How can the US promote the peace process between Israel and the Palestinians? An attempt to show the use of tools of economic statecraft.

Table of Contents

1. Introduction
1.1. Defining the subject

2. Theoretical approach to economic statecraft
2.1. Economic Statecraft
2.2. Positive Sanctions
2.3. Negative Sanctions

3. Interdependence in the US-Israeli relationship
3.1. Assymetrical interdependence
3.2. Economic and military interdependence
3.2.1. Economic linkage
3.2.2. Military linkage
3.3. Political and ideological interdependence

4. The impact of sanctions in the peace process
4.1. Negative sanctions
4.2. Positive sanctions
4.3. Combination of positive and negative sanctions

5. Conclusions

6. Literature

7. Zusammenfassung / Abstract

1. Introduction

There is no other place in the world that is so conflict-ridden as the region between the Mediterranean Sea and the Persian Gulf. Since the foundation of Israel in 1949 hostility tremendously increased and made a small regional conflict become one of the major issues in international politics.

Particularly interesting is the involvement of the US in this conflict and its motivation to do so. Different interests have to be balanced, on the one hand economic interests in the oil flow from the Arab Gulf states and on the other hand the support of Israel as the only real ally to the US in that “sea of authoritarian regimes”, as one author puts it.

After the terrorist attacks in September 2001 the region has attracted much more attention by US politicians than ever before. The administration of George Bush jr. developed the concept of spreading peace and democracy in the Middle East in response to the terrorist attacks. Of special importance is the negotiation of a settlement of the Israeli-Palestininan conflict. Only if a lasting and, in the eyes of the Arab states, just peace is reached, will the US find support for its Middle East policy among the other countries of the region.

Reaching this aim means carefully exerting coercion to the conflict parties, but also offering incentives to them. Economic statecraft as a form of foreign policy is particularly important in this case.

1.1. Defining the subject

In this paper I will analyse the use of negative and positive sanctions as tools of economic statecraft by the US towards Israel. My special interest is to show, how sanctions can affect Israels performance in the peace process. I have chosen not to examine the use of sanctions by the US towards the Palestinian Authority (PA). It certainly might have been interesting to take this relationship into account, but it would have led to an increase of complexity in an issue that is already complex enough when only considering the US and Israel. Further, American linkages to the PA are not very distinct. Between 1994 and 1998 the US only spent 13 % of the financing, which were $65 million, of the PA´s budget. From 2002 to 2005 the US refused negotiations with the Palestinians, condemning their leadership as being supportive of terrorism. As the existing linkages are rather narrow, it would have been hard to show the use of sanctions in this case.

The first part of this paper is dealing with the theoretical approaches to the concept of economic statecraft and the role of sanctions. Definitions and assessments by David Baldwin, Randall E. Newnham and David Cortright are the basis of this theoretical argumentation.

I will then go on by shortly introducing the theoretical approach to assymetrical interdependence by Keohane and Nye. In the following chapters the level of interdependence between the US and Israel is analyzed. In order to show the complexity of this special relationship I did not restrict myself to analyzing economic interdependence only, but I considered other forms of interdependence as well. Those patterns of interdependence are important for analyzing the use and the effectiveness of sanctions.

In the last part of the paper I will show in which way either negative or positive sanctions can influence Israel´s position in the peace process. For this part I chose to examine the course of the peace process since the early 1990s, as this is the time when the peace process came alive with the recognition of Israel by the PLO.

2. Theoretical approach to economic statecraft

The concept of economic statecraft is an important aspect of understanding a country’s foreign policy. Nevertheless, the link between economics and politics as a mean of influencing other countries or international actors is not very well conceptualized (Baldwin 1985: 30). Therefore it is necessary to introduce and shortly outline at least the three key terms “economic statecraft” “positive sanctions” and “negative sanctions”.

2.1 Economic Statecraft

According to Baldwin, this term describes “governmental influence attempts relying primarily on resources that have a reasonable semblance of a market price in terms of money” (Baldwin 1985: 30). This definition is very broad and shows, that economic statecraft is not restricted to core economic transactions but can have rather hidden forms.

Sanctions can be regarded as the most common tools or instruments of economic statecraft.

2.2 Positive sanctions

Positive sanctions are “attempts to promise or provide towards” (Baldwin 1985: 40). Other authors use the term “incentives” or “inducements” instead of “positive sanctions”, i.e. Cortright. This form of sanctioning does not focus on coercion or pressure but rather on convincing actors to implement a policy that the initiator of the sanction is fond of. There is a broad variety of instruments that can be used to implement positive sanctions, which I will pay attention to in chapter 4.2. It is noteable that the nature of the policy instrument does not determine its use (Baldwin 1985: 40), meaning that the same instrument can be used for positive sanctioning as well as for negative sanctioning.

