The financialization of foreign policy : targeted financial sanctions and government retaliation

Author / Creator

Glenn, Caileigh, author

Summary

Finance and foreign policy are decisively intertwined. The financialization of foreign policy features the reliance on financial power for political purposes and is exhibited in the use of targeted...

Finance and foreign policy are decisively intertwined. The financialization of foreign policy features the reliance on financial power for political purposes and is exhibited in the use of targeted financial sanctions as a first-resort tool of foreign policy. Governments whose subnational firms are sanctioned can credibly refrain from issuing a response. Yet, governments sometimes retaliate. Under what conditions do governments retaliate in response to the imposition of targeted financial sanctions on subnational firms? In this dissertation, I offer an answer to this and related questions. Chapter 1 describes the financialization of foreign policy, the factors contributing to the shift from broad trade-based economic sanctions to targeted financial ones, and existing explanations of retaliation. Chapter 2 presents a theory of the conditions under which government retaliation is likely to occur in response to the imposition of targeted sanctions by the United States. The theory proposes retaliation is likely when the intended target of the coercion is the government, when state-owned entities are sanctioned, and when strategic sectors are implicated. Chapter 3 introduces the Targeted Financial Sanctions Dataset (TFSD), a new dataset of targeted financial sanction episodes imposed by the United States and government responses. Using this dataset and detailed case examples, Chapter 4 tests the hypotheses and finds that retaliation is indeed more likely when the intended target of the coercion is the government, rather than the firm, and when state-owned entities are targeted, compared to privately-held companies. The tests find mixed support for the strategic sector hypothesis, revealing that the transportation sector is statistically associated with retaliation. Chapter 5 examines domestic political vulnerability, finding that politically vulnerable governments are less likely to retaliate and the influence of the sanction-specific conditions is attenuated in the presence of political vulnerability. Chapter 6 discusses the implications of this research for the study of sanctions, for the target country, and for the use of targeted financial sanctions. This project demonstrates that conditions specific to a sanctions event can motivate government retaliation; further, it shows that, in the context of targeted sanctions, domestic political vulnerability attenuates aggressive international behavior.

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