reading 3 - interdependence

Question 1

weaponized interdependence: how global eco networks shape state coercion

Answer 1

Henry Farrell + Abraham L. Newman

topography of the economic networks of interdependence intersects with domestic institutions and norms to shape coercive authority

globalization => unprecedented levels of interdependence + continued jockeying for power

• Globalization has transformed the liberal order, by moving the action away from multilateral interstate negotiations and toward networks of private actors.
• market actors created institutions and technologies to overcome the transaction costs associated with decentralized markets

structural explanation of interdependence in which network topography generates enduring power imbalances among states
-> assymetric networks create the potential for “weaponized interdependence”: some states are able to leverage interdependent relations to coerce others

2 strategies through which states can gain powerful advantages from weaponizing interdependence

• panopticon effects of networks = states use their network position to extract informational advantages vis-a-vis adversaries
• chokepoint effects of networks = states cut adversaries off from network flows

institutions designed to generate market efficiencies and reduce transaction costs can be deployed for coercive ends

Question 2

the role of global networks

Answer 2

globalization -> new (internationalized) networks of exchange
e.g. informational networks (e.g. internet)

liberalism: “complex interdependence” = fragmented polity in which there were multiple actors (not just states), multiple issues (not necessarily hierarchic) and force and the threat of force where not valuable tools of policy
-> emphasis on reciprocal vulnerabilities/dependencies making coercive strategies less effective

• there are multiple diff hubs -> reducing dominance of great powers as the US
• Keohane and Nye: asymmetries are likely to diminish over time: structural holes are filled in
• Slaughter: globalization creates decentralized/nonhierarchical networks that create new opportunities for cooperative diplomacy -> power with rather than power over

premises networks approach authors article =

1. networks are (sociological) structures: they shape what actors can and can’t do
   networks can change but in short-medium term they are selfreinforcing and resistent to disruption efforts
2. network structures have implications for the distribution of power (hub and spoke systems

Question 3

definition network

Answer 3

networks = two elements

1. nodes: representing speciic actors/locations within the network
2. ties/edges: connections between nodes, which channel information, resources or other forms of influence

degree of a node = nr of ties that connect it to other nodes

topography/structure of the network = the pattern of nodes and links between them

asymmetric growth: globalization generates networks with stark inequality of influence (distribution of degrees is unequal)

• new nodes more likely to attach to nodes with many ties -> over time sharp unequality in degrees
• network effects: actors converge on networks that already have many participants (bc value of service increases as more people use it)
• learning-by-doing effects: central nodes have access to more info and relationships -> others link to them to maintain access to learning processes

global financial networks = UK and US highly connected nodes

most central nodes are territorially concentrated in advanced industrial econs

centralized network structures are hard for outsiders to challenge: many actors need to defect + defection is not likely unless more people are doing it

• e.g. Facebook: challengers are less privacy-invasive, but people don’t switch bc it is relatively costly if individuals know that many other people won’t switch
• e.g. SWIFT (Society of Worldwide Interbank Financial Telecommunication) is a middleman/broker in the global financial network

Question 4

new forms of network power

Answer 4

1. market power: aggregate economic potential of a country produces power resources bc states with large eco markets can leverage market access for strategic ends
2. bilateral dependence: states that rely on a good from another state and lack a substitute supplier may be sensitive to shocks or manipulation

but also: states can weaponize interdependence on the level of the network itself:
both these also in earlier periods of globalization, but now new technology

1. panopticon effect = weaponizing the ability to glean critical knowledge from information flows
   (states with physical access to or jurisdiction over hub nodes can use influence to obtain information passing through the hubs => advantage in understanding adversaries’ intentions and tactics)
2. chokepoint effect = privileged states an limit or penalize use of hubs by third parties

!geographical skew network hubs -> some states can benefit from weaponized interdependence, others may still play a disruptive role
!national institutions matter: if states want to exploit hubs, they require appropriate legal and regulatory institutions
- e.g. EU countries hard to benefit from panopticum effects bc EU law limits the amount of data that may be collected/stored by commercial internet providers

Question 5

argument

Answer 5

= states variable ability to employ panopticum effects and chokehold effects (forms of coercion) depends on the combination of:

