THE DYNAMICS OF 'SMALL STATE' LEVERAGE: IMPLICATIONS FOR NORTH-SOUTH RELATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00889A000800020001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 42
• Document Creation Date: December 19, 2016
• Document Release Date: May 4, 2006
• Sequence Number: 1
• Publication Date: August 1, 1976
• Content Type: STUDY

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,Z-esearch Stud.y
'he Dynamics of "Small State" Leverage:
implications for North-South Relations
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(WNINTEL)
Classified b
Exempt from General Dac ass Ica ion Schedule
of E.O. 11652, exemption- category,
?58(1), (2), and (3)
Automatically declassified on:
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C E N T R A L I N T E L L I G E N C E A G E N C Y
DIRECTORATE OF INTELLIGENCE
OFFICE OF POLITICAL RESEARCH
August 1976
THE DYNAMICS OF "SMALL-STATE" LEVERAGE:
IMPLICATIONS FOR NORTH-SOUTH RELATIONS
by
NOTE: Representatives of the Office of Economic Research and the
Office of Current Intelligence made valuable suggestions
and comments which helped shape the basic analysis of this
study and are in general agreement with its key conclusions.
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FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . .
KEY JUDGMENTS . . . . . . . . . . . . . . . . . . . . . . 3
THE DISCUSSION . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . 7
ANALYTICAL FRAMEWORK: LEVERAGE IN SMALL STATE-
LEVERAGE AND ITS LIMITS IN NORTH-SOUTH RELATIONS .-. . . 13
The Role of Leverage in the North-South Dialogue . . 13
LDC Assessments of the Lessons of the Arab Oil
Embargo . . . . . . . . . . . . . . . . . . . . . . 22
OPEC-LDC Relations . . . . . . . . . . . . . . . . . . 27
LDC Perceptions of the Costs of Leverage . . . . . . . 29
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During the past several years, relations between the devel-
oping countries and the industrial powers have been characterized
by growing uncertainty and tensidn. North-South problems are
increasingly competing for attention with the more traditional
East-West security issues, and with the political and economic
issues affecting relationships among the non-communist industrial
states.
To what extent will the demands of the developing states
for far-reaching changes in the distribution of economic wealth
and political power impinge on US interests directly? And to what
extent will reverberations from these demands affect US relations
with the other industrial powers? If for no other reason, these
questions have become more salient because of the potential impact
on the prosperity of non-communist industrial nations, and on
amicable relations among them, of the recent growth of the economic
power and political leverage of oil-exporting states.
OPR has already addressed the political implications of
several specific issues in contention between North and South
in a series of papers published during 1974-1975.* The present
study attempts to establish a more general analytical framework
for assessing recent and prospective trends in North-South relations.
It examines the uses and limits of small state leverage; i.e.,
the influence weak states attempt to gain over major powers
by exploiting the latters' dependence in the areas of resources,
OPR-408, December 1975, SECRE
For example: "Law of the Sea: Issues and Implications," 0PR-3,
April 1974, CONFIDENTIAL; "The United Nations: Problems and Potential,"
September 1974, OFFICIAL USE ONLY; "The Political Implications of
Modernization: The Brazilian Case," OPR-407, September 1975;
"Managing Nuclear Proliferation: The Politics of Limited Choice,"
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1;.
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security concerns, and international politics generally. The study
assesses the attempts of the legs developed countries (LDCs) to
use the leverage of their control of oil and other resources needed
by the industrial states to achieve a "New International. Economic
Order" (NIEO), the consequences of the success or failure of the
effort for North-South relations, and the implications for the US.
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The Arab oil embargo and the OPEC experience have stimulated
greater assertiveness by the developing countries on issues relating
to their individual and bloc-wide economic interests. LDC leaders
were also initially optimistic about the benefits they could achieve
by using control of oil and other natural resources as a political
instrument. They saw resource leverage as a means of focusing the
the attention of the industrial countries on the demands of LDCs
for greater cont-rol over and profit from their resources, increased,
less "demeaning" economic assistance, and greater influence over
the decisions of international economic institutions. And they saw
a "common cause" alliance developing between the oil-producing
states and other developing countries that would induce the indus-
trialized nations to be forthcoming. Thus, by 1974, the developing
countries en bloc were calling for the creation of a "New Interna-
tional Economic Order" (NIEO) in which their problems would receive
priority attention and over which they would have a major influence.
