Chapter 10: States and Markets in the World Economy


Do not join international institutions
For the time being, Chechen industries will be allowed to develop without exposure to global economic competition (and global resources/firm alliances). As a result, Chechnya will not develop closer ties with other capitalist countries because they desire an open world economy.


You have chosen a mixed economic liberalist path. Your infant domestic industries are fully open to domestic competition, but are protected from international competition. That being said, your domestic economy loses out on benefitting from specialization and access to more markets and resources. Furthermore, rejecting institutions means your linkages with the capitalist bloc remain basic and minimal. The Russians approach the Chechen president and offer to sell oil at a discounted rate and/or provide the Chechen government with unconditional loans. Then, the President asks you: Chechnya is a developing country and stands to benefit from the proposed economic relationship, but do the economic benefits outweigh the harm to your political autonomy (Russia would have leverage over Chechnya because it could cut off energy/capital whenever it wanted to)?

What do you do now?

Accept the offer for cheap Russian oilThe discounted energy resources will more easily enable Chechnya to develop its infant domestic industries and/or build up its military. No other fossil fuel suppliers in the world are willing to offer energy resources at anywhere near that low a price. This means the deal would create Chechen dependency upon Russia because the Russians could cut off the energy supply whenever they liked.
Accept the offer for unconditional loansRussian capital would allow the Chechen government to more easily invest in its economic or military development in the short term. This would also result in Chechen dependency upon Russia because the Russians could cut off financial assistance whenever they liked and/or demand immediate payment. If the Russians demanded immediate payment, Chechen economic growth would likely be disrupted, given the government's need to collect greater resources from domestic industries to pay off the Russians.
Accept both offersSee above for the risks and benefits. This could benefit Chechnya greatly in the short term, but would also create a large dependency upon Russia in the long term.
Reject both offersThe risks of dependency on communist Russia outweigh the short-term benefits of economic assistance.