Counterbalancing: Manipulating the Balance of Power to Prevent Misuse

Abstract: States frequently turn to allies, clients and non-state armed groups to help deter threats, compel policy concessions and fight wars. How do delegating states (principals) get their agents to advance the principal's objectives over the agent's own priorities? I argue that principals sometimes prevent misuse by manipulating the balance of power between the agent and its adversaries, through military transfers and defense assurances to these adversaries. These counterbalancing commitments prevent the agent from using military power to improve outcomes vis-\`a-vis its adversaries and thus creates relative incentives for the agent to advance the principal's objective instead. To test whether counterbalancing is an important delegating strategy, I consider evidence from policymaker interviews and panel data of post-World War II arms transfers. Fixed-effects analysis finds patterns that are consistent with delegating states using counterbalancing strategies to resolve agency problems. Historical analysis of an influential case -- U.S. arms transfers to Burma -- validates the findings. This research has broader implications for the study of external balancing and the arms trade.