System Structure and State Strategy

8/6/2019 System Structure and State Strategy

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SYSTEM STRUCTURE AND STATE STRATEGY:

ADDING HEDGING TO THE MENU

BROCK F. TESSMAN1

University of Georgia

This paper presents strategic hedging as a way to conceptualize much of the strategic

behavior currently employed by second-tier states like China Russia, and France. Hedging is an alternative to existing strategies like balancing, bandwagoning, and

buckpassing. Like those existing strategies, hedging is driven by structural incentives

associated with the current polarity of the international system, and power concentrationtrends within it. Hedging will be most prevalent in international systems that are defined

by a leading state that, while in a position of power preponderance, is also in the processof relative decline. Strategic hedging behavior is effective for second-tier states in suchdeconcentrating unipolar systems because it avoids outright confrontation with the

system leader in the short term, while still increasing the hedging states ability to

survive such a direct military confrontation should it occur in the long run. Strategic

hedging behavior can also be used to insure the hedging state against security threatsthat might result from the loss of public goods or subsidies that are currently being

provided by the system leader. In this article, I define strategic hedging behavior, present

a mechanism for identifying empirical evidence of strategic hedging, and apply thatmechanism to three case studies: Chinese energy security strategy, the Sino-Russian

strategic partnership, and French opposition to the 2003 U.S. invasion of Iraq.

1 Brock F. Tessman is an Assistant Professor of International Affairs and Associate Director of the Centerfor the Study of Global Issues (Globis) at the University of Georgia. The author would like to thank PatriciaSullivan, Darius Ornston, Markus Crepaz, T.V. Paul, William Wohlforth, Robert Pape and other membersof the Soft Balancing and International Relations panel at the 2010 Meeting of the International StudiesAssociation in New Orleans (February 17-20, 2010) for their valuable comments on earlier versions of this paper. The author is also grateful for the research assistance provided by Holger Meyer and LeahCarmichael.


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Existing concepts like balancing, bandwagoning, and buckpassing do not account

for much of the strategic behavior currently employed by second-tier states like China

Russia, and France. Chinas global energy security strategy, the emergence of the

Shanghai Cooperation Organization (SCO), and French opposition to the 2003 U.S.-led

invasion of Iraq exemplify behavior that is simultaneously less confrontational than

traditional balancing, less cooperative than bandwagoning, and more proactive than

buckpassing. This paper presents the idea ofstrategic hedgingas a way to conceptualize

this general type of behavior, and develops a basic theory of state behavior that uses

current system polarity and trends in system concentration in order to predict the relative

prevalence of balancing, bandwagoning, buckpassing, and hedging strategies in four

different system types. I argue that hedging will be most prevalent in systems that are

unipolar and in the process of power deconcentration. These systems are defined by a

leading state that enjoys power preponderance, but is clearly in relative decline. For

second-tier states, strategic hedging behavior is effective because it avoids outright

confrontation with the system leader in the short term, while still increasing the hedging

states ability to survive such a direct military confrontation should it occur in the long

run. Strategic hedging behavior can also be used to insure the hedging state against

security threats that might result from the loss of public goods or subsidies that are

currently being provided by the system leader.

This paper has four sections. I begin by establishing the theoretical foundation of

my argument: structural considerations are a primary influence on state strategic choice.

Although various factors may condition (and in some cases alter) the relationship

between system structure and state strategy, second-tier states will be drawn toward


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certain core strategies based on incentive structures that are derived from two factors

related to the distribution of material capabilities in the international system: current

polarity and expectations regarding power concentration. Given this basic theory of state

behavior, I highlight the incentive structures that characterize four different system types:

concentrating multipolar, deconcentrating multipolar, concentrating unipolar, and

deconcentrating unipolar. Balancing and buckpassing strategies are identified as core

strategies for second-tier states in concentrating and deconcentrating multipolar systems,

respectively, but are shown to be ineffective under conditions of unipolarity. I argue that

bandwagoning is the core strategy for second-tier states in concentrating unipolar systems

in which the leading state is increasingly dominant, but that it is much less attractive in

deconcentrating unipolar systems in which there are far fewer incentives for second-tier

states to seek profit or security from bandwagoning with a declining system leader.

Consequently, none of the major existing approaches to state strategy balancing,

buckpassing, or bandwagoning are likely to be widespread in systems with a

preponderant but declining system leader. I use the second section of this paper to

introduce strategic hedging as the core strategy for second-tier states in such

deconcentrating unipolar systems. I sketch out the specific structural incentives that lead

to different types of strategic hedging, and then provide an identification mechanism that

can be used to distinguish hedging from other types of strategic behavior. In the third

section, I apply the identification mechanism to three case studies: Chinese energy

security strategy, the strategic relationship between Russia and China, and French

opposition to the 2003 U.S. invasion of Iraq. While I find the first two to be examples of

strategic hedging behavior, I classify the third as behavior that is better labeled as either


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soft balancing or normal diplomatic friction. A brief concluding section offers a basic

roadmap for further development of the strategic hedging approach, along with some

policy prescriptions for leading states that are seeking to counter a hedging strategy.

SYSTEM STRUCTURE AND STRATEGIC CHOICE

For major powers, basic strategic incentives can be derived from structural

considerations related to the current and projected distribution of power in the

international system. Regardless of system type, states are motivated by the search for

security within the context of structural anarchy. Security-maximizing behavior will help

states minimize immediate threats and maximize immediate opportunities, but it will also

help them prepare for threats and opportunities that they believe are likely to emerge in

the future. Immediate threats and opportunities will depend largely on factors related to

current system polarity, while perceptions about future threats and opportunities will be

driven by expectations regarding trends in power concentration and, eventually, the

transformation of the system from one type of polarity to another.

Although this paper outlines a rather direct relationship between system structure

and state strategy, it is important to note that specific strategic choices will not always

align with the core strategy associated with each system type. Ceteris paribus, structural

incentives related to the current and projected global distribution of power will draw

second-tier states toward a core strategy for that system type. All other things are not

always equal, however, and it is important to note that specific strategic choices will be

influenced considerably by conditioning factors that are not directly related to polarity or


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power concentration: geography, ideology, nuclear weapons, state capacity, and the rise

of threatening powers may pull a second-tier state away from the relevant core strategy

and push it toward a different option that fits its particular circumstances. 2 For example,

second-tier states will not always pursue the core strategy of hedging in a deconcentrating

unipolar system. If second-tier state B is in close geographic proximity to rapidly rising,

threatening second-tier state C, it may choose to bandwagon with system leader A,

balance against rising power C, and entirely avoid any hedging strategies.3

Likewise,

states may sometimes employ hedging strategies in systems that are not deconcentrating

or unipolar. Conditioning factors may exert more influence on state strategic choice in

some system types than in others.4

The extent to which strategic choice is affected by

conditioning factors will determine the relative strength of the core strategy that is

identified for each system type. For instance, the core strategy for concentrating

multipolar systems is balancing, but it is a relatively weak core strategy because specific

strategic choices will be highly influenced by conditioning factors such as geographic

proximity, ideological similarity, and economic interdependence.5 Strong ideological

2 The role of conditioning factors may be similar to the domestic and individual-level variables that neo-classical realists use as complements to power-based explanations of foreign policy. For more onneoclassical realism as a theory of foreign policy, see Gideon Rose, Neoclassical Realism and Theories ofForeign Policy, World Politics 51, no. 1 (1998): 144-172; and Steven E. Lobell, Norrinn M. Ripsman, andJeffrey W. Taliaferro, Neoclassical Realism, the State, and Foreign Policy (New York: CambridgeUniversity Press, 2009).3 This might be even more likely if the second-tier state (B) considers the current system leader (A) to berelatively benign in contrast to threatening, rising power (C). This hypothetical scenario might beparticularly relevant to the actual strategic choices made by second-tier states like Japan, which may very

well perceive greater threat from a rising China than from the United States.4 Of course, some conditioning factors may serve to reinforce the core strategy. It is also important to notethat multiple conditioning factors are likely to influence strategic choice simultaneously in any givensituation. If those factors act as countervailing vectors, they will offset each other and the state willcontinue to find the core strategy to be most appealing.5 Other conditioning factors may also come into play: economic interdependence with a rising systemleader in a concentrating multipolar system may lead a second-tier state to favor bandwagoning overbalancing. In a deconcentrating multipolar system, the same factor may push states to engage in a certaintype of strategic hedging rather than buckpassing. Specific interpretations will depend on assumptionsabout the relationship between interdependence and war. See, Dale C. Copeland, "Economic


