Jonah Patel
Checkbook diplomacy, or chequebook diplomacy, is a foreign policy approach in which countries use economic aid, investment, and development funding to gain diplomatic favour or support. This strategy, often associated with China, has been employed by various nations to exert influence and achieve their geopolitical goals. While it can lead to mutually beneficial relationships, checkbook diplomacy may also result in vulnerable countries falling into debt traps, potentially leading to concessions or control by the creditor nation.
| Characteristics | Values |
|---|---|
| Foreign policy that uses economic aid and investment between countries to achieve diplomatic favor | China, Taiwan, Germany, Japan, Saudi Arabia, United States, United Arab Emirates, Gulf monarchies, Iran, Western countries, North Korea |
| Debt-based diplomacy in bilateral relations between countries | China, Nepal, Djibouti, Argentina, Namibia, Laos, Burundi, Chad, Mozambique, Zambia, Sri Lanka |
| Used to gain diplomatic recognition of breakaway states | Russia, Nauru, Tuvalu, Vanuatu, Abkhazia, South Ossetia, Georgia |
| Used to gain support in international organizations | China, Taiwan, Estonia, Slovenia, Kuwait |
| Used to influence other countries' politics | China, United States, Estonia |
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What You'll Learn
- Checkbook diplomacy is a foreign policy tool used by countries to gain diplomatic favour
- China is a leading practitioner of checkbook diplomacy, using its \$3.2 trillion in foreign reserves to wield influence
- Checkbook diplomacy is a type of diplomacy based on debt in bilateral relations between countries
- Examples of checkbook diplomacy include China's lending to vulnerable countries, imposing unsustainable debt burdens
- Checkbook diplomacy has been used by Western countries to advance their national interests and by emerging donor nations
Checkbook diplomacy is a foreign policy tool used by countries to gain diplomatic favour
Checkbook diplomacy is often used by countries to exert influence and advance their national interests. For example, China has used its economic might to cultivate countries around the world, providing aid and investment to sustain the North Korean regime and reward Phnom Penh for deporting Uighur asylum-seekers. Western countries have also employed checkbook diplomacy, such as when the U.S. brokered an agreement to provide North Korea with $4 billion in energy aid and light-water reactors in exchange for freezing and dismantling its nuclear weapons program.
Another example of checkbook diplomacy is when countries provide aid or investment to gain influence in international organisations. For instance, China's substantial support for Pacific nations during the COVID-19 pandemic helped it gain support in the UN General Assembly and other international organisations. Estonia's aid to Fiji to host the 2017 Conference of the Parties to the UN Framework Convention on Climate Change was also a diplomatically important move as the country was canvassing for support for its bid for a Security Council seat.
Checkbook diplomacy can also refer to a type of diplomacy based on debt, where a creditor country intentionally extends excessive credit to a debtor country with the intention of extracting economic or political concessions when the debt becomes unmanageable. China has been accused of engaging in this type of checkbook diplomacy, with countries like Sri Lanka, Nepal, Djibouti, and several others falling into a "debt trap" and being forced to make concessions to stave off default.
Overall, checkbook diplomacy is a powerful foreign policy tool that can be used to gain diplomatic favour, exert influence, and advance national interests. However, it is important to note that it needs to be embedded in a broader policy framework to be successful, and without this, it can become part of the problem rather than the solution.
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China is a leading practitioner of checkbook diplomacy, using its \$3.2 trillion in foreign reserves to wield influence
Checkbook diplomacy is a foreign policy that uses economic aid and investment to achieve diplomatic favour. It is a type of diplomacy based on debt, carried out in the bilateral relations between countries. It involves a creditor country intentionally extending excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country is unable to honour its debt obligations.
China, with its $3.2 trillion in foreign reserves, has been a leading practitioner of checkbook diplomacy. Beijing has been unreserved in its use of economic incentives to gain influence and achieve strategic objectives, such as territorial claims in the South China Sea. China has also been accused of buttressing repressive regimes and exploiting developing countries through high-rate loans, with the intention of coercing these countries to align with its key strategic and military interests.
One example of China's checkbook diplomacy is its involvement with Pakistan. China is investing $56 billion in the China-Pakistan Economic Corridor (CPEC), with Pakistan's loan repayment starting in 2020 at an annual rate of $2.5 to $3.5 billion, totalling a debt burden of $90 billion to be repaid in 30 years. Pakistan is unlikely to be able to repay this debt, and experts predict that China will gain a "lease agreement" over strategic parts of Pakistani territory as a result.
Another example is China's use of checkbook diplomacy to acquire real estate in strategically-located foreign lands. In 2016, China waived all outstanding loans to Cambodia after the Permanent Court of Arbitration at The Hague ruled against China's territorial claims in the South China Sea. This prevented the ASEAN nations from issuing a joint statement supporting the ruling. China also offered aid and assistance to the Philippines, whose new president, Rodrigo Duterte, made overtures to Beijing.
China has also been accused of using its economic power to sustain the North Korean regime with food, arms, and energy, and to reward Phnom Penh with billions in "no strings attached" aid for deporting Uyghur asylum-seekers back to China. In addition, China has pledged billions in assistance and credits to African countries to develop energy and other resource flows and to support Chinese positions in the United Nations.
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Checkbook diplomacy is a type of diplomacy based on debt in bilateral relations between countries
Checkbook diplomacy, or chequebook diplomacy, is a foreign policy that uses economic aid and investment between countries to achieve diplomatic favour. It is a type of diplomacy based on debt carried out in the bilateral relations between countries. This involves a creditor country intentionally extending excessive credit to a debtor country, with the intention of extracting economic or political concessions when the debtor country is unable to honour its debt obligations. The conditions of the loans are often not made public, and the loaned money is typically used to pay contractors from the creditor country.
