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Strategic U-Turns between the EU and Russia: Explanatory Prospects of Prospect Theory

Periodic Reporting for period 1 - EUEaPRU (Strategic U-Turns between the EU and Russia: Explanatory Prospects of Prospect Theory)

Reporting period: 2018-03-01 to 2020-02-29

The project “EUEaPRU” sought to test the analytic potential of prospect theory to account for the regional integration choices – the EU or Eurasian Economic Union – of ruling elites from Eastern Partnership (EaP) countries.

The project sought to make several scientific contributions:

• To import the concepts of risk, the reference point and loss aversion from prospect theory into the study of regional integration choices of ruling elites from the EaP region;
• To introduce and employ the notion of multi-attribute reference points (MARP) for non-experimental complex social settings, as encountered in politics, international relations and foreign policy;
• To explain the competing regional integration choices of ruling elites from EaP countries with reference to the variation in their reference level, risk propensities and loss averse inclinations.
The main outcomes of the project “EUEaPRU” are the following:

Article 1 “Tertium Datur: Multi-Attribute Reference Points and Integration Choices between the EU and Eurasian Economic Union”: imports insights from prospect theory into the study of regional integration choices of ruling elites from EaP countries. It introduces the notion of multi-attribute reference points and provides an example of identifying their coordinates, against which ruling elites from Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine are expected to consider distinct integration choices: the EU or Eurasian Economic Union (EAEU). The article finds that ruling elites from EaP countries with the lowest levels of affluence, with medium to high intensity conflicts with Russia and with lower, but still non-trivial costs of domestic transformation have tended to be risk-seeking and opted for the EU as an integration choice. On the other hand, ruling elites from EaP countries with low and medium levels of affluence, with no conflict with Russia and with medium to high costs of domestic transformation have tended to be risk-averse and selected the EAEU as an integration option.

Article 2 “Regional Integration Choices between the EU and Eurasian Economic Union: Explanatory Prospects of Prospect Theory”: explains distinct regional integration choices of governing elites from EaP countries with reference to the variation in their reference level, risk propensities and loss averse inclinations.

Policy Paper “The EU and the Eastern Partnership Countries: How to ‘Lose Weight’ and Incentivise Reforms?”: revisits the “more for more” principle used by the EU in its policy approach towards EaP countries and proposes a revised incentivisation formula for the entire EaP region.

Article 3 “‘One Hand Washes the Other’ in EU’s Eastern Neighbourhood: What Policy Response?”: addresses, potentially, the most formidable problem with which the societies in EaP countries are currently faced: resilience and the reproduction mechanisms of informal institutions.

Article 4 “External Incentives Model and Domestic Transformation Costs”: seeks to contribute to the external incentives model (EIM), proposed by Frank Schimmelfennig and Ulrich Sedelmeier. EIM is a potent theoretical framework for explaining rule adoption by non-EU third countries, including EaP countries. Credibility and the size of external incentives, as well as domestic adjustment costs feature in this model as core explanatory variables. The model outlines compelling scope conditions under which rule transfer can occur in non-EU third countries, but it leaves the cost-related variable and its methodological operationalisation underspecified. The article distinguishes between domestic transformation and adjustment costs, as well as provides a corresponding methodological measurement by the means of fs/QCA.

Dataset: has been constructed as the empirical basis for Article 2 “Regional Integration Choices between the EU and Eurasian Economic Union: Explanatory Prospects of Prospect Theory”. The dataset encompasses 24 variables for all 6 EaP countries and the period 1991-2018 (approximately 4.032 country-year observations).

The results of the project “EUEaPRU” have been communicated and disseminated by the means of: (a) international conferences, (b) invited talks, (c) newspaper interview, (d) teaching and (e) website. The researcher has attended 3 international conferences in the US and UK; gave 3 talks at research institutes within the host institution (EU Foreign Policy Research Group/EIS and Russia Institute, King’s College London) and beyond (St. Antony’s College, University of Oxford).

The interview was provided to “Jurnal de Chișinău”, the main bi-weekly newspaper from Moldova, which is one of the case studies covered by the project.

In order to disseminate selected results of the project to the younger student community, the researcher has convened at EIS, King’s College London, the MA module “Foreign Policies of the EU”. The module is part of the EIS’s MA program in European Studies, consisted of 1x1hr lecture and 2x1hr seminars weekly, and was attended by 37 master students.

The website was a complementary avenue by which the researcher sought to make available the results of the project. It serves as an additional platform on which the main deliverables of the project have been placed.
The project “EUEaPRU” makes the pioneering attempt to import insights from prospect theory into the study of the regional integration choices of ruling elites from Eastern Partnership countries. It indicates that the prospect-theoretic concept of multi-attribute reference points proves to be a compelling analytical tool, which allows risk propensities and integration choices of ruling elites from the EaP region to be anticipated.

The project also confirms that loss aversion turns out to be a valid psychological inclination, which explains regional integration U-turns experienced by Armenia and Ukraine in the fall of 2013.

Impact on society is yet difficult to objectively evaluate at this stage. However, the project “EUEaPRU” has the potential to contribute to relevant policy-related debates concerned with the EU’s approach towards the EaP region. The Policy Paper has been mailed directly to 113 decision-makers working for EU institutions, as well as to relevant policy experts working for various European think-tanks and funding bodies. The EU’s decision-makers targeted by the Policy Paper work for the European Commission, European Council, Council of the EU, European Parliament and European External Action Service. The think-thanks targeted by the Policy Paper include EUISS, CEPS, ECFR, EPC, Chatham House, RUSI, Open Society European Policy Institute, ZOIS, DIE, FFIA, SIIA, DIIS, IAI, Carnegie Europe, GMF, IEP, DGAP, SWP, etc.