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literally, contain more than one significant concentration of power.7 From a structural

perspective, the primary immediate threat for states in such a system is the emergence of

another state or coalition that may be able to achieve power preponderance. Traditional

balance of power theory holds that power imbalances are inherently threatening to

weaker states, and that those states will react by developing defensive alliances (external

balancing) or engaging in intense arms build-ups (internal balancing) in order to counter

the superior power of the system leader.8

Variations of traditional balance of power

theory reject the idea that stronger powers are inherently threatening to weaker states, and

argue that specific factors like nuclear deterrence, geography, economic policy, and

regime type determine the level of threat posed by rising powers and the resulting

balancing response by other states. The recent absence of balancing against the United

States has been attributed to some of these additional considerations, particularly the

acquisition of nuclear weapons by most major powers and the non-threatening nature of

U.S. hegemony. 9

7 For the purposes of this comparative analysis, I allow the conceptual umbrella of multipolarity to coverbipolar systems as well as more traditional multipolar systems with three or more concentrations of power.8 The tendency toward balancing behavior is highlighted as a core element of the structural realist approachto international relations. See Waltz, Theory of International Politics. Waltz went on to predict that, in theaftermath of the Cold War, new balancers would emerge to challenge the United States. See, Kenneth N.Waltz, Structural Realism After the Cold War, International Security 25, no. 1 (Summer 2000): 5-41.The distinction between internal and external balancing is originally captured by Waltz (1979), but it isimportant to note that Waltz saw balancing as an automatic international outcome, not a conscious,manually driven foreign policy strategy. For differences between manual and automatic balancing see, InisClaude,Power and International Relations (New York: Random House, 1962).9 The security-enhancing effects of nuclear deterrence are outlined well by Kenneth Waltz. See, Kenneth N.

Waltz, The Spread of Nuclear Weapons: More May be Better (London: International Institute for StrategicStudies, 1981). Stephen Walt expands upon the logic of balancing, but argues that states are unlikely to balance against capability concentration if that concentration is not threatening due to geographical,ideational, or other circumstances. See, Stephen M. Walt, "Alliance Formation and the Balance of WorldPower,"International Security 9, no. 4 (Spring 1985): 3-43; and Stephen M. Walt, The Origins of Alliances(Ithaca: Cornell University Press, 1987). For more recent application to U.S. foreign policy, see Alliances,Threats, and US Grand Strategy: A Reply to Kaufmann and Labs." Security Studies 1, no. 3 (1992): 448-482; and "Keeping the World Off Balance: Self-Restraint in American Foreign Policy," in AmericaUnrivaled: The Future of the Balance of Power, ed., G. John Ikenberry (Ithaca: Cornell University Press,2002) 121154.


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Thus, while there are incentives for some states to engage in outright balancing in

reaction to the threat posed by a more powerful state, there may also be incentives for

countries to free ride on the balancing efforts of others by employing a buckpassing

strategy. Buckpassing may be most attractive to second-tier states in multipolar systems

with a large number of other potential balancers, if the stronger power is geographically

distant, and if there is thought to be a defensive advantage in military conflicts. 10

Moreover, while a rising power may threaten some actors in a multipolar system, it may

also serve as a short-term opportunity for others. In fact, there are strong incentives for

states to bandwagon with the rising power under conditions of multipolarity. There may

be a chance to share in the spoils of war by actively joining an increasingly powerful

revisionist state in the early or late stages of conflict, or even through passive support via

diplomatic alignment.11

In other words, multipolarity not only generates structural

incentives for balancing and buckpassing, it also provides incentives for some states to

bandwagon with strong, growing powers because of opportunities for profit.

If actors in a multipolar system are likely to be threatened by the emergence of a

more powerful rival, actors in a unipolar system must deal with a status quo in which a

10 See, Thomas J. Christensen and Jack Snyder. "Chain Gangs and Passed Bucks: Predicting AlliancePatterns in Multipolarity." International Organization 44, no. 2 (2009): 137-168. Christensen and Snyderargue that balance of power theory does not account for the full range of foreign policy strategies availableto states. They explain the prevalence of chain-ganging behavior prior to World War One, and buckpassingstrategies in the run up to World War Two. The latter is more attractive when leaders perceive a defensivemilitary advantage. Jennifer Lind applies the theory to the case of Japanese foreign policy during the Cold

War. See, Jennifer M. Lind, "Pacifism Or Passing the Buck? Testing Theories of Japanese Security Policy."International Security 29, no. 1 (Summer 2004): 92-121. Buckpassing can also be predatory in a way thatclosely resembles bandwagoning. In this case, states align with the stronger side, but avoid contributing tothe alliance while still seeking to share in the spoils of victory. See, Randall L. Schweller, "Bandwagoningfor Profit: Bringing the Revisionist State Back In," International Security 19, no. 1 (Summer 1994): 72-107. States may also seek to buckpass by hiding from potential threats by removing themselves from thepolitical fray. See, Paul Schroeder "Historical Reality Vs. Neo-Realist Theory." International Security19, no. 1 (Summer1994): 108-148.11 Randall Schweller labels this phenomenon as predatory buckpassing, and attributes a jackal-likedisposition to states that are apt to engage in it. See, Schweller, Bandwagoning for Profit, p. 103.


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single state has already achieved unquestioned dominance. In such a system, the primary

immediate threat for all second-tier states is the possibility of a direct confrontation with

the vastly superior leading power. There are almost no incentives for second-tier states to

engage in either internal or external hard balancing, though the former may be slightly

more likely than the latter: while both strategies run the risk of provoking the leading

state, external balancing will be exceedingly unlikely because it requires coordination

among several states, and because it will likely entail very high costs and have very little

chance to succeed.12 As already mentioned, the empirical record of the current unipolar

era offers little or no evidence of traditional balancing against the United States.

13

Given

the low likelihood of balancing behavior, buckpassing strategies are also essentially

irrelevant, as there are not many incentives to free ride if there are few, if any balancing

efforts to free ride upon.14

As a result, second-tier states in unipolar systems are only able

to cope with the immediate threat of confrontation with the dominant power by

employing a strategy that is based on conflict avoidance. Of all the major strategies,

12 William Wohlforth and Stephen Brooks provide a structural understanding of balancing disincentives,focusing on the role of power preponderance (both in absolute terms and in terms of comprehensiveness),as well as coordination problems, the predominance of local threats over global threats, geographicdistance, and potential aid from the system leader as factors that discourage balancing behavior. See,William C. Wohlforth, "The Stability of a Unipolar World," International Security 24, no. 1 (1999): 5-41;William C. Wohlforth "US Strategy in a Unipolar World," in America Unrivaled: The Future of the

Balance of Power(2002): 98118; and Stephen M. Brooks and William C. Wohlforth, World Out ofBalance: International Relations and the Challenge of American Primacy (Princeton: Princeton UniversityPress, 2008).13 The absence of empirical support for balancing propositions is highlighted by, among others, Richard Ned Lebow, The Long Peace, the End of the Cold War, and the Failure of Realism,InternationalOrganization 48, no. 2 (Spring 1994): 249-277; John Vasquez, The Realist Paradigm and Degenerative

Versus Progressive Research Programs: An Appraisal of Neotraditional Research in Waltzs BalancingProposition,American Political Science Review 91, no. 4 (Winter 1997): 899-912; and T.V. Paul, TheEnduring Axioms of Balance of Power Theory and Their Contemporary Relevance, in Balance of Power:Theory and Practice in the Twenty-First Century, ed. T.V. Paul, James J. Wirtz, and Michael Fortmann(Palo Alto: Stanford University Press, 2004), 1-25. Richard Rosecrance and Paul Schroeder address thehistorical lack of balancing. See, respectively, Richard Rosecrance, Is There a Balance of Power? in

Realism and the Balancing of Power: A New Debate, eds. John A. Vasquez and Colin Elman (SaddleRiver: Prentice Hall, 2003), 154-165; and Paul Schroder, The Transformation of European Politics, 1763-1848 (Oxford: Oxford University Press, 1994).14 An exception is Schwellers predatory buckpassing behavior.


