Achieving and Sustaining Economic Peace: The Process of Sanctions Removal

(Committee Members: Navin A. Bapat (chair), Mark J.C. Crescenzi, Stephen Gent, Anna Bassi, Cameron Ballard-Rosa)

In my dissertation, I develop a three-step theory of how two countries engaging in an economic conflict can achieve economic peace and resume their profitable transactions. First, I analyze economic, political and domestic conditions that lead senders and targets to re-evaluate their policies and initiate negotiations over the removal of sanctions. Second, I use a game theoretic model to show that bargaining problems are key barriers to economic peace, and focus on how these challenges can be overcame. Lastly, I examine target compliance and sanctions recurrence in post-sanctions periods. In my pursuit to answer these questions, I integrate theories on economic sanctions, international political economy, and domestic politics, and use various quantitative and formal approaches. I also collect new data and expand the existing ones to test my theories. My dissertation also offers important policy implications by pushing scholars and policy-makers to view sanctions removal as a multi-dimensional and a long-term process.

Manuscripts Under Review:

  • Achieving Economic Peace: Ending Sanctions in the Shadow of Information Problems (ISA 2017, SPSA 2016)

Can senders remove economic sanctions without the fear of strengthening their targets’ capabilities? Senders may prefer to end economic coercion given its ex-post inefficiency, yet doing so might give the target greater access to resources and contribute to its offensive behavior. Targets’ inability to credibly commit to reverse their policies in exchange for sanctions relief, coupled with the difficulty of perfectly observing their compliance behavior, creates an obstacle for ending economic coercion and resuming profitable economic transactions. Using a game theoretic model of sanctions removal under uncertainty about targets’ intentions, I formally demonstrate and empirically find that sanctions are more likely to end if senders can successfully detect targets’ compliance, but only if the target finds the promised sanctions relief attractive. Targets that are able to offset the costs of economic sanctions will not value the promised sanctions relief and choose not to negotiate over sanctions removal.

  • Economic Coercion and the Problem of Sanctions-Proofing (with Navin A. Bapat) (ISA 2016)

Although sanctions generate economic costs, target states may “sanction-proof” their regime by borrowing capital from abroad. While some targets obtain interest free capital from black knight states, others may need to borrow with interest from international credit markets. These interest rates may sometimes make borrowing cost prohibitive, giving targets no choice but to acquiesce to the demands of the sender. However, since senders cannot observe if black knight states are assisting target states, targets have an incentive to misrepresent their source of external capital. In an effort to deter sanctions, targets that must borrow at high interest rates may signal that they have black knight support and are sanctions-proof. We formally and empirically demonstrate that in this uncertain environment, senders are more likely to impose sanctions on targets with low credit ratings, but only do so if the target places a relatively low value on uninterrupted economic transactions with the sender.

Papers in Progress:

  • Sustaining Economic Peace: When Do Sanctions Snap Back? (APSA 2017, ISA 2018)

Thirty percent of all the targets of security-related sanctions imposed between 1945 and 2005 face new sanctions by their senders within the ten years following sanctions removal. The literature analyzes the sanctioning processes from initiation to termination; however, few studies examine sender-target relations in the post-sanctions period and whether target states comply with sender demands in the long run. This paper attempts to fill this gap by identifying the conditions under which targets go back to challenging the status quo and senders re-impose sanctions. I argue that sanctions removal and subsequent sanctions relief provide targets with an opportunity for recidivism. Targets may choose to use this opportunity, especially if the risk of re-imposition is low. Utilizing time series, cross-national sanctions data and two-stage models, this paper shows that targets are more likely to challenge the status quo in the post-sanctions period if the risk of sanctions reinstatement is not credible. I find that recidivism by the target is more likely if the initial sanctions were multilateral and the leadership of the sender remains the same.

  • David vs. Goliath: Why Do Authoritarian Leaders Sanction Major Powers? (with Yuree Noh) (APSA 2017)

Why do authoritarian countries impose sanctions on strong economies? Surprisingly, G8 countries were the target of economic sanctions in 348 instances, accounting for 25 percent of all sanction episodes between 1945 and 2005. For these authoritarian regimes, sanctioning major powers may signal the strength of the leadership to their domestic audiences. However, imposing economic sanctions can be counter-productive as they also generate costs for the authoritarian sender. Therefore, authoritarian regimes face with the following trade-off: sanctioning major powers may strengthen the regime’s domestic standing, but may exacerbate economic problems that can ultimately undermine the regime’s power. Using data on sanctions and authoritarian regimes from 1980 to 2005, we demonstrate that authoritarian regimes are more likely to impose sanctions on major powers in times of domestic vulnerability. However, authoritarians are likely to direct these sanctions against major powers that their citizens view as the “enemy” or the “other”.

  • The Dynamics of Terrorist Organizations’ Shift into Politics (with Chelsea Estancona and Stephen Gent) (ISA 2015)

Why do some terrorists organizations choose to form political wings? Why do some governments allow such parties to participate in the electoral process, while others ban them? In this paper, we tackle these questions by considering the strategic interaction between domestic terrorist organizations and their host governments over entering the conventional political arena. We anticipate that these actors’ decisions are based on two primary factors: terrorist group expectations of changes in support and capacity resulting from party formation and government perception of the group’s likelihood of abandoning violence for strictly electoral participation. To analyze this strategic behavior, we develop a game theoretic model. We illustrate the empirical implications of our model by examining state-terrorist interactions in three cases: the IRA in Northern Ireland, ETA in Spain, and the LTTE in Sri Lanka.