Chinese Journal of European Studies

Based on the relevant theories of International Political Economy, International Business and Institutional Economics, this article introduces “strategic alliance” as an independent unit into the analysis of the interaction between multinationals and geopolitics. It aims to investigate the mechanism and logic by which commercial interests affect geopolitics. Multinationals can use “strategic alliance” as an effective institutional arrangement to lock in geopolitical risks caused by state actors. Furthermore, this article constructs a “strategic alliance-geopolitics” framework to examine the four  interaction models through case studies of the Nord Stream, South Stream and Nabucco Pipelines. This article finds out that market power and alliance structure are the core factors that determine whether strategic alliances can hedge geopolitical risk. In terms of the interaction between the two factors, market share and company size not only affect the market power of multinationals, but also determine their ability to dominate alliance partnerships. Different types of alliance structures in turn affect strategic alliances’ use of market power to hedge risk. This article also finds out that adjusting the shareholding structure is an important means for strategic alliances to respond to geopolitical risk in that changes in the shareholding structure can not only adjust the weight of multinationals in alliance decisions, but change the market power of strategic alliances. The “strategic alliance-geopolitics” framework provides a new perspective for examining Russia-Europe gas politics. It also provides useful enlightenment for Chinese energy companies to hedge geopolitical risks when they operate overseas.