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bandwagoning is most effective at accomplishing this. Bandwagoning strategies involve

cooperation with the leading state in order to avoid attack from that state, or in order to

share in the spoils of victory.15 In the short-term, bandwagoning can also serve as a form

of strategic surrender.16

Power Concentration and Strategic Choice

While an assessment of current system polarity can help define the basic strategic

options available to states, strategic choice is also driven by expectations about long-term

threats and opportunities. At the structural level, these expectations are based on

projections regarding the future polarity of the international system. If polarity is defined

by the number of top-tier major powers that are active in the international system, then

changes in polarity are almost always driven by fluctuations in the systemic concentration

of power.17 As systemic concentration increases, there are fewer and fewer major powers.

If concentration is high enough, the system will contain only one top-tier power and will

15 The idea of bandwagoning was first presented in rough terms, and only as the antithesis of balancing behavior. Among others, see Waltz, Theory of International Politics, Arnold Wolfers, "The Balance ofPower in Theory and Practice," inDiscord and Collaboration: Essays on International Politics, ed. ArnoldWolfers (Baltimore: The Johns Hopkins University Press, 1962), 124; and Stephen M. Walt, "TestingTheories of Alliance Formation: The Case of Southwest Asia," International Organization 43, no. 2(Spring 1988): pp. 275- 316. The concept is later developed more thoroughly in order to account for profitmotives, domestic political incentives, regional dynamics, and the historical record from both recent andmore distant periods. See, respectively, Randall L. Schweller, "Bandwagoning for Profit: Bringing theRevisionist State Back In," Deborah Welch Larson, Bandwagoning Images in American Foreign Policy,inDominoes and Bandwagons: Strategic Beliefs and Great Power Competition in the Eurasian Rimland,eds. Robert Jervis and Jack Snyder (New York: Oxford University Press, 1991), 85-111; Jack S. Levy and

Michael M. Barnett, "Domestic Sources of Alliances and Alignments: The Case of Egypt, 1962-1973," International Organization 45, no. 3 (Summer 1991): 369- 395; Stephen R. David, Choosing Sides:Alignment and Realignment in the Third World(Baltimore: The Johns Hopkins University Press, 1991);Robert G. Kaufman, "To Balance or to Bandwagon? Alignment Decisions in 1930s Europe," SecurityStudies 1, no. 3 (Spring 1992): 417-447; and Paul Schroeder "Historical Reality Vs. Neo-Realist Theory."16 For bandwagoning as a form of strategic surrender, see Walt, "Alliance Formation and the Balance ofWorld Power," pp. 7-8.17 This is a matter of some debate among scholars, with Mansfield (1993) showing that polarity andconcentration, while related, can change independently. See, Edward D. Mansfield, "Concentration,Polarity, and the Distribution of Power."International Studies Quarterly 37, no. 1 (1993): 105-128.


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be considered unipolar. Conversely, systemic deconcentration will most likely indicate

the diffusion of power among actors and an increasing number of actors that are,

relatively speaking, major powers.

States will perceive different long-term threats and opportunities based on

prevailing perceptions about system concentration. In multipolar systems, significant

power concentration signals the emergence of a potentially dominant power and, all

things being equal, increases the balancing incentives for second-tier states that hope to

prevent the rising power from achieving power preponderance. As such, balancing serves

as a core strategy for second-tier states in a concentrating multipolar system. Importantly,

however, not all states will feel threatened by the rising power. Instead they may detect

the opportunity for profit via a bandwagoning strategy, or the chance to avoid the costs of

balancing by using a buckpassing strategy to free ride on the balancing efforts of other

major powers. The presence of attractive alternative options means that balancing should

be considered a relatively weak core strategy. Of course, the actual probability that a state

will choose an alternative strategy of bandwagoning or buckpassing will depend on the

conditioning factors that are relevant to its situation.

Multipolar systems in the process of deconcentration will offer very few

incentives for the type of bandwagoning behavior described above. By definition,

multipolar systems are unlikely to have a leading state that is dominant enough to offer

second-tier states the type of spoils, or pose the type of threats that might engender

bandwagoning behavior. The process of power deconcentration signals a trend toward

parity rather than preponderance, and means that there are fewer incentives to engage in

bandwagoning. Deconcentrating multipolar systems do, however, offer significant


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incentives for balancing, especially among second-tier states that seek to directly

challenge the declining system leader for reasons related to historical rivalry, territorial

revisionism, or geographic proximity. For most states, however, buckpassing will be the

most attractive strategy, as systems in deconcentration are not characterized by rising

states and the concomitant possibility that they will present an existential threat once they

achieve power preponderance. Absent this imminent threat, most second-tier states will

seek to avoid the costs associated with traditional balancing strategies by letting other,

more threatened states work to actively counter the already declining power of the system

leader. As a result, buckpassing should be considered the core strategy in deconcentrating

multipolar systems. The fact that there are easily identifiable incentives for some states to

engage in balancing, however, means that should also be considered a relatively weak

core strategy.

What are the core strategies for second-tier states in unipolar systems? For

reasons presented earlier in this section, balancing and buckpassing are both unlikely to

emerge as viable strategies under conditions of unipolarity. The former is too costly and

is unlikely to be effective. Consequently, the latter is unlikely to be an option. There are

very strong incentives and ample opportunities for second-tier states to engage

bandwagoning behavior within the context of unipolar systems that contain a

preponderant power that is still widening the capability gap between itself and other

major powers. Bandwagoning is a relatively strong core strategy in concentrating

unipolar systems. This is not only because alternatives like balancing and buckpassing

are unattractive, but also because bandwagoning has both short-term and long-term

appeal. Still-growing but already dominant system leaders will often seek to revise


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various political, territorial, and economic aspects of the pre-existing international status

quo, and second-tier states with similar aspirations for revisionism will be inherently

attracted to the broader policy objectives identified by those states. If the newly minted

system leader is expected to have an extended tenure as the dominant state in a unipolar

system, second-tier states will have additional incentives to ride the wave of the future,

and bandwagon as a sort of long-term investment in the benefits of a positive relationship

with a leading state.

But not all unipolar systems are characterized by a leading state that is still in the

process of expanding its material advantage over other key actors in the system.

Moreover, not all system leaders are expected to remain ascendant for the foreseeable

future. Just like multipolar systems, unipolar systems may be in the process of power

concentration or power deconcentration. Typically, power concentration is most

significant and steady when the new system leader emerges and asserts is dominance

over other actors. But over time, the empirical record suggests that a process of power

deconcentration will set in as the system leader begins to show signs of relative decline

and its advantage over second-tier states begins to erode. This process of power

deconcentration is driven by a wide range of factors including: imperial and military

overstretch, the general burdens of economic hegemony, free riding by secondary

powers, the emergence of new leading sectors of the global economy, and uneven

population growth across countries.18

18 These factors are discussed in greater depth in a wide range of literature on the rise and fall of greatpowers. For more on each factor see, respectively, Paul Kennedy, The Rise and Fall of the Great Powers:Economic Change and Military Conflict from 1500 to 2000 (New York: Random House, 1987); RobertGilpin, War and Change in International Politics (Princeton: Princeton University Press, 1981); GeorgeModelski, Long Cycles in World Politics (Seattle: University of Washington Press, 1987); GeorgeModelski and William R. Thompson, Leading Sectors and World Powers: The Coevolution of Global


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What are the basic structural incentives for second-tier states in unipolar systems

that are in the process of power deconcentration? The overwhelming gap in material

capabilities between the leading and second-tier states means that balancing and

buckpassing are still unlikely. And while bandwagoning out of fear, or as a form of

strategic surrender, is still an attractive strategy in a deconcentrating unipolar system, the

idea of bandwagoning for profit is less appealing once the duration of the leading states

dominance is called into question. As the trend of deconcentration becomes apparent to

other actors, they will be less likely to bandwagon in hopes of sharing the spoils, because

there will be far fewer spoils for the system leader to share. Short-term or predatory

bandwagoning may still occur within the context of a specific war coalition, especially

early in the process of deconcentration. There will be far fewer states, however, that are

willing to make long-term strategic choices that align them with a declining power.

Wave of the future bandwagoning will be extremely unlikely once it is clear that the

days of unipolarity are numbered. Given the somewhat weak incentives for

bandwagoning and the absence of balancing or buckpassing incentives, it is hard to

identify a viable core strategy for second-tier states in a deconcentrating unipolar system.

