15:00 - 16:40
P4
Room: South Room 225
Panel Session 4
Yuleng Zeng - Sanction Shocks, Economic Integration, and Military Spending
Thies Niemeier - The Broken Shield - US Secondary Sanctions and Countermeasures
Leonhard Hummel - Who benefits from the Russia sanctions? – Trade destruction and diversion since 2014
Sanction Shocks, Economic Integration, and Military Spending
P4-01
Presented by: Yuleng Zeng
Yuleng Zeng, Andreas Dür
University of Salzburg
Sanctions shock target states' economies and shrink their military budgets. However, it is not clear whether sanctioned countries would necessarily reduce their military expenditure in relative terms. We argue that in the short run channeling proportionally more resources to the military can both boost target states' bargaining leverage against foreign adversaries and consolidate their domestic political power. We further argue this impact is moderated by two additional factors: a country's economic integration into the global import networks of strategic commodities and its regime type. Countries that are better integrated have smaller pressure to spend; less integrated countries, in contrast, have stronger incentives to purchase and stock weapons and strategic resources while they can. Meanwhile, democratic targets are more constrained in reallocating resources to the military since they rely more on the provision of public goods. Applying dynamic panel modeling, we find strong support that sanction shocks can result in a higher portion of military spending in the short run, particularly for less integrated countries. This effect dissipates as states become sufficiently integrated and as sanctions prolong. However, we do not find significant differences between democratic and autocratic targets.