Daniel Drezner on the Global Economic Order Amidst Russia’s War in Ukraine and Challenges with China

Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and a nonresident senior fellow at the Chicago Council on Global Affairs. He is the co-director of Fletcher’s Russia and Eurasia program. Prior to Fletcher, he taught at the University of Chicago and the University of Colorado at Boulder. He has previously held positions with Civic Education Project, the RAND Corporation and the U.S. Department of the Treasury, and received fellowships from the Rockefeller Foundation, German Marshall Fund of the United States, Council on Foreign Relations, and Harvard University. Drezner has written seven books, including The Ideas Industry and All Politics is Global, and edited three others, including The Uses and Abuses of Weaponized Interdependence. He has published articles in numerous scholarly journals as well as in the New York Times, Wall Street Journal, and Foreign Affairs, and has been a regular columnist for Foreign Policy and the Washington Post. He received his B.A. in political economy from Williams College and an M.A. in economics and Ph.D. in political science from Stanford University. He co-hosts the Space the Nation podcast with Ana Marie Cox.
Thomas Falci '23 interviewed Dr. Daniel Drezner on March 6, 2023.
Photograph and biography courtesy of Dr. Daniel Drezner.

In February 2022, the West responded to the Russian invasion of Ukraine with far-reaching sanctions. How do you asses this response relative to other uses of sanctions by the United States and its partners? Has the Western-led sanctions regime against Russia achieved some, if any, of its aims?

In some ways, the sanction regime has been unprecedented, but it hasn't achieved a lot of its aims. This much coordination among US allies in terms of sanctioning another state in response to a kinetic event is unprecedented. Maybe the Soviet invasion of Afghanistan, was the last time we have seen something like this. The United States was able to coordinate actions with European allies, with Pacific Rim allies, and to even get countries like Switzerland on board, even if they didn't get a full buy-in from the Global South. It did lead to a significant effect, in the short term, on the Russian economy. Seizing the central bank reserves and having a ban on high tech exports to Russia are both significant events. Did they actually affect Russia? That's a four-stage question, as the sanctions had a number of different purposes. First, the sanctions were designed to deter. The whole point of the diplomacy that took place at the end of 2021 and beginning of 2022 was to convince the Russians that if they invaded Ukraine, they would face a world of economic pain. Clearly, deterrence failed in that respect. Part of the reason for this is that some of the most painful sanctions on Russia couldn’t have been shared in advance. The Russians have acknowledged that they weren't expecting the central bank seizures. Second, the sanctions were meant as an act of coercion. If the sanctions on Russia come after the military has invaded, the purpose is to force them to retreat. Clearly, coercion hasn't worked either. But that's not surprising. Asking a country to give up territory for which it expended blood and treasure is the biggest ask in world politics. The most punishing sanctions in the world aren't going to work, particularly against a great power like Russia. Third, there is still a question of deterrence – not so much deterring Russia as deterring other actors that might be contemplating similar land grabs. This is a tough question as you don't know what the counterfactual is. However, the Chinese have been looking at Russia’s invasion of Ukraine and updating their beliefs about what would happen if they made a military move in Taiwan. Maybe in that sense the sanctions might have worked, but that's something we won't know for sure for a long time. Fourth, these sanctions were designed to cripple the Russians’ ability to actually prosecute the war, in terms of weakening their economy, and more importantly, weakening their military industrial base. There's some evidence that the sanctions are working here. Russia is running low on precision guided munitions and other things. We will not know for sure, however, whether this counts as a success or failure until the war ends.

Has the sanctions regime been able to vocalize a clear and defined collective objective, which is often the critique of previous sanctions regimes?

Yes and no. When the sanctions were first designed as deterrence, the message was “please don’t go into Ukraine.” Since then, the same sanctions now have multiple purposes. While they won’t coerce Russia out of Ukraine, there is some acknowledgement that they might be working in terms of warfare. The problem in this case is that the demand is very clear. The demand is, we will stop sanctioning you, presumably, if you withdraw your forces from Ukraine. However, from the Russian perspective, the land the sanctions want Russia to withdraw from is not part of Ukraine, it’s Russian soil. As far as Russia is concerned, they've “legally” annexed four Ukrainian provinces. Therefore, in their mind, it’s a war over their own territory.

What are the most important lessons from the current sanctions against Russia that you take away one year later?

First, it's dangerous to try to generalize lessons from this, because there were multiple ways in which the Russian invasion of Ukraine was a unique case. This is a rare instance in which the United States and the West more generally knew what Russia was going to do six months before it happened. Often, when you see sanctions imposed, it's in reaction to an event that was unexpected or when there was minimal warning. In this case, there was warning about what was going to happen, and that made it easier to coordinate sanctions. Having that much advanced time is rare but it does show what advanced planning can do in similar circumstances. The second takeaway is that the most surprising element of the sanctions was the corporate response. Many of them could have stayed in Russia with some restrictions, but chose not to stay. They divested themselves, shut down operations or sold off their businesses to Russians. That does raise interesting questions regarding if we will see this kind of corporate bandwagoning behavior play out in future sanctions. It also demonstrates the degree to which violations of territorial sovereignty really remain the last thing that gets a lot of actors to agree. The third takeaway is related to possible long-term ramifications for the global economy. Normally, you could talk about cases of economic sanctions without thinking about systemic implications for the global economy. That's not true in this case. We are talking about sanctioning the tenth largest economy in the world, a leading energy supplier, and leading food supplier. This has consequences. Thus, the question becomes, to what extent are these consequences going to play out over time? And we still don't know the answer to that.