This could signal that such systems are simply strategically ambiguous for second-tier

states in a way that the other three system types are not. But the idea of structural

exceptionalism should only be accepted after confirming that the absence of an

identifiable core strategy for second-tier states in deconcentrating unipolar systems is not

simply the result of conceptual underdevelopment. In the rest of this paper, I argue that

the relationship between system structure and state strategy is, in fact, conceptually

Politics and Economics (Columbia, SC: University of South Carolina Press, 1996); and A.F.K. Organski,World Politics (New York: Knopf, 1958).


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underdeveloped. I address this underdevelopment by introducing, defining, and

illustrating the concept of strategic hedging as a core strategy for second-tier states in

deconcentrating unipolar systems. More broadly, I present strategic hedging as an

effective complement to the existing concepts of balancing, buckpassing, and

bandwagoning, and as a way to complete the connection between system structure and

strategic choice that is depicted in Table 1.

[INSERT TABLE 1 ABOUT HERE]

STRATEGIC HEDGING IN INTERNATIONAL RELATIONS

Strategic hedging behavior helps second-tier states cope with the threats and

constraints they are likely to encounter under conditions of unipolarity, while

simultaneously preparing them for new threats and opportunities that are likely to emerge

as the system leader falls farther into relative decline. As a result, strategic hedging will

be particularly attractive to second-tier states in a deconcentrating unipolar system such

as the one that has characterized the early 21st Century.

The primary short-term threat (at least at the system level) for second-tier states in

any unipolar system is armed confrontation with the system leader. While strategic

hedging may involve some enhancement of military capabilities, it falls well short of the

internal or external hard balancing that might provoke the system leader and lead to a

dispute, crisis, or armed confrontation. Strategic hedging also serves to minimize long-

term threats and maximize long-term opportunities that are likely to emerge as the system


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begins the transformation toward multipolarity. As the process of deconcentration

unfolds, the probability (and utility) of military confrontation with the system leader may

increase. The leading state may target second-tier states as part of a preventive war

designed to forestall further decline, or the second-tier state could achieve rough power

parity with the leader and sense an opportunity for aggression. Either way, one common

form of strategic hedging behavior improves the long-term ability of the hedging state to

successfully compete during a potential militarized dispute with the system leader, but

does so while consciously avoiding any sort of provocation that might spark a military

confrontation in the short term. This kind of behavior is called Type A hedging. Type A

strategic hedging will explicitly and observably increase the leverage of the hedging state

should it someday enter into a militarized dispute with the system leader. While Type A

hedging may be economic, diplomatic, or even military in form, it will always fall short

of what would be considered hard internal or external balancing. Possible examples of

Type A hedging might include the diversification of energy supplies as a way to reduce

vulnerability to embargos or blockades, or the development or acquisition of technologies

that bolster military capabilities which have been specifically identified as valuable

within the context of a potential confrontation with the system leader.

Strategic hedging may also address a different long-term threat faced by second-

tier states in a unipolar system: the potential loss of public goods or subsidies currently

being provided by the system leader. Examples of public goods that a leading state might

provide for other countries include protection of key sea lines of communication (SLOC)

or transportation bottlenecks, support of the international monetary system, and global


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counter-proliferation or counter-terrorism efforts.19 The system leader may cease

provision of a global public good voluntarily if the cost-benefit ratio of providing it

becomes less favorable, or involuntarily in the face of dwindling resources. Both reasons

for termination are more likely to exist as the leading state falls further into relative

decline. Second-tier states may also enjoy direct subsidies from the system leader in the

form of economic aid, military aid, outright military protection (conventional or nuclear),

or technology transfers. Like provision of public goods, subsidies may be terminated as

the declining leader makes hard choices about resource allocation. Actions that address

the potential loss of pubic goods or subsidies currently provided by the system leader

might be considered a form ofType B hedging. Type B hedging may involve the search

for other providers of the goods or subsidies, the development of independent provision

capabilities, or progress toward decreased reliance on the goods or subsidies. Examples

of Type B hedging might include the establishment of regional organizations that can

provide security-related public goods that might disappear in the face of retrenchment by

the system leader, the development of independent naval capabilities that are sufficient

for protection of key shipping routes and bottlenecks that are important to hedging state,

or reduced reliance on direct defense subsidies (troops, bases, nuclear umbrellas) being

provided by system leader to the hedging state. This last example of Type B hedging

might be particularly attractive to second-tier states that are allied with the system leader

but threatened by the rise of another, more threatening power. In this scenario, second-

tier states may engage in Type B hedging because they are worried that, as it falls further

19 For more on global public goods, see Joseph S. Nye, United States Leadership and 21st Century GlobalPublic Goods, Hampton Roads International Security Quarterly 9, no. 2 (2009): 49-52; and Inge Kaul,Isabelle Grunberg, and Marc A. Stern, Global Public Goods: International Cooperation in the 21stCentury. (New York: United Nations Development Program, 1999).


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into decline, the system leader will be both less willing and less able to offer protection

against the increasingly powerful and threatening country.

The concept of hedging is not new to international relations in general, or even

the study of strategic behavior specifically. Existing uses of hedging emphasize the way

in which second-tier and minor powers seek to avoid excessive security dependence on a

single Great Power. Hedging has been used to conceptualize the desire of many Southeast

Asian states to strike a middle path in relations with both China and the United States,

and the European Unions decision to develop some independent military capabilities in

order to avoid too much reliance on U.S. forces.

20

John Ciorciari focuses on limited

alignments as a way for developing countries to find a balance between the risks

associated with full alignment with Great Powers and the vulnerability that accompanies

genuine non-alignment.21

These treatments use hedging in somewhat the same way I do

here, but whereas existing work focuses on hedging bets by striking a middle ground

between actors, or between alignment and non-alignment, the strategic hedging approach

I present here is about hedging bets by allowing states to balance between the

constraints associated with current polarity and the threats and opportunities they predict

will emerge as a result of power deconcentration.

Beyond hedging, other concepts such as binding, transcending, specialization,

leash slipping and soft balancing have already been used to describe the strategic

behavior of second-tier states in the current deconcentrating unipolar system. To a certain

20 See, Evelyn Goh, Great Powers and Hierarchical Order in Southeast Asia: Analyzing Regional SecurityStrategies, International Security 32, no. 3 (Winter 2007/2008): 113-157; and Robert J. Art, EuropeHedges its Security Bets, inBalance of Power: Theory and Practice in the 21st Century , eds., T.V. Paul,James J. Wirtz and Michel Fortmann (Palo Alto, CA: Stanford University Press, 2004)21 See, John D. Ciorciari, The Limits of Alignment: Southeast Asia and the Great Powers since 1975(Washington: Georgetown University Press, 2010).


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degree, these concepts do account for some of the specific strategic choices being made

by China, Russia, France, and other states in recent years. The effort in this paper,

however, is to identify a core strategy for second-tier states in deconcentrating unipolar

systems. For various reasons, existing concepts fall short of this objective. The strategies

of binding, transcending, and specialization involve using a wide array of tools in order to

accomplish state objectives: the binding power of institutional connections, normative

appeal to common religious or cultural standards, and specific areas of leverage within

dyadic trade relationships.22 But they are more dependent on specific institutional,

normative, or trade relationships rather than system-level incentives based on current

polarity or power concentration trends. As such, they may very well be attractive options

for specific states faced with very particular conditioning factors, but because they are not

driven primarily by broad, systemic incentives related to the material distribution of

power, they are incapable of serving as core strategies in the same way that balancing,

buckpassing or bandwagoning can.

