Economic Statecraft and Great Power Politics: The Impact of Economic Sanctions and their Consequences on Great Power Foreign Policy Aggression

Abstract

The attack on Ukraine in February 2022 changed the geopolitics of the post-cold war era. The United States and its allies in Europe and Asia have used diplomatic and economic statecraft against Russia, which has aligned itself with China as an alternative axis of power. This economic statecraft has led to a decoupling of Russia from the West. Economic relations between China and the West are strained. In this new era of great power competition, and in the wake of massive sanctions against Russia following its invasion, the question of whether and how economic sanctions work has gained renewed importance. Furthermore, the geopolitical contest has invited comparisons to the 1930s, when revisionist great powers aligned politically in the face of a common strategic threat to their interests. If the 1930s are a guide, then economic decoupling comes with the risk of economic competition leading to a much more aggressive foreign policy in revisionist great power states. This paper will review the literature of whether and how sanctions work. It will explain the theories of stateness and trade- expectations. The hypothesis that high stateness and declining trade expectations will lead to a more aggressive foreign policy in targeted states is tested on four cases. The historical cases of Japan and Germany in the 1930s, and the current cases of Russia and China will be analyzed, and the question whether economic statecraft was and is responsible for the more aggressive foreign policies of the targeted states answered. A comparative analysis shows that the theory of stateness and trade- expectations only explains the case of Japan’s aggressive foreign policy in the 1930s and 1940s sufficiently. Germany and Russia, while facing declining trade expectations, do not confirm the hypothesis. The case of China is still ambiguous and could develop in either direction in the coming years. More research is necessary to analyze the effect of economic statecraft and its role in great power competition.