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- Convenor:
-
Mariya Omelicheva
(National Defense University)
Send message to Convenor
- Theme:
- POL
- Location:
- Voesar Conference Room 412
- Sessions:
- Saturday 12 October, -
Time zone: America/New_York
Long Abstract:
After Russia invaded Crimea in 2014 and then eastern Ukraine, the United States and the EU imposed sanctions on Moscow to deter further aggression and cajole Russia to comply with the Minsk ceasefire agreement. Since 2014, the United States has enacted 61 rounds of sanctions on Russia targeting over 230 individuals. The European Union has targeted their own growing list of Russian individuals and entities. Economic sanctions cover all forms of coercion that impact on the economy of the state and that are intended by the sender to bring about a certain result or to shape the behavior of the target state. Coercive measures include trade sanctions, boycotts, aid suspensions, freezing financial assets, and the manipulation of tariff rates. Research is generally pessimistic about sanctions as a form of coercion. A substantial literature exists investigating the variety of unintended consequences of sanctions for target countries, including the counterproductive punishment of large civilian populations (something "smart sanctions" were designed to avoid), the erosion of political rights, and the rise in local violence. This panel goes beyond examining the unintended consequences of sanctions on the target to examine consequences for Russia's Eurasian neighbors as a result of their interdependency on the same financial mechanisms and relationships that bind the participating countries to the target. The heavy burden of the sanctions are more understood on Russia's European trade and business partners. The burden is less understood for Russia's neighboring Eurasian states. Research reveals that sanctions are impacting financial and trade flows, political priorities, and foreign relations. Dr. Stacy Closson of American University researches the extent to which sanctions have shifted Russian foreign and security policy towards Eurasia, including China and Iran. Dr. Mariya Y. Omelicheva of National Defense University examines negative externalities of Russia's crisis (impacted by sanctions) in Central Asia in terms of both economic spillover and some political instability. Dr. Iikka Korhonen, Head of Research at the Bank of Finland uses confidential BIS data on bilateral capital flows to examine the level of investments to Russia from the countries that imposed sectoral sanctions in 2014 versus from those countries that did not impose sanctions, including Eurasia.
Accepted papers:
Session 1 Saturday 12 October, 2019, -Stacy Closson (American University )
Paper long abstract:
A substantial literature exists investigating the variety of unintended consequences of sanctions for target countries, including the counterproductive punishment of large civilian populations (something "smart sanctions" were designed to avoid), the erosion of political rights, and the rise in local violence. This paper goes beyond examining the unintended consequences of sanctions on the target to examine consequences for Russia's Eurasian neighbors as a result of their interdependency on the same relationships that binds countries to the target. This paper asks the extent to which Western sanctions against Russia since 2014 have had the unintended consequence of shifting Russia's foreign and security policy interests away from the West and towards Eurasia, including China and Iran. One the one hand, sanctions have not deterred Russia from taking foreign and security policy positions antithetical to Western ones, including in the Kerch Strait, Donbass, Iran, and Syria, as well as election interference. On the other hand, there is no obvious re-ordering of Russian foreign and security policy away from the West and toward Eurasia, perhaps with the exception of China. Russia's role as a regional power remains steady with Russia accepting that it is not always the dominant power in Eurasian regional organizations. Using theories of international relations, this paper will explore Russian foreign and security policy since 2014, particularly toward China and Iran, to assess the extent to which Russia has shifted its foreign and security policy towards Eurasia.
Iikka Korhonen (Bank of Finland)
Paper long abstract:
In this paper we assess with difference-in-differences methodology how financial sanctions imposed by Western countries against Russia in 2014 have affected banks' investments in Russia. We utilize partially confidential BIS data on bilateral cross-border capital flows, and find that investments into Russia declined from all countries after 2014. However, investments declined more from the countries that imposed sanctions related to financing of Russian entities. As especially the European Union countries had traditionally supplied Russia most of its external financing, this curtailment of financing is significant. We calculate that sanctions have meant at least $700 million less external investments per quarter since mid-2014.
Mikhail Ivonchyk (University of Georgia) Kenneth Kriz (University of Illinois - Springfield) Temirlan T. Moldogaziev (Indiana University)
Paper long abstract:
Patrons in illiberal governance systems are expected to spread the state's largess selectively, channeling the most benefits to their networks of cronies. Regions with governing elites that are proximate to the elites in the central government enjoy the most advantages in such patron-client cronyist systems. This empirical study evaluates whether the congruence in formal relationships between regional leadership and the federal government influences the levels of regional debt in the Russian Federation. Using regional government data for Russian regions and their municipalities for 2005-2015, we test three formal hypotheses. 1) Does congruence in political affiliation between regional governors and the federal government influence the levels of debt in the regions? Governors that are from a proximate political party to the ruling elite in the federal government are expected to have a significant impact on regional debt. 2) Does direct appointment of regional governors influence the levels of debt in the regions? Russia shifted back and forth in its approach of selecting regional governors, alternating between elected and appointed governorships in the period under review. 3) Do divided governments in the regions (represented by the distance between elected/appointed governors and regional legislatures) influence the levels of debt in the regions? It is expected that maximum largess accrues in the regions with unified executive and legislative branches of government that are most proximately related to the governing regime at the federal level.
George Wright (University of Washington)
Paper long abstract:
Research question: This paper draws on available corruption measures and previous econometric research to estimate the reduced economic growth due to the unusually high levels of corruption in the C.I.S. How much does corruption cost in terms of economic growth? The question is consequential because the answer is relevant to the priority given anti-corruption campaigns. The answer is also not a priori obvious given the success of Asia's tigers such as South Korea, well known for high corruption.
Methodology: This descriptive study offers two alternative estimates of reduced growth. First, it applies the parameters previously estimated by cross-national panel regressions - in particular a recent study covering over 15 years and 91 countries, including all the C.I.S. nations. A shortcoming of this estimate is that the corruption index is based on standardized questions asked in interviews of businesses and misses the large-scale dealings of elite Oligarchs.
A second estimate adds up separate calculations for the different pathways by which corruption reduces economic growth - petty corruption's effects on households and small business, and large-scale corruption's impact on private domestic investment, foreign investment, public infrastructure and public education. Given data requirements only the Russian Federation is included. Capital transferred out of Russia, often by shadowy means, is lost to domestic investment and government revenue. Nominal tax rates and parameters estimated in published research yield the consequences for growth.
Results:Applying regression results to C.I.S. long-term growth we find little impact for nations with mid-range scores (Armenia, Belarus, Moldova and Ukraine), but low-income Central Asia pays a heavy (and most likely underestimated) price for its weak institutions. The Russian Federation's projected loss is 12% of 2017 per capita income.
Household surveys find substantial petty bribes reported by households and small business but since they offset inadequate state salaries, their aggregate drag on the economy is not large. Public and private investment lost to overseas capital flight depends on different estimates ranging from $27 billion to $150 billion annually.
Conclusion: The disaggregated analysis finds higher lost Russian growth than the applied regression estimates. But some of the capital flight to low-tax havens is legal and employed by wealthy elites the world over. The problem is thus not only criminality but weak property rights stemming from a corrupt and politicized court system. Emphasizing other reforms to institutions and economic policy may have greater rewards for economic growth.