Economic Incentives, Ideas, and the End of the Cold War

ForsbergEconomic Incentives, Ideas, and the End of the Cold War

Economic Incentives, Ideas, and the End of the Cold War: Gorbachev and German Uniªcation

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Among various explanations of the end of the Cold War, Soviet economic weakness relative to the West has been the factor most often cited.1 It is widely assumed that Mikhail Gorbachev had to yield in negotiations with the West because the Soviet economy was bankrupt. Often repeated is the view that Gorbachev “sold” East Germany to West Germany or, alternatively, that Helmut Kohl “bought” German uniªcation from Gorbachev. In other words, the “price” for Gorbachev’s acceptance of German uniªcation and Germany’s membership in the North Atlantic Treaty Organization (NATO) was the food aid and loans that Kohl provided to Gorbachev in 1990.2 At ªrst glance, German economic aid to the Soviet Union seems to ªt a materialist liberal explanation that runs against realist assertions of the importance of military power and against the constructivists’ emphasis on new ideas, learning, and identity change. Yet, both realists and constructivists can incorporate the role of German economic aid into their theoretical frame- works. Realists can claim that the efªcacy of the economic incentives de-

1. See especially Stephen Brooks and William C. Wohlforth, “Power, Globalization and the End of the Cold War,” International Security, Vol. 25, No. 3 (Winter 2000/2001), pp. 5–53; and Celeste Wallander, “Western Policy and the Demise of the Soviet Union,” Journal of Cold War Studies, Vol. 5, No. 4 (Fall 2003), pp. 137–177. For related debate, see Robert English, “Power, Ideas and New Evi- dence on the Cold War’s End: A Reply to Brooks and Wohlforth,” International Security, Vol. 26, No. 4 (Spring 2002), pp. 70–92; Stephen Brooks and William C. Wohlforth, “From Old Thinking to New Thinking in Qualitative Research,” International Security, Vol. 26, No. 4 (Spring 2002), pp. 93– 111; Margarita Petrova, “The End of the Cold War: A Battle or Bridging Ground between Rationalist and Ideational Approaches in International Relations,” European Journal of International Relations, Vol. 9, No. 1 (March 2003), pp. 115–163; and Jeremi Suri, “Explaining the End of the Cold War: A New Historical Consensus,” Journal of Cold War Studies, Vol. 4, No. 4 (Fall 2002), pp. 60–92. 2. See, for example, Hélène Seppain, “European Integration, German Uniªcation and the Economics of Ostpolitik,” in Heinz Kurz, ed., United Germany and the New Europe (Aldershot, UK: Edward Elgar, 1993), pp. 113–127; Randall Newnham, “The Price of German Unity: The Role of Economic Aid in the German-Soviet Negotiations,” German Studies Review, Vol. 22, No. 3 (October 1999), pp. 421–446; and Randall E. Newnham, “More Flies with Honey: Positive Economic Linkage in Ger- man Ostpolitik from Bismarck to Kohl,” International Studies Quarterly, Vol. 44, No. 1 (March 2000), pp. 73–96. Journal of Cold War Studies Vol. 7, No. 2, Spring 2005, pp. 142–164 © 2005 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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pended on the underlying power structure, deªned primarily in military terms, and constructivists can argue that the economic aid was a means to communicate changing identities. In other words, to see the economic aid merely as a “purchase” is to take a narrow view of the possible role of economic incentives. In this article, I will elaborate on the constructivist perspective. By focus- ing on the role of economic incentives, I will demonstrate the crucial role of ideas in shaping the “power” of material factors. My aim in this article is not to assert that German economic aid alone was a key to German uniªcation and consequently to the end of the Cold War,3 but that it was important enough to merit special attention. Soviet acceptance of German uniªcation and of German membership in NATO can be seen as the culmination of the rapprochement leading to the end of the Cold War. To assess the relative importance of different factors contributing to the end of the Cold War, it is necessary to analyze concrete decisions. It is one thing to acknowledge that material constraints “forced” the Soviet Union to change the basic course of its foreign policy, but it is quite another to explain crucial decisions. Regard- ing German uniªcation and, in particular, the acceptance of uniªed Ger- many’s membership in NATO, Gorbachev had a choice: he could have acted otherwise. At the time, both German and U.S. decision-makers were unsure about what would happen if Gorbachev agreed to uniªcation only on the condition of neutrality.4 After all, explanatory puzzles remain in the main- stream realist account of the solution to the German question. If Soviet de- cline drove Gorbachev’s foreign policy concessions, why did the Germans offer Moscow so many expensive economic incentives? Although the role of economic incentives is often downplayed by the key decision-makers of the time—not least by Gorbachev himself—other former ofªcials stress that “money” is what forced the Soviet Union to abandon East Germany.5 Most scholars who have studied the case in greater detail accord some importance to the economic dimension.6 Even though it was not neces-

3. Kevin Clements, “Carrots Were More Important than Sticks in Ending the Cold War,” in Ralph Summy and Michael E. Salla, eds., Why the Cold War Ended: A Range of Interpretations (Westport, CT: Greenwood Press, 1995), ch. 16. On the effectiveness of positive inºuence methods see, for example, David Baldwin, ParadoxesofPower(Oxford: Basil Blackwell, 1989); and Eileen Crumm, “The Value of Economic Incentives in International Politics,” Journal of Peace Research, Vol. 32, No. 3 (August 1995), pp. 313–330. 4. See, for example, Jack F. Matlock Jr., Autopsy on an Empire: The American Ambassador’s Account of the Collapse of the Soviet Union (New York: Random House, 1995), p. 387; and William C. Wohlforth, ed., Cold War Endgame: Oral History, Analysis, Debates (University Park, PA: Pennsylvania States University Press, 2003), ch. 2. 5. This includes the former Soviet Foreign Ministry ofªcial Sergei Tarasenko. See Wohlforth, ed., Cold War Endgame, p. 70. 6. Philip Zelikow and Condoleezza Rice name thirteen variables that were part of the diplomatic pro-

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sarily the overriding factor, it is seen as an essential part of the causal chain that led to the end of the Cold War. Yet, as William Wohlforth and Nina Tannenwald stress in the introduction to this special issue of the journal, historical research showing that something was “important” does not, as such, refute or conªrm any theory.7 The crucial question is what the role of economic incentives was in the end of the Cold War. Even if we agree that economic aid mattered, the second and more fundamental question is, how did it matter? This question has so far been given only scant attention in the theoretical literature. The constructivist emphasis on the importance of ideas does not dimin- ish even if the claim about the relationship between economic incentives and identity change is shown to be wrong. Ideas matter in the typical realist and liberal interpretations because the role of economic aid depends on its mean- ing in a wider interpretive framework. Brute material forces explain relatively little in the social world. A simple act such as a “purchase” involves normative