Christopher Layne, Robert Art, and Barry Posen suggest that second-tier states

engage in leash slipping in order to maintain security autonomy in the face of superior

rivals.23 Layne cites three examples of leash slipping: Great Britains attempt to emerge

22 Joseph Grieco and Daniel Deudney explore institutional binding as a strategic choice in modern Europeand the post-independence United States, respectively. See, Daniel H. Deudney, "The PhiladelphianSystem: Sovereignty, Arms Control, and Balance of Power in the American States-Union, Circa 17871861." International Organization 49, no. 2 (1995): 191-228; and Joseph M. Grieco, "The Maastricht

Treaty, Economic and Monetary Union and the Neo-Realist Research Programme."Review of InternationalStudies 21, no.1 (1995): 21-40. Paul Schroeder highlights the ability of states to transcend conflict byappealing to normative or religious common ground, and to make minimize threats by making themselveseconomically indispensable to the stronger state through specialization and interdependence. Ja Ian Chongidentifies a number of other strategic options, most notably that of buffering, which closely resembles whatothers called soft balancing. See, Ja Ian Chong, Revisiting Responses To Power Preponderance: GoingBeyond The Balancing-Bandwagoning Dichotomy,Institute of Defence and Strategic Studies Singapore,Working Paper no. 54 (November 2003); and Paul Schroeder "Historical Reality Vs. Neo-Realist Theory."23 See, Christopher Layne, The Unipolar Illusion Revisited: The Coming End of the United StatesUnipolar Moment International Security 31 no. 2, (Fall 2006): 7-41; Art, Europe Hedges its Security


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as a third force in world politics during the 1950s, French development of an

independent nuclear force around the same time, and the more recent attempts by the

European Union to build a common security force. Even if more powerful states are not

currently threatening, weaker actors will seek insurance against the possibility that they

might become aggressive in the future. As Art explains, leash slipping is a way for

second-tier states to allay concerns about the adverse effects of that states rise on its

general position, both political and economic, in the international arena. This concern

also may, but need not, include a worry that the rising state could cause security problems

in the future, although not necessarily war.

24

Based on the existing conceptualization

and illustrative cases identified by its proponents, the strategy of leash slipping will

seemingly be equally attractive to second-tier states across all system types. Because

states engage in leash slipping against both allies and enemies, against rising and

declining states, and in both multipolar and unipolar systems, it is less connected to any

particular structural context than to the basic instinct of states to seek security in the face

of power inferiority.

For its part, the concept of soft balancing has been used quite frequently to

explain the institutional and diplomatic strategies, which are intended to constrain U.S.

power through the use of territorial denial, entangling diplomacy, economic

strengthening, and signaling of resolve to participate in a balancing coalition.25

As an

Bets; and Barry R. Posen, European Union Security and Defense Policy: Response to Unipolarity?Security Studies 15 no. 2 (2006): 149-186.24 See Art, Europe Hedges its Security Bets, 180.25 See, respectively, T. V. Paul, "Soft Balancing in the Age of U.S. Primacy," International Security 30, no.1 (Summer 2005), p. 58 and Robert Pape, "Soft Balancing against the United States,"International Security30, no. 1 (Summer 2005), p. 36. For general soft balancing arguments see Robert J. Art, "Correspondence:Striking the Balance," International Security 30, no. 3 (Winter 2005/06): 177-185; Pape, "Soft Balancingagainst the United States," pp. 7-45; Paul, "Soft Balancing in the Age of U.S. Primacy, pp. 46-71; andStephen Walt, "Keeping the World Off Balance: Self-Restraint and U.S. Foreign Policy" in America


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extension of traditional balance of power theory, soft balancing is meant to counter the

preponderance of the system leader while avoiding the confrontation associated with an

extensive arms build up or the development of a defensive military alliance aimed at the

system leader. Proponents have identified several examples of soft balancing behavior,

including Russian arms sales to Iran, French opposition to the 2003 U.S. invasion of Iraq,

and the formation of the European Security and Defense Policy (ESDP). Critics argue,

however, that soft balancing is hard to distinguish from the normal rough-and-tumble of

major power politics, otherwise known as normal diplomatic friction.26 In order for soft

balancing to be considered as an effective complement to traditional balance of power

theory, the concept needs to address behavior that is primarily driven by the desire to

counter the strength of the system leader, and not behavior that is largely the result of

specific policy differences, domestic political incentives, economic interests, or regional

dynamics.27 In other words, critics assert that soft balancing does not have a clear enough

connection with the type of structural incentives that lead states to strategically employ

balancing, bandwagoning, and buckpassing behavior.

While it is likely that soft balancing and strategic hedging will account for some

of the same behavior, they are distinct in a number of significant ways. Most importantly,

Unrivaled: The Future of the Balance of Power, ed., G. John Ikenberry (Ithaca: Cornell University Press,2002). Applications of soft balancing logic to more specific issues like East Asian security and U.N. votingpatterns can be found in Yuen Foong Khong, "Coping with Strategic Uncertainty: The Role of Institutionsand Soft Balancing in Southeast Asia's Post-Cold War Strategy," in Rethinking Security in East Asia:

Identity, Power and Efficiency, eds., Peter J. Katzenstein and J.J. Suh Allen Carlson (Stanford, California:Stanford University Press, 2004); and Erik Voeten, "Resisting the Lonely Superpower: Responses of Statesin the United Nations to U.S. Dominance,"Journal of Politics 66, no. 3 (May 2004): 729-754.26 See, Keir A. Lieber and Gerard Alexander, "Waiting for Balancing: Why the World Is Not PushingBack,"International Security 30, no. 1 (Summer 2005): 109-139.27 Critics point out that, as currently conceived, soft balancing neglects its balance of power roots, whichemphasize a structural understanding of state behavior and the systemic tendency toward balancing as anatural law of international relations. See Stephen G. Brooks and William C. Wohlforth, "Hard Times forSoft Balancing," International Security 30, no. 1 (Summer 2005): 72-108; and Lieber and Alexander,"Waiting for Balancing," pp. 109-139.


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strategic hedging is defined with conceptual clarity in mind. This gives hedging a clearer

connection with specific structural incentives, and a more coherent strategic rationale.

Hedging reflects the strategic calculus of second-tier states that are confronted not only

with unipolarity, but also a system that is in the process of power deconcentration. As

such, it is more consistent with the two structural elements incorporated into the theory of

state behavior developed earlier in this paper. Soft balancing is certainly attractive for

second-tier states in unipolar systems, because they do not have the material capabilities

or coordination capabilities to engage in traditional external or internal balancing. But it

will be equally attractive to second-tier states in either concentrating or deconcentrating

unipolar systems. In fact, it would seemingly be appropriate for any state that suffers

from inferior capabilities vis--vis another country. In other words, soft balancing is not

only hard to distinguish from normal diplomatic friction, but it is hard to connect with

any particular set of structural incentives.

Strategic hedging is also distinct from soft balancing in the way that the behavior

in question targets the system leader. While soft balancing is directly at the system leader

in an effort to constrain its ability to exercise power, strategic hedging is a more indirect

approach; it explicitly avoids confrontation while also preparing the second-tier state for

a wide range of eventualities that might occur as the system leader falls further into

relative decline.

Hedging is also conceptually distinct from soft balancing because of the specific

objectives the strategy is meant to accomplish. While soft balancing is intended to

broadly constrain the system leaders power, hedging is specifically oriented toward one

of two goals: increasing long-term military leverage in ways that are particularly relevant


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to the way in which a confrontation between the second-tier state and system leader is

likely to play out, or finding alternative methods for obtaining identifiable public goods

or subsidies that the second-tier state currently receives from the system leader. In this

way, hedging has a specific strategic rationale that soft balancing may lack. Soft

balancing may be successful in constraining the power of the system leader, and even

laying the foundation for coordination and eventual hard balancing. There are specific

and considerable costs, however, that may accrue directly to a state that employs a soft

balancing strategy. In addition to the initial costs of policy coordination and

implementation, provocation of the system leader might have additional drawbacks such

as frayed alliances, diplomatic isolation, and targeting through economic statecraft. Most

generally, soft balancing requires that a state accept direct, immediate costs in order to

achieve the diffuse benefit of broadly constraining the system leaders power. In short,

there is a certain lack of strategic rationale evident in the current conceptualization of soft

balancing behavior. While strategic hedging can also involve direct, short-term costs, it is

also designed to produce both short and long-term benefits that directly accrue to the

hedging state. Furthermore, the objectives of hedging behavior are explicitly tied to

threats and opportunities that are more likely to appear in deconcentrating unipolar

systems.

Finally, strategic hedging is also distinct from soft balancing in the way that the

behavior in question targets the system leader. While soft balancing is directly at the

system leader in an effort to constrain its ability to exercise power, strategic hedging is a

more indirect approach; it explicitly avoids confrontation while also preparing the


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second-tier state for a wide range of eventualities that might occur as the system leader

falls further into relative decline.

Strategic hedging is conceptually distinct from normal diplomatic friction.

