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German Dependence on Russian Energy, Economic Stress and Green Transition
The invasion of Ukraine has created a reassessment in many European governments of the risks that Russia inflicts on countries and the current world order. This has implications for both the military buildup and the reliance on trade and exchange with Russia in particular in the area of oil and gas.
Perhaps nowhere has this turnaround been more significant than in Germany. Probably the country within Europe that has maintained the closest business ties with Russia since 1991.
Anders Olofsgård, Deputy Director at the Stockholm Institute of Transition Economics, and Associate Professor at the Stockholm School of Economics discusses the turnaround of German policy towards Russia with Guido Friebel, Professor at the Goethe University in Frankfurt.
Professor Guido Friebel is also a Fellow at CEPR, IZA, a VP of SIOE, a founding member of the Organizational Economics Committee of the German Economic Association (VfS), and a member of the Scientific Advisory Board of Sciences Po, and of ConTrust at Goethe University. He also serves as a Scientific Director of CLBO. Before joining Goethe, I held positions at the Toulouse School of Economics and EHESS, and at SITE, Stockholm School of Economics.
#AcademicsStandWithUkraine
The Forum for Research on Eastern Europe and Emerging Economies (FREE Network) stands for peace, security and democracy and condemns Russia’s invasion of the independent and democratic nation of Ukraine and violation of international law.
The FREE Network has an extensive history of building networks and partnerships with leading academic experts on economic issues in Central and Eastern Europe and emerging markets.
The FREE Network invites academics from the region and beyond to express their solidarity with the Ukrainian people, academics, educators, and students suffering from Russia’s invasion into the democratic nation of Ukraine.
To speak out on Russia’s aggression against Ukraine, please use the hashtag #AcademicsStandWithUkraine.
Donations for humanitarian aid are organized by the Kyiv School of Economics, a member of the FREE Network.
Ukrainian Refugees in Poland: Current Situation and What to Expect
The 2022 Russian invasion of Ukraine has forced millions to flee from the war zone. This brief addresses Ukrainian refuge in Poland. It provides an overview of the current situation, discusses the ongoing solutions and potential future challenges, and stresses the key areas for urgent policy intervention. It is based on a presentation held at the FREE Network webinar Fleeing the war zone: Will open hearts be enough?, which took place on March 14, 2022. The full webinar can be seen here.
The latest data (from March 15, 2022) shows that since February 24, 1.8 million refugees have already crossed the Polish-Ukrainian border. This number represents over 60 percent of Ukrainians who have fled the country thus far. Among this group that relocated to Poland, approximately 97 percent were people with Ukrainian citizenship. Most of the foreign nationals living in Ukraine before the war, and who came to Poland after its outbreak, have already returned to their countries of origin.
Figure 1. The influx of refugees from Ukraine to Poland since February 24, 2022.

Note: The vertical axis shows the number of refugees per million. Source: Data from Polish Border Guard
Our estimates show that there are currently about 1.1 million Ukrainian war refugees in Poland. Many stay in large cities such as Warsaw, Kraków or Wrocław. The rest of those who crossed the Polish border transited to the other EU Member States or countries outside of Europe, such as Canada or the USA, reuniting with their families and friends.
In the first days after the outbreak of the war, refugee assistance in Poland was mostly provided by Polish families and households, as well as owners of guesthouses and hotels who made them available for the purpose of providing accommodation.
A similar situation took place at the border and at railway and bus stations where refugees were arriving, with a majority of support coming from volunteering citizens. This assistance largely consisted of the provision of basic necessities such as food, hygiene products, and medical or psychological first aid. The level of mobilization among non-governmental organizations, grass-roots initiatives, private citizens, and civil society, in general, is extremely commendable and should be accredited with providing the safe welcome refugees received upon arrival. For example, during the first days, Polish families sheltered several hundred thousand refugees, often in their own houses or apartments. There are currently two main Ukrainian social groups arriving in Poland: women with children and older persons over the age of 60. This is a result of Ukraine’s internal regulations, which prohibit men aged between 18 and 60 from leaving the country.
Among those who have managed to escape the war, there is a large group of people requiring very specialized support, e.g. children suffering from oncological diseases, and elderly with a high degree of disability. So far, these groups have been provided with the necessary support, but if these needs become more frequent, a review of the capacity of the Polish healthcare system and the system of support for the disabled will be needed.
In the first days after the war broke out, the situation at the border was very difficult. The waiting time for crossing reached up to 70 hours. However, this was related to problems with the information system and the limited number of border guards on the Ukrainian side. Currently, crossing the border is quick and seamless. Every day the Polish Border Police register 80 to 100 thousand individuals, a vast majority of them crossing into Poland. This is a many-fold increase compared to pre-war migration flows, which fluctuated around 12-15 thousand people per day. At the same time, over 80.000 people, mainly men, have crossed the Polish border to Ukraine in the last 20 days with the goal of joining the army or territorial defense.
For a long time, the Polish government held the position that there would be no need to build refugee centers. However, the government recently reversed this decision and decided to open a dozen centers, located in market and sports halls. Currently, over 100,000 people are staying in these types of temporary accommodation facilities. However, these centers are not sufficiently adapted for stays longer than a few days. It is necessary to prepare housing infrastructure (temporary accommodation centers equipped with habitable containers) in which refugees can stay for two or three months until they find another place to live.