cess leading to Gorbachev’s acceptance of German uniªcation and its membership in NATO. Limited ªnancial aid from Germany and promises to develop ties with and deliver assistance to Russia are among them. Philip Zelikow and Condoleezza Rice, Germany Uniªed and Europe Transformed: A Study in Statecraft, 2nd ed. (Cambridge, MA: Harvard University Press, 1997), p. viii. Rafael Biermann, in turn, lists seven motives for Gorbachev’s concession. One of them is the foundation of a new German Russian partnership, and in Biermann’s view the German “Jumbo-Credit” in May 1990 and the payment of billions toward the withdrawal of the troops showed that the Germans were pre- pared to help Gorbachev. Rafael Biermann, Zwischen Kreml und Kanzleramt: Wie Moskau mit der deutschen Einheit rang (Paderborn, Germany: Schöningh, 1997), p. 781. In the view of Stephan Bierling, “uniªcation would not have been achievable without the large economic concessions of the Federal Republic government.” See Stephan Bierling, Wirtschaftshilfe für Moskau: Motive und Strategien der Bundesrepublik Deutschland und der USA 1990–1996 (Paderborn, Germany: Schöningh, 1998), p. 327. Angela Stent contends that “economic factors, though not decisive, certainly inºuenced Gorbachev and Shevardnadze.” Angela Stent, Russia and Germany Reborn: Uniªcation, the Soviet Collapse and the New Europe (Princeton, NJ: Princeton University Press, 1999), p. 146. James Davis and William Wohlforth discuss material incentives, ideas, domestic politics, and leadership as four generic ways of explaining German uniªcation. They argue that at the time of crucial negotiations both East Berlin and Moscow were seeking increased ªnancial favors from Bonn and that this re- duced their bargaining leverage. James W. Davis and William C. Wohlforth “German Uniªcation,” in Richard K. Herrmann and Richard Ned Lebow, eds., Ending the Cold War: Interpretations, Causation, and the Study of International Relations (New York: Palgrave MacMillan, 2004), p. 137. On the diplo- macy of German uniªcation, see also Alexander von Plato, Die Vereinigung Deutschlands—Ein weltpolitisches Machtspiel: Bush, Kohl Gorbatschow und die geheimen Moskauer Protokolle (Berlin: Ch. Links, 2002); Werner Weidenfeld, Aussenpolitik für die deutsche Einheit: Die Entscheidungsjahre 1989/ 90 (Stuttgart: Deutsche Verlags-Anstalt, 1998); Hans-Hermann Hertle, Der Fall der Mauer: Die unbeabsichtigte Selbstauºösung des SED-Staates, 2nd ed. (Opladen, Germany: Westdeutscher Verlag, 1999); and Charles S. Maier, Dissolution: The Crisis of Communism and the End of East Germany (Princeton, NJ: Princeton University Press, 1997). 7. See also Colin Elman and Miriam Fendius Elman, eds., Bridges and Boundaries: Historians, Political Scientists and the Study of International Relations (Cambridge, MA: MIT Press, 2001); William C. Wohlforth, “Reality Check: Revising Theories of International Politics in Response to the End of the Cold War,” World Politics, Vol. 50, No. 4 (July 1998), pp. 650–680; and Caroline Kennedy-Pipe, “In- ternational History and International Relations Theory: A Dialogue beyond the Cold War,” Interna- tional Affairs, Vol. 76, No.4 (October 2000), pp. 741–754.

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and interpretative conceptualization. In other words, what are seen as power resources and how these resources are converted into actual inºuence depend partly on ideational structures: power and interests are not idea-free baselines. Constructivist theorizing not only reinterprets the realist and liberal explanations by showing their dependence on ideational constructions; it also adds a separate explanation of the events that differs from the realist and liberal explanations by enlarging the framework of possible interpretations.8 In bringing the constructivist position to bear, one must show the difference ideas make. A constructivist analysis of the economic incentives Germany provided to the Soviet Union is important for three reasons. First, the economic incentives were signiªcant as trust-building measures. This interpretation gives only partial support to the theses of “the West won the Cold War” and the “rational exchange of quid pro quo.” Neither Soviet weakness nor the existence of mutual beneªts alone can account for the deal. The parties needed to establish a shared understanding of a future partnership for the economic incentives to work. Second, the analysis will contribute to the application of constructivist theory as it has developed within the ªeld of international relations (IR). The question of achieving political change through changes in identities lies at the core of the constructivist theory. For many constructivists the end of the Cold War is a primary example of such an interaction process. But constructivist explanations of the end of the Cold War have not attributed much importance to economic aid even though gifts and rewarding can be seen as basic means through which social relationships are formed and transformed.9

8. Alexander Wendt, Social Theory of International Politics (New York: Cambridge University Press, 1999). See also Wendt’s reply to his critics, Alexander Wendt, “On the Via Media: A Response to the Critics,” Review of International Studies, Vol. 26, No. 1 (January 2000), pp. 165–180. On the constructivist view of the role of ideas, see also Ronald Jepperson, Peter Katzenstein, and Alexander Wendt, “Norms, Identity and Culture in National Security,” in Peter Katzenstein, ed., The Culture of National Security: Norms and Identity in World Politics (New York: Columbia University Press, 1996), ch. 2; Emanuel Adler, “Seizing the Middle Ground: Constructivism in World Politics,” European Jour- nal of International Relations, Vol. 3, No. 3 (September 1997), pp. 319–363; Jeffrey Checkel, “The Constructivist Turn in International Relations Theory,” World Politics, Vol. 50, No. 2 (January 1998), pp. 324–348; Ted Hopf, “The Promise of Constructivism in International Relations Theory,” Interna- tional Security, Vol. 23, No. 1 (Summer 1998), pp. 171–200; and Stefano Guzzini, “A Reconstruction of Constructivism in International Relations,” European Journal of International Relations, Vol. 6, No. 2 (June 2000), pp. 147–182. 9. For example, Thomas Risse, who defends constructivist theory and emphasizes the role of communication, argues that “there is no evidence that the German loan guarantee was crucial in the Soviet decision to accept rapid uniªcation in NATO.” Yet, he conceptualizes the economic incentives as “exchange for cash” or “bribery” and not from the perspective of constructivist theory. Thomas Risse, “The Cold War’s Endgame and German Uniªcation,” International Security, Vol. 21, No. 4 (Spring 1997), pp. 159–185. Andrew Bennett, who emphatically but critically reviews Risse’s account of trust

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Third, and more generally, the theoretical framework developed here will offer a broader understanding of the mechanisms of change in international relations and help to reªne our understanding of economic aid policies. It will show how the inºuence of economic power depends on the underlying and attached ideational constructions, and how the practices themselves shape these constructions. To gain a more comprehensive understanding of rewarding practices in international politics, we need to go beyond exchange theories based on rational choice. I will justify my claims about the importance of ideas in three steps: ªrst, by making them theoretically plausible; second, by analyzing the views of par- ticipants and their behavior; and third, by testing them on the basis of a counterfactual analysis.10 Accordingly, in the ªrst section below I distinguish between economic incentives as face-savers, payments, and signals and show in theoretical terms why, on matters dealing with national security between potential enemies, economic incentives are likely to be the most effective mechanism for communicating signals about changing interests and identities. The second section examines the evidence on the case itself, showing how the power of economic incentives in the negotiations over German uniªcat- ion depended less on their material value than on their symbolic value. The evidence suggests that the ability of economic incentives to assure Gorbachev that there was a prospect of true partnership with Germany in particular and the West in general was more important than their direct economic utility. The third section presents a counterfactual comparative analysis of Japan’s un- successful attempts to link economic aid to the return of the four disputed Kurile Islands. The case is crucial because any analysis that tries to explain why the Cold War ended in Europe should be able to account why the stale- mate continued in East Asia. With due regard for the important differences between the two cases, the comparison effectively illustrates the critical role of ideas in determining the effect of economic incentives on behavior and thus on the disparate outcomes.

building with the help of cognitive theories, accepts his view that the economic incentives were mere sweeteners. Andrew O. Bennett, “Trust Bursting Out All Over: The Soviet Side of German Uniªca- tion,” in Wohlforth, ed., Cold War Endgame, p. 187. For constructivist explanations of the end of the Cold War, see also Brian Federking, “Resolving Security Dilemmas: A Constructivist Explanation of the Cold War,” International Politics, Vol. 35, No. 2 (June 1998), pp. 207–232. On the symbolic aspects of rewarding and gift giving, see Helmuth Berking, Sociology of Giving (London: Sage, 1999). 10. For methodological discussion of ideas-as-causes, see Albert Yee, “The Causal Effects of Ideas in Policies,” International Organization, Vol. 50, No. 1 (Winter 1996), pp. 69–108; Jeffrey Checkel and Andrew Moravcsik, “A Constructivist Research Program in EU Studies?” European Union Politics, Vol. 2, No. 2 (June 2001), pp. 219–249; and Craig Parsons, “Showing Ideas as Causes: The Origins of the European Union,” International Organization, Vol. 56, No. 1 (Winter 2002), pp. 47–84.