• the structure of the underlying network
• domestic institutions of the states attempting to use them

Question 6

the rise of network inequality - global finance and SWIFT’s centrality

Answer 6

global finance = payment systems (backroom arrangements to facilitate capital flows) with reliable and secure comm between financial institutions

businesses depend on payment systems to move funds from one entity to another

since 1970s = interbank communication provided by SWIFT (Society for Worldwide Interbank Financial Telecommunication)

• before = comm via national telecommunications providers = slow
• SWIFT established in 1973 by European and US competitors of First National City Bank of New York (bc they didn’t want to become dependent on their MARTI system)
• big role in authorizing transactions, authenticating parties, recording exchanges
• by 2016 dominant provider

dominance over financial messaging -> monopoly regulation by the Commission of the European Union 1997: became a quasi utility and had to follow an open access model -> more financial institutions began to use it

Question 7

the rise of network inequality - the internet all roads lead through northern virginia

Answer 7

in the 1990s seen as a “distributed” network: multiplicity of ties between nodes, but no node more important than another = idea that it was invulnerable to control
- the net interprets censorship as damage -> routes around it = resistance to blockages

in practice: underlying architecture of the internet increasingly centralized + some hubs and interconnections between hubs more important than others

• states control on traffic entering and leaving their country + censor/control ordinary uses of the internet
• fiber optic cables (communication nodes) provide services between continents = sensitive to sabotage (clear in 2008: ships anchor severed two cables -> internet Middle East and South Asia shut down)
• internet exchange points to heighten connection speeds = often located in major cities -> substantial amount of traffic travels through a few key nodes

emphasis on self-regulation and individual choice -> private firms can set their own rules in global electronic commerce (e.g. big role ICANN)

business model based on algorithms: US domestic regulations (1996 Communications Decency Act) protect businesses from legal actions aimed at content posted by users -> business model based on content by users, companies were intermediaries analyzing behavior and offering targeted advertising

small nr of firms build effective near monopolies (e.g. Google and Facebook)
*China has excluded these companies + created domestic competitors, but this is hard for small states and liberal democracies

large part global data traffic is channeled through servers of a handful of companies sitting in the US

• ICANN provides some privileged actors with levers for achieving political outcomes

cloud providers have emerged as central hubs

Question 8

weaponizing the hubs - SWIFT, counterterrorism and nonproliferation

Answer 8

SWIFT = both panopticon and chokepoint effects

SWIFT = info about most global financial transactions -> used as surveillance asset mostly by the US = panopticon effect

• 1992 FAFT (financial action task force = gov anti-money laundering body) approached SWIFT to track down illicit activity -> SWIFT refused: was an information carrier, should be immune to gov monitoring + FAFT should go to the banks
• 9/11 -> US treasury subpoenas against SWIFT to compel it to provide financial data (so US could curtail terrorist financing) = TFTP (terrorist financing program) -> SWIFT secretly used as global eye for the US to fight terrorism
  *European actors worried about civil liberties -> challenged it, but it persisted

chokepoint effect: disconnection from SWIFT access = bad bc near absence of alternatives

• US and European policymakers used SWIFT to reinforce the sanctions regime against Iran: US policymakers private campaign (United Against Nuclear Iran = UANI) in the 2000s, targeting SWIFT as complicit in assisting the Iranian regime -> EU and US prohibited use of SWIFT to targeted institutions -> SWIFT required to cut Ian out of its system -> Iran locked out from international payment system ->lifting SWIFT measures key part of the eventual Iran deal
• 2018 US backed out of the Iran deal: threatened to reimpose SWIFT restrictions, EU resisted re-weaponization SWIFT -> SWIFT delisted key Iranian institutions (afraid of US sanctions), maintaining it was doing so to maintain the stability of the overall financial system
  -> EU began discussing if it needed own international financial payment channels to provide a hub less less vulnerable to US pressure

shows that global networks allow great strategic resources: in counterfactual world without network structures US and EU could have acted unilaterally by blocking Iran access to their market, but Iran could have easily turned to other partners = would have had smaller effect

Question 9

weaponizing the hubs - internet: the national security agency, prism and counterterrorism

