Abstract
What is the role of economic interdependence with foreign powers when legislators vote on foreign policies? Foreign aid and trade are among the European Union’s most important foreign policy instruments, over which the European Parliament has veto power. Yet, few studies address foreign economic policy voting in European Parliament scholarship. This study presents a new theoretical model about economic interdependence and foreign policy positioning in the European Parliament. I argue that economic interdependence with major foreign powers is associated with legislators’ foreign policy positions. Analysing European Parliament votes concerning aid and trade with Ukraine, I show a statistical association between Members of the European Parliaments with high levels of Russian Foreign Direct Investment in their electoral districts and voting against aid and trade with Ukraine (supporting the pro-Russian policy). These findings offer new insights on Members of the European Parliaments’ position-taking in foreign economic policy decisions that have global economic and political ramifications.
Introduction
How do Members of the European Parliament (MEPs) form policy positions on foreign economic policy? What is the role of economic ties with foreign countries when MEPs vote on foreign policy? Foreign aid and trade agreements are two of the European Union’s (EU's) most important foreign policy instruments, over which the European Parliament (EP) has veto power. Yet, few studies address MEPs’ role in foreign economic policy.
In this article, I argue that MEPs consider economic interdependence with major foreign powers when voting on foreign policy positions. Specifically, I analyse MEPs’ support for aid and trade with Ukraine and inflows of foreign direct investment (FDI) from Russia, a country whose outward FDI is largely state-owned or state-influenced (Kalotay and Sulstarova, 2010). I test my predictions empirically using a dataset on EP votes concerning financial assistance and trade with Ukraine during the eight EP (2014–2019), coinciding with the years following the 2014 Euromaidan protests in Ukraine. Policies towards Ukraine were among the most prominent foreign policy issues for the EU, as they cut against Russia's position that Ukraine should join the Russia-dominated Eurasian Economic Union instead of growing closer to the EU. I find that large FDI inflows from Russia to EU member states reduce the likelihood that MEPs vote in favour of aid and trade policies supporting Ukraine, and increase the likelihood that they take a pro-Russian policy position. For countries that have subnational EP-electoral districts, I calculate Russian FDI into districts. The association between Russian FDI inflows and support for pro-Russian policies remains significant when breaking down FDI inflows to EP electoral districts.
This article introduces an original argument to advance our understanding of how the directly elected EP chooses policy positions on foreign economic policy. Existing scholarship on EP voting typically emphasises political ideology, party group belonging and Euroscepticism to explain MEPs’ policy positions. I add to these findings the argument that MEPs take into consideration economic interdependence when voting on foreign aid and trade. I offer a causal pathway where major foreign powers leverage economic ties, specifically their outward FDIs, to influence public debates to support the foreign nation's preferred policies. Career-driven MEPs do not want to risk political backlash for approving EU policy that goes against the interests of foreign powers with high levels of investment in their districts.
Linking the effects of economic interdependence with MEPs’ policy preferences, this study makes three scholarly contributions. First, it presents a new theoretical model about the role of economic interdependence in foreign policy positioning. Existing accounts of MEP position-taking in foreign policy are incomplete without attention to economic relations with major foreign powers. Second, it contributes to the scholarly literature on one of the most consequential foreign policy issues: the EU–Russia relationship. Third, it advances our knowledge of the EP's role in foreign economic policy.
European Parliament voting and foreign policy
Voting in the EP is regularly explained with the left–right dimension (Kreppel and Tsebelis, 1999), party group cohesion (Coman, 2009; Hix, 2002; Kreppel, 2000; McElroy and Benoit, 2012) and national party identity (Faas, 2003; Hix, 2002; Meserve et al., 2017). Voting cohesion following party lines appears to depend on the saliency of the issue – MEPs are more likely to rebel against their EP party group on issues that are salient in their home countries (Chiru and Stoian, 2019; Klüver and Spoon, 2015). After the Eurozone crisis and Brexit, EP scholarship has put more emphasis on the pro-EU/Eurosceptic dimension when explaining MEPs’ policy positions (Otjes and Van der Veer, 2016). A small but growing number of EP studies challenge the dominant narrative by emphasising variance across issue areas and finding issue-specific predictors of voting (Cencig and Sabani, 2017; Chiru and Stoian, 2019; Kang, 2019; Norrevik, 2020). Inspired by these findings on the dynamics of issue-specific voting (see also Hix and Høyland, 2013: 179), I investigate the sub-field of foreign economic policy in the EP.
As the EU has risen as an actor on the world stage since the early 1990s with the Maastricht treaty (about the legal basis for EU sanctions see Weber and Schneider, 2020: 4), and further with the Lisbon Treaty's creation of European External Action Service (EEAS) in 2011, the powers of the EP have increased considerably in relation to other institutions (Klüver and Spoon, 2015; Kreppel and Webb, 2019; Servent, 2017). The EP is involved in various ways in deciding the foreign policy of the EU: it has power to veto major political agreements with partner countries around the world – a right which it has practised in past years; it approves the EU's budget including foreign aid and financing of the EU's civilian and military operations; it approves Commissioners with a foreign policy portfolio (Cini and Borragán, 2016: 249).