So far, Poland has essentially dealt with two of three possible migratory waves. In the first, people with family members or friends living in Poland or in other EU Member States arrived. Before the war, there were already approximately 800 thousand Ukrainians working or studying in Poland. In the second wave, after the bombing of civilian facilities in large cities, people without family or friends living in Poland started arriving. They require full assistance. A third wave is possible, and this one may be much larger than the previous two. It may occur if the situation at the front worsens and the repressions by Russian troops become harsher. Such reports are already coming from eastern Ukraine. If the situation worsens, Poland could even face a couple of additional million people that would leave Ukraine. Under these circumstances, we should assume that the third wave would include young men in addition to women, children, and the elderly. This scenario is currently very unlikely, but cannot be completely ruled out.
Since the beginning of March, Poland has seen an increase in the activity of both local representatives of the government administration and the central government. Information has been gathered about vacancies in smaller cities and local communities where refugees could be accommodated. This is because large cities are on the verge of reaching their capacity for the number of refugees they are able to manage. In addition, a special law entered into force on March 13, which provides for a catalogue of support tools for refugees. The main issues are:
1. The possibility of obtaining an individual identification number, which will enable the opening of a bank account and grant access to the labor market, education, and social benefits. It will be possible to apply for the ID number from March 16. Certainly, large queues can be expected in the first days, as the procedure is complicated and rather bureaucratic. The government decided to require all the necessary information at the start of the application process, which could be complicated for some applicants and lead to additional delays. Based on recent numbers, up to 1 million Ukrainians may apply for an individual identification number in the near future.
2. Reimbursement of the costs of hosting refugees from Ukraine in Polish family homes and in private hotels. The government has agreed to cover the value of around 8 euros per day for each person. However, receiving this refund requires submitting a special application to the local administration offices, which may again cause various kinds of perturbations, and even resignation from obtaining such support.
3. Ukrainian children can be enrolled in Polish schools. It will also be possible to open school branches in temporary accommodation centers, as well as parallel Ukrainian classes inside Polish schools. At present, however, the preferred model is the inclusion of Ukrainian children in Polish classrooms. Currently, no major problems have been reported with this process, but only around 10% of Ukrainian children have entered Polish schools so far. Numerous challenges connected with this integration process are expected. Part of the solution could be distance learning or hybrid learning. The priority is to involve children in education as fast as possible so that they do not lose time while living in Poland from an educational development point of view.
4. A simplified system of qualifications recognition has been implemented for nurses and doctors. Unfortunately, contrary to the advice of experts, the act does not provide guidelines for a simplified qualification recognition of teachers, educators or psychologists from Ukraine. In his media statements, the Minister of Education and Science did not rule out introducing a simplified procedure in the near future. Such recognition could, to some extent, solve the problem of understaffing in Polish schools.
5. All adults from Ukraine who arrived after February 24 have open access to the labor market.
Until early March, the Polish government did not apply for support from other EU member states. Now, this position has changed. Over the first weekend of March alone, more than 20 trains were organized that made it possible for refugees interested in moving from Poland to countries such as Germany or other destinations within the EU. Additional relocation measures are expected in the near future. However, in contrast to the European migrant crisis in 2015, the relocation scheme of Ukrainian refugees is carried out on a voluntary, rather than a compulsory basis.
It is very difficult to predict what will happen in the next days or weeks. While it should be emphasized that Poland is managing the migration challenge well, this is not least due to the exceptional commitment of civil society. Certainly, in the coming months, Poland will not be able to cope with the integration of more than 800.000 people into the labor market and education system. Of course, it is possible to provide ad-hoc support, but that is completely different than integrating refugees into Polish society. Ukrainians are still treated as guests who are expected to return to their homes when possible. Such an assumption should not be changed until May when the situation in Ukraine will be more predictable. We must also be aware that we are dealing with dispersed families who will want to reunite as soon as possible. It is not known, however, whether this will take place in Poland or in Ukraine. It depends on how the situation develops in the weeks and months to come.
In the coming weeks, the key issue will be the relocation of Ukrainian refugees from large to smaller cities within not only Poland but also the European Union. It is absolutely necessary to coordinate activities both at the level of the Polish government and the European Commission. As far as the Polish government is concerned, a task force should be established to maintain constant contact with the European Commission and the EU Member States regarding the ability to relocate refugees from Poland to other countries. This team should be composed mainly of civil servants from the Ministry of Foreign Affairs and the Ministry of the Interior. It is also necessary to appoint a team coordinating the actions of voivodes, who are responsible for crisis management in accordance with Polish law. It is also critical to ensure the flow of information between local administrations and the government, as well as to coordinate the activities of non-governmental organizations, whose activity is key in dealing with the challenges related to the migration crisis. In the next stages, it will be necessary to adopt a systemic approach to the inclusion of Ukrainian children in the education system (Polish and Ukrainian, but functioning in Poland – remote learning), and adult refugees to the labor market.
In the end, I would like to recall my opinion, which is now popular in the media and among representatives of the central government, local governments and non-governmental organizations: “Helping refugees and managing migration crises is a marathon, not a sprint.” We must keep this in mind.
The webinar “Fleeing the war zone: Will open hearts be enough?”, was hosted by the FREE Network together with the Stockholm Institute of Transition Economics (SITE) and can be seen here.
Russian Oil and Gas: What to Expect?