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How Ideas Construct Economic Incentives

Economic power depends on ideas—not only conceptions of what is valuable but also rules and norms that tell how items of value can be exchanged. For example, the inºuence of economic aid on donors and recipients depends on whether they view the aid as a face-saver, a payment, or a signal. In the ªrst conception (i.e., aid as a face-saver), economic aid is effective only if enough military power supports it; in the second, economic aid is itself the key vehi- cle; and in the third, economic aid helps because it establishes trust and a sense of partnership between the parties. Although each of these conceptions is primarily associated with a major school of IR theory, each can also be understood from multiple perspectives. The ªrst two conceptions converge in generating the expectation that, on national security issues involving potential enemies, economic aid is not a perfect face-saver, and the possibilities of using economic aid as a form of payment are severely restricted. Delivering economic aid is, by contrast, one means that an adversary may use to signal partnership, though whether it actually transforms a relationship is always questionable.

Economic Incentives as Face-Savers From the realist perspective the general efªcacy of coercive methods does not mean that positive means of inºuence are futile. They may play an important role when combined with coercive methods. For example, Arnold Wolfers argued that rewarding methods can be useful in some situations but are not generally as effective as coercive power. The situations that favor positive inducements, he claimed, are rare and are related to questions of minor importance. In Wolfers’s view, changes are especially difªcult to achieve on questions related to territory and national security. Wolfers conceded, however, that in cooperative contexts, especially when demands are made between friendly countries, non-coercive inºuence can outstrip coercive power.11 Simi- larly, when addressing the potential role of economic incentives vis-à-vis the Soviet Union, William Kaufmann was skeptical of their efªcacy but concluded that we are mistaken if we assume that concessions are not worth making at all. “In conjunction with our other weapons,” he argued, “they can give us reasonably powerful means of inºuencing the opponent’s calculations of cost and risk.”12

11. Arnold Wolfers, “Power and Inºuence: The Means of Foreign Policy,” in Arnold Wolfers, Discord and Collaboration: Essays on International Politics (Baltimore: Johns Hopkins Press, 1962), p. 107–108. 12. William Kaufmann, “The Requirements of Deterrence,” in William Kaufmann, ed., Military Pol- icy and National Security (Princeton, NJ: Princeton University Press, 1956), p. 32.

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Other realists also assume that rewarding modes of inºuence do not work in crisis situations where some important issues are at stake. Glenn Snyder and Paul Diesing maintain that a distinctive feature of crisis bargaining is the prominence of coercion. This is so, they argue, because crises usually develop around issues that have a redistributive character, and the resister is likely to stand ªrm because he has something to lose.13 In those cases, exchange is impossible and economic incentives can work only if they are backed by military power. As E. H. Carr wrote, “if dollars were a humanitarian substitute for bullets, they could and would be reinforced by bullets in the case of political need.”14 What is the purpose of economic rewards from a realist perspective? The importance of positive sanctions, in the realist conception, depends on their use as face-saving gestures.15 Face-savers are needed because the country that backs down needs to show its resolve. Face-savers are not primary causes in the achievement of the resolution but are important in facilitating agreement under coercion.16 According to Snyder and Diesing, the winner provides face- savers to the loser “not so much because he has to, to gain the ªnal victory, but to avoid unnecessary embitterment of future relations with the adversary.”17 In situations in which a solution is likely to be achieved anyway, positive sanctions may smooth the way for an honorable retreat. In a situation in which the outcome would otherwise be seen as a relationship of superior power, face-savers transmit an image of a more balanced relationship. Although the overwhelming power of the opponent would be a rational reason to yield, face-savers are needed to uphold the reputation of the other party. The upshot is that face-savers are special kinds of rewards because of their symbolic value. In sum, for realists, economic incentives can be effective when they are backed by coercive force. Under the rationalist version of realism, economic promises and rewards give an additional reason to yield. Under the constructivist version of realism, these rewards help to overcome the problems associated with the norm requiring states to be resolute.

13. Glenn Snyder and Paul Diesing, Conºict among Nations: Bargaining, Decision Making, and System Structure in International Crises (Princeton, NJ: Princeton University Press, 1977), p. 26. 14. E. H. Carr, Twenty Years’ Crisis, 1919–1939 (London: MacMillan, 1964), p. 126. 15. On face-saving, see Bert Brown, “Face-Saving and Face-Restoration in Negotiation,” in Daniel Druckmann, ed., Negotiations: Social-Psychological Perspectives (London: Sage 1977), pp. 275–299. 16. Roger Fisher, William Ury, and Bruce Patton, Getting to Yes: Negotiating an Agreement without Giving In, 2nd ed. (London: Business Books, 1991), p. 29. 17. Snyder and Diesing, Conºict among Nations, p. 256.

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Economic Incentives as Payments The second possibility is to see economic incentives simply as payments or, more broadly, as elements of a reciprocal exchange. No coercion is needed in this case because exchange is based on mutual beneªt. According to liberal logic, rewarding should be effective if the offers are more attractive than the alternatives. Although the degree to which cooperation is “voluntary” depends on the range of alternatives, liberals argue that the best way to inºuence the other side is to increase the number of alternatives rather than restrict them. Thus, from the liberal perspective, anything can be exchanged when there is a mutuality of interests, and the greatest problem liberals see is how to adjust the values associated with the objects to be exchanged so that the offers will be credible. Klaus Knorr writes: “Whether or not a reward will be offered and accepted depends on each party’s estimate of whether the exchange is advantageous and also on the actor’s estimate of whether the expected beneªt will actually be forthcoming.”18 Gerald Sorokin concurs: “States are more likely to accept rewards when the rewards are valuable and the demands are small.”19 No doubt, many exchanges between states are characterized in these terms. According to Robert Keohane, for example, speciªc reciprocity, which refers to situations in which certain partners exchange items of equivalent value speciªed in terms of the rights and duties of particular actors, plays an important role in world politics.20 Yet, the international system is not a market in which political issues can be traded the way equities are on the stock exchange. As Keohane notes, the problem for speciªc reciprocity is that the measurement of equivalence is often impossible to carry out without market prices that would show whether an exchange involves equivalent values. Therefore, speciªc reciprocity is not a sure-ªre recipe for promoting cooperation.21 This limitation decreases the scope of exchange despite the existence of mutual beneªt. To remedy this problem, liberals tend to stress diffuse reciprocity, which means that the exchange does not have to be as rigorously framed as in the case of speciªc reciprocity.22 Diffuse reciprocity makes multilateral arrange-

18. Klaus Knorr, Power and Wealth: The Political Economy of International Power (New York: Basic Books, 1971), p. 21. 19. Gerald Sorokin, “The Role of Rewards in Conºictual International Interactions,” Journal of Conºict Resolution, Vol. 40, No. 4 (December 1996), p. 676. 20. Robert Keohane, “Reciprocity in International Relations,” in Robert Keohane, International Insti- tutions and State Power (Boulder: Westview Press, 1988), p. 137. 21. Ibid. 22. Ibid. Keohane draws on the difference between economic and social exchange as outlined in Peter Blau, Exchange and Power in Social Life (New York: John Wiley & Sons, 1964).