Yet, studies that focus specifically on MEPs’ voting behaviour in foreign policy are missing, with a few exceptions: Chiru and Stoian (2019) analyse MEPs voting on directives relating to surveillance and the fight against terrorism; Norrevik (2020) analyses MEPs’ policy positions on comprehensive trade agreements with third countries. Relating specifically to the EU–Russia relationship, Braghiroli (2015) analyses the role of MEPs’ party group affiliation and nationality and their stance towards Russia using EP voting records between 2004 and 2012. Other studies investigate the EU's relationship with Russia in general, where the EP is mentioned as an ‘increasingly audacious and outspoken EU institution on foreign policy’ (David et al., 2013: 204).
The use of roll-call voting in studies of the EP has been a topic of scholarly debate. In the past, only a small portion of votes in the EP was taken by roll call. The use of voting records in studies of EP legislative behaviour was considered ‘dubious’ (Carrubba et al., 2006: 691), ‘poorly suited’ (Høyland, 2010) and ‘problematic’ (Hug, 2010), as roll-call votes in the EP were subject to selection bias. With the EP's 2009 amendment of its Rules of Procedure, roll-call voting is now required for all final legislative votes. As a result, roll-call voting has become a more reliable, mainstream data source in EP scholarship (Cencig and Sabani, 2017; Chiru and Stoian, 2019; Hix et al., 2018; Hug, 2016; Kaniok and Mocek, 2017; Lindstädt et al., 2012; Yordanova and Mühlböck, 2015). As the EP has increased its role in EU external affairs, EP roll-call voting records in external affairs provide an untapped resource for EP scholars.
This study shows that economic interdependence with major powers is a factor to consider when explaining MEPs’ preferences in the sub-field of foreign policy. Contributing to the growing literature on economic interdependence and state coercion (Bapat and Kwon, 2015; Bush and Prather, 2020; Farrell and Newman, 2019; McLean, 2015; Weber and Schneider, 2020), I present evidence of a negative relationship between Russian FDI in MEPs’ electoral districts and MEPs’ support of EU cooperation with Ukraine.
Economic interdependence with foreign powers
While the dimensions of EP politics have been established in the literature – party group cohesion, political ideology, and Euroscepticism – the theoretical underpinning to study MEPs as policy actors remains underdeveloped, specifically MEPs’ policy positioning on sub-specific policy issues. Whereas economic voting is a common predictor of national elections in Europe (Kayser and Wlezien, 2011) and EP elections (Hobolt and De Vries, 2016; Okolikj and Quinlan, 2016), it has received little attention as a predictor of EP voting. An exception is a study of EU economic governance, where economic conditions in MEPs’ home countries is found to decrease legislators’ support of EU economic governance reforms (Cencig and Sabani, 2017).
Foreign aid and trade are often used in combination to advance specific foreign policy goals. The combination of aid and trade towards neighbouring countries, with the prospect of future membership, has been one of the EU's most successful foreign policy instruments. A case in point is the EU's ability to influence Central and Eastern European countries’ internal and external policies by offering membership when political and economic conditions were met (Smith, 2004). Post-enlargement, the EU's normative pro-democracy influence has waned (Juncos and Whitman, 2015; Pomorska and Noutcheva, 2017).
A central assumption I consider is that major foreign nations pursue activities to influence and shape the EU's foreign policy. Recent scholarship establishes that foreign meddling, or side-taking, is common among major powers (Bush and Prather, 2020; Corstange and Marinov, 2012; Lanskoy and Myles-Primakoff, 2018). Foreign economic policy is often subject to side-taking by foreign powers, in the form of public statements, technical advice, material support and other ‘economic carrots and sticks’ (Bush and Prather, 2020: 3).
The mechanisms for foreign influence are manifold; foreign powers use both bottom-up advocacy (shaping citizens preferences) and top-down lobbying (persuading elites to take the side of the foreign power). Public advocacy by foreign powers is conducted by official representatives such as ambassadors, and non-government actors including high-profile individuals associated with state-controlled enterprises. An example of the latter is former Chancellor of Germany, Gerhard Schröder, now chairman of the Russian energy company Rosneft and a prominent advocate of the Nord Stream 2 pipeline in Northern Europe.
Policymakers are more vulnerable if their districts have strong economic interdependence with the foreign power, as economic ties can be leveraged to favour foreign interests. Recent studies show that economic networks are commonly used to coerce other nations, a phenomenon described as weaponised interdependence (Farrell and Newman, 2019). 1 Within the sanctions literature, scholars have detected a relationship between high levels of economic interdependence with a foreign power and policy makers’ unwillingness to impose sanctions of that same power (Bapat and Kwon, 2015; Weber and Schneider, 2020: 5): sanction decisions are often vetoed (or not enforced) by countries that have strong economic interdependence with the target state. Economic ties with the target state may undermine the senders’ domestic competitiveness, providing a disincentive to impose sanctions. Similarly, research in multilateral foreign aid shows that domestic groups with economic interests in foreign economic policy pressure legislators in favour of their preferred policy (McLean, 2015: 105). Specifically, case studies suggest that Russia, with high levels of government influenced FDI, use economic leverage to advance their foreign policy interests in Europe (Conley et al., 2016).