For decades, Russian oil and gas have been a cornerstone of Europe’s energy supply, powering industries and heating millions of homes. However, following the Russian invasion of Ukraine, energy flows to the West have sharply declined. Experts speculate that it could stop entirely, either through sanctions or policy decisions from Russia itself, posing a significant challenge to Europe’s energy security.
This shift raises two critical questions:
- How will reduced Russian oil and gas exports affect global energy markets?
- And what are the long-term consequences for both the European Union and Russia’s economy?
Together, they examined how the reduction of Russian oil and gas flows reshapes energy trade and accelerates Europe’s transition to renewables. This shift also challenges global market stability and raises new concerns for Europe and its energy security.
Event Panelists:
- Julius Andersson, Assistant Professor, Stockholm Institute of Transition Economics (SITE)
- Chloé Le Coq, Professor, Université Paris 2 Panthéon-Assas and Research Fellow at SITE
- Sergej Gubin, Research Fellow, BICEPS
- Paweł Wróbel, Managing Director, BalticWind.EU
Together, they examined how the reduction of Russian oil and gas flows reshapes energy trade, accelerates Europe’s transition to renewables, and challenges global market stability.
Disclaimer: Opinions expressed during events, seminars, and conferences are those of the authors. They do not necessarily reflect those of the FREE Network and its research institutes.
Fleeing the War Zone: Will Open Hearts be Enough?
The invasion of the Russian Federation in Ukraine has resulted in the loss of lives and destruction of infrastructure and has forced millions to flee from the war zone.
By March 14th 2022 over 2,8 million people have found refuge outside of Ukraine and many more have been displaced within its borders. The UNHCR estimates the total number of those forced to flee Ukraine may grow to 4 million.
Program
On March 14, 2022 experts from Ukraine, Sweden and Poland discussed the consequences of the invasion for the Ukrainian population.
- Maciej Duszczyk (University of Warsaw)
- Hanna Vakhitova (Kyiv School of Economics)
- Jesper Roine (Stockholm Institute of Transition Economics)
- Annika Sunden, (Migration Studies Delegation)
- Moderated by Michal Myck (Centre for Economic Analysis)
Disclaimer: Opinions expressed during events, seminars and conferences are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Sanctions on Russia: How They Impact Europe Energy Security and the Region
As Russia’s war in Ukraine continues, Western sanctions are beginning to chip away at the Kremlin’s war machine. Although President Vladimir Putin appears undeterred, the sanctions are draining resources that could otherwise fund the conflict.
How Sanctions Work?
According to Maria Perrotta Berlin, Assistant Professor at the Stockholm Institute of Transition Economics (SITE), sanctions are most effective when they come as a surprise. “If the threat of sanctions didn’t deter aggression, their implementation is unlikely to change behavior — unless they are more severe than expected,” she explains.
Sanctions, however, are a blunt instrument. They can unintentionally harm other economies and are rarely effective on their own. Maria Perrotta Berlin notes that “the stick of sanctions works best when paired with a carrot”. For instance, offering a clear path toward lifting restrictions, as was done in Iran’s nuclear negotiations.
The Three Types of Sanctions on Russia
Currently, three main categories of sanctions are in place against Russia:
- Financial sanctions: including restrictions on the Russian Central Bank, disconnection from the SWIFT system, and asset freezes. These measures have the most immediate impact.
- Trade sanctions: particularly on technology imports and energy exports. These take longer to affect the Russian economy and are more costly to sender countries.
- Sanctions of inconvenience: such as airspace closures, travel bans, and exclusion from international sports and cultural events. While symbolic, they contribute to isolating Russia on the global stage.
Such isolation can influence public opinion within Russia. It may generate opposition to the government — or conversely, trigger a “rally around the flag” effect that strengthens domestic support for Putin.
Signaling and Solidarity
Despite Putin’s resistance, the sanctions are sending a powerful signal both within Russia and abroad. They demonstrate the unity of Western nations and highlight that much of the world condemns Russia’s actions in Ukraine.
Experts say there is still room to tighten sanctions by expanding the list of targeted individuals, banks, and sectors, as well as closing loopholes used to bypass restrictions.
Regional Impacts: Belarus and Georgia
The FREE Network webinar, “The Sanctions on Russia, and Their Impact on the Region,” brought together experts from Belarus and Georgia to assess the broader consequences.
Belarus faces additional sanctions due to its support for Russia’s aggression. The country has already lost key export routes through both Russia and Ukraine. Its economy is reeling from the depreciation of the Russian ruble and fears of a banking crisis.
In Georgia, the war in Ukraine revives painful memories of the 2008 Russian invasion. While Georgia relies less on Russian gas than the EU, it remains vulnerable to rising oil prices and inflation, already at 13.7%. Nearly 90% of Georgia’s wheat comes from Russia, making food security a growing concern.
Learn More About the Russian War Economy and Sanctions
To learn more about Western sanctions and Russia’s countermeasures, visit the Sanctions Timeline. And for details on sanctions imposed on Russia and their effects, see the Evidence Base section of the sanctions portal. Explore more policy briefs on sanctioning Russia here.
Disclaimer: Opinions expressed during events, seminars and conferences are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Securing Women’s Safety at the Time of War
As the Russian invasion of Ukraine continues, millions of women are facing grave risks from displacement, violence, and loss. On this International Women’s Day, it is crucial to recognize the unique challenges women experience during armed conflicts — from direct violence to long-term psychological and economic harm. Evidence from past wars shows that gender-based violence increases sharply during and after conflicts, demanding urgent international attention and support.