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ments viable, and it allows for a time lag in the reciprocation. Overall, the idea of diffuse reciprocity is that people do not keep track of the inputs of others. But there is no claim that such reciprocal relationships necessarily evoke a desire to increase others’ welfare. Diffuse reciprocity becomes possible if people are following the rule of reciprocity.23 The parties are not calculating whether it is better to reward or coerce; it is a matter of obligation rather than rational choice. Reciprocity fos- ters cooperation because it diminishes the need to show resolve.24 Yet, people do not mechanically reciprocate conciliation and defection. Their decision is mediated by their analysis of what the other side did and why it did it. As Deborah Larson has contended, perceived motives are critical in determining whether states reciprocate concessions.25 The players may not agree on whether an act is positive or negative or on how to match the acts of others.26 Although reciprocity can be seen as a powerful norm that is recognized almost universally, its mere existence does not necessarily lead to cooperation if the relationship is perceived as competitive.27 In short, reciprocal exchange can in many circumstances work as a strategy for achieving objectives in world politics. Normally the logic of exchange is strong enough to spark substantial cooperation, but a hostile environment can cause immense problems for any substantial deals; it is especially unlikely that adversaries would be able to exchange issues that are closely linked to national security.

Economic Incentives as Communication Economic incentives can also be seen as forms of communication in a relationship that itself can be reproduced and transformed by strategic moves, such as giving economic aid or threatening the use of force. Noel Kaplowitz stresses the importance of taking into account “not only the inºuence of an actor’s strategy upon the adversary’s tangible costs and beneªts, but also upon his self-images and enemy perceptions, all of which feed back into and deter-

23. Deborah Welch Larson, “The Psychology of Reciprocity in International Relations,” Negotiation Journal, Vol. 4, No. 3 (July 1988), pp. 281–301. 24. Robert Jervis, “Security Regimes,” in Stephen Krasner, ed., International Regimes (Ithaca: Cornell University Press, 1983), pp. 182–183. 25. Larson, “The Psychology of Reciprocity in International Relations,” p. 282. 26. Robert Jervis, “Realism, Game Theory, and Cooperation,” World Politics, Vol. 40, No. 3 (April 1988), pp. 317–349. 27. See, for example, Juan Carlos Martinez Coll and Jack Hirshleifer, “The Limits of Reciprocity: So- lution Concepts and Reactive Strategies in Evolutionary Equilibrium Models,” Rationality and Society, Vol. 3, No. 1 (January 1991), pp. 35–64.

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mine his strategy.”28 In Han Dorussen’s words, “the value of incentives is their ability to alter the preferences and perceptions of the recipients as well as the sender. These psychological beneªts go beyond the speciªc bargain or quid pro quo but are often the real objectives of the states involved.”29 Similarly, James Davis concludes that “through the iterative process of signaling—of threatening and promising—actors’ goals and interests are formed and transformed.”30 Because relationships are formed by interaction, the parties’ interests can be crucially shaped by it. Constructivists like Alexander Wendt have suggested that practices of rewarding can reduce the competitive dimension of identities, allowing for greater cooperation.31 Wendt’s idea is often likened to Charles Osgood’s strategy of Graduated Reciprocation in Tension-Reduction (GRIT),32 which, as Osgood put it, amounts to “the application of the Golden rule on an international scale.”33 Through positive unilateral acts, this approach tries to reduce international tension and foster an atmosphere of mutual trust that will facilitate negotiations on critical political and military issues. The basic point is that the unilateral initiatives must be continued over a considerable period, regardless of the lack of immediate reciprocation or the occurrence of adverse events, in order to achieve the assumed ends.34 It follows that the efªcacy of economic incentives as a form of communication differs from their efªcacy as a face-saver or a payment. In particular, the amount of the inducements as such is not as important as their quality. Be- cause fast responses show best the sincerity of the actor, they make cooperation more likely. Unconditional rewards are better because otherwise the signals are interpreted as part of an offensive posture. The rewards must be unambiguous—big enough to be substantial but perhaps not so big that the opponent would become suspicious. As C. R. Mitchell has remarked, “the

28. Noel Kaplowitz, “Psychopolitical Dimensions of International Relations: The Reciprocal Effects of Conºict Strategies,” International Studies Quarterly, Vol. 28, No. 3 (December 1984), pp. 373–406. 29. Han Dorussen, “Mixing Carrots with Sticks: Evaluating the Effectiveness of Positive Incentives,” Journal of Peace Research, Vol. 38, No. 2 (May 2001), pp. 251–262. 30. James Davis Jr., Threats and Promises: The Pursuit of International Inºuence (Baltimore: Johns Hopkins University Press, 2000), p. 159. 31. Alexander Wendt, “Anarchy Is What States Make of It,” International Organization, Vol. 46, No. 2 (Spring 1992), p. 422. See also Friedrich Kratochwil, International Order and Foreign Policy: A Theo- retical Sketch of Post-War Politics (Boulder: Westview Press, 1978), pp. 116–117. 32. Wendt himself regards his position as a constructivist reading of Axelrod’s tit-for-tat theory. See Wendt, “Identity and Structural Change in International Politics,” in Yosef Lapid and Friedrich Kratochwil, eds., The Return of Culture and Identity in IR Theory (Boulder: Lynne Rienner, 1996), p. 57. 33. Charles Osgood, An Alternative to War or Surrender (Urbana: University of Illinois Press, 1962). 34. Ibid., p. 103.

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more an action renders an initiator obviously vulnerable, or places him in a risky situation vis-à-vis the target, the more likely that action will be seen as genuinely conciliatory by the target.”35 When used as signals, economic incentives may help change not only the interests but also the identities of the other side. They can develop trust and goodwill between the actors so that the interests of the other are taken into account. Economic incentives can thus break the interpretative framework of mutual hostility and establish a cooperative relationship through empathy and mutual role-taking. These different conceptualizations of economic aid are not mutually ex- clusive. Although the most relevant actors deªning the nature of the aid are the ones directly involved in the process as decision-makers, other partici- pants, observers, and domestic audiences may challenge and resist the original interpretations. Even the decision-makers themselves can have overlapping and almost contradictory views of the process. Hence, looking at the verbal narratives and assessments of the process is not enough. A solid interpretation must be sustained by evidence of corresponding behavior. If the economic incentives serve as face-savers, coercion should take place; if they are payments, bargaining should follow; and if they are signals of a closer partnership, discussion about the changing nature of the relationship should occur. In the case of German uniªcation the empirical question is whether Germany’s economic incentives to the Soviet Union were face-savers in circumstances in which the outcome was already a fait accompli, payments for a balanced deal, or signals that helped amalgamate understandings toward partnership.