EU policymakers, including MEPs, are cognizant of economic relations and investments from major powers. For example, EU Commissioner Věra Jourová alluded to economic interdependence with Russia when addressing MEPs in a plenary debate: ‘But Russia is also an important economic counterpart and an essential partner for the solution of many pressing international problems. […] there is an imperative for cooperation based on the inter-dependence and complementarity of our economies […]’. – Věra Jourová, EP Plenary Debate ‘State of EU-Russia relations’, 9 June 2015.
While Jourová is not an MEP, she is a top EU official and former politician from the Czech Republic, a country with high levels of FDI from Russia (80th percentile of Russian FDI per capita). Statements by MEPs from districts with high levels of Russian FDI provide further anecdotal evidence of the argument. In the plenary debate ‘Situation in Ukraine’ in 2015, MEP Janice Atkinson argued against EU support to Ukraine and against Russian sanctions,
2
based on potential damage to EU businesses: ‘The EU shook a stick at the Russian bear and it reacted […]. Then this place voted to impose sanctions against Russia. Yet who did the sanctions harm? The nation states of the EU trying to sell goods and services to Russia’. – Janice Atkinson, EP Plenary Debate ‘Situation in Ukraine’, 11 June 2015.
Notably, Atkinson's district, South East England, has a relatively high level of Russian FDI in a five-year period prior to 2014, equalling the 70th percentile of Russian FDI per capita among EP districts.
Not surprisingly, Russian government officials publicly advocate for changes in the EU's policy towards Ukraine and leverage Russia's economic presence in EU member states to advance its interests. For example, Foreign Minister Sergey Lavrov reiterates the strategy of using economic cooperation as leverage on European foreign policy: ‘Russia and the EU are important trade and economic partners […]. By the way, if it were not for the EU's biased position in the context of Ukrainian developments, Russia-EU trade would have reached $500 billion, becoming a global factor comparable to the EU's trade with the United States or China’. – Sergey Lavrov in Rossiyskaya Gazeta, 18 December 2019.
Argument
I argue that major foreign powers use their economic leverage to shape public debates in districts and countries where they have a prominent presence of outward FDI. Because MEPs are career-driven (Faas, 2003; Frech, 2016) and do not want to go against the economic interests of their constituents, they are cognizant of government influenced FDI from major powers. MEPs do not want to risk the loss of economic investment and jobs as a result of political backlash for adopting EU policy that goes against the interests of the major power and source of FDI in their districts.
To test my argument, I collect data on Russian FDI in EU member states and sub-national districts to control for the existence of an association with MEPs’ policy positions on financial aid and trade with Ukraine. I expect that MEPs with higher FDI inflows from Russia in their home countries are more likely to vote along the pro-Russian line and not support EU financial aid and trade with Ukraine. Hypothesis 1: MEPs from countries (Hypothesis 1a) and electoral districts (Hypothesis 1b) with high FDI inflows from Russia are less likely to vote in favour of Ukraine aid and trade.
MEPs know that citizens value the economic investments and job opportunities that come with FDI and do not want to risk a change of the status quo. As much as MEPs value the welfare of their citizens, they are also career-driven, and do not want to be associated with casting votes that may receive political and economic backlash from foreign investors. Jensen (2008; also Jensen et al., 2012: 31) argues that voters can punish democratic leaders for poor relationships with investors through the mechanism of audience costs. Hence, I expect MEPs from countries with higher Russian FDI to be more inclined to take pro-Russian policy positions. With little or no Russian FDI, MEPs are more likely to support Ukraine's integration with the EU, as pro-Russian interests cannot leverage economic interdependence to mobilise opinion for their cause in these EU member states. Hypothesis 2: MEPs affiliated with national parties that are opposed to EU cooperation are less likely to vote in favour of Ukraine aid and trade.
Taking note of findings in recent EP scholarship about the amplified importance of the Eurosceptic dimension (Otjes and Van der Veer, 2016), I expect to find an association between MEPs’ positions on European integration and voting on cooperation with Ukraine. Policies that strengthen the EU as a unified actor vis-à-vis member states go against EU-sceptic sentiments that exist in MEPs’ home countries. As Euroscepticism became more salient after events such as the Eurozone crisis, migration crisis and Brexit (De Vries, 2018), voters increasingly base their EP vote choices on the EU integration dimension (Hobolt and Wittrock, 2011). MEPs that are elected on an anti-EU platform in the domestic arena do not want to risk political backlash from voters who oppose the EU acting as a global actor. Additionally, Eurosceptic beliefs among European parties tend to be associated with pro-Russian sentiments (Onderco 2019: 529). Hence, MEPs who oppose EU cooperation in the domestic arena will not support EU aid and trade with Ukraine, as such policies strengthen the EU as a global actor.