Women’s Vulnerability During the Ukraine War
The war in Ukraine has caused immense human suffering, forcing over 1.5 million people to flee by early March 2022. Russian attacks have targeted cities, disrupted humanitarian aid, and endangered civilians. Research shows that women in war zones face multiple layers of risk — including sexual violence, psychological abuse, and displacement-related exploitation. Gender-based violence often extends beyond physical assault, encompassing coercion, loss of freedom, and systemic mistreatment (Wirtz et al., 2014).
Sexual Violence as a Weapon of War
Scholars now recognize sexual violence in armed conflicts as a deliberate tool of warfare rather than random brutality (Skjelsbaek, 2001). Studies indicate that aggressors from gender-unequal societies are more likely to use such violence (Taylor, 1999; Meger, 2016; Guarnieri & Tur-Prats, 2020). Even after fleeing, women face heightened threats in refugee camps, where sexual and domestic violence often persist (Araujo et al., 2019; Stark & Ager, 2011).
Protecting Women in Conflict and Displacement
Governments, humanitarian organizations, and the international community must prioritize women’s safety, justice, and empowerment. Key steps include:
- Ensuring safe evacuation from conflict zones.
- Holding perpetrators of sexual violence accountable, with zero tolerance for impunity.
- Including sexual violence in sanctions regimes, per UN Security Council Resolution 1820.
- Involving refugee women in leadership roles in protection programs.
- Providing training and awareness on gender-based violence prevention.
- Enabling legal work opportunities for displaced women to prevent exploitation.
- Offering mental health and trauma support for survivors.
A Call for Global Solidarity
As we hope for peace and the safe return of displaced families, this International Women’s Day should serve as a call to action — to strengthen protection for women, prevent gender-based violence in conflict, and ensure justice for survivors.
The FREE Network and the Forum for Research on Gender Economics (FROGEE) continue to advocate for women’s safety and empowerment, supported by the Swedish International Development Cooperation Agency (SIDA).
References
- Araujo, J. D. O., Souza, F. M. D., Proença, R., Bastos, M. L., Trajman, A., & Faerstein, E. (2019). Prevalence of sexual violence among refugees: a systematic review. Revista de saude publica, 53.
- Meger, S. (2016). Rape loot pillage: The political economy of sexual violence in armed conflict. Oxford University Press
- Ray S, Heller L. (2009). Peril or protection: the link between livelihoods and gender-based violence in displacement settings. New York (NY): Women’s Refugee Commission.
- Skjelsbaek, I. (2001). Sexual violence and war: Mapping out a complex relationship. European journal of international relations, 7(2), 211-237.
- Spangaro, J., Adogu, C., Ranmuthugala, G., Powell Davies, G., Steinacker, L., & Zwi, A. (2013).What evidence exists for initiatives to reduce risk and incidence of sexual violence in armed conflict and other humanitarian crises? A systematic review. PLoS ONE. 2013;8(5):1–13.
- Spangaro, J., Adogu, C., Zwi, A. B., Ranmuthugala, G., & Davies, G. P. (2015). Mechanisms underpinning interventions to reduce sexual violence in armed conflict: A realist-informed systematic review. Conflict and health, 9(1), 1-14.
- Stark, L., & Ager, A. (2011). A systematic review of prevalence studies of gender-based violence in complex emergencies. Trauma, Violence, & Abuse, 12(3), 127-134.
- Taylor, C. C. (1999). A gendered genocide: Tutsi women and Hutu extremists in the 1994 Rwanda genocide. PoLAR, 22, 42.
- Willman, A. M., & Corman, C. (2013). Sexual and Gender-Based Violence: What is the World Bank Doing and What Have We Learned, A Strategic Review. Washington (DC): World Bank.
- Wirtz, A. L., Pham, K., Glass, N., Loochkartt, S., Kidane, T., Cuspoca, D., & Vu, A. (2014). Gender-based violence in conflict and displacement: qualitative findings from displaced women in Colombia. Conflict and health, 8(1), 1-14.
- UNHCR. (2011). Action against sexual and gender-based violence: an updated strategy. Geneva: UNHCR Division of International Protection.
The Sanctions on Russia, and Their Impact on the Region
As the war in Ukraine intensifies, the international community continues to respond with new measures. Understanding the economic impact of sanctions on Russia has therefore become critical. On 3 March, the Stockholm Institute of Transition Economics (SITE) and the FREE Network hosted a timely webinar titled “The Sanctions on Russia, and Their Impact on the Region.”
The discussion brought together leading economists and policy experts. They analyzed how Western sanctions are reshaping Russia’s economy, influencing neighboring countries, and altering regional stability.
Expert Panelists
- Torbjörn Becker, Director of SITE
- Larry Samuelson, Professor at Yale and Cowles Foundation
- Lev Lvovsky, Research Fellow at BEROC
- Nataliia Shapoval, Chairman of KSE Institute
- Yaroslava V. Babych, Lead Economist at ISET Policy Institute
- Tamar Sulukhia, Director at ISET – International School of Economics
Together, the panelists explored the financial, trade, and geopolitical consequences of the sanctions. Moreover, they highlighted key challenges faced by Ukraine, Belarus, and Georgia. They also discussed possible long-term outcomes for the European and global economies.
