Improvise, Adapt, Overcome: Target Governments' Adjustment to Economic Sanctions

This dissertation seeks to expand our knowledge of how countries respond to external shocks generated by other countries' policies towards them, with the government being at the forefront of this process. For the inquiry into a country's response to other countries' actions, I leverage the case of economic sanctions for two reasons—a growing body of empirical evidence that is at odds with the bargaining framework of sanctions, and general blackboxing of the target state in the literature. I argue that target states become more inward-looking, and, instead of paying attention to the sender, they adjust to the sanctions regime.  The main assumption is that the target government has agency in this process and uses a full range of policy options|domestic and international|to compensate for the damage to its budget. This implies that target governments not only engage in cutting expenditure as a direct response to a decrease in resources, but also seek out new opportunities for generating income. Furthermore, target governments manipulate domestic public opinion and find ways to restore their international reputation. This way, economic sanctions do not simply pose a threat to the regime but present a management challenge for governance.

The main contribution of this project is, first and foremost, in deepening our understanding of economic and political processes that happen within the target state once sanctions are imposed. It is important to recognize the target government's agency and policies it adopts to not only survive but also recover its economy in the long-term. This study takes a more comprehensive approach to the target government's adjustment strategies by examining domestic and foreign policies as a bundle of policies that may be used to achieve the same goal. In addition to that, it sheds light on unintentional consequences for other countries should the target government change its patterns of engagement in international politics. More broadly, this dissertation contributes to our knowledge on how countries deal with external shocks to their resources. The arguments presented here can be generalized to countries that experience foreign aid withdrawal when they rely on it; natural disasters such as draught,  floods, and wildfires when they rely on crops; fall in oil prices when they rely on oil exports; and even pandemics that shut down economies.