Economic Incentives in German Unification

During the eleven months from the opening of the Berlin wall in November 1989 to the signing of the two-plus-four agreement in September 1990, West Germany used economic incentives several times in its relations with the Soviet Union. From the beginning Kohl assured Gorbachev that he was will- ing to support the economic reforms of the Soviet Union. In February 1990, Bonn quickly decided to grant food aid worth 220 million Deutschmarks (DM) to relieve the shortage in the Soviet Union. In ªnancial negotiations between Bonn and Moscow in the spring of 1990, the West Germans pledged to guarantee that the Soviet Union would not lose anything because of uni- ªcation. A payment of 1.25 billion DM was agreed to cover the costs of

35. C. R. Mitchell, “A Willingness to Talk: Conciliatory Gestures and De-escalation,” Negotiation Journal, Vol. 7, No. 4 (October 1991), pp. 405–429.

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Soviet troops in the German Democratic Republic (GDR). In May 1990, Shevardnadze secretly asked whether the West German government would provide guarantees for a commercial loan of 20 billion DM. The German government reacted immediately, and West German banks granted the Soviet Union a loan of 5 billion DM, which was delivered in July. In September 1990, Gorbachev presented a bill of 35 billion DM to the Germans and de- manded economic assistance. Kohl was reluctant to contribute the amount Gorbachev proposed, but he agreed to a compromise that would oblige Germany to pay 12 billion DM plus an interest-free credit of 3 billion DM. A smaller part of that assistance was used as compensation to the Soviet Union for its troops stationed in the GDR, as well as for their transportation and vo- cational rehabilitation. The German government allocated 8 billion DM for a civilian housing program in the Soviet Union.36 If Germany was able to inºuence the Soviet Union by means of economic incentives, how did this really happen? For realists, the signiªcance of economic incentives lies not in their ultimate power in ensuring the success of negotiations but in their role as face-savers. Some observers interpreted Kohl’s economic promises and rewards to Gorbachev in this vein. James Goldgeier has argued that “despite the West’s overwhelming victory in the negotiations over Germany’s future, the United States and Germany did see the need to offer Gorbachev a face-saver for the capitulation.” German economic assistance, according to Goldgeier, served this function.37 Yet, the case of German uniªcation revealed a paradox in the use of economic rewards for face-saving purposes. Receiving economic beneªts instead of military concessions is seen as dishonorable. For Gorbachev the core problem was that he not be regarded as selling anything, because such a perception would badly damage his domestic reputation and make the Soviet Union appear weak. This paradox aside, realist claims about the importance of face-savers are, in principle, accurate. Although Gorbachev was not forced to yield, he needed to justify to his domestic critics the “concessions” in his policy toward Ger- many. An agreement on the reduction of German military power fulªlled that purpose. Because Gorbachev had to avoid the impression that money played any role in the deal, economic incentives could not serve as face-savers that would pave the way for an “honorable retreat.” Gorbachev realized that he would need to defend himself against allegations that he sold out the USSR’s “victory” in World War II, and therefore no reference to the economic aid was

36. See, for example, Horst Teltschik, 329 Tage: Innenansichten der Vereinigung (Berlin: Siedler, 1991), pp 28, 100, 226; Bierling, Wirtschaftshilfe für Moskau; and Newnham, “The Price of German Unity.” 37. James Goldgeier, Leadership Style and Soviet Foreign Policy: Stalin, Khrushchev, Brezhnev, Gorbachev (Baltimore: Johns Hopkins University Press, 1994), p. 110.

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included in the press release of the Caucasus meeting.38 Gorbachev also does not mention the role of economic assistance in his memoirs and instead emphasizes that he was able to insist on a signiªcant reduction of German armed forces.39 Because the need to obtain economic assistance was nevertheless crucial to Gorbachev, the view that the agreement between the Soviet Union and Germany was an exchange based on mutual beneªt has some obvious merit. As Stephan Bierling argues, Gorbachev wanted to receive the maximal ªnancial compensation for his cooperative stance on the issue.40 Exchange theorists can also easily explain why the deal was lucrative to both. According to the theory of marginal utility, the relative value of the economic resources that were transferred was higher for the poorer side and lower for the richer. Germany was in a stronger position and could negotiate a deal that reºected its interests, but the deal was still mutually beneªcial. The problem with this exchange argument is that the amount of economic incentives was hardly the key to the settlement. In 1988 Gorbachev had already received a much bigger offer from German industrial circles. They promised to deliver 500 billion DM to the Soviet Union in various forms of commodities if Gorbachev acquiesced in German uniªcation.41 The reason this offer did not have any inºuence is not that Gorbachev feared domestic opposition or that the sum was too small but that it simply did not seem serious at the time. The amount of the economic assistance Gorbachev ultimately accepted was less signiªcant than the interpretative context within which things were exchanged. The view that German economic aid was merely a payment is also belied by the dearth of evidence of direct bargaining between Kohl and Gorbachev. Although the Soviet Union tried to receive a substantial amount of German assistance, this was not the main issue in the crucial phase of negotiations. As Hannes Adomeit has pointed out, the economic and ªnancial aspects of Ger- man uniªcation were treated in a rather vague and haphazard fashion, almost as if economics did not play an important role in Gorbachev’s consent to uniªcation.42 When Gorbachev and Kohl met in Stavropol (Gorbachev’s home town in southern Russia) in July 1990 to set the terms of German uniªcation, the ªnancial arrangements were left to the two sides’ ªnance min-

38. von Plato, Die Vereinigung Deutschlands, p. 393. 39. Mikhail Gorbachev, Memoirs (London: Doubleday, 1996). 40. Bierling, Wirtschaftshilfe für Moskau, p. 318. 41. Ekkehard Kuhn, Gorbatschow und die deutsche Einheit: Aussagen der wichtigsten russischen und deutschen Beteiligten (Bonn: Bouvier, 1993), p. 45. 42. Hannes Adomeit, “Gorbachev, German Uniªcation, and the Collapse of Empire,” Post-Soviet Af- fairs, Vol. 10, No. 3 (July/September 1994), pp. 197–230.

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isters. The two principals—Kohl and Gorbachev—focused on their mutual partnership and the general terms of their future cooperation. During the three-day meeting, speciªc ªgures for the amount of aid rarely came up. Real bargaining on the sum of the German aid took place only after the two sides reached agreement in Stavropol. When Kohl received the request for 36 billion DM in September, he responded with an offer of 8 billion and then agreed to provide 12 billion plus 3 billion of credit. This compromise was achieved through tough negotiations that Adomeit called “two of the most expensive telephone conversations in recent Russian German history.”43 The notion of a pure exchange is therefore insufªcient to explain the nature of the link between German economic aid to the Soviet Union and Gorbachev’s acceptance of German uniªcation and Germany’s membership in NATO. To understand how the German economic assistance was con- nected to the agreement, we need to examine the promises of future cooperation. Gorbachev explained ten years after the fall of the Berlin Wall that in the political circumstances of 1990 he did not present (and could not have presented) Germany with uniªcation. Rather than depicting the agreement as a mere business deal, he stressed that the most important element was the pro- vision for extensive future cooperation.44 From this perspective, economic incentives were largely a form of diffuse reciprocity. What was exchanged was not deªned clearly, but the idea of common future cooperation loomed large and Gorbachev was able to count on long-term beneªts. Gorbachev’s aide Anatoly Chernyaev believes that “economic support for perestroika would not have been limited to ‘moments of German gratitude’ but would have become a mutually advantageous collaboration on a broad scale.”45 Although Gorbachev had to fulªll his obligation to reciprocate, he did not believe that his acceptance of German uniªcation and its membership in NATO was any direct reciprocation. Gorbachev’s way of handling this issue at the Stavropol meeting demonstrates the point. According to Adomeit, “Kohl reiterated the theme that that to him economic and ªnancial assistance was an integral part of the total package. Gorbachev spoke about the great economic opportuni- ties that existed for the Federal Republic in the Soviet Union and said that the USSR was not concerned about (economic) dependency on Germany.”46 Gorbachev still fully believed that the Soviet Union was a powerful country