While the ambiguity of soft balancing makes it admittedly hard to separate from the

everyday messiness of major power relations, strategic hedging behavior is

distinguishable from normal diplomatic friction because it can be identified as part of a

coherent long-term plan that is designed to maximize opportunities and minimize threats

for a second-tier states in a unipolar system with a leading state that is clearly in relative

decline. The long-term plan has concrete, identifiable military or public goods objectives

and, in order to be considered an instance of strategic hedging, behavior must be intended

to develop or expand the means for achieving those objectives. While it is not always

possible to find evidence of intentionality, strategic hedging behavior is also consciously

designed, funded, implemented and monitored at the highest levels of government. If

normal diplomatic friction can sometimes reflect what are primarily organizational or

bureaucratic interests, strategic hedging is designed to primarily reflect the national

interest, as defined by the highest levels of governing authority.

How can strategic hedging behavior be identified in a way that maximizes

objectivity and minimizes ambiguity? I present an identification mechanism in the

discussion below and in Figure 2. The mechanism is comprised of three filters. Starting

with the universe of state behavior in the international system, the first filter serves to

identify behavior that seems to resemble either Type A or Type B strategic hedging. The

second and third filters identify behaviors that may initially appear to be strategic


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hedging, but are better labeled as an example of either hard balancing or non-strategic,

normal diplomatic friction.

In order to pass through the first filter, behavior must improve, in an observable,

significant, and specific way, the competitive ability of the hedging state should it

someday enter into a militarized confrontation with the system leader (Type A hedging),

and/or improve the ability of the hedging state to cope without global public goods or

direct subsidies currently being provided to it by the system leader (Type B hedging).

Importantly, the behavior in question can be military in orientation, but it must

fall short of what would be considered an example of hard internal or external balancing.

With this in mind, the second filter eliminates behavior that includes the formation of an

explicit military alliance aimed at the system leader (external balancing), constitutes an

extensive arms build-up (internal balancing), or involves the initiation of a militarized

interstate dispute.28

The third filter clarifies the strategic aspect of strategic hedging by requiring

that the behavior in question address an issue area that has been explicitly acknowledged

as a major national security issue by high-ranking (cabinet level or equivalent)

government officials in the hedging state. Furthermore, the behavior must be primarily

funded by the central government, and must include centralized oversight that could

involve executive orders, policy coordination via a dedicated ministry, group or

committee, or significant state subsidies or monetary incentives that influence any sub-

national or private actors that actually carry out the behavior. These requirements are

28 In general, strategic hedging behavior is separated from traditional hard balancing by focusing onintensity. Lieber and Alexander argue that states engage in internal balancing when they invest heavily indefense by transforming their latent power (i.e. economic, technological, social and natural resources) intomilitary capabilities. This behavior is observed in the form of meaningful increases in defense spending asa percentage of GDP. See Lieber and Alexander, Waiting for Balancing, p. 119.


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meant to filter out behavior that is developed, funded, and executed primarily by

corporations or non-governmental organizations that will presumable seek their own

interests first, and those of the state secondly, or not at all. Although it is possible, if not

likely, that a single action may serve multiple interests at multiple levels, behavior that

addresses a major national security issue and is developed, funded, and executed at the

highest levels of government is not likely to be absent strategic calculation by the state.29

Consequently, if behavior passes through the third filter, it can be considered part of the

states strategic calculus rather than an instance of normal diplomatic friction.

[FIGURE 2 ABOUT HERE]

IDENTIFYING CASES OF STRATEGIC HEDGING BEHAVIOR

How might the mechanism presented above be used in order to identify strategic

hedging behavior by second-tier states in the international system? In this section, I apply

the identification mechanism to three examples: Chinas global energy strategy, the

emergence of a so-called strategic partnership between Russia and China, and French

diplomatic opposition to the 2003 U.S. invasion of Iraq. These examples are not drawn as

random cases as part of an attempt to demonstrate the prevalence of strategic hedging

behavior. Instead, they are chosen because they have been central to previous analyses of

competitive behavior in the post-Cold War era, and because they illustrate, respectively,

an example of both Type A and Type B strategic hedging, a mixed example with some

29 That said, behavior in question may be secondarily driven by some of the sources of normal diplomaticfriction such as: economic interests of domestic actors, regional security concerns, policy differencesbetween the hedging state and the system leader, and popularity with domestic political audiences.


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Type A and Type B hedging, as well as an example of behavior that is not considered to

be an instance of strategic hedging.30

As such, the basic purpose of the very brief

analyses that follow is to demonstrate how the identification mechanism can distinguish

strategic hedging behavior from that which is not, and how certain behavior can be

defined as one type of hedging but not the other.

Chinese Energy Security Strategy

Chinas ongoing energy security strategy is a clear example of both Type A and

Type B strategic hedging behavior. Although there is a clear incentive for the P.R.C.

(Peoples Republic of China) to develop a global energy strategy in order to fuel the

domestic economic growth that is necessary for political stability, significant elements of

Beijings approach to energy security are designed to reduce vulnerabilities that the

United States would likely try to exploit during future crises or militarized disputes.

Chinas energy policies also help it prepare for future scenarios that do not include a

confrontation with the U.S., but rather the termination of public goods (most important

being sea lane protection and stability operations in the Middle East) currently being

provided by Washington.

The P.R.C. is increasingly dependent on energy imports. It became a net oil

importer in 1991, and by 2008 it imported about 3.6 million barrels of oil per day; by

2020, it is projected to import somewhere between 60 and 80 percent of the oil it will

30 French opposition to the Iraq invasion and the Sino-Russian relationship have been labeled as example ofsoft balancing behavior by some, but others say that they are better examples of simple policy differencesor action that is dictated by economic interests. Similarly, Chinas energy security strategy has beeninterpreted differently by those that perceive it as part of a coordinated effort to overtake the United Stateson the world stage, and those that see it as largely motivated by profit-seeking by Chinas National OilCompanies (NOCs).


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consume.31 Domestic supplies of natural gas and coal are abundant, but it appears as

though Chinas ability to meet domestic demand for energy will depend on its success in

expanding imports for the foreseeable future.32 Its dependence on imported energy leaves

the P.R.C. vulnerable to supply disruptions that could occur during an armed

confrontation with a strong naval power like the United States, because of instability in

supplier states, or in the event that key transportation routes were blocked because of

piracy, terrorism, or natural disaster.

With this vulnerability in mind, there are four basic goals that Beijing associates

with improving energy security: increasing diversity in supply sources, developing more

import avenues, building a strategic petroleum reserve (SPR), and crafting stronger ties

with important supplier states. These objectives fall in line with Type A strategic hedging

because they are all likely to improve the ability of the P.R.C. to compete during a

confrontation with the United States that involves the threat or actual use of force. Just as

there are myriad opportunities for engagement and cooperation between China and the

United States, there are multiple scenarios that may one day lead the two countries into a

militarized crisis. Destabilization of the Korean Peninsula, controversy over human rights

violations, intense trade disputes, currency manipulation, confrontations with third parties

such as Japan, and, of course, the Taiwan question may all serve as sources of conflict in

the future. According to a long tradition of scholarship in the hegemonic stability and

power transition research programs, one would generally expect the likelihood of

31 Figures in this paragraph are drawn from Erica S. Downs and the 2009 report of the International EnergyAgency. See, Erica S. Downs, The Brookings Foreign Policy Studies Energy Security Series: China (Washington: Brookings Institution, 2006): 1; and International Energy Agency, Key World EnergyStatistics (Paris: International Energy Agency, 2009).32 For further discussion, see Erica S. Downs, The Chinese Energy Security Debate, The China Quarterly177 (2004): 21-41; and David Zweig and Jianhi Bi, China's Global Hunt for Energy,Foreign Affairs 84,no. 5 (2005): 25-38.