Understanding the Regional Effects
The experts emphasized that sanctions on Russia extend far beyond its borders, affecting energy markets, trade routes, and financial stability in neighboring nations. They also underlined the importance of international solidarity and coordinated policy responses to mitigate regional disruptions.
About the FREE Network and SITE
The FREE Network and SITE continue to provide in-depth analysis on transition economics, sanctions policy, and Eastern European economies, promoting evidence-based dialogue among researchers and policymakers.
Disclaimer: Opinions expressed during events, seminars and conferences are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Investing, Producing and Paying Taxes Under Weak Property Rights
Oil majors often choose to operate in countries with weak property rights. This may appear surprising, since the lack of constraints on governments may create incentives to renege on initial promises with firms and renegotiate tax payments once investments have occurred and, in the worst case, expropriate the firm. In theory, backloading investments, production and tax payments may be used to create self-enforcing agreements which do not depend on legal enforcement. Using a new dataset covering the universe of oil majors’ assets that started production between 1974 and 1999, we indeed show in a recent CEPR Working Paper (Paltseva, Toews, and Troya-Martinez, 2022) that investments, production and tax payments are delayed by two years in countries with weak institutions relative to countries with strong institutions. Extending the dataset back to 1960 and exploiting the transition to a new world oil order where expropriation became easier, allows us to interpret our estimates as causal. In particular, prior to the transition expropriations were not feasible, due to the omnipresent and credible military threat imposed by the oil majors’ countries of origin. As the new order sat in, a new equilibrium emerged, in which expropriations became a feasible option. This transition incited an increase in expropriations and forced firms to adjust to the new reality by backloading contracts.
The Hold-up Problem
In December of 2006, when the oil price was climbing towards new heights, the Guardian reported that the Russian government was about to successfully force Shell into transferring their controlling stake in a huge liquified gas project back into the hands of the government. While officially this was motivated by environmental concerns surrounding the Sakhalin-II project, most observers agreed that this might be considered a textbook example of the hold-up problem faced by oil firms when investing in countries with limited constraints on the executive. At its core, the hold-up problem refers to the idea that the government may renege on the initial promise and appropriate a bigger share of the pie once investments have been made. Obviously, this is not an oil-specific issue and concerns any type of investment in countries with weak property rights. Academics, who worked on resolving these issues, suggest the use of self-enforcing agreements (Thomas and Worrall, 1994). These agreements use future gains from trade (as opposed to third-party enforcement) to incentivize the governments not to expropriate. And while the theoretical literature has prolifically developed over the last 30 years (Ray, 2002), to the best of our knowledge no empirical evidence has been provided on the use and dynamic patterns of self-enforcing backloaded contracts.
Data and Sample
In Paltseva, Toews and Troya-Martinez (2022), we rely on micro-level data on oil and gas projects provided by Rystad Energy, an energy consultancy based in Norway. Its database contains current and historical data on physical, geological and financial features for the universe of oil and gas assets. We focus on the assets owned by the oil majors (BP, Chevron, ConocoPhilips, Eni, ExxonMobile, Shell, and Total) using all assets that started production between 1960 and 1999, leaving us with a total of 3494 assets. An asset represents a production site with at least one well, operated by at least one firm, and with the initial property right being owned by at least one country. Being able to conduct the analysis on the asset level is particularly valuable since it allows us to control for a large number of confounding factors and rule out several alternative explanations of our main finding.
Moreover, there are three advantages of focusing our analysis on the oil and gas sector in general and the oil majors in particular. First, the sunk investments in the development of oil and gas wells are enormous, making the hold-up problem in the oil sector particularly severe. Second, oil majors have been around for many years since all of them were created before WWII. This provides us with a sufficiently long horizon to capture backloading over time. Third, the majors are simultaneously investing in many countries which provides us the necessary cross-sectional variation in institutional quality. To differentiate between countries with weak and strong institutions, we use a specific dimension from the Polity IV dataset measuring the constraints on the executive. The location of all the assets disaggregated by firm as well as a binary distinction in a country’s institutional quality is shown in Figure 1.
Figure 1. Spatial distribution of assets and institutional quality

Note: Location and ownership of assets are provided by Rystad Energy. The executive constraint indicator is taken from Polity IV and we use the median from the period 1950 to 1975 to define whether the country is considered to have strong or weak institutions. The cut-off of 5 implies that roughly 1/3 of the countries are defined as having strong institutions and roughly 50% of all the assets which started operation between 1950 and 2000 are located in countries with weak institutions.
A Stylized Fact
For the empirical analysis, our variables of interest are investment, production and tax payments normalized by the respective asset-specific cumulative sum over a period of 35 years. The resulting cumulative shares are depicted in Figure 2. We focus on physical production which, in addition to being considered the most reliable measure of an asset’s activity, does not require discounting. Real values of investment and tax payment depict a very similar picture. Most importantly, the dashed lines illustrate that 2/3 of cumulative production shares are reached approximately two years earlier in countries with strong institutions, in comparison to countries with weak institutions. The average asset size does not differ significantly between these groups. Such delays are costly for countries with weak institutions. Our back-of-the-envelope calculation suggests that the average country loses around 120 million US$ per year due to the delayed production and the respective tax payments. We confirm that the two-year delay cannot be explained by geographical, geological or financial confounders such as the location of the well, fuel type or contract features.