43. Adomeit, “Gorbachev, German Uniªcation, and the Collapse of Empire,” p. 225. 44. “Gipfelgespräch: Wie es wirklich war,” interview with George H. W. Bush, Mikhail Gorbachev, and Helmut Kohl, Welt am Sonntag (Berlin), 14 November 1999, p. 3. 45. Anatoly Chernyaev, “The Uniªcation of Germany: Political Mechanisms and Psychological Ste- reotypes,” Russian Politics and Law, Vol. 36, No. 4 (July/August 1998), p. 24. 46. Hannes Adomeit, Imperial Overstretch: Germany in Soviet Policy from Stalin to Gorbachev (Baden- Baden: Nomos, 1998), p. 548.

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that would be able to modernize its economy and pay back its debt to Ger- many after a period of necessary restructuring. Gorbachev claimed he would never have accepted political dependence in return for economic credits: “If we take something, we will pay for it.”47 Because exchange that rests on ideas of future cooperation requires a considerable amount of trust, the economic rewards and promises can also be seen as signals that help to forge a bond of common interest. Gorbachev himself claimed that a frank atmosphere and mutual understanding on a variety of issues were essential in resolving the German question. The delivery of aid without strings attached strengthened the idea of a communal relationship and increased the feeling of trust. This is how Kohl and his aides conceived the effects of the economic assistance. Kohl later wrote: “The good relationship we had established in Bonn in 1989 proved to be watertight because I subsequently had several occasions in which I was able to redeem promises. [Gorbachev] knew that I was somebody who keeps his word and on whom he could rely in difªcult situations.”48 Kohl and his chief foreign policy adviser, Horst Teltschik, regarded the Soviet request for aid as a good sign because it showed that Gorbachev was not seeking conºict. They wanted to reciprocate and use the economic aid consciously to improve the atmosphere. However, the German leaders did not want to exploit the situation in a blatant manner, which they believed would be counterproductive.49 Instead, they tried to make their expectations of reciprocal gestures from Moscow as explicit as they could without proposing a direct deal. This was especially the case when Horst Teltschik negotiated over the conditions of the German credit to the Soviet Union. Teltschik later re- called that Soviet acceptance of Germany’s NATO membership was clearly part of the package:

At the discussion with Gorbachev my task was to make clear that the chancellor was ready to give the credit. But we wanted to get something in return for it. (Laughter.) And I could not say this openly. I mean, the most difªcult aspect of this discussion was to let the partner know that we regarded the credit as a part of the entire solution without causing annoyance that we said it and without causing bad feelings. That was my task.50

47. von Plato, Die Vereinigung Deutschlands, p. 339. All translations here are by the author. 48. Helmut Kohl, Ich wollte Deutschlands Einheit (Berlin: Propyläen, 1996), p. 280. 49. This view was also shared by Foreign Minister Hans-Dietrich Genscher. See Hans-Dietrich Genscher, Erinnerungen (Berlin: Siedler, 1995), pp. 829–830. 50. Cited in von Plato, Die Vereinigung Deutschlands, p. 338. See also Horst Teltschik, 329 Tage, p. 221.

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It is not clear whether Gorbachev himself understood the message exactly this way. The protocols of the meeting do not provide a clue. Gorbachev has re- peatedly denied that there was any direct linkage between the credit and the political agreement on German uniªcation. But, as we have seen before, he subscribes to the view that the German economic assistance was important in building mutual conªdence, which was crucial for the political solution. In- deed, his defense was somewhat open-ended: “Some people insinuate that we sold the victory that was achieved with so many sacriªces [in World War II] for the Deutschmark. One must not simplify the connection, but we have to see the reality.”51 This account suggests that explanations of the end of the Cold War depicting Gorbachev as having simply upheld his own principles when he accepted Germany’s membership in NATO are not sufªcient either.52 Gorbachev had introduced new thinking in foreign policy, but Soviet identity—and, with it, Soviet interests—continued to change during the process. They did not transform in a vacuum but as a result of interaction. When Gorbachev was looking for feedback on his vision of a common European home, German economic rewards reinforced his beliefs. Timothy Garton Ash, among others, has hinted at the importance of German aid from this perspective: [I]t would of course be quite absurd to suggest that German unity was bought for 52,000 tonnes of beef. But this was an important and very speciªc signal that the prospect of Germany being Gorbachev’s greatest helper in his embattled attempt to modernize the Soviet Union was made not less but more real by the possibility of German uniªcation.53 The clue to success was that Gorbachev was able to interpret Kohl’s promises and rewards as genuine signs of a changing style of policymaking in Europe based on the idea of shared responsibility. The German promises and rewards were interpreted in this way because of the communicative processes that un- derlay them, but the economic incentives themselves were part of the communicative process. The promises and rewards seemed to offer a totally different way of understanding of how great-power politics was to be conducted in the future. The trust that was established was important because it allowed Gorbachev to separate political from economic issues. Because he assumed

51. Mikhail Gorbachev, Gipfelgespräche: Geheime Protokolle aus meiner Amtszeit (Berlin: Rowohlt, 1993), p. 171. 52. See, for example, Risse, “The Cold War’s Endgame and German Uniªcation.” 53. Timothy Garton Ash, In Europe’s Name: Germany and the Divided Continent (New York: Random House 1992), p. 350.

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that assistance and mutually beneªcial cooperation would be forthcoming, he did not need to ask for “money” directly for his acceptance of German membership in NATO. Gorbachev found economic assistance from Germany valuable because the Soviet Union was facing increasing ªnancial problems. This is hardly a contentious point. But the clue to the success of the German economic incentives was not that Gorbachev saw the credits as a direct payment for a political deal but that he was able to interpret Kohl’s promises and rewards as genuine signs of a changing style of policymaking in Europe and the beginning of a new partnership between the countries. To gauge the difference that this ideational factor made, it helps to examine a contrasting case in which it was absent.