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confrontation to increase as China and the United States approach a state of rough power

parity.33

Despite the variety of issues that might be at the core of any potential dispute,

both American and Chinese planners agree that a significant focus of U.S. strategy would

be an effort to deny the P.R.C. access to the raw materials it depends on.34

In any sort of

protracted crisis, Chinas success would depend on its ability to maintain energy supplies

necessary for its military and economy to continue to function. This would require that

the Peoples Liberation Army Navy (PLAN) be able to protect ships bound for China all

along extended sea lines of communication and through key choke points like the Straits

of Malacca and the Lombok Straits.35

This issue is recognized as vital to the national

security interest of the P.R.C., and has been recognized at the highest level of Chinese

leadership. In a notable speech in late 2003, President Hu identified Chinas Malacca

Dilemma, and asserted that certain major powers were attempting to dominate the

Straits.36 Prominent scholars and policy makers echo Hus line of thinking. Zhang

Yuncheng argues that, Whoever controls the Straits of Malacca and the Indian Ocean

could block Chinas oil transport route, while Yang Yi warned that, If we do not have

33 Broad treatments can be found in A.F.K. Organski and Jacek Kugler, The War Ledger (Chicago:University of Chicago Press, 1980) and Robert Gilpin, War and Change in International Politics (NewYork: Cambridge University Press, 1981). Using Gross National Income (The World Banks new methodof calculating GDP at purchasing power parity) as a measure of power, the PRC is currently at $7.97trillion, while the US has a GNI of $14.23 trillion. According to a Goldman Sachs Senior Executive, the

2008-2009 economic crisis accelerated the shift of power from West to East, and one should see ChineseGDP matching that of the US by as early as 2027. See, Rana Foroohar, Power Up, Newsweek Online.March 21, 2009. Available at http://www.newsweek.com/2009/03/20/power-up.html. (Accessed June 21,2010).34 See, James Kurth, The New Maritime Strategy: Confronting Peer Competitors, Rogue States, andTransnational Insurgents, Orbis 51, no. 4 (2007): 585-600.35 On Chinese strategy in the face of a crisis, see Jacqueline Newmyer, Oil, Arms, and Influence: TheIndirect Strategy Behind Chinese Military Modernization, Orbis 53, no. 2 (2009): 205-219.36 Jason Blazevic, Defensive Realism in the Indian Ocean: Oil, Sea Lanes and the Security Dilemma,China Security 5, no. 3 (2009), p. 62.


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any conflicts of interest with the U.S., we can go along for the ride. As soon as a conflict

occurs, however, it will be disastrous.37

Chinas energy security strategy addresses the Malacca Dilemma in a number

of ways, but the general focus is on diversification of supply sources and import avenues.

Instead of fighting for control of key chokepoints and SLOCs, the P.R.C. can make them

less significant in a crisis by increasing the geographical diversity of its energy supply.

New ports, pipelines and other transportation links in places like Myanmar, Russia,

Central Asia and Gwadar, Pakistan make U.S. interdiction at least more difficult, if not

impossible. Even more important, new overland pipelines are capable of bringing in oil

and gas from Central Asia and eastern Siberia without traversing vulnerable waterways.

Even if the US chose to stop short of a quarantine or blockade, it would likely

seek to isolate the P.R.C. diplomatically and economically by pressuring key energy

suppliers to restrict exports to China. By increasing the number of its supplier countries,

the P.R.C. is less vulnerable to this approach than it would be if it relied heavily on one

or two countries like Saudi Arabia or Iraq. The economic value that Chinese oil imports

represent to countries like Iran, Angola, Kazakhstan and Venezuela, along with the

economic assistance and military aid that is often part of Chinas oil diplomacy make it

less likely that these states would actively side with the U.S. in most plausible crisis

scenarios.38

As such, the strategy of diversifying supply sources and import avenues makes it

harder for the U.S. to unilaterally block all the necessary pipelines and ports, while also

37 See Blazevic, Defensive Realism in the Indian Ocean, p. 62; and Downs, Brookings Energy SecuritySeries: China, p. 14.38 For a critical analysis of Beijings links with energy exporters, see Hongyi Lai, Chinas Oil Diplomacy:Is it a Global Security Threat? Third World Quarterly 28, no. 3 (2007): 519-537.


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creating a favorable set of economic, military and political relationships with key supplier

states that will have significant incentives to maintain oil exports to China. Moreover,

Beijing is in the final stages of filling a 90-day Strategic Petroleum Reserve (SPR) that

will act as further insurance against any U.S. attempts at supply disruption that might take

place during a short or medium-term crisis between Beijing and Washington.

Chinas energy security does not just revolve around the possibility of an

adversarial relationship with the United States. In fact, much of Beijings emphasis on

diversifying supply sources and import avenues has more to do with fears surrounding

U.S. decline rather than concerns over a potential confrontation with the United States.

Currently, the United States plays the primary role in providing important public goods in

regions that are crucial to Chinese interests. Although it is beyond the scope of this paper

to fully address the role of the U.S. as a provider of global public goods, some obvious

examples that are relevant in this context include the protection of key maritime choke

points and sea lanes against threats from piracy or terrorism, heavy support for U.N. and

N.A.T.O. peacekeeping operations in key oil producing regions, as well as promotion of

free trade, and service as a global lender of last resort.39

Should the U.S. react to

declining economic prosperity or its worsening balance of payments situation by

retrenching militarily or engaging in economic protectionism, however, it will likely

reduce or eliminate its contribution to several public goods upon which the P.R.C.

currently relies.

For example, the absence or reduction of U.S. naval forces in Southeast Asia may

increase the frequency of pirate attacks against shipping in places such as the Malacca

39 See Joseph S. Nye, United States Leadership and 21st Century Global Public Goods, pp. 49-52 formore detailed discussion of the United States as a provider of global public goods in the Twenty-FirstCentury.


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Straits, which would undoubtedly affect oil imports bound for China. A reduced U.S.

military presence in the Persian Gulf, or diminished support for peacekeeping missions

may increase political instability and lead to supply disruptions in a particular country

like Sudan or rapidly rising prices on the global oil market in general. The price of oil

could also rise if diminished U.S. counter-terrorism operations allow for a significant

terror attack against a key oil field in Iraq, Russia or Saudi Arabia. In such a scenario,

Chinas energy investments may give it some immunity to price fluctuations, or at least

allow it to benefit by selling the oil it has rights to at an elevated market price.40

As a whole, Chinas energy security strategy appears to be a strong example of

both Type A and Type B strategic hedging. Within the context of the identification

mechanism presented in the previous section, it is safe to say that Chinas behavior

passes through the first filter. Diversification of supply sources and import avenues, and

the development of a strategic petroleum reserve help to reduce the extent to which China

would be vulnerable to any attempts by the U.S. to interrupt energy imports during a

militarized dispute. Even absent a confrontation with the U.S., Chinas energy security

strategies are an example of Type B hedging: they help prepare the P.R.C. for a future

scenario in which the U.S. reduces its global presence to the extent that it stops providing

some or all of the public goods which China currently enjoys.

Before the Chinese behavior discussed above can be considered an example of

strategic hedging, however, it must be pass through the second and third filters. In order

to do so, it must be ruled out as a potential case of internal or external balancing, and it

must also be clearly identified as the result of strategic coordination at the highest levels

40 Erica S. Downs provides an extended discussion of Chinese equity oil investments and their impact onthe global energy market. See, Erica S. Downs, The Fact and Fiction of Sino-African Energy Relations,China Security 3, no. 3 (2007), pp. 42-68.


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of Chinese government. In other words, Chinese energy security strategy must be shown

to exist as something less intense than traditional hard balancing, but more coherent than

what could be called normal diplomatic friction.

Is Chinas energy security strategy an example of either internal or external hard

balancing? Upon inspection, the answer is unequivocally negative. Surely, there is some

debate about Chinas larger efforts at military modernization, and whether it constitutes

the firsts signs of internal balancing. China military spending increased by at least 10

percent in the two decades from 1989 to 2009, though in 2010 it only grew by 7.5

percent.

41

Significant attention was given to bolstering the Peoples Liberation Army

Navy (PLAN) during this time period, and it is possible to attribute this to Beijings

desire to protect the sea routes it uses to import its energy. But Chinas naval buildup is

much more focused on anti-access tools like submarines rather than force projection tools

like aircraft carriers. In this sense, it appears that any naval buildup that is occurring is

designed primarily with Taiwan in mind rather than the defense of distant import routes.42

Chinas energy security strategy also falls short of a well-established threshold for

external balancing. Although the P.R.C. has used oil diplomacy as a way to strengthen

ties with supplier states, there is thus far no evidence that China seeks to form explicit

military alliances directed at the United States as part of its global energy security

strategy. Arms sales have sometimes served as a side payment to energy-rich states that

facilitate investment deals and also ensure the security of those investments. Tanks and

41 Military spending figures for 2010 are taken from Michael Wines and Jonathan Ansfield, China Says ItIs Slowing Down Military Spending,New York Times, March 4, 2010: A7. Chinas military buildup, evenif it were directly related to Chinas energy security, would not meet constitute the meaningful increasein military spending as a percentage of GDP that Lieber and Alexander present as their definition ofinternal balancing. According to the World Bank, Chinese military spending was less than two percent ofits GDP in 2008, and has stayed within a narrow range of 1.5 percent to 2.5 percent of GDP for each of thepast 20 years. See, World Bank, World Development Indicators 2009: China.42 See Lai, Chinas Global Oil Diplomacy, p. 531.


