem, which increases interstate conflict. Converting a novel and comprehensive database of cross-border oil and natural gas pipelines to a dyad-year dataset, this thesis shows through empirical analysis that cross-border pipelines have no robust effect on the incidence of interstate conflict from 1946 to 1992.