China

This chapter examines how the pursuit of market power over rare earth elements (REEs) influences China’s use of strategic delay in East and South China Seas. As the dominant global producer of REEs, China has the ability to set prices in this market. The desire to maintain this market power motivates China to continue to push its long-standing claims to sovereignty over seabed resources in the East and South China Seas. International institutions such as UNCLOS and the International Seabed Authority do not provide a dispute-resolution option that allows China to maintain unfettered access to deep sea mineral extraction. At the same time, China’s economic dependence on Japan and the global REE market constrains China from turning to military escalation to press its claims. Instead, China has relied upon strategic delay and gray zone tactics to gradually expand its presence in the East and South China Seas.

Conclusion

This concluding chapter addresses some additional aspects of market power politics and outlines several implications of this study for scholars and policymakers. First, to complement the previous case studies of violence and strategic delay, it provides a brief discussion of Russia’s decision to abandon a delay strategy and agree to a settlement of the long-running dispute over the Caspian Sea. It then outlines a set of questions for future research on market power politics. Next, the chapter reflects upon how the research in the book informs an understanding of international relations. It highlights some important lessons concerning the effects of market structure on conflict behavior and the limitations of international institutions. It then contemplates the future role of gray zone tactics by countries like Russia and China. The chapter concludes with a discussion of some of the policy implications that follow from this research.

Empirical Cases

This chapter discusses the selection of the case studies for the book: Iraq and the oil market, Russia and the natural gas market, and China and the rare earth elements market. These cases provide useful plausibility probes for the authors’ theory of market power politics. First, these cases involve competition in key commodity markets in which states could potentially have the opportunity and willingness to pursue a market power opportunity though territorial expansion. Second, since these states have had significant control over their firms in these commodity markets, one can isolate the mechanism by which market power motivations influence foreign policy decisions. Finally, these cases include incidents of both violence and strategic delay, which provides variation on the dependent variable.

Introduction

This introductory chapter provides an overview of this study of market power politics. Two main puzzles drive this research. First, why do some states continue to pursue policies of territorial expansion in the face of widely accepted norms of territorial integrity and increased interconnectedness in the global economy? Second, why do these states sometimes turn to strategic delay and gray zone tactics, rather than war or institutional settlements, to achieve their expansionist goals? To answer these puzzles, the chapter introduces a theory of market power politics. According to this theory, the desire to gain market power motivates states to expand their territorial reach, while the presence of economic interdependence and international instructions can constrain states from taking aggressive steps in pursuit of these goals. After discussing some contributions of the research project, the chapter concludes with an outline of the book.

Market Power, War, and Strategic Delay

This chapter develops a theory to explain how market power competition can lead to violence and strategic delay in international relations. When states have opportunities to change market structures to provide their firms with price-setting abilities, a competitive environment can emerge. Given the economic rents and political leverage that can accompany the ability to set prices in hard commodity markets, states may be motivated to take aggressive action to expand their territorial reach. This market power motivation can sometimes lead to war. However, when states are economically interdependent, they may be constrained from turning to violence. This can open up an opportunity for institutional settlements. However, in some cases, institutional rules and procedures can preclude states from reaching a settlement in line with their market power goals. When this happens, states may turn to strategic delay and attempt to gradually accumulate market power over time through salami tactics.

Markets, Institutions, and Property Rights Disputes

This chapter describes how politics normally functions in the global economy. In normal economic exchange environments, prices are set by supply and demand conditions in the market. Without an ability to affect prices, political actors largely focus their efforts on coordinating or manipulating the effects of the market price. To promote efficiency in the global political economy, states have created a variety of institutions that promote coordination and cooperation through the reduction of transaction costs and the creation and maintenance of property rights. At the global level, territorial borders and maritime boundaries delineate international property rights among states. When disagreements over the sovereign control of territorial and maritime resources arise, international institutions can provide an effective mechanism for resolving these property rights disputes.

Iraq

This chapter examines how the motivation to establish market power in the oil export market influenced Saddam Hussein’s decision to invade Kuwait in 1990. In the wake of the costly Iran-Iraq war, Hussein desperately needed access to new resources. By controlling Kuwait’s oil production, Iraq could both augment its own oil resources and prevent Kuwait from overproducing and putting downward pressure on the price of oil. Relatively unconstrained by low levels of economic dependence and a lack of acceptable institutional solutions, Hussein turned to violence to pursue his market power goals. A subsequent invasion of Saudi Arabia would have given Iraq a sufficient market share to be able to control the global output and price of oil. To prevent such a shift in market power, a coalition of forces led by the United States intervened militarily and drove Iraqi forces out of Kuwait.

Russia

This chapter examines how Russia’s pursuit of territorial expansion and gray zone tactics in Georgia and Ukraine can be seen as part of its overall strategy to preserve and expand its market power in the natural gas market. As the predominant gas supplier to many European countries, Russia’s state-owned gas company, Gazprom, has price-setting capabilities that the Russian state can exploit to extract rents and exert political leverage internationally. As part of its overall strategy to block potential competitors and secure its control over the transit of gas to European consumers, Russia has perpetuated territorial disputes with neighboring Georgia and Ukraine. Given its high level of economic interdependence with the European Union, Russia has largely refrained from escalating these disputes militarily and has instead relied upon strategic delay to achieve its market power goals.