One of the major advantages of positive sanctions is their non-hostile character, which makes mutual agreements become more likely (Newnham, 2000: 79). Another effect likely to occur is the inducement of reciprocity, or in other words interdependence, in the relationship between two states. (Newnham, 2000: 79).

Positive, as well as negative sanctions, can be further classified as either specific or general sanctions. (Newnham, 2000: 81) Specific sanctions are linked to a certain issue, while general sanctions are not. General sanctions do not “produce an immediate concession by the target state” (Newnham, 2000: 82), which suggests that the success of a sanction shall not be determined only by the factor time. Of course it has to be noticed that measuring the success of sanctions is especially difficult when it comes to positive sanctions. It is often not obvious whether it is the economic incentive that worked or another factor which contributed to the desired political outcome.

2.3 Negative sanctions

Negative sanctions are “attempts to threaten or punish” (Baldwin, 1985: 40) by the means of economic leverage. In common language and in many other texts about economic statecraft, negative sanctions are simply called sanctions.

The main characteristic of this form of sanctioning is the “clear linkage [...] to a specific desired behaviour on the part of the target state” (Newnham, 2000: 81). Thus the target state clearly knows the options it has in order to abandon the negative sanction.

However, negative sanctions tend to be rather “ineffective as instruments of international statecraft” (Cortright, 2000). One reason, why negative sanctions often do not lead to a change of political behaviour by the target state is their non-cooperative character, which causes resentment among the politicians of the target state (Newnham, 2000: 78). A state that is threatened in this way is not likely to co-operate with the sender of the sanctions, as on the basis of hostility and coercion a state will rather abide by its point of view than to give in to the pressure.

Another reason for the ineffectiveness of negative sanctions is that they cannot be all-embracing. As Newnhamn calls it, they “generate a powerful economic incentive for ‘cheating’ “ (Newnham, 2000: 79). Economic interests, especially of companies, are probably stronger than political ones and therefore, although negative sanctions are employed, there is a high probability that they will be ignored by certain actors. The point should also be made that negative sanctions are unilateral in most cases. The target state still has the possibility to avoid the negative effect of the sanction by co-operating with states or actors that do not support the sanction. A good example can be seen in the Iranian nuclear programme. Although negative sanctions by the US and many Western countries do exist, Iran can still count on the support of Russia. It should be pointed out that not only the target state is affected by negative sanctions, but especially companies within the sender state of negative sanctions are victims of their governments´s policy (Cortright, 2000).

One important aspect of sanctions, negative as well as positive ones, is the specific relation between the target and the sender state. A state that does not have much economic power will not be able to use economic sanctions in an effective way. Economic linkages are the basis of negative and positive sanctions. (Gartzke, 2003: 14).

3. Interdependence in the US-Israeli relationship

To show how economic sanctions can be a succesful means of econmic statecraft in the US-Israeli relationship, it is important to know about the linkages between the two countries. A certain dependency by one actor or an assymetric interdependent relationship could be the starting point for the use of sanctions.

3.1. Assymetrical interdependence

According to the terminology of Keohane and Nye, the relationship between the USA and Israel can be characterized as assymetrically interdependent. This term defines a status, in which both countries have reached a certain level of interdependence, but one actor is less dependent than the other. “Assymetrical interdependence can be a source of power” (Keohane and Nye, 1999: 11) and this power can be used for a coercive policy by the actor that is more influential. Therefore the state that is more dependent in the asymmetrical relationship is likely to be exposed to coercion (Gartzke, 2003: 4). Military force is usually not used as a means of coercion in an interdependent relationship, as it would certainly be the end of the relationship. That means that both actors loose the benefits they have drawn from the interrelationship and therefore it is means of economic statecraft that is employed instead. That finally leads us to sanctions, although especially negative sanctions might be a harm to retaining interdependence between the two states (Gartzke, 2003: 14) . Giving up interdependence may lead to high costs for both actors, even for the more powerful state.

Therefore it is important to know about the special relationship between the US and Israel in order to give explanations for the possibility of effectively implementing economic sanctions. I will shortly describe the most important links between the USA, certainly the less dependent actor, and Israel which is more dependent in most cases. I will not only describe economic forms of interdependence, which are by far the most important links between the two countries, but forms of interdependence in other issues as well. I do so, in order to show a possible explanation for the sensitivity of this relationship. Only looking at economic matters would narrow the understanding of the level of interdependence that exists between the US and Israel.

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