Adaptive Strategy to Resist Financial Sanction

• In Event: Poster Session: International Political Economy 1 & Migration and Citizenship
  In Poster Session: Poster Session: International Political Economy 1

Abstract

With the resurgence of great power competition and ongoing regional wars, the US and its allies have carried out a series of targeted financial sanctions against Russia, China, and Iran. In addition to the immediate goals of stopping terrorist and war financing, these sanctions also punish individuals and entities involved in anti-democracy and humanitarian crimes. The targeted states have taken countermeasures, ranging from enforcing capital controls to building a new cross-border payment system. The strategic interaction between senders and targets has gone beyond the traditional bargaining process that concentrates on specific conflicts within the established world economic order. Some of the countermeasures can arguably challenge Western dominance in world finance and international currency.

Traditional research falls short in explaining to what extent financial sanctions serve as an exercise in learning for both senders and targets in terms of updating their offensive and defensive measures. Additionally, we have limited knowledge of how targets are learning from each other to prepare for potential future sanctions. This research uses panel data that tracks financial sanctions, countermeasures, and the timing of each maneuver, taking advantage of the Bayesian network model and causal graph advanced by Judea Pearl. It explains how Russia, China, and Iran have learned from each other and developed updated strategies to prepare for potential conflicts. The findings contribute to our general understanding of financial sanctions and offer insight into the political calculus behind a growing spate of international conflicts.

Author

• Jingding Wang, Syracuse University