Economic Incentives in the Kuriles Dispute

The Japanese also tried to inºuence Gorbachev with economic incentives at the end of the Cold War. In particular, they tried to use their economic power to resolve the dispute over the four Kurile Islands that had been under Soviet control since the end of World War II. The Japanese linked large-scale aid to progress in peace treaty negotiations over the territorial question. Although the linkage was mainly negative (i.e., Japan was withholding large-scale economic assistance), Japan also tried to use promises of economic aid in a more positive manner.54 Because the purpose of this analysis may be misconceived, let me clarify its validity before moving forward. Some people may object to the comparison because they feel that the cases were entirely different. This is true to a degree, but real-world counterfactuals in open systems are always different in various respects. Historically speaking, however, it was by no means clear in 1989–1990 that it would be easier for the Soviet Union to accept German uniªcation than to return the disputed islands to Japan. Moreover, I do not explain the different outcomes solely by referring to the economic aid. Rather I try to demonstrate that the reason the dynamics were different in the two cases is that the parties attached different meanings to the economic aid.55

54. This narrative is based mainly on Tsuyoshi Hasegawa, The Northern Territories Dispute and Russo- Japanese Relations, Vol. 2, Neither War nor Peace, 1985–1998 (Berkeley: University of California Press, 1998); and Hiroshi Kimura, Distant Neighbours, Vol. 2, Japanese-Russian Relations under Gorbachev and Yeltsin (Armonk, NY: M. E. Sharpe, 2000), esp. pp. 239–255. See also William Nimmo, Japan and Russia: A Reevaluation in the Post-Soviet Era (Westport, CT: Greenwood Press, 1994); and Joachim Glaubitz, Between Tokyo and Moscow: The History of an Uneasy Relationship, 1972 to the 1990s (Lon- don: Hurst & Co., 1995). 55. Randall Newnham makes a parallel point in comparing German and Japanese policies toward the

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German economic aid and promises of future assistance paved the way for Gorbachev’s acceptance of German uniªcation and membership in NATO. By contrast, Japanese attempts to use economic statecraft to settle the long-standing territorial dispute with the Soviet Union were futile and even counterproductive. If the Germans were able to inºuence the Soviet Union with economic aid, why were the Japanese unable to? Or, even more striking, why did the promises of Japanese aid seem to complicate rather than facilitate the solution? Materialist notions of power and self-interest do not seem to offer any clear keys to this puzzle. In terms of military power or economic compatibil- ity, one should not expect any major difference between the German and Jap- anese cases. In materialist terms, the relevant factors are the total amount of the promised aid, the need for assistance, and the credibility of the promises. For ideationalists, by contrast, the relevant factors are how the aid was conceived between the parties and how its delivery would (re)deªne the relationship between the parties. In the cases of German uniªcation and the dispute over the Kurile Islands, there was a clear difference in the role of economic aid in the bilateral relationships and how this role was perceived. The most striking example of Japan’s use of economic statecraft occurred in March 1991, just before Gorbachev’s scheduled visit to Tokyo, when Ichiro Ozawa, the head of the then-ruling Liberal Democratic Party, went to Mos- cow to discuss the territorial issue personally with Gorbachev. He suggested that $26 billion of Japanese aid would be forthcoming if the Soviet Union promised to return the islands, but the attempt failed badly.56 Later the linkage between economic aid and the territorial question was more subtle but still rather overt. In October 1991 the Japanese government declared that, as a special gesture, Moscow would receive $2.5 billion worth of emergency aid, but the decision was only partly implemented.57 The Japanese told Russian leaders that they would provide this “unconditional aid” only after a peace treaty had been concluded.58 In the early 1990s Japanese aid lagged behind Western assistance. Food aid worth some $155,000 was delivered separately to residents of the contested islands. In 1992 only fairly modest direct aid was provided, including $25 million to upgrade safety standards at nuclear power plants, $20 million to help provide a decent wage to nuclear weapons scien-

Soviet Union. Randall Newnham, “A Comparison of German and Japanese Economic Linkage Pol- icies,” in Iliana Zloch-Christy, ed., Eastern Europe and the World Economy: Challenges of Transition and Globalization (Cheltenham, UK: Edward Elgar, 1998), pp. 244–261. 56. Another politician who suggested a purchase of the islands was Shin Kanemaru. See Nimmo, Ja- pan and Russia, p. 79; and Glaubitz, Between Tokyo and Moscow, p. 208. 57. See, for example, Leszek Buszyñski, “Russia and Japan: The Unmaking of a Territorial Settle- ment,” The World Today, Vol. 49, No. 3 (March 1993), pp. 50–54. 58. Nimmo, Japan and Russia, p. 116.

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tists in Russia and Ukraine (who might otherwise have been tempted to seek work abroad), and tons of humanitarian aid worth $150 million to Russia’s Far East regions.59 Private Japanese investments were also minimal, in part because Japanese business executives did not want to be seen as proªting while the islands remained in Russian hands.60 Ozawa’s offer in 1991, however, was large by any measure. The Soviet Union was in desperate need of economic assistance, and Soviet diplomats had hinted to the Japanese that they would like to develop cooperation schemes. Yet, Gorbachev angrily rejected the offer because he regarded a deal over the disputed islands to be impossible. He insisted that Ozawa’s proposal was an affront to the Soviet state.61 If Gorbachev had agreed to the Japanese proposal, he would have been accused of selling the islands. Rumors of con- spiracy circulating in the Soviet press provided a strong interpretative framework for any deal involving economic issues. Consequently, Gorbachev was in a no-win situation. The Soviet press accused the Japanese of believing “that the USSR will inevitably capitulate on the territorial question in exchange for Japanese foreign assistance.”62 Moreover, ofªcials in Moscow believed that the economic promises came not from reliable people but from “political ªgures or Foreign Ministry ofªcials who do not actually have economic power or corresponding material resources.”63 The opposition to territorial concessions became more vocal in 1992 after the Soviet Union had collapsed. Russian leaders and parliamentarians argued that the territorial question should never have been raised at all. For reasons of national pride, hardline commentators were viscerally opposed to the idea of trading what they called Russia’s “sacred land” for promises of increased Japanese aid.64 The Russians stressed that they would not begin their existence as an independent state by abandoning some of their territory. An inºuential Russian industrialist accused Japan of treating Russia “like some kind of Zimbabwe” by trying to coerce it to give up the islands for promises of massive economic aid.65 According to another commentator, “when [Soviet

59. “Japan’s Basic Policy on Relations with the Russian Federation,” Japanese Ministry of Foreign Af- fairs, Tokyo, 13 April 1993. 60. Gerald Segal, Normalizing Soviet-Japanese Relations, RIIA Special Paper (London: Royal Institute of International Affairs, 1991). 61. Hasegawa, The Northern Territories Dispute, Vol. 2, p. 384. 62. Vsevolod Ovchinnikov, “Poishchem reshenie vmeste,” Pravda (Moscow), 10 October 1991, p. 5. 63. S. Agafonov, “Kto popadet v spiski,” Izvestiya (Moscow), 1 November 1991, p. 5. 64. See, for example, Falkenheim Meyer, “Moscow’s Relations with Tokyo: Domestic Obstacles to a Territorial Agreement,” Asian Survey, Vol. 33, No. 10 (October 1993), p. 958. 65. Nimmo, Japan and Russia, p. 150.