Russian FDI into the EU
A growing literature considers the political economy of developing countries’ FDI, specifically Chinese investments abroad (Tuman and Shirali, 2017), and to a smaller extent Russia (Kalotay and Sulstarova, 2010; Liuhto and Majuri, 2014; Panibratov, 2013). Given the scholarly uncertainty about FDI from Russia, my argument relies on two observations relating to Russian FDI in Europe. First, Russia has been pursuing a strategy of increased commercial and economic cooperation with Europe since the early 2000s to exert influence (Conley et al., 2016). As Russia recovered from its 1998 financial crisis, it sought new economic ties with European nations in the early 2000s (Chang, 2018). From 2000 to 2013 Russian accumulated Outward FDI (OFDI) stock increased from US$20b to US$500b (Liuhto and Majuri, 2014).
Second, government control of Russian multinational corporations (MNCs) increased during the same time as OFDI was rising. Relationships between the government and Russian businesses became increasingly blurred. For example, in 2008 the former chairman of Gazprom, Dmitri Medvedev, became President of Russia and the former chairman of Rosneft, Igor Sechin, became Deputy Prime Minister. The development of increased state intervention and state support to Russian MNCs is consistent with Putin's tenure as President and Prime Minister that began in 2000. Government influence over businesses in Russia goes beyond direct ownership. Many analysts consider Putin's Russia a kleptocracy, where officials can ‘extort money from private business, and even orchestrate the outright seizure of profitable enterprises’ (Lanskoy and Myles-Primakoff, 2018).
To be clear, the main goal of OFDI from Russia is not to influence MEPs to take pro-Russian policy positions. Yet, pro-Russian interests can use FDI as leverage to shape public debates in member states. If the EP approves policies at odds with Russian interests, MEPs with significant levels of Russian FDI fear that investment from Russia could dry up as a political punishment, which would disappoint voters. Hence, Russian FDI serves as a motivation for strategic voting in the EP.
In comparison to Russian FDI to the EU, FDI from Ukraine to the EU is not economically nor politically prominent. In 2012 – before the 2014 crisis in Ukraine – Ukrainian FDI stock in the EU was about US$6 m, compared to US$276 m FDI stock from Russia in the same year (UNCTAD, 2019), and has remained negligible. For this reason, FDI from Ukraine is not a relevant predictor of MEPs policy preferences, and I focus on Russian FDI to the EU.
Empirical analysis
Dependent variable
I test my argument on five policies concerning support for Ukraine through financial aid and trade. The conflict between Ukraine and Russia is a top concern in EU foreign policy. Ukraine is in the EU's immediate neighbourhood, is a ‘priority partner’ for the EU (European External Action Service, 2020) and has been on a path to integrate with the EU since 2005. For Russia, the most consequential EU policies during the 2014–2019 period concern economic sanctions on Russia and the integration of Ukraine with the EU, which contradicts Russia's larger foreign policy goals. Of these EU policies, the EP can only veto policies concerning aid and trade with Ukraine. EU sanctions targeting Russia do not require approval by the EP, as they are approved by the Council solely. For this reason, I include votes on financial aid and trade with Ukraine in my analysis.
All votes were held during the eight EP, and after the Euromaidan protests and Russia's invasion in Ukraine in 2014. Four of the votes were conducted in the Committee on International Trade (INTA), and the fifth vote was conducted in the Foreign Affairs Committee (AFET). VoteWatch Europe provides the data for my dependent variable, MEPs names and political affiliation. The following five votes are included:
Customs duties on goods from Ukraine, on 23 October 2014 (631 votes, 497 in favour). Macro-financial assistance to Ukraine, on 25 March 2015 (612 votes, 492 in favour). Introduction of temporary autonomous trade measure for Ukraine, on 1 June 2017 (638 votes, 475 in favour). Further macro-financial assistance to Ukraine, on 13 June 2017 (680 votes, 527 in favour). EU–Ukraine Association Agreement: Explanatory Statement, on 12 December 2018 (568 votes, 433 in favour). This vote was prepared in the Foreign Affairs Committee.
The dependent variable is a vote in support of cooperation policies with Ukraine. Since MEPs are able to reject each of these policies in the co-decision procedure (where the Council is the other veto player), I consider a vote against the policy as a vote against aid and trade with Ukraine.
As with most social scientific studies that do not involve random controlled trials, there is a potential for causality in the opposite direction. To address this possibility, I calculate FDI inflows 5 years before the vote, to indicate an association between MEPs’ policy positions and FDI inflows. While it is possible that Russian FDI is reduced due to political backlash from Russia after an EP vote, it will not have an effect on the association between votes and FDI prior to the vote. Another concern is the possibility of a spurious correlation, where a third variable accounts for the observed association. I therefore include a number of control variables that are likely to be associated with MEPs’ voting rationale. These are explained in the following.
Explanatory variables
My main explanatory variable is Russian FDI/GDP, which I measure as aggregate greenfield investments 3 in the host country 5 years prior to the vote, divided by the host country's GDP to indicate the strength of the economic relationship with the host country compared to other countries. For example, the vote Customs duties on goods from Ukraine were conducted in October 2014; hence, I include all FDI from Russia between 2010 and 2014 in the measure for Russian FDI/GDP. Russian MNCs that undertake FDI in Europe are concentrated in a few sectors, such as energy (Lukoil, Gazprom, Yukos), infrastructure (Russian Railways), metals (Novolipetsk Steel), automotive (Kamaz, owned by Rostec, UAZ), ICT and telecom (Kaspersky Lab, Luxoft). The largest investments are undertaken in the oil and gas industry. I retrieve data on Russian outward investments in Europe from fDi Markets and calculate the total value of investments in the five-year interval for each vote. I manually calculate the value of investments at the subnational district-level based on the investment location provided by fDi Markets.