Checkbook diplomacy has been used to describe German and Japanese international involvement during and after the Gulf War. Their history made both countries unable to commit troops to the coalition due to restrictions placed into their constitutions when they were drawn up under allied occupation following World War II. More recently, the term has been used to describe the diplomatic recognition of the breakaway South Caucasus states of Abkhazia or South Ossetia by a short list of Pacific island nations. For example, Nauru recognised both nations in exchange for USD 50 million in aid from Russia.
Checkbook diplomacy has also been used by China to cultivate countries around the world. China has provided substantial support to Pacific nations, such as through its aid to tackle the COVID-19 pandemic. China has also rewarded Phnom Penh with billions in "no strings attached" aid for deporting Uyghur asylum seekers back to China. In addition, China has pledged billions in assistance and credits to African countries to develop energy and other resource flows and support Chinese positions in the United Nations. China's lending has been criticised for imposing unsustainable burdens on vulnerable countries, with many countries, from Argentina to Zambia, ensnared in a Chinese debt trap.
Western countries have also regularly resorted to checkbook diplomacy to advance their national interests. For example, between 1979 and 1989, the United States provided $3 billion to the mujahedeen fighting the Soviet Union in Afghanistan, which was matched dollar-for-dollar by Saudi Arabia. In the 1990s, the United States brokered an agreement to provide North Korea with $4 billion in energy aid and light-water reactors in exchange for freezing and dismantling its nuclear weapons program.
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Examples of checkbook diplomacy include China's lending to vulnerable countries, imposing unsustainable debt burdens
Checkbook diplomacy, or chequebook diplomacy, is a foreign policy that uses economic aid and investment between countries to achieve diplomatic favour. In recent times, the term has been used to describe the diplomatic recognition of breakaway states by other nations in exchange for economic aid.
China has been accused of providing excessive loans to countries such as Sri Lanka, Malaysia, and Kenya, leading to concerns about debt-trap diplomacy. In the case of Sri Lanka, the country's debt burden reached $51 billion, with 95% of its government revenue going towards debt servicing. China has also been accused of sustaining the North Korean regime with food, arms, and energy, as well as rewarding Phnom Penh with billions in "no-strings-attached" aid for deporting Uyghur asylum seekers.
In contrast to the conditions imposed by the World Bank or IMF, Chinese loans are often collateralized by strategically important natural assets, such as the Hambantota port in Sri Lanka, which has long-term value despite lacking short-term commercial viability. China has also been known to require the use of Chinese labour on projects funded by its loans.
Other examples of checkbook diplomacy include the United States and Saudi Arabia matching dollar-for-dollar $3 billion provided to the mujahedeen fighting the Soviet Union in Afghanistan. Additionally, Saudi Arabia and the United Arab Emirates supply Jordan with over $2 billion in annual aid, in part to contain and dismantle the Muslim Brotherhood.
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Checkbook diplomacy has been used by Western countries to advance their national interests and by emerging donor nations
Checkbook diplomacy is a foreign policy approach that uses economic aid and investment between countries to achieve diplomatic favour. It is a type of diplomacy based on debt, carried out in the bilateral relations between countries. It involves a creditor country intentionally extending excessive credit to a debtor country, with the intention of extracting economic or political concessions when the debtor country is unable to honour its debt obligations. The loaned money is typically used to pay contractors from the creditor country, and the conditions of the loans are often not made public.
Western countries have regularly resorted to checkbook diplomacy to advance their national interests. For instance, in the 1990s, the US brokered an agreement to provide North Korea with $4 billion in energy aid and light-water reactors in exchange for freezing and dismantling its nuclear weapons program. Similarly, Germany and Japan engaged in checkbook diplomacy during and after the Gulf War.
China has also become a leading practitioner of checkbook diplomacy. With $3.2 trillion in foreign reserves, Beijing has cultivated countries around the world by offering economic aid and investment. For example, China provides substantial support to Pacific nations, including during the COVID-19 pandemic, to "buy" diplomatic recognition. China's lending, however, has imposed unsustainable burdens on vulnerable countries, often resulting in debt traps.
Emerging donor nations are also engaging in checkbook diplomacy. For instance, Estonia provided Fiji with over $225,000 in aid to host the 2017 Conference of the Parties to the UN Framework Convention on Climate Change, which was diplomatically important for Estonia as it sought support for its bid for a Security Council seat. Similarly, Slovenia provided $44,000 in aid to three nations in a Compact of Free Association with the US – Palau, Micronesia, and the Marshall Islands.
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Frequently asked questions
Checkbook diplomacy is a foreign policy that uses economic aid and investment between countries to achieve diplomatic favour. It is a type of diplomacy based on debt carried out in the bilateral relations between countries.
One example of checkbook diplomacy is China's lending to vulnerable countries, which has imposed unsustainable burdens on them. This has led to countries such as Sri Lanka, Nepal, Djibouti, and several others falling into a debt trap. Another example is the Marshall Plan, which was implemented by the United States to aid Western Europe following World War II.
Checkbook diplomacy involves a creditor country intentionally extending excessive credit to a debtor country. The debtor country then becomes unable to honour its debt obligations, which allows the creditor country to extract economic or political concessions. The loaned money is typically used to pay contractors from the creditor country, and the conditions of the loans are often not made public.
