Interdependence, Statecraft and Leverage: Can Coercion be Avoided?

Interstate interdependence and coercion are flip sides of the same coin: most forms of coercion are only possible if the sender and target states have some level of interdependence. Because of asymmetries in interdependent relations, scholars have argued that the less dependent—and therefore presumably more powerful—partner can exert pressure on its more dependent partner (Keohane and Nye 1977; Hirschman 1945). Under this logic, the potential for coercion exists in every asymmetrical relationship: every more dependent actor is a potential target, and every less dependent actor could plausibly exert pressure to achieve foreign policy objectives. Economic statecraft—and sanctions in particular—has received substantial attention of late, partly because of the potential for coercion to replace military intervention as a way for states and international institutions to settle disputes (Hufbauer 2007; Early 2015). But coercion also has a darker side: the more powerful challenger may use its leverage to fulfill repugnant objectives, such as Russia’s manipulation of natural gas supplies to influence elections in neighboring countries. Because of the potential for coercion, dependent partners may be uncomfortable, particularly if they are locked into the relationship, that is, if the costs of exiting the relationship are high. The recent literature covering interdependent relations is replete with observations of states pursuing diversification, often to avoid undue influence. However, aside from the dependency scholars, who examine developing states, little theorizing has been hitherto conducted on how developed states may alter asymmetries to avoid coercion and influence. This paper seeks to fill this gap. I argue that dependent partners have four options: first, they may attempt to substitute, which can comprise producing domestically the same commodities or close substitutes and/or importing the same commodities or close substitutes from third parties. Second, they can enhance their ability to adjust, which could range from increasing efficiencies to reducing the need for a commodity altogether. Third, they may attempt to impede the capacity of more powerful states to exert leverage. These tactics could include implementing regulations over trading behavior (‘setting the rules’) and strategically seeking allies. Fourth, domestic actors as well as the general public can jeopardize a state’s attempt to change economic relations, for example, some U.S. firms tried to circumvent sanctions against apartheid South Africa; thus a dependent state may have to regulate and monitor domestic risks. This could involve monitoring the contracts and exchanges of domestic firms or framing the dispute in ways that rally public opinion in favor of changing relations. The salience of these factors will be illustrated through various examples, including the European Commission’s (EC) attempts to lessen European Union (EU) reliance on Russia for natural gas. Over the past decades, the EC has promulgated policies to achieve all four options, with varying levels of success. The insights of this paper extend theory and have practical implications for policy makers.