Understanding And Interrupting Authoritarian Collaboration

Over-reliance on democracies and western-dominated international institutions for development aid, investment, and trade leaves authoritarian regimes vulnerable to the application of conditionalities: the explicit linkage of aid or trade with pressure to liberalize their policies. The demands attached to western loans are problematic for autocratic regime stability. For instance, requiring autocrats to rein in spending by cutting popular subsidies and bloated bureaucracies can inspire elite defections and counter-regime mobilization. To reduce the leverage of western regimes and institutions, autocrats diversify their partnerships. While fellow autocrats also use economic leverage to influence partners' policies, it seems reasonable to assume that they are less likely to pressure autocrats to engage in regime reforms that could be destabilizing to their rule.

Authoritarian regimes in Asia and the Middle East have promised alternative approaches to foreign aid and investment that eschew unattractive political conditionalities. The so-called "non-traditional" or "new" donors, including China and the Gulf monarchies, instead promise a growing number of recipient states that they will not interfere in their domestic affairs. As the volume of aid from China and other authoritarian lenders has grown, authoritarian recipient countries increasingly skirt the demands of western institutions. Countries receiving aid from China are less likely to implement market-liberalizing reforms and less likely to comply with conditions attached to loans received from traditional donors, including the World Bank.⁹⁷ In response to this new competition, the World Bank has changed its lending portfolio to emulate the types of projects China funds and imposes fewer conditions on recipients receiving aid from China.⁹⁸ Nonetheless, preliminary evidence suggests that increasing aid from China leads to short-term economic growth in recipient countries and that China does not appear to prioritize lending based on regime type.⁹⁹ In sum, diversifying aid channels to rely more on fellow authoritarian regimes is likely to enhance autocratic stability.

Authoritarian-led regional financial institutions are also important actors in the global financial safety net responsible for stabilizing countries during financial or economic crises. To some extent, these regional institutions are outside options to the International Monetary Fund (IMF) for members facing public debt crises. Unlike the IMF, the regional financial institutions typically attach no--or relatively few--conditions to their loans and can disperse loans rapidly.¹⁰⁰ Particularly in regions with significant disparities between low-income and high-income states, authoritarian-led IOs provide institutionalized channels for transfers to stabilize regimes more susceptible to economic shocks. For example, the Arab Monetary Fund (AMF), a sub-organization of the Arab League, provided liquidity to Bahrain's monarchs to quickly stabilize their regime during the Arab Spring crisis.¹⁰¹ Beyond the Arab Spring, the AMF has typically enabled the Gulf region's oil exporters to stabilize co-members who import oil and face balance of payment difficulties when oil prices are high, including Djibouti and Mauritania.¹⁰² To a lesser extent, the Gulf's oil exporters draw on the AMF when oil prices are low. The AMF alone was used more times than the IMF as of 2019--174 versus 117 instances--though its loans are also much smaller on average.¹⁰³ The Eurasian Fund for Stabilization and Development's (EFSD) lending was five times greater than IMF lending to its members from its founding in 2009 until 2014.¹⁰⁴

When authoritarian regimes alienate their traditional donors during periods of heightened brutality, they may turn to regional multilateral lending institutions to fill in some financing gaps. In recent years, as the repressive Ortega-Murillo regime in Nicaragua grew isolated, the Central American Bank for Economic Integration (CABEI) maintained its plans to fund projects in Nicaragua worth hundreds of millions of dollars.¹⁰⁵ Because the political impacts of regional banks' lending to authoritarian regimes has not been studied extensively, many questions about their effects on member states' domestic or foreign policies are unanswered.

For groups of lower-income autocracies dependent on foreign aid, IOs also serve as a fundraising and donor coordination platform.¹⁰⁶ For example, in the Horn of Africa, the regional Intergovernmental Authority on Development (IGAD) raises more than 80 percent of its project and operating funds from donors outside of Africa.¹⁰⁷ These funds pay for projects that benefit members in sectors ranging from security and health to agriculture and climate resiliency. Lower-income authoritarian regimes can also benefit from the patronage functions of such IOs, which allow them to co-opt supporters through the distribution of prestigious positions and project contracts.¹⁰⁸

When they have seats on the board of multilateral lending organizations, democracies do attempt to limit funding for projects likely to fuel corruption in authoritarian regimes. For example, while the Inter-American Development Bank's (IDB) Charter requires lending decisions to be made impartially based on economic criteria, U.S. officials are required by federal law to take into account recipients’ human rights situations when determining their vote. In contrast, democracies do not necessarily have a seat at the table in the regional multilateral banks discussed in previous sections.¹⁴⁰ Nonetheless, development agencies in democracies can revise their terms of cooperation with multilateral organizations that are dominated by authoritarian regimes, or those where safeguards against corruption have failed.