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leaders] learned that the Japanese wanted back at least four islands of the Kurile chain, they started hating the Japanese.”66 Another Russian view was that “we should not deceive ourselves into thinking that anyone in Japan will take this as a show of goodwill; instead it is purely a sign of weakness, a concession by a military superpower to an economic superpower, a gesture aimed in the pitiful hope of [gaining] aid in return.”67 Other Russian commentators concurred, describing the Japanese promises of aid as hostile acts that were an insult to Russia.68 In the view of a prominent Japanese specialist, Tsuyoshi Hasegawa, the offers of economic aid in exchange for the islands diminished any prospect of early compromise: “The Japanese government’s change in position was not perceived by the Soviet side as good intentions but rather as a crude maneuver for the sale of the territory.”69 Thus, the Japanese proposals failed not because Japan lacked military capacity in comparison to Germany or because the ªnancial offers were smaller or because Japan’s economy was not strong enough. Nor did Soviet and Russian leaders believe that Japan’s offers stemmed from weakness and that there was no need for Moscow to budge. On the contrary, Soviet and Russian leaders regarded the proposals as threats and concluded that they must not budge. Russian President Boris Yeltsin indicated that Japan should loosen the link between economic assistance and the territorial question. Moreover, he claimed that Japan had been “putting pressure on Russia eco- nomically, politically and psychologically” and thus making it more difªcult to solve the dispute: “The idea of putting pressure on me is no good. More pressure makes it more difªcult to solve problems. That’s the way Russians think.”70 Twice Yeltsin decided to cancel a planned visit to Tokyo because he feared that the Japanese wanted to pressure him. Moscow’s weakness, not its strength, is what prevented the deal. Although it is true that Japan’s economic promises were not entirely credible from Moscow’s standpoint, the lack of credibility cannot be explained by Japan’s objective capabilities. The reason the Japanese rewards lacked credibility in Moscow is that the Japanese evinced a sense of mistrust. The Japanese limited their economic incentives to a direct exchange because they did not expect that cooperation with Moscow would be beneªcial. Soviet

66. Leo Mlechin, “Japanophobia,” Moscow News (Moscow), No. 44 (October 1991), pp. 22–23. 67. Feodor Ivanov and Alexandr Anichin, Izvestiya (Moscow), 28 March 1991, quoted in Rozman, Ja- pan and Russia, p. 86. 68. See Alexei Arbatov and Boris Makeyev, “The Kuril Barrier,” New Times, No. 42 (1992), pp. 24– 26. 69. Hasegawa, The Northern Territories Dispute, Vol. 2, p. 387. 70. Nimmo, Japan and Russia, p. 147.

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and Russian leaders, in turn, regarded the Japanese promises as an affront. Neither Gorbachev nor Yeltsin could escape the image that by returning the islands they would be acting in a “non-statesmanlike manner.” Holding ªrm on the territorial issue boosted Yeltsin’s support in conservative circles. That support was more important to Yeltsin than the promised economic beneªts. The Japanese offers not only failed to alter existing identities but actually fortiªed them, pushing Yeltsin to defend past Soviet actions. Because the relationship was seen as competitive rather than cooperative, the Russians regarded the Japanese promises of future economic aid not as a carrot but as a stick. The problem was that the Japanese economic promises did not signal a desire to strengthen common bonds. Rather, they suggested that Moscow could not yet be treated as a real partner. When Soviet and Russian leaders expected aid anyway, Japan’s conditional promises were understood not as a positive inducement but as a negative deferral of any large-scale aid. Yeltsin seemed to take for granted that it was the moral obligation of other countries to assist Russia.71 In short, the determination that helped Germany to achieve its objectives did not work in the Japanese case. On the contrary, Soviet and Russian leaders were irritated by the rigidity of the Japanese position. Some also suspected that the four disputed Kurile Islands were not what the Japa- nese genuinely wanted and that they would extend their claims to Sakhalin and to the entire chain of the Kurile Islands. As a result, Russia became increasingly averse to Japanese aid. Although Japan increased its economic assistance after 1992, it did not have the effect of promoting friendship. Psycho- logically, the Russians had to deny that the Japanese were helping them and had to strip the aid of its obligations. The normative commitments that gift giving can produce in international relations did not obtain in this case. Real- izing that aid and the islands question were tacitly linked, Russia did not want to establish any reciprocal relationship.72 The success of Germany’s rewarding strategy and the failure of Japan’s can be explained not by the amount of the promised aid but by the way the rewards were delivered and conceived. The German rewards were based on the idea of diffuse reciprocity, and they signaled changing identities and interests. The Japanese rewards were based on the idea of speciªc reciprocity, which did not entail changes in identities and interests.

71. Hasegawa, The Northern Territories Dispute, Vol. 2, p. 445. 72. In May 1995, an earthquake occurred north of Sakhalin, killing nearly 2,000 people in the Neftegorsk area. The Japanese offered aid to the town, but the Russian government turned down the offer. “Yeltsin said that Russia did not want Japanese aid because Japan might then say ‘Give us back the islands.’” “Geo-Political Earthquake,” The Economist, 3 June 1995, p. 45.

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Conclusions

In this article I have tried to show how seemingly materialist factors (Soviet economic weakness and the USSR’s need to receive economic assistance) that are often cited as reasons for the end of the Cold War and for Moscow’s ac- commodation with Western positions in foreign policy were in a crucial way constituted by ideational elements. How economic incentives work depends on the way they are constructed by the parties involved. In this sense, material forces cannot be separated from ideas. When looking at the assumed link between German economic assistance and Gorbachev’s acceptance of German membership in NATO, the depiction of German aid as a payment for Gorbachev’s concession is only one possible construction of the nature of the aid. Far from expediting a solution, the idea of a “purchase” actually limited Gorbachev’s actions. The role of German economic statecraft, in the pledges and delivery of economic assistance to the Soviet Union, was not a supplementary compo- nent of coercive power. German economic assistance cannot be adequately described as a face-saver that was needed to rescue Gorbachev from complete humiliation, nor can it be seen as simply a payment or “bribe” paid to Gorbachev for his concessions. Rather, it was a signal of future cooperation and partnership between Germany and the Soviet Union that facilitated Gorbachev’s decision to accept German membership in NATO. If we want to explain why economic incentives were important in the German case and failed in the Japanese case, the constructivist argument is that the different role of economic incentives depended on their meanings. What was remarkable in these two cases was how differently the economic aid was seen from the Soviet/Russian perspective. This difference in signiªcation was partly due to the nature of the proposed aid and partly to the context of the relationship in which the economic rewards and offers of further aid were embedded. German aid was important not only because it matched Soviet interests but because it bolstered Gorbachev’s belief that Soviet relations with Germany could be—and were being—fundamentally transformed. Japanese aid, by contrast, did not help to redeªne Soviet interests, because it was mainly conditional. Soviet and Russian leaders were irritated by the rigidity of the Japanese position. There was no larger framework of promises of future cooperation within which the offers of economic aid could have been interpreted. The Japanese government believed it had no speciªc obligations to help the Soviet Union because it did not share the same cultural space. The conditionality of Japan’s offers of economic assistance did not establish trust between Soviet/Russian and Japanese leaders. Even though

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the economic situation in the Soviet Union and Russia was worsening, Gorbachev’s and then Yeltsin’s willingness to bargain over the conditions of economic assistance declined. In sum, when explaining the role of economic incentives at the end of the Cold War, ideas mattered in several ways. An exchange of material items is not an idea-free process; it rests on notions of what can be exchanged and when. Liberal ideas construct a wide range of space for exchange, especially when tied to the norm of reciprocity, but it is not guaranteed that government leaders adopt these ideas. In particular, realist notions of what is honorable to be exchanged hampered the use of economic incentives. In the case of Ger- man uniªcation, Gorbachev was able to adopt ideas of diffuse reciprocity and shared responsibility. Although normative structures tend to reproduce themselves, the end of the Cold War shows that they are not immutable. Many things enabled Gorbachev to adopt new rules and ideas: he wanted to ªnd so- lutions to economic problems, but he also wanted to establish a radically different partnership with Germany. In this context, Germany’s economic incentives played a crucial role in conªrming Gorbachev’s belief that the rules of international politics and of relationships in Europe could be fundamentally transformed.

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