But the increasing assertiveness of LDCs as a bloc
must be viewed against the background of the concern many LDC
spokesmen evince about the costs and risks associated with using
resource leverage and the confrontation this generates to achieve
an NIEO. These spokesmen indicate a sensitivity to the limits
of small state leverage especially over the long term, underscored
for them by the ability of the industrial nations during 1975-1976
to offset in good measure what during 1973-1974 appeared to most
LDCs to be the enormous political leverage of the oil-exporting
countries.
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Among the specific concerns expressed by various LDC spokesmen,
are the following:
--The leverage of oil is unique, and the immediate
political successes achieved by the embargo are
unlikely to be duplicated in a struggle for an NIEO.
--LDC calls for confrontation will cause industrialized
countries to search for greater security of supplies
for key resources. Since this would stimulate a more
vigorous pursuit of alternative sources of supply,
substitutes, and stockpiles of commodities for bargain-
ing purposes, individual LDCs and members of cartels run
$ he risk not only of diminished leverage but also
of reduced markets.
--This prospect and other initiatives by the industrial
countries, as well as fundamental differences among the
non-industrial states, would accentuate dissension among
the LDCs (e.g., as between the oil-rich and oil-poor),
and undercut the cooperation needed to make pressure
tactics effective in North-South relations.
--Too blatant a pursuit of LDC bloc tactics in
such organizations as the UN (e.g., the PLO
issue and the vote on Zionism) could cause
the US and other developed countries to
reduce further their participation in UN pro-
grams of particular benefit to the LDCs.
In sum, there is concern among a growing number of LDCs that too
militant a stance on North-South issues, instead of making the
industrial countries more forthcoming, may cause them to harden
their positions in multilateral negotiations on economic issues
of paramount importance to the LDCs.
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The basic tension among LDCs--between impulses toward con-
frontation and recognition of the need for moderation in North-
South relations--is bound to continue over the next several years.
The actual course of future LDC strategy and tactics will be
determined as much by the actions of the industrial states
as by power politics within the LDC camp. Clear signals by the
industrial powers as to which NIEO issues are open to cooperative
North-South action and in which forums meaningful negotiation
can occur would probably encourage moderation and help to prevent
the emergence of a united LDC front favoring confrontation. Continued
efforts on the part of the individual industrial countries to
secure essential supplies through bilateral arrangements (e.g.,
technology for oil) would also serve these ends. In short, the
manifest divisions and other weaknesses of the LDCs en bloc will
tend to work against strong and united confrontational efforts
to achieve an NIEO. And even if the latter were employed, the
overall strength of the industrial democracies would be sufficient
to contain and deflect pressures at least for the next several
years.
But it is important to note that even a diminution of the
level of confrontation associated with the NI._EO would sti_l.l leave
the basic problems between North and South on the foreign policy
agenda. To the extent that the industrial countries remain dependent
on the LDCs--for supplies and markets, for international stability,
and for cooperation in addressing such global issues as control of
nuclear proliferation and terrorism, protection of the, environment,
law of the seas, and the security of investments abroad--the largely
intractable problems of the poor nations will continue to affect
the rich.
In a sense, then, the very weakness of most of the LDCs may
provide a compelling reason for the industrial democracies
to continue to respond to the issues and demands inherent in the
NIEO concept.
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In an era of growing dependence among nations and links be-
tween international problems, the trade-off North-South relations
involves for the industrial democracies is between exercising
their power to deflect "inconvenient" LDC demands in the short
term and the need to promote the stability of the international.
system over the long run. US interests may not often be directly
damaged to any serious extent either by persistent North-South
acrimony or by an increase in domestic radicalism and instability
among LDCs. But such developments would place strains on the
other industrial democracies (who are much more dependent upon
stable relations with supplier countries), and this could, in turn,
affect their relations with the US. Such developments could also
provide opportunities for adventure to the communist powers, es-
pecially the USSR, who are much less constrained than the US or its
allies by"the accommodations that interdependence appears to require
between the developing and the industrial states. Thus regardless
of the level of confrontation or cooperation in North-South relations,
the long term significance of North-South problems may lie primarily
in their potential linkage to conflicts and tensions among the indus-
trial democracies and between them and the communist world.
