Yuri Yegorov

Statistical detection of systematic election irregularities

Democratic societies are built around the principle of free and fair elections, and that each citizen’s vote should count equally. National elections can be regarded as large-scale social experiments, where people are grouped into usually large numbers of electoral districts and vote according to their preferences. The large number of samples implies statistical consequences for the polling results, which can be used to identify election irregularities. Using a suitable data representation, we find that vote distributions of elections with alleged fraud show a kurtosis substantially exceeding the kurtosis of normal elections, depending on the level of data aggregation. As an example, we show that reported irregularities in recent Russian elections are, indeed, well-explained by systematic ballot stuffing. We develop a parametric model quantifying the extent to which fraudulent mechanisms are present. We formulate a parametric test detecting these statistical properties in election results. Remarkably, this technique produces robust outcomes with respect to the resolution of the data and therefore, allows for cross-country comparisons.

Gas Transit, Geopolitics and Emergence of Games with Application to CIS Countries

Gas is an interesting example in which the market structure cannot be derived from pure economic aspects. Due to huge required investments, substantial transport costs and large heterogeneity in gas deposits and major consumption areas geography is very important. Politics also plays an important role as a restriction to the development of otherwise optimal investment projects. As a consequence, land locked countries (like Central Asian) have very few choices of transport routes, and geopolitics more than economics governs the choice of pipelines including projects. The Baker Institute World Gas Trade Model makes an attempt to forecast future development of gas markets till 2040 and reveals the crucial role of both geography and political constraints on future development. Therefore, any analysis of the gas market must include economic theory, geography and geopolitics. The phenomenon of gas transit has geopolitical origin and may lead to games. If transit country cannot become a member of any geopolitical coalitions (this is rarely possible), then it brings little externality to the relations between producer and consumer, who have to use its territory to have market link. The temporal evolution of transit game can also differ. For example, gas games between Russia and Ukraine can vanish over time given the technical possibility of gas pipeline transit via the bottom of Baltic and Black Seas. Such opportunity is less favourable for Turkmenistan, as it cannot have sea access and cannot influence security level in Afghanistan.

Energy relations between Russia and EU with emphasis on natural gas

Russian gas exports play a crucial role in political discussions today. This paper argues that the European strive for energy diversification at present is economically inefficient, given the nearby resources and existing or committed transport network to Russia. Furthermore, this present diversification strategy will put Europe into competition with other consuming regions in the future, when the sources available for diversification turn dry. Hence, the current policy pursued by the EU faces a serious trade off of risking future supplies for present energy security (after all its questionable whether some of these sources are secure). We use the methodology based on the dynamics of gas reserves and path dependency in trade flows based on investment in pipeline infrastructure.

Is LNG Arbitrage Possible in Natural Gas Market

The dynamics of markets for natural gas during the last years included the higher role of LNG in gas trade, the growing role of spot markets, deregulation, liberalization and competition in national gas markets. Rising flexibility in contracts’ destination clauses created new international arbitrage opportunities. However, technical, contractual and market restrictions, difference in LNG qualities, shipping capacity limitation and high transportation costs are the most important barriers for an arbitrageur in LNG market. This paper studies the main barriers for LNG arbitrage and its cost. Using the time series for natural gas prices in different regional markets, we show to what extent arbitrage between three main hubs was possible, and discuss why the markets do not converge to unique world price for natural gas.

Arbitrage in natural gas markets

Regional LNG markets are characterized by substantial price differences since 2009. These regional differentials in prices suggest arbitrage possibilities which are incompatible with functioning markets; this creates a puzzle. This paper seeks to explain this puzzle by investigating potential explanations ranging from transport costs, bottlenecks in network (liquefaction, shipping and regasification), and restrictions arising from contracts. Of these factors, only the past and current constraints on U.S. liquefaction capacity has some explanatory power. However, this cannot be the entire story because given this past and current constraint, U.S. gas producers can engage in intertemporal speculation, i.e., keep their gas in the ground until the necessary liquefaction capacity exists and U.S. gas prices increase towards the prices in other regions (transport costs leave from price differences). Since it is difficult to believe that such obvious and simple money pumps are not exploited, further explanations are needed and linked to potential U.S. government interventions; high and irreversible investment costs and rational expectations (i.e., others too will exploit this opportunity, which will move regional prices closer) further add to keep investments low. Summarizing, these factors combined can explain the price differences of the past and their persistence, albeit at a lower level, in the future.

Economics of Talent: Dynamics and Multiplicity of Equilibria

The economics of art and science differs from other branches by the small role of material inputs and the large role of given talent and access to markets. E.g., an African violinist lacks the audience ( = market) to appreciate her talent unless it is so large that it transgresses regional constraints; conversely, a European violinist of equal talent may be happy to end up as a member of one of the regional orchestras. This paper draws attention to this second aspect and models dynamic interactions between investments into two stocks, productive capital and access (or bargaining power). It is shown that there exists multiple equilibria. The separation between pursuing an artistic career or quitting depends on both idiosyncracies, individual talent and individual market access (including or depending on market size), which explains the large international variation in the number of people choosing a career in arts as market access is affected by geographic, linguistic, and aesthetic dimensions.

US Shale Gas Revolution and World Gas Supply Shock

The US shale gas revolution has caused a substantial decline of US dependency on natural gas imports and has led to a significant decrease of spot prices for natural gas at Henry Hub. Given that the recent LNG development has been largely oriented towards the US market, this was the major reason for oversupply of natural gas, especially in LNG form, and caused a spot price decline for natural gas in Europe as well. The goal of this study is to address the following questions: a) when the USA will become fully independent of gas imports and will be able to export gas; b) whether shale gas technology is likely to make substantial changes in other continents.

Iranian Oil Embargo: Game with Different Scenarios

The EU imposed an embargo on Iranian oil on 23 January, 2012 that will come into full force in July, preventing the members from importing Iranian oil. The embargo was enforced by the UN, EU, USA and other countries in the wake of Western pressure policies. This multiplies sanctions imposed on Iran since 1979. Evidence so far suggests that the previous sanctions worldwide and those imposed on Iran have failed to achieve the expected results. Proposing different scenarios, the study investigates possible consequences of Iranian oil embargo on Iran’s economy and that of world. The results reveal that Iranian oil embargo only leads to an increase in crude oil prices and thus, in effect, is a failed policy of the West.

The Difficulty to Stabilize Energy Markets

Energy is one an important class of traded commodities. The particular feature of energy is that about 85% of energies consumed are produced from non-renewable sources. While the structure of energy market is complex, in general we have competitive markets. Some exceptions like OPEC cartel in fact work now towards stabilization of market for oil, with periodical adjustment in production to keep prices within acceptable corridor. It is important to understand that not only real energy but also paper energy (like future contracts and options) are traded. The aim of the article is to analyse the main recent events to understand the specifics of energy markets and macroeconomic externalities derived from price instability, as well as to point towards some solutions to stabilise markets and trends within the current economic crisis.

Iran’s Nuclear Program and the West’s Response: A Game Theoretic Approach

Iran’s nuclear power program is conceived as a dangerous addition to the already highly explosive situation in the Middle East. This paper proposes a game theoretic model between Iran (to side step the non-proliferation treaty) and the West (imposing sanctions). Our analysis suggests that it requires substantial benefits (a ‘carrot’) offered by the West for Iran to stop its program if the West’s strategy is restricted to (economic) sanctions of a subset of countries. The game is then extended beyond the current conflict in order to understand why Iran chose this kind of a brinkmanship strategy in the first place and whether and if what this choice reveals about Iran’s strength or weakness.