To test the association of FDI and pro-Russian voting at the electoral EP-district level, I divide district-level Russian FDI by total population in the electoral district (subnational for five member states, national for the remaining 23 member states) to indicate the relative impact of FDI in the EP district. Subnational electoral EP districts do not have consistent GDP data available; hence, I use FDI/capita as the explanatory variable for both subnational and national districts in this fine-grained analysis. I use this measure as an alternative main explanatory variable. I expect these alternative measures to be associated with MEPs adopting a pro-Russian position on the votes, that is, a negative association with support for financial aid and trade with Ukraine.
I test the association between Euroscepticism and voting on cooperation with Ukraine by using the variable EU position. The score reflects the overall orientation of MEPs’ national party leadership towards European integration in 2014 on a scale from 1 to 7 (one equals strongly opposed to EU cooperation, seven equals strongly in favour) and is provided by the 2014 Chapel Hill expert survey (Polk et al., 2017).
To control for economic size, I include total GDP (logged) (in current prices, purchasing power standard and logged to reduce skewness) in MEPs’ home countries. GDP (logged) measures aggregate economic output, and its inclusion is consistent with the gravity model of trade where the size of the economy is an established predictor of trade. Following the gravity model of trade, there is reason to expect a positive coefficient associated with aid and trade with Ukraine. On the other hand, smaller countries in the EU are typically more dependent on trade as they cannot specialise in as many sectors as larger countries, which would make them supportive of increased trade with Ukraine. For this reason, I expect to find a negative coefficient for GDP (logged).
MEPs’ political ideology and European party group membership are the most common predictors of voting in the EP. Since the 2000s, scholarship on the EP emphasises the role of European party groups to explain voting patterns among MEPs (Hix, 2002). However, policy positions of EP party groups are endogenous, and related to the composition of MEPs in each party group. The Ukraine crisis was unfolding at the same time as parties were forming groups in the EP during spring and summer 2014 (EP elections were held in May 2014). Before the Ukraine crisis, European parties paid little attention to Russia (Onderco, 2019: 527). Thus, it is unlikely that MEPs’ national parties dictated policy positions on Ukraine and Russia as MEPs were taking their seats. Even if voting cohesion in EP party groups is high, it is not an exogenous factor unrelated to MEPs’ home countries. If pro-Russian actors target MEPs whose home countries have economic ties to Russia through FDI, these MEPs may, in turn, try to influence their party groups to adopt a pro-Russian policy. Hence, I expect an association between high levels of Russian FDI in MEPs’ home countries and voting for the pro-Russian policy position even when controlling for ideology and party groups. I control for ideology by including a dummy variable, Left ideology. Traditional ideological cleavages are found in the economic left–right dimension. The variable Left ideology takes the value of 1 for MEPs that belong to left-leaning party groups, including the Progressive Alliance of Socialists and Democrats (S&D), the Confederal Group of the European United Left/Nordic Green Left (GUE-NGL), and the Greens-European Free Alliance (Greens-EFA). All other party groups are assigned a 0.
The data consists of EP votes concerning trade policy and foreign aid policy, which leads to conflicting expectations for how MEPs’ ideology affects their policy positions. Following Milner and Judkins (2004), left-leaning MEPs are less likely to support trade policy, as right-leaning parties are more supportive of trade in general. On the other hand, Tingley (2010) finds that right-leaning (conservative) legislators are less likely to support foreign aid. Consequently, I expect mixed results for the association between MEPs’ ideology and policy positions on aid and trade with Ukraine. Onderco (2019) notes that both the far-right and far-left parties in Europe are associated with pro-Russian beliefs. To control for a more nuanced ideological variable, I combine far-right and far-left parties in Far-left/right ideology. It takes the value of 1 for MEPs that belong to any of the party groups Europe of Nations and Freedom Group (ENF), Europe of Freedom and Direct Democracy (EFDD), European Conservatives and Reformists Group (ECR), the Confederal Group of the European United Left/Nordic Green Left (GUE-NGL), as well as non-attached members. I expect MEPs in the Far-left/right ideology category to take more pro-Russian policy positions when voting in the EP compared to other MEPs. In additional robustness checks available in the Online appendix, I include the control Far-right ideology for MEPs that belong to EP party groups ENF, EFDD, ECR and non-attached MEPs who belong to far-right national parties, such as Hungarian Jobbik, Belgian Vlaams Belang and French Front National.
I also control for the presence of a Russian diaspora, measured as a country's stock of foreign population by nationality provided by OECD's International Migration Database and the European Commission, divided by a thousand. Nearly 2 million Russian-born persons live in the EU. The presence of a large Russian diaspora in MEPs’ home countries should be associated with a more pro-Russian line. However, not all Russians in Europe are supportive of their kin-state's policy, and some may resist the Russian line and favour Ukraine's integration with the EU instead of Russia – after all, they live in the EU and not Russia. For this reason, the association could be mixed, but I expect the average effect to show support of the pro-Russian position. The role of immigrant groups and diasporas in policy-making has been studied for decades in international relations (Bermeo and Leblang, 2015). Immigrant groups tend to lobby host country governments on policies towards to their kin-state (Bermeo and Leblang, 2015: 627), although these policies may range between support for kin-state governments and punishing the kin-state through economic sanctions (Kustra, 2020).