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THE DISCUSSION
INTRODUCTION
Throughout the 1950s and 1960s, the significance of small
states in international affairs was apparent in the relationships
that certain developing countries achieved with the great powers
because of the Cold War. To appreciate the impact of the leverage
of such states, one need only recall how both Vietnams and both
Koreas exploited the concerns of their great power patrons with
the regional and global implications of local conflicts to gain
aid or to influence the terms on which such conflicts were to
be fought or_ended. Moreover, small states generally. sought
a host of benefits from the US and the USSR in return for their
votes at the UN on the China question and other major issues. UA1C 5'
In the 1970s, the ability of key developing countries to
influence international. affairs has been faci.l.i.tat_ed by (and has
contributed to) the rise in salience of international economic
issues. In particular, the heightened awareness of the dependence
of industrial nations on the oil and other natural resources of
the LDCs, the willingness of some LDCs to link this dependence to
contentious international political issues, and the interdependence
in trade and monetary affairs of non-communist nations generally
have increasingly politicized international economic relations.
Today, questions that previously turned on rather technical
deliberations among economists (e.g., exchange rates, IMF drawing
rights) are international political issues. This, in turn, has
affected both the type of issues and the degree of complexity
with which US foreign policy has to deal. As Secretary Kissinger
put it in terms that represent an attempt to define the "new agenda"
these developments have created for foreign policy: !AA/U4
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The traditional agenda of international affairs--
the balance among major powers, the security of
nations--no longer defines our perils or our
possibilities.... Now we are entering a new era.
Old international patterns are crumbling; old
slogans are uninstructive; old solutions are un-
availing. The world has become interdependent
in economics, in communications, in human aspir-
ations....[Consequently,] a new and unprecedented
kind of issue has emerged. The problems of energy,
resources, environment, populations, the uses of
space and the seas rank with questions of military
security, ideology and territorial rivalry which
have traditionally made up the diplomatic agenda.* UgJ SS.
.
In essence, global economic problems and the heightened
sense of the interdependence of nations they have caused have
made decisions about security and diplomacy more complex, and
the application of military power and other forms of influence
in international relations more uncertain. At the same time,
as the economic dependencies of industrialized states have become
especially oignifzcaut to their foreign relations and domestic
well-being, the use of leverage by small states in international
affairs has tended to polarize international economic relations
along North-South lines.** (W124.
"Toward a New National Partnership," address in Los Angeles,
24 January 1975. For an indication of the degree to which the
''new agenda" has been recognized throughout the industrial world,
see Helmut Schmidt, "The Struggle for the World Product," Foreign
Affairs, 52 (April 1974), pp. 437-451; Thierry de Montbrial, "For
a New World Economic Order," Ibid, 54 (October 1975), pp. 61-78.
The North-South dichotomy is used in this study to distinguish
the non-communist industrial states (the "North") from the LDCs of
Asia, Africa, and Latin America (the "South"). Some LDC observers,
in contrast, include the USSR and other communist industrial states
in their references to the "North".
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The sections that follow first set out an analytical frame-
work for assessing the uses and limits of small state leverage.
This framework is then applied to an analysis of how developing
countries have used their economic power to influence major powers
in the 1970s and how such leverage is likely to affect the course
of North-South relations. The concluding section discusses the
significance of leverage and North-South issues in international
affairs over the next three to five years.1
ANALYTICAL FRAMEWORK: LEVERAGE IN SMALL STATE-
GREAT POWER RELATIONS
The object of leverage in international relations is influ-
ence. Leverage refers to the influence one state gains over another
by exploiting the latter's diplomatic, economic, and security-related
dependence. Strong states usually prevail over the weak by employing
some combination of leverage and superior military, economic, and
political power. But under certain circumstances, small states can
exercise influence disproportionate to their actual power in relation-
ships with stronger states by exploiting the latters' dependence on
natural resources, access to a strategic location, loyalty against a
common adversary, or cooperation on some common goal. Wev404-'
Historically, wars or international crises stemming from
great power rivalries, changes in the alignments of great powers,
their expansion into new territories, and the need for raw materials
generated by industrial growth have all contributed to small state
leverage in international affairs.* In the 1950s and 1960s, for
example, small state-great power relations were largely seen
by the latter in terms of their own strategic rivalries. 4W'u'+EA~Y
These are the prominent themes emerging from most analyses
of "small states" in international relations. See, for example,
George Liska, Alliances and the Third World (Baltimore: Johns
Hopkins Press, 1968); Robert E. Osgood, Alliances and American
Foreign Policy (Baltimore: Johns Hopkins Press, 1968); Robert
L. Rothstein, Alliances and Small Powers (New York: Columbia
University Press, 19685; and David Vital, The Inequality of
States (New York: Oxford University Press, 19675.
