| The "Days of Empire," when political entities extolled their control over other territories, have long since expired. Yet hierarchies between states remain. While international relations theorists often assume that states are fully sovereign, weak states sometimes delegate decision-making authority to strong states. This delegation, or surrendering of sovereignty, occurs in both the economic and security arenas. When a state accepts the dollar as its only currency, it surrenders to the United States some control over its monetary policy. When foreign troops based on a state's territory outnumber its own military forces, the state no longer has full decision-making authority over its security policy. In the former Soviet region, Belarus and Kazakhstan gave Russia the right to set their external tariff rates. Tajikistan retained the Russian ruble, allowing Russia to set monetary policy. Armenia encouraged Russian troops to remain on its territory. Ukraine reluctantly consented to Russia basing its Black Sea Fleet on Ukraine's Crimean peninsula. Not all states have forsaken full autonomy and those that have surrendered some sovereignty have retained autonomy in other arenas, despite Russian pressures for a deeper hierarchy. Nationalism, ethnic identity, and a history of independence do not fully account for this variation. Drawing on transaction cost economics, I use the dyad of a strong state and a weak state as the unit of analysis, and formulate several testable hypotheses about the role of relation specific assets (RSAs) and the white knights that ameliorate or eliminate vulnerability caused by RSAs. RSAs are assets, such as fuel pipelines, electricity grids, even geographic positions, that are costly to change and have low value outside of the dyadic relationship. When RSAs are present, one or both states lack optional partners. White knights---such as the International Monetary Fund, foreign direct investors, and NATO---can reduce vulnerability, allowing the weak states to avoid hierarchic relationships with the regional dominant power. In rich qualitative studies, I test the theory on five states---Ukraine and Belarus in the west, Kazakhstan in Central Asia, and Azerbaijan and Armenia in Transcaucasia---and find that RSAs played a significant role in determining whether states would enter into a hierarchy. |