Figure 2. Years to reach 66% of cumulative flows in 35 years

Note: We use the Epanechnikov kernel with an optimally chosen bandwidth to plot the cumulative production over the 35-year life span of the asset. We group countries into two groups with weak and strong institutions according to Polity IV. This figure contains assets that started producing between 1975 and 1999.
The Transition to a New World Order
To push towards a causal interpretation of the results, we exploit the global transition to a new world oil order. This change affected the probability of expropriations in countries with weak institutions while leaving countries with strong institutions unaffected. In particular, the post-WWII weakening of the OECD members as political and military actors provides a natural experiment of global proportions. Expropriations are first viewed as impossible due to the military threat of British, French and US armies, and then become possible due to a global movement aiming at returning sovereignty over natural resources to the resource-rich economies. In the words of Daniel Yergin (1993): “The postwar petroleum order in the Middle East had been developed and sustained under American-British ascendancy. By the latter half of the 1960s, the power of both nations was in political recession, and that meant the political basis for the petroleum order was also weakening. […] For some in the developing world […] the lessons of Vietnam were […] that the dangers and costs of challenging the United States were less than they had been in the past, certainly nowhere near as high as they had been for Mossadegh, [the Iranian politician challenging UK and US before the coup d’etat in 1953], while the gains could be considerable.” Consequently, the number of expropriations has grown substantially since 1968, marking the transition to a new world order (Figure 3). However, Kobrin (1980) finds that even during the peak of expropriations in 1960-1976, only less than 5 % of all foreign-owned firms in the developing countries were expropriated. We suggest that this is, at least partly, thanks to the use of backloaded self-enforcing contracts.
Figure 3. Transition to a new world order

Note: Data on firm expropriations across all industries from Kobrin (1984).
Indeed, focusing on the years around the transition to the new world oil order, we show that there have not been any differences in investment, production or tax payments dynamics between countries with weak and strong institutions in the early years of the 1960s. But investment, production and the payments of taxes started experiencing significant delays after 1968 in the countries with weak institutions, using countries with strong institutions as a control. Intuitively, the omnipresence of a credible military threat in response to an expropriation served as an effective substitute for strong local formal institutions and eliminated the need for contracts to be self-enforced and backloaded in countries with weak institutions. Once this threat disappeared, contracts had to be self-enforcing and investment, production and tax payments had to be backloaded to decrease the risk of being expropriated by the governments of resource-rich economies. Theoretically, these initial differences in contract backloading between countries with strong and weak institutions should disappear in the long run, because the future gains from trade need to materialize eventually. We confirm empirically that this point is reached on average 20 years after firms start a contractual relationship with a country.
Conclusion
We provide evidence that oil firms seem to backload contracts in countries with weak institutions. We show that such backloading appears in the data during the transition to a new world order since 1968, when firms were in need of a new mechanism to deal with weak property rights and the risk of expropriations. We estimate the cost of such delays to be around 120 US$ per country and year. While this cost is high, it is important to emphasize that in the absence of such backloading, forward-looking CEOs of oil majors would often choose not to invest in the first place, since they would anticipate the severe commitment problems (Cust and Harding, 2020). Thus, as a second-best, the cost of the backloading may be marginal compared to the value added from trade when oil majors are willing to invest in countries with weak institutions and questionable property rights.
References
- Cust, J. & Harding, T. (2020). “Institutions and the location of oil exploration”. Journal of the European Economic Association, 18(3): 1321–1350.
- Kobrin, S. J. (1980). “Foreign enterprise and forced divestment in LDCs”. International Organization, 65–88.
- Kobrin, S. J. (1984). “Expropriation as an attempt to control foreign firms in LDCs: trends from 1960 to 1979.” International Studies Quarterly, 28(3): 329–348.
- Paltseva, E, Toews, G & Troya Martinez, M. (2022). ‘I’ll pay you later: Relational Contracts in the Oil Industry‘. London, Centre for Economic Policy Research.
- Debraj, R. (2002). “The time structure of self-enforcing agreements.” Econometrica, 70(2): 547–582.
- Jonathan, T. & Worrall, T. (1994). “Foreign direct investment and the risk of expropriation.” The Review of Economic Studies, 61(1): 81–108
- Yergin, D. (2011). The prize: The epic quest for oil, money & power. Simon and Schuster.
From East to West: A Paper Curtain in Swedish Foreign News Coverage?
How much a country is talked about in the media can determine its place in the public debate. In this brief, we collect data on the mentions of Eastern and Western European countries in the main Swedish newspapers over the past decades. We find consistently more coverage devoted to Western compared to Eastern Europe in the Swedish press. We investigate several factors that could explain this pattern. We find that while Eastern European countries are on average not more geographically distant from Sweden, Sweden tends to have closer trade links with Western European countries. Sweden is more culturally similar to the average Western European country in terms of language, religion and attitudes, cultural values and social norms. Trade relations and cultural proximity are associated with higher media coverage.
The media plays a vital role in modern societies by keeping the public informed and policymakers accountable. Whether and how events are covered by the news determines their relevance in the public debate. There is ample empirical evidence on the agenda-setting power of the news media. For example, Snyder and Strömberg (2010) show that local press coverage affects how informed US voters are about their representatives and in turn how much their politicians work in the interest of their constituencies. Eisensee and Strömberg (2007) find that news coverage affects how much disaster relief the US sends to foreign countries.