Answer 9

US dominance over information networks and e-commerce firms

less eager to deploy chokepoint effect:

1. US believes that general diffusion of communication tech and global dominance of US e-commerce firms was in its interest
   + saw internet as freedom to connect, wanted to give the correct example
2. domestic institutional constraints: US precommitted to keeping e-commerce free from gov control (except for problems as child pornography)
3. commercial advantage in an open internet

exception: 2009 protests in Iran, US official asked Twitter to delay temporary technical shutdown bc the official believed Twitter helped organize the protests

US gov sought to protect ICANN from a series of rearguard actions in the UN and other forums

• 2005 appeared that the EU migh allign with non-dem parties to move authority over domain names to a more conventional international organization -> US pushed back forcefully
• 2012 renewed pressure + Snowden revalations -> US separated ICANN from the gov in the closing days of the Obama admin

panopticon effect

• after 9/11 = STELLARWIND program = to leverage advantage of information gathering, was found illegal -> replaced by other programs
• surveillance through undisclosed direct relations with tech companies
• PRISM program = US gov legal authority to compel production of record and info regarding non-US individuals from tech companies
• US gov demands cooperation of telecommunications companies carrying out “upstream collection” of large amounts of data from US companies that help run the internet backbone (e.g. AT&T)
• US copies data in bulk and mines it later (superficially complying with laws that distinguish between data of US and non-US citizens)

Snowden revelations -> political uproar -> legal reforms that partly limited US gov access to data of US citizens + presidential policy directive to reassure allies the US would not use citizen’s info in unduly invasive ways

other stats also surveillance activities, but less bc no “home advantage” of network centrality

internet as liberal space with open exchange and cooperation = conceals power dynamics that shape relationships between the US and online comm networks
- information-gathering power degree of the US would not be possible without asymmetric networks

Question 10

conclusion

Answer 10

NO: eco interactions globalization has fragmented and decentralized power relations
YES: eco interactions generate new structural conditions of power

complex interdependence may generate enduring power asymmetries

• Theoretically, our account shows how the topography of networks
  shapes power relations, generating systematic differences in the ability of some states—and not others—to gather information and deny access to adversaries
• Empirically, we demonstrate how decentralized patterns of economic exchange have led to centralized global networks such as SWIFT and the internet

implications = eco interdpendence scohlars and securit studies in closer dialogue + IR scholars need to pay more attention to practical workings of networks

States need both leverage over network hubs and appropriate institutions if they are to take advantage of the panopticon and chokepoint effects

• EU has fragmented instruments of ªnancial regulation, which means that it has not been able to exercise control over SWIFT, except when its member
  states have agreed unanimously on formal sanctions under prodding from the United States
• US lacked the appropriate institutions to oblige U.S. e-commerce companies to regulate other businesses and individuals or cut them out of
  the network,

! not all markets rest directly on asymmetric networks (e.g. oil markets are sufficiently diversified -> no single point of control -> hard to weaponize interdependence)

states that are less integrated in IPE are less likely vulnerable to information gathering, vulnerability to chokepoints depends on autarky

Targeted states—or states that fear they will be targeted—may attempt to isolate themselves from networks, look to turn network effects back on their more powerful adversaries, and even, under some circumstances, reshape networks so as to minimize their vulnerabilities or increase the vulnerabilities of others

States are locked into existing network structures only up to
that point where the costs of remaining in them are lower than the beneªts: should this change, one may see transitions to new arrangements

• concerns led to initial U.S. suspicion of Huawei and ZTE and to fears that their telecommunications equipment may have built-in vulnerabilities that assist Chinese surveillance

as interdependence becomes increasingly weaponized, global supply chains may unravel

• EU threats to cut Russia from SWIFT -> Russia becoming less dependent on the dollar: creates blockchain-based payment system that could mute chokepoint strategies
• EU remains close to US unless they decide that US abuses weaponized interdependence in ways that conflict with EU interests, bc it is also in the EUs interest to weaponize: they benefit more than that they suffer from US exercise of network hegemony
  *still EU is exploring financial options outside of US financial system > could lead to elite infighting + erosion US ability to weaponize key eco networks (bc competing financial instruments)