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combat aircraft have been sent to Sudan in the aftermath of oil deals, but most sales to

developing countries like Iran and Angola actually predate Chinas first overseas

investments.43 Most importantly, in no case have energy deals or arms sales actually led

to a formalized military alliance between the P.R.C. and the energy supplier. It is likely

that arms sales are just used as deal sweeteners the weapons and technologies involved

are typically outdated and they are likely less attractive to states than the strictly financial

and political incentives that are usually also offered.44

In summary, while the Chinese may seek to secure their overseas energy

investments via hard balancing or outright confrontation under more favorable conditions

in the future, their present approach falls well short of what can be called traditional hard

balancing. But is there really a coherent strategy behind Chinas energy policies?

Balancing, buckpassing, and bandwagoning strategies are all developed and coordinated

at the highest levels of government as a way to maximize the national security of the

country in question. Do leaders in Beijing engage energy security at the strategic level?

Despite the relative autonomy of Chinas National Oil Companies (NOCs) when it

comes to implementation, evidence suggests that the government considers energy

security to be of the highest importance, and that it is in the process of further

centralizing decision making authority on energy-related issues.45

In 1997, shortly after China became a net oil importer, Premier Li Peng developed

his Policy on Energy Resources, which called for any and all means including

43 For more details see, Chinas Overseas Investments in Oil and Gas Production. Report Prepared for theUS-China Economic and Security Review Commission. (New York: Eurasia Group, 2007).44 See, Erica S. Downs, The Brookings Foreign Policy Studies Energy Security Series: China, p. 42.45 See, for example, Edward Cunningham, Chinas Energy Governance: Perception and Reality, MITCenter for International Studies Audit of the Conventional Wisdom 07-04, March, 2007; and TrevorHouser, The Roots of Chinese Oil Investment Abroad,Asia Policy 5 (January 2008): 141-166.


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lobbying, financial aid and information exchange to achieve the broader goal of

diversifying the sources of Chinas energy supply.46

More recently, President Hus

elaboration on his countrys Malacca Dilemma suggests a keen awareness of, and

anxiety over Chinas energy security challenges. Bureaucratically, there has been real

consolidation of control over energy policy since 2008. After years of delegating

decisions about energy policy to lower levels of the National Defense and Reform

Commission (NDRC), the formation of the National Energy Agency (NEA) in 2008

indicated some centralization of authority. But the NEA was replaced two years later by

an even more powerful super ministry called the National Energy Commission (NEC).

The NEC is charged with developing, implementing and reviewing Chinas domestic and

international energy security strategy, and was formed despite the opposition of the

NDRC and the NOCs.47

That, and the fact that its 21 members include high ranking

members of the military, national intelligence agencies, and Premier Wen Jiabao, suggest

that the NEC is a clear victory for the interests of the central government, which is intent

on tightening control over energy policy in the years ahead.48 The NEC may also seek to

reinvigorate traditional top-down methods of controlling energy investments, including

direct financing, permit approval, and penalty enforcement. Any additional oversight

from the NEC will complement what is already an important role for Beijing in guiding

the overseas activities of the NOCs. The government provides funding for the vast

majority of deal sweeteners that the NOCs use in order to secure overseas deals and most

46 The text of the speech is reported by Xinhua, and accessed through the World News Connection. See, LiPeng, Chinas Policy on Energy Resources. http://wnc.fedworld.gov (Document ID: drchi119-n-97001)(Accessed June 18, 2010).47 See, Zhiyue Bo, Chinas New National Energy Commission: Policy Implications, East Asian Institute

Brief504 (Singapore: East Asian Institute, February 5, 2010).48 Keith Bradsher, Security Tops Environment in China Energy Plan,New York Times. (June 17, 2010):B1.


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major overseas mergers and acquisitions. In many cases Beijing provides direct grants,

debt relief and military assistance to energy suppliers on its own. In some cases, the

government even uses highly visible political meetings or summits in order to facilitate

important deals. President Hu was personally involved in important negotiations between

China National Petroleum Corporation (CNPC) and PetroKazakhstan.49

Motivations that would lead to normal diplomatic friction, such as economic

interests, regional dynamics, policy issues, and domestic politics also influence Chinas

energy security policies. But these influences are at best complementary to the coherent

energy security strategy developed, funded, and monitored at the highest levels of

government in Beijing. Thus, according to the identification mechanism outlined here,

Chinas global energy strategy should definitely be considered an example of strategic

hedging rather than an instance of ad hoc, non-strategic, normal diplomatic friction.

The Sino-Russian Strategic Relationship

There is no doubt that relations between Russian and China are significantly

warmer today than they were during the last two decades of the Cold War. The two

countries have resolved most of their border disputes, signed the 2001 Treaty on Good-

Neighborliness, Friendship and Cooperation, and are co-leaders of the Shanghai

Cooperation Organization (SCO). Russia is also the leading arms supplier to the P.R.C..50

How should recent Sino-Russian relations be defined? There is little consensus in the

existing literature. Soft balancing proponents interpret the strengthened relationship as

49 The preceding paragraph draws heavily from arguments made in Edward Cunningham, Chinas EnergyGovernance, and Erica S. Downs, The Brookings Foreign Policy Studies Energy Security Series: China.50 Data on arms transfers are taken from the Stockholm International Peace Research Institute (SIPRI),which maintains an online database at http://www.sipri.org.


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part of an overall effort by Moscow and Beijing to engage in soft balancing against the

United States. According to T.V. Paul, the desire to soft balance was borne out of general

concerns about U.S. power preponderance and specific objections to U.S.

interventionism, which were exacerbated by the 1999 NATO operations in Kosovo.51

Critics argue, however, that the 2001 Treaty, the establishment of the SCO, and the arms

trade between Russia and China have very little to do with the United States or its

policies in Kosovo or elsewhere. Instead, Brooks and Wohlforth attribute growing

diplomatic ties to a common interest in subduing radical Islamism in Central Asia (a goal

that the United States shares), and explain the booming arms trade as a result of Russias

need to find external demand for its extensive domestic arms industry.52

Given the

difficulty that others have had in conceptualizing the current Sino-Russian relationship, it

is not surprising that it is a somewhat complicated illustration of strategic hedging

behavior: it is an example of Type A hedging with respect to China, but not with respect

to Russia. It is an example of Type B hedging for both countries.

Between 2000 and 2009, Russia accounted for well over 75 percent of Chinese

arms imports, with deals including surface-to-air missiles, attack helicopters, anti-ship

missiles, destroyers and submarines.53 Many of these weapons systems would be useful

for China in case of a confrontation with the United States in the Taiwan Straits or

another coastal area. It is true that the vast majority of the weapons sent to the P.R.C. are

from the Soviet era, as Moscow has been reluctant to share its most advanced systems out

51 Paul and others also include India in the discussion of Sino-Russian relations, and interpret warmingrelations between the three countries as the emergence of a strategic triangle of states that may beinterested in countering U.S. strength in Asia.52 See Brooks and Wohlforth, Hard Times for Soft Balancing, pp. 83-88.53 The full register of Russian arms exports can be downloaded as part of the SIPRI Arms TransferDatabase. Accessible at: http://www.sipri.org/research/armaments/transfers/databases/armstransfers.


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of fear that the Peoples Liberation Army (PLA) will replicate Russian technology on its

own and begin to produce (and potentially export) its own sophisticated weaponry

without the need to rely on Russian imports. Indeed, there has been a drastic reduction in

arms transfers from Russia to China since 2006, mostly due to the fact that the P.R.C.s

own arms industry is increasingly capable of producing the kinds of weapons that

Moscow is actually willing to send its way.54 This suggests that China only imports arms

from Moscow in order to develop basic domestic capabilities that can be used to develop

its own arms export industry. But those earlier imports were crucial in accelerating the

development of a domestic arms industry that is capable of producing the type of

missiles, ships, and submarines that will

System Structure and State Strategy

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