To account for systematic differences in MEPs’ policy preferences due to their home countries’ historic experiences and geography, I construct two control variables. First, I control for Eastern European member states, which includes the eleven countries that entered the EU in the 2000s. 4 Following Onderco (2019: 530), I expect Eastern European MEPs to be more negatively predisposed towards Russia than Western European MEPs. The reason is that these countries have historical experiences of Russian occupation or interference, whereas Western European MEPs have a lower threat perception of Russia in general. Naturally, exceptions exist; some parties in Eastern Europe have strong ties with Russia based on linguistic or geographic proximity. Beesley (2020) shows that citizens favour foreign relations with countries based on both ethnolinguistic identity and geographic proximity to trade partners, based on survey data among Ukrainians. Second, I include Distance to Kiev as a control variable, measured as the distance in (thousands of) kilometres between MEPs’ home capitals and the capital of Ukraine. Following the gravity model of trade, the closer distance to Kiev, the more likely it is that MEPs are supportive of aid and trade policies with Ukraine. In robustness tests, I also include a control for Distance to Moscow, which does not change the results for the main variable.
Within studies of trade policy, scholars have in the last two decades emphasised the role of socio-tropic attitudes to predict preferences for trade (Mansfield and Mutz, 2009). For example, attitudinal or symbolic predispositions shape preferences towards trade policy (Edwards, 2006; Rankin, 2001). Ethnocentrism and nationalism are considered intransigent attitudinal predispositions that are associated with reduced support for outsourcing (Mansfield and Mutz, 2009). EU policies of financial aid and trade with Ukraine involve conditions that improve Ukrainians’ ability to travel and work in the EU, which may be viewed negatively among EU populations that are ethnocentric. Consequently, I include a control for member states’ attitudes towards immigration, Negative view of immigrants, provided by Eurobarometer. Respondents in Eurobarometer surveys express feelings towards the immigration of people from outside the EU. The variable Negative view of immigrants represents the total share of respondents who hold negative views towards immigration. These sentiments should be negatively associated with MEPs’ support for aid and trade with Ukraine.
Finally, I control for MEPs’ home governments’ voting alignment with Russia in the United Nations General Assembly, UNGA voting alignment. I use a measure of foreign policy similarity with Russia, derived from Bailey et al.’s (2017) ideal point estimates, for each year corresponding to the year of the EP vote. I expect to find a negative association between the foreign policy alignment in the UN between MEPs’ home countries and Russia and MEPs’ support for financial aid and trade with Ukraine in the EP.
Method
The dependent variable, Support for Ukraine, has a binary outcome; hence, I estimate a multilevel (mixed) logistic regression model that allows for random variation both across and within countries. The data includes primarily member state characteristics, but also individual characteristics (MEPs’ ideology and EU position). Variation is likely to be found both across and within countries, around the mean for the EP vote. Therefore, I use a mixed model that includes fixed effects and random effects to estimate predictors of voting on financial aid and trade with Ukraine. The majority of predictors in my models are country-level characteristics, while Left ideology is nested within countries and allowed to vary by country.
The fixed effects variables in the model are level-2 predictors which are country-level characteristics. Since I assume the variables Left ideology and Far-left/right ideology to be nested within countries, this variable is estimated with a random slope allowed to vary by country.
Findings and discussion
I estimate the effects of FDI inflows from Russia to MEPs’ home countries on support for the pro-Russian policy position of voting against financial aid and trade with Ukraine. Results show that Russian FDI in MEPs’ home countries is associated with less support for aid and trade with Ukraine in EP roll-call voting, thus, following the pro-Russian policy. When estimating Russian FDI in MEPs’ electoral districts for countries that have subnational electoral divisions (Belgium, Italy, Ireland, Poland and the UK) combined with data for countries that have national EP districts, the association remains negative and significant. Table 1 presents the results of the estimations. Negative coefficients indicate that associated variables increase the probability that MEPs take a pro-Russian policy position and do not support EU financial aid and trade with Ukraine.
Voting on financial aid and trade with Ukraine in the European Parliament and Russian FDI to EU member states and electoral districts.
Note: The dependent variable, Support for Ukraine, is a binary measure of voting in support for EU financial aid and trade with Ukraine based on five votes in the eight European Parliament.
FDI: foreign direct investment; EU: European Union; GDP: gross domestic product; ICC: intra-class correlation.
Standard errors in parentheses.
***p < 0.01, **p < 0.05, *p < 0.1.
Models 1–4 in Table 1 show that Russian FDI/GDP is associated with less support for EU–Ukraine cooperation at conventional levels of significance, providing support for Hypothesis 1a that MEPs’ votes are more likely to favour the pro-Russian policy when their home countries have received more Russian outward FDI. Similarly, Model 5 shows that Russian FDI/capita into MEPs’ electoral districts is associated with less support for EU aid and trade with Ukraine, at statistically significant levels (Hypothesis 1b). 5 An increase of US$100 in Russian FDI/capita to MEPs’ electoral districts, yields a 0.57 decrease in the odds ratio of voting for likelihood that MEPs vote for aid and trade with Ukraine.
