Recent weaponized interdependence research has focused on mapping international economic structures to explain states’ capacity to inflict costs on foreign actors. This paper proposes a different approach that integrates weaponized interdependence research with microeconomic concepts of substitution. If an international economic exchange is restricted, actors on either end turn to the best available alternative. Substitution costs describe the utility loss actors incur when doing so. The extent of these costs determines whether either side can ‘weaponize’ the exchange. Monopolies and monopsonies are instances where buyers and sellers face high substitution costs as they lack alternatives. The theory delineates three determinants each for international monopolies and monopsonies, offering a nuanced understanding of why states can weaponize the economic exchanges of some market actors but not others. Various cases illustrate the theory, drawing on in-depth interviews. For instance, the cases contrast the know-how and intellectual property underlying technological monopolies in semiconductor production with the international network effects that bolster several monopolies in the realm of international finance. The developed theory reframes and refines the weaponized interdependence discourse and has important implications for policymakers’ ongoing efforts to ‘de-risk’ international economic exchanges without comprehensively ‘decoupling’ them.
Claas Mertens is a Postdoctoral Research Fellow for Net Zero Governance systems. His research focuses on the international political economy of climate change and international economic conflicts, such as economic sanctions and weaponised interdependencies. It also explores intersections between these two areas. His work is published or forthcoming in International Studies Quarterly and The Review of International Organisations.
Before joining the Blavatnik School, Claas was a DPhil student in International Relations at Oxford University’s Department for Politics and International Relations. He also holds an MPhil in Politics from Oxford and a BA in Business from the University of St. Gallen and was a visiting student at Harvard. Before his DPhil, he worked as a management consultant. Claas was Rowing World Champion in 2015 and represented Oxford in the 2018 Oxford-Cambridge Boat Race. Now, he enjoys surfing, where his passion far exceeds his skills.