In this brief, we study the amount of news coverage devoted to European countries in the Swedish press. We document a systematic difference between Western and Eastern Europe and explore underlying factors that could be important in explaining this East-West divide.
The East-West Divide
We choose the four most widely read Swedish newspapers (Aftonbladet, Expressen, Dagens Nyheter, and Svenska Dagbladet) and use the newspaper database Retriever Research Media Archive to obtain statistics on the number of mentions of each country between 1995 and 2021. A country mention is an article in which the name of a country appears. Since two or more countries can be named in the same article, the total number of mentions does not correspond to the number of articles. As a percentage of all articles published by the four newspapers in 2021, roughly 20% mention at least one of these countries. While this simple measure of news coverage can be informative, it does not take into account many other aspects of a country’s prominence in the news, such as the length of articles, where articles appear, the tone of coverage, etc.
Figure 1 plots the sum of annual number of mentions by region over time. We see a clear difference in the amount of coverage devoted to Eastern and Western European countries. Over the entire time period, the 21 Western European countries were mentioned on average 2.7 times more than the 22 Eastern European countries.
While there does not appear to be a trend in relative coverage, there is considerable variation from year to year. The year when the relative difference in the number of mentions is smallest is 2014. The two most mentioned Eastern European countries in that year were Russia and Ukraine. Coverage likely increased due to the Crimean Crisis, when Russia invaded and annexed the Crimean Peninsula in Southern Ukraine. The relative difference was also low in 2008, coinciding with the Russo-Georgian war in August. In that year, other newsworthy events, such as the Global Financial Crisis or the UEFA European Football Championship, have a more ambiguous effect on relative media coverage.
Figure 1. Country mentions in Swedish newspapers

Note: Countries included in Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Moldova, Montenegro, North Macedonia, Poland, Russia, Serbia, Slovakia, Slovenia, Ukraine. Countries included in Western Europe: Andorra, Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, Norway, Portugal, San Marino, Spain, Switzerland, United Kingdom.
What Explains This Discrepancy Between East and West?
There are a number of potential reasons why some countries systematically receive more attention in the press. In this section, we correlate the mean annual mentions of each country between 2019 and 2021 with different aspects of that country’s relationship with Sweden.
Distance and Population
Figure 2 shows how news coverage of a country depends on its geographic distance to Sweden and its population size. Overall, the further a country is from Sweden, the less that country is covered in the Swedish press. On average, Eastern European countries (in yellow) are covered less than Western European countries (in blue), for a given distance to Sweden. For example, Poland and Germany are both around 1000km away from Sweden, but Germany is mentioned almost twice as often in the Swedish press. As we measure the distance between the most populous city of each country and Stockholm, some of this difference in coverage is driven by the fact that countries sharing a border with Sweden receive extensive coverage. For instance, Denmark, Finland, and Norway are on average covered more than six times as much as Latvia.
Population also plays a role, that is, larger countries (e.g., Germany, Russia, Spain, and Poland) receive more coverage than smaller countries (e.g., Lithuania, Ireland, and Estonia). As Eastern European countries have on average smaller populations than Western European countries, population can partly explain the East-West difference in news coverage. One counterexample is Russia, which has more than twice as many people as France or the UK, but receives less coverage in the Swedish press.
Figure 2. Geographical distance and population

Note: Geodesic distances are calculated between the latitudes and longitudes of the most populous city of each country and Stockholm. Marker sizes are weighted by population averaged over 2019-2021, and fitted line is unweighted. Source: CEPII’s GeoDist dataset (Mayer and Zignago, 2006) and the World Bank. See Figure 1 for a list of countries included.
Trade and GDP
Figure 3 shows that Sweden’s economic relationship with a country affects how much the country features in Swedish news. We find a strong positive correlation of 0.8 between a country’s total trade volume with Sweden and country mentions in Swedish newspapers. As Sweden’s largest trading partners tend to be in Western Europe, this partly explains the relative coverage of East and West. Another factor is the overall size of a country’s economy (as measured by its GDP). Swedish newspapers more commonly mention countries with higher GDP, and these are more likely to be in Western than Eastern Europe.
Figure 3. Trade and GDP

Note: Trade data are from 2019. Marker sizes are weighted by national GDP, and fitted line is unweighted. GDP figures are averaged over 2019-2021 and measured in current prices, PPP adjusted, international dollars. Source: The World Bank’s WITS database and the IMF World Economic Outlook, October 2021. See Figure 1 for a list of included countries.
Culture
There is a large literature documenting the link between cultural factors and the economic relationship between nations. For instance, studies show that similarities in ancestry, language, religion, norms and values can influence bilateral trade (Melitz, 2008; Guiso et al., 2009) and the diffusion of technology (Spolaore et al., 2009). In this section, we show how the amount of press coverage correlates with differences in language, religion, and values and norms using cultural distance data from Spolaore and Wacziarg (2016).
Figure 4.a shows that Swedish newspapers are more prone to cover countries whose languages are similar to Swedish. The language similarity measure originally developed by Fearon (2003) is based on the prevalence of languages within a country and distance between languages. The distance measure is calculated using linguistic trees provided in Ethnologue. It ranges from 0 (close) to 1 (distant) and reflects the expected number of common linguistic nodes between two randomly chosen individuals from each country and takes into account that countries can be linguistically heterogeneous (for more details, see Fearon 2003). Norway and Denmark are linguistically closest to Sweden, however, these are also two neighboring countries with which Sweden conducts extensive trade. On average, Eastern European countries are more linguistically distant from Sweden, although some Western European countries (such as France and Spain) are as linguistically distant from Sweden as many of the Eastern European countries and receive considerably more press coverage.