Figure 1 plots the predicted probabilities of voting in favour of aid and trade with Ukraine at different levels of FDI/capita in electoral districts. An increase in Russian FDI/capita in the five-year period prior to the vote from 0.05 to 0.10 (a difference of US$50) equals a decrease in the odds ratio of voting for EU–Ukraine cooperation of 0.07, on average, and the result is statistically significant. The likelihood that MEPs support aid and trade with Ukraine at zero Russian investments during the past 5 years is 0.78 compared to 0.53 when Russian FDI/capita is 0.20. High levels of Russian FDI/capita appear to make MEPs more receptive to pro-Russian interests. MEPs are aware of the high degree of political control of Russian MNCs and prefer to keep the status quo of foreign investments, by aligning themselves with Russia. By taking this action, they do not risk losing job opportunities in their districts and avoid political backlash.

Predicted probabilities of MEPs’ voting for EU–Ukraine cooperation and Russian FDI.
In Table 1 Model 2, the coefficient for EU position shows a negative association with voting in support of EU–Ukraine cooperation, at conventional levels of significance. As expected in H2, MEPs who are affiliated with national parties that oppose EU integration are less likely to support aid and trade cooperation with Ukraine. In substantive effects, Euroscepticism is an important predictor of voting: An increase in EU position from two (low EU favourability in the 15th percentile) to six (high EU favourability, 90th percentile) increases the odds ratio of voting in favour of EU–Ukraine cooperation from 0.41 to 0.89. Notably, this model excludes the control for Negative view of immigrants, since both variables capture nationalist sentiments in MEPs home countries.
Among the control variables, the coefficient for Left ideology is positive and significant at conventional levels when estimated with a random slope allowed to vary by country. The coefficient is not significant when estimated with fixed effects in Models 1 and 3. The reason for this positive association could be that it is predominantly far-right groups, such as ENF and EFDD that vote along the pro-Russian line in the EP. While Onderco (2019) notes that both far-right and far-left parties in Europe tend to be supportive of Russia, the pro-Russian far-left in the EP may weigh the benefits of supporting Ukraine based on solidarity over the benefits of voting along the pro-Russian line, whereas the far-right worry about increased immigration from Ukraine or foreign aid spending (Tingley, 2010).
The control variable for MEPs in the far ends of the ideological spectrum, Far-left/right ideology, is associated with reduced support for aid and trade with Ukraine and is significant when estimated with a random slope allowed to vary by country. It is unsurprising that far-right and far-left MEPs are less willing to support aid and trade with Ukraine, as they are generally pro-Russian and Eurosceptic. In additional tests for robustness (see the Online appendix) I include a control for MEPs with Far-right ideology. These results do not change the sign or significance of my main variables Russian FDI/GDP and Russian FDI/capita (per electoral district).
A large Russian diaspora in MEPs’ home countries is associated with increased support for financial aid and trade with Ukraine, across all models and with conventional levels of significance. Following Kustra (2020), it is possible that a large share of Russian immigrants in EU member states are not supportive of their kin-state's preferred policy, and may be willing to punish Russia through policies that are oppose its interests. Similarly, Eastern European MEPs are more likely to support EU–Ukraine cooperation and not follow the pro-Russian policy. This association could relate to Eastern European countries’ history of interference from Russia and the Soviet Union, which has led to a higher threat perception from Russia. Hence, these MEPs are more willing to support Ukraine's integration with the EU.
GDP (logged) is associated with reduced support for aid and trade with Ukraine at conventional levels of statistical significance, in all models except Model 4 (when controlling for Far-left/right ideology). MEPs from countries with smaller economies appear to be more likely to vote in support for EU–Ukraine cooperation, against the pro-Russian policy. A possible explanation for this association is that small economies in the EU are more dependent on trade than large economies since these countries’ domestic production is limited compared to larger member states. Similarly, consumption is limited in small countries and producers often depend on exports. Thus, MEPs from these countries are more inclined to support trade with Ukraine as it potentially benefits exports and imports.
Negative view of immigrants in MEPs’ home countries reduces MEPs’ support for aid and trade with Ukraine with statistical significance. This is unsurprising, given that the policies voted upon will increase EU–Ukraine cooperation and integration, and make it easier for Ukrainians to move to Europe.
MEPs whose home governments tend to vote with Russia in the UN General Assembly, as measured by UN voting alignment, are more likely to take a pro-Russian policy position when voting on aid and trade with Ukraine in the EP. The finding is significant at conventional levels and across all models. There could be two causal explanations for this association. First, most MEPs have ties – to some extent – to their home governments. Some MEPs belong to the same party as the government, while others maintain relationships with governments due to their importance as MEPs. It is common that MEPs meet government representatives regularly which may influence their voting in the EP. The other reasonable explanation is that both voting in the UN General Assembly and voting in the EP rely on an underlying variable, for instance, economic interdependence with foreign powers. Governments and MEPs are both cognizant of the role of government-influenced FDI from major powers and want to avoid future backlash in terms of decreased investment.