How has this war shaped your thinking about the future of the global liberal order? 

As important as Russia is, it is still an actor that, in many ways, remains on the periphery. Russia is not imbricated in key global supply chains, so this can occur and not disrupt the global economy. The bigger question is about China. At the same time the Biden administration has moved to sanction Russia, it has also sanctioned China. It has imposed significant export controls on a wide array of industries, including biotech and semiconductor chips. The war in Ukraine might have been a clarifying moment for not just the West’s dealing with Russia, but also with China. Europe is also taking a harder line on China than it used to. Even just a couple of years ago, I'm not sure the Europeans would have done this. The main question here is how will China react to this? Will it react by saying “we don’t want to be Russia. We get a lot of benefits for being in the global economy and we need to stop this wolf warrior stuff and be more accommodating.” Or, does China say “we did benefit from the global economy, but look at what the United States is doing. The U.S. is weaponizing interdependence and we can’t be the target of this. So we need to develop our own self-sufficient system independent of the United States.” If China does this, then it doesn’t need the West as much, which also leads to great power war becoming more conceivable.

How much of the challenge to the existing order is solely a product of Russia’s war in Ukraine, versus the linger impacts of the COVID-19 pandemic?

In some ways this goes back to 2008 and the global financial crisis. The response to that was to keep the global economy open. But it did lead a lot of people to reject the idea of the Washington Consensus as the right way of organizing the global economy. One of the key tenets of the Washington Consensus is, free trade, open borders, open capital movements. In some ways, the current surge of populism goes back to 2008. First you have populists who are never keen on globalization to begin with, coming up with alternative ideas. COVID on a very superficial level, reaffirms this, even though there was little evidence that supply chains got disrupted because of COVID. They got disrupted for other reasons, but COVID didn't really cause people to stop producing, for example. It was more that, oddly enough, the macroeconomic response to the pandemic was so effective that demand stayed relatively elevated, and firms didn't anticipate that. That said, COVID was still another nail in the coffin and now concerns about great power competition are pushing the system towards more closure than was the case in the past. 

Since the release of your article “Counter-Hegemonic Strategies in the Global Economy” in 2019 in Security Studies, have you witnessed China becoming a more aggressive revisionist power?

There's definitely evidence that China has tried to become more of a revisionist power. Their whole wolf warrior diplomacy emerges around 2019. Obviously, China has become more autocratic since the release of that article, as Xi Jinping has tried to elevate himself to the same level as Mao and Deng. What’s happening in Xinjiang, what happened and is still happening in Hong Kong, and the moves China is making on Taiwan, China is becoming more autocratic and is also lashing out more than it used to. To be fair to China, it's not like the US has behaved terribly well, either. Beginning with Trump's election, and actually even before that during the Obama administration, the United States was starting to crack down on Chinese trade. Trump carried it to a whole other degree. The difference between Donald Trump and Joe Biden is that Joe Biden is a much better protectionist in practice than Donald Trump. Donald Trump mostly talked about protectionism, Biden actually does it.

What would a less hawkish policy against China look like, particularly given the increasingly autocratic nature of Xi Jinping’s rule, and how effective would that be?

The concern I have is that I don't think there's any appetite in Washington right now for a policy of restraint when dealing with China. The political parties outbid each other, each trying to come across as more hawkish. It's a little disturbing, given that there are areas where cooperation would be beneficial.  

With tensions rising between the United State and China, how has this accelerated the forces of deglobalization and create a less interconnected global economy?

There are three drivers that maintain an order: power, interests, and ideas. The problem with power is that the US was the undisputed hegemon but now the world looks more bipolar. Bipolar structures often tend to have a more segmented global economy. In terms of interest, in the wake of the 2008 financial crisis, you had firms that were embedded deeply in global supply chains and had an interest in maintaining an open economy. Fifteen years later, there are still lots of firms that are embedded in these supply chains, but they have become a little warier about them. They don't necessarily want to see them closed off, but they're not going to fight this either. Now the United States and China invest a lot in things like industrial policy, that provide alternative incentives for how firms behave. The interest groups that have a stake in globalization are thinning. Lastly, in terms of ideas, you see every idea but neoliberalism being championed at this point. In a world in which power suggests there should be segmentation, the interests in favor of an open economy are weak. The ideas are shifting more towards resiliency and self-sufficiency. We are starting from a very high level of globalization and the world economy still remains highly globalized, but the trendline is definitely leading to more and more segmentation.

What would a more stable, coherent China policy look like for the United States at this time?

A more stable China policy would be one in which there is bipartisan agreement about what the floor is. In other words, it is worth remembering that even during the Cold War, there were areas where the United States and Soviet Union cooperated reasonably well. Arms control, control over Antarctica, and outer space were among them, and these are not insignificant things. It's not that the United States and the Soviet Union were close friends, but there were areas of agreement. Is that true now between the United States and China? I think it is. Indeed, there are more areas where cooperation is mutually beneficial. The question remains whether there is any political will, or whether each party just wants to continue to blast the other as weak on China. Another problem is that during the Cold War there was a legitimate fear that the Soviet system was going to overtake the US system, but that dissipated quickly. For most of the Cold War, the US feared the Soviet military but didn’t fear the Soviet economy. Now, the US military is concerned about the Chinese military and US individuals are paranoid about the Chinese economy. That adds another massive constraint on what US actors can do.

Thomas Falci '23Student Journalist

Downtowngal, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons

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