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The Cold War thus gave small states opportunities to exercise
leverage because of great power dependence on them as surrogates
in regional and global struggles for influence (e.g., the USSR
and Cuba, the US and Latin America generally)./U`GL'Y
The effective--and certainly the continuous--use of
leverage by small states is relatively rare, however, because
the dependence of a great power is a necessary rather than a
sufficient requisite for influence. In politics as in physics
leverage depends on the amount of force that can be brought to
bear in attempting to move an object, and the forces (e.g.,
inertia and gravity) that keep the object where it is in the
first place. In international politics the leverage that a
weaker state can achieve over a stronger state rests on the
means it has to exert influence (i.e., some form of assymetrical
dependence). the incentives and means the latter has to resist
such pressures, and the importance each state attaches to the
relationship. fNAlk
How readily a specific issue in dispute can be linked
to other international problems and relationships acts as a
fulcrum which can multiply the smaller state's power and can,
cause the stronger state to accede to the weaker state's basic
demand. `4
Using leverage, and sustaining its impact over time, is
thus a complex process. But we do know in general terms what
has traditionally been required for success. The dependence must
be clear, vital, and unlikely to change over the period of time
(e.g., a war, a UN session) the party doing the influencing be-
lieves will be required to achieve its goals. The party to be
influenced must attach such a high value to the relationship,
usually because of linkages to other international concerns,
that an abrupt change in it--ranging from terminating the
relationship altogether to changing its need for the resources
or factor that has made it vulnerable--would be unlikely. 144' '`
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The considerations highlighted in Chart I summarize those
consistently identified as key concerns of the weaker party or
"actor" using leverage. They are drawn from a review of studies
done by historians on international negotiations, by political
scientists on the nature of bargaining, by economists on game
theory and labor mediation, and by psychologists on determining
how individuals weigh the risks of trying to influence other
individuals. These studies show that the weaker "actor" (i.e.,
a state, labor union or individual) tends to assess leverage
from basically a cost-benefit point of view.* For the tensions
or confrontations in the relationship that using leverage could
generate may outweigh or even vitiate any immediate gain. The
implication of this finding is that even when one state clearly
possesses an advantage because of another's dependence on it,
the exploitatio"n of that advantage normally involves assessing
the costs of doing so. 1# YY
The fact that costs enter into the calculation by small
states of their leverage is enormously significant for the countries
that are its target. While such countries may not be able to
regulate their dependence unilaterally, they can control what
appears to others to be the costs of exploiting it. k*,44-
It is because of the salience of the cost factor that
stronger states have the power to check small state leverage,
especially over time. Simply put, a great power can pay costs to
* Among the studies which point this out--and are now considered
classics on negotiation and bargaining strategies--are: Thomas
C. Schelling, "An Essay on Bargaining," The American Economic
Review XLVI (June 1956), pp. 281-306; Chamberlain and Kuhn,
Collective Bargaining (N. Y.: McGraw Hill, 1965); Chester
L. Karrass, The Negotiating Game (New York: World, 1970);
D. Ellsberg, 'The Theory and Practice of Blackmail," RAND
Corporation P-3883 (July 1968); K. E. Boulding, Conflict
and Defense (New York: Harper and Row, 1962); and
Roger Fisher, International Conflict for Beginners (New York:
Harper and Row, 1970).
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THE WEAKER
Do I:have any leverage:
--Is our relationship more
important to the party I
wish to influence than what ~
I am specifically demanding?-
--Can I 'link my basic demands'to
issues and/or other relation-
KEY CONSIDERATIONS FOR
ships that affect the security,
and-well-being of the party I.
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CALCULUS-_,OF LEVERAGE.-A
4m.I willing to suffer=the
consequences of hostility in
our relationship or its ter-
aiination~
--Will my use of leverage this
time prejudice ocher demands
I might make later?
--Can l;use my leverage without
adversely affecting the other.
relationships I - maintain?
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achieve its will that a small state generally cannot (e.g., by
seeking alternative sources of supply or political support).
And the small state's perception of the willingness of the great
power to pay such costs, in effect, largely determines the uses
and limits of small state leverage. W14-01-
In applying the analytical framework developed above to
North-South relations today, then, two questions should be of
~t.`.
central concern:
--what are the levers at work?
--what are the perceived costs of using them? `j k-mr
The Role of Leverage in the North-South Dialogue
From an LDC perspective, the importance accorded North-South
issues today is a direct result of the use of oil as a political
weapon by the Arab states. Prior to 1973, most leaders in the
developing world believed that LDCs substantially lacked the
capacity to act effectively as s bloc. in pressing for fundamental
changes in the international economic system. Most had become
frustrated, moreover, at the results of appealing for aid on
the (demeaning) grounds of their dependence and vulnerability l$
and the virtue and humanitarianism of the developed countries.*-