To see if there is a systematic difference between the different types of economic agreements, I estimate separate models for aid proposals (Macro-financial assistance to Ukraine, 2015; Further macro-financial assistance to Ukraine, 2017) and trade proposals (Customs duties on goods from Ukraine, 2014; Introduction of temporary autonomous trade measure for Ukraine, 2017). The 2018 vote on the EU–Ukraine Association Agreement is excluded from both estimations since it includes both types of policies. Results from these estimations show that the main explanatory variable, Russian FDI/GDP, remains negative and significant. These models are found in the Online appendix. Finally, I calculate Anscombe residuals to check for outliers. Results are available in the Online appendix.
Conclusion
Is economic interdependence with foreign powers associated with MEPs’ voting on foreign economic policy? Existing scholarship on EP voting tends to focus on party group cohesion and Euroscepticism as predictors for MEPs’ policy positioning. While they make important contributions to the field, these studies under-theorise the origins of policy positions in issue areas such as foreign policy. This article identifies a new and significant determinant of MEPs’ positioning in foreign policy-making – economic interdependence with major powers. MEPs are aware of the state-controlled and state-influenced nature of FDI from major powers. Russian FDI is perceived, to some extent, as controlled from the Kremlin. MEPs do not want to risk a change of investment status quo in their districts, which may entail the loss of jobs and tax revenues due to deteriorating political relations between the foreign investor and the EU. Further, loss of investment may lead to political backlash for MEPs if the issue becomes salient among constituents. MEPs know that their voting record can be scrutinised after the roll call and that issues may gain salience post-hoc. 6
I show an empirical association between MEPs’ voting on foreign policy and FDI inflows into their districts, while controlling for traditional predictors of EP voting. Specifically, I find evidence of a statistically significant relationship between Russian FDI in MEPs’ electoral districts and MEPs’ voting on aid and trade with Ukraine. MEPs whose electoral districts receive higher levels of Russian FDI during 5 years prior to the vote are more likely to take a pro-Russian policy position, that is, not support EU–Ukraine cooperation. EU policy towards Ukraine is crucial for the Kremlin since Russia wants Ukraine to be part of its sphere of influence and not integrate with the EU.
These findings have policy implications. While MEPs who vote in favour of the pro-Russian policy were not numerous enough to sway the vote, I show that economic interdependence is a factor that has bearings on MEPs’ policy positions. Since the occurence of these votes, the EP has changed composition with the opening of the ninth EP. The EU's leadership in the European Commission and the Council has changed as well. At the same time, Russia's strategy of advancing interests by leveraging economic cooperation remains steady: ‘The new institutional cycle in the EU history offers an opportunity to relaunch relations with Russia’ (Foreign Minister Sergey Lavrov in Rossiyskaya Gazeta, 18 December 2019). With increasing populism in Europe coinciding with Russia's strategy, it is possible that current and future MEPs successfully strike down policies that go against the interests of Russia.
Future studies on foreign policy positions in the EP may strengthen the evidence of economic interdependence as a predictor of MEPs’ position taking. My argument suggests that the rationale for voting along the pro-Russian line relies on the perception of political control over Russian FDI, based on the high share of state-influenced Russian MNCs, which may risk loss of jobs and investment. For this reason, the argument may not be generalisable to FDI that originates in countries with low levels of government control over MNCs. Yet, Russia is not unique in its high degree of state-controlled FDI. China is another major power that has increased its economic presence around the world through FDI from predominantly state-controlled enterprises (Morck et al., 2008). In Saudi Arabia, the government owns the world's largest oil company. Empirical associations from these cases should be analysed in future studies. State-controlled or state-influenced FDI may originate from countries with less authoritarian regimes as well. In times of economic crisis such as the coronavirus pandemic, the share of state-controlled MNCs increases as governments – even those that put a premium on free-market capitalism – take over MNCs to save them from bankruptcy. Accordingly, policy-makers must be aware of policy consequences that may arise from their own legislatures as a result of foreign investments, as they navigate this new environment.
Supplemental Material
sj-docx-1-eup-10.1177_14651165211035060 - Supplemental material for Foreign economic policy in the European Parliament and economic interdependence with foreign powers
Supplemental material, sj-docx-1-eup-10.1177_14651165211035060 for Foreign economic policy in the European Parliament and economic interdependence with foreign powers by Sara Norrevik in European Union Politics
Supplemental Material
sj-zip-1-eup-10.1177_14651165211035060 - Supplemental material for Foreign economic policy in the European Parliament and economic interdependence with foreign powers
Supplemental material, sj-zip-1-eup-10.1177_14651165211035060 for Foreign economic policy in the European Parliament and economic interdependence with foreign powers by Sara Norrevik in European Union Politics
Footnotes
Acknowledgements
I thank the two anonymous reviewers, the editor of EUP, Catherine de Vries, Amie Kreppel, Erik Lin-Greenberg, Matias Margulis, Elena McLean, Harvey Palmer and Antoine Yoshinaka for helpful comments that have improved the article.
Declaration of conflicting interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.
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References
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