The religious distance measure by Spolaore and Wacziarg (2016) is calculated analogously to the linguistic distance measurement. It is based on the prevalence of different religions within a country and the distance between religions. Figure 4.b shows that countries that are religiously different from Sweden receive less coverage in the Swedish media. With the exception of the three Scandinavian countries, Eastern and Western European countries have similar levels of religious distance to Sweden. Based solely on this metric, the Swedish press mentions Eastern European countries less (and Western European countries more) than their religious distance to Sweden would predict.
Figure 4.c shows an index of a country’s cultural proximity to Sweden, that is, its distance in terms of cultural values, attitudes and norms based on average responses to the World Value Surveys from 1981 to 2010 (see Spolaore and Wacziarg, 2016). This cultural proximity index aggregates the Euclidian distances in survey responses between each country and Sweden. The index is standardized so that 0 shows the average country’s cultural distance to Sweden and negative (positive) values indicate above (below) average cultural similarity. Western European countries are significantly closer to Sweden than Eastern European countries based on this measure. As Swedish press coverage is on average declining in a country’s cultural distance to Sweden, this difference in country’s values and attitudes can explain some of the East-West difference in media coverage.
Figure 4. Cultural distance
Panel a. Linguistic distance

Note: We use the indicator of tree-based weighted linguistic distance from Spolaore and Wacziarg (2016) and originally developed in Fearon (2003). This measure is an estimate of the expected or weighted number of common linguistic nodes between two randomly chosen individuals from each country. The data on language prevalence is compiled from a number of different sources and assembled in Fearon (2003). Countries included in Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Moldova, Poland, Russia, Slovakia, Slovenia, Ukraine. Countries included in Western Europe: Austria, Belgium, Denmark, Finland, France, Germany (average between East and West Germany), Ireland, Italy, Netherlands, Norway, Portugal, Spain, Switzerland, United Kingdom
Panel b. Religious distance

Note: We use the tree-based weighted religious distance from Spolaore and Wacziarg (2016). This measure is an estimate of the expected distance between the religions of two randomly chosen individuals from each country. See Figure 4.a for a list of included countries.
Panel c. Distance in cultural values, attitudes, and norms

Note: We use the distance in cultural norms and values from Spolaore and Wacziarg (2016). This measure is based on all value-related questions from the World Values Survey Integrated Questionnaire from 1981–2010. The mean distance across countries is standardized to zero. See Figure 4.a for a list of countries included.
Conclusion
As the public and policymakers primarily receive information from the mass media, news coverage can have profound effects on public debate and policy decisions. Using data on the content of the four most widely read Swedish newspapers over the past decades, we measure how much the Swedish press covers Eastern and Western European countries. We find that over the past 25 years, there have been 2.7 times more mentions of Western than Eastern European countries. We find that the Swedish press is more likely to mention countries that are geographically closer, more populous, have a larger GDP and more trade with Sweden. Cultural proximity (as measured by language, religion and values, attitudes and social norms) also correlates with higher coverage. These factors are of course not independent from each other. For instance, the other Scandinavian countries with whom Sweden shares a border and a history, are culturally similar to Sweden and some of Sweden’s most important trading partners. They are also some of the countries that are most covered by the Swedish press. Some of these factors, such as sharing similar values, appear to explain the gap in coverage between East and West, while others, such as geographic distance, do not. More recently, concerns over energy security in the EU (see e.g., Le Coq and Paltseva, 2022) and the rise in military tension between Russia and Ukraine illustrate how developments in Eastern Europe can directly affect life here in Sweden. Perhaps it is time for Sweden to pay more attention to her eastern neighbours?
References
- Eisensee, T., & Strömberg, D. (2007). “News droughts, news floods, and US disaster relief”. The Quarterly Journal of Economics, 122(2), 693-728.
- Fearon, J. (2003) “Ethnic and Cultural Diversity by Country”, Journal of Economic Growth, 8, 195–222.
- Guiso, L., Sapienza, P., & Zingales, L. (2009). “Cultural biases in economic exchange?”. The Quarterly Journal of Economics, 124(3), 1095-1131.
- Le Coq, C. & Paltseva, E. (2022). “What does the Gas Crisis Reveal About European Energy Security?” FREE Policy Briefs.
- Mayer, T. & Zignago, S. (2006). “GeoDist: The CEPII’s Distances and Geo-graphical Database” MPRA Paper No. 31243.
- Melitz, J. (2008). “Language and foreign trade”. European Economic Review”, 52(4), 667-699.
- Snyder, J. M., & Strömberg, D. (2010). “Press coverage and political accountability”. Journal of Political Economy, 118(2), 355-408.
- Spolaore, E., & Wacziarg, R. (2009). “The diffusion of development”. The Quarterly Journal of Economics, 124(2), 469-529.
- Spolaore, E., & Wacziarg, R. (2016). “Ancestry, language and culture”. In The Palgrave Handbook of Economics and Language (pp. 174-211). Palgrave Macmillan, London.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
