Despite the traditional use of overseas aid to achieve foreign policy goals, in
recent years foreign aid appears to be given increasingly for altruistic reasons; donor nations seek
to improve the economic situation of other, less developed nations. However, the incentives to
use foreign aid as a policy tool remain great. Foreign aid is a means to exert influence on
recipient nations in a less intrusive manner than other alternatives. This soft power is
particularly appealing to nations which are strong economically but do not have the military
strength to credibly achieve their foreign policy objectives.
Countries may be using foreign aid
as a means to achieve their foreign policy goals.
Critics of bilateral aid agencies often scrutinize the motives behind foreign aid donations.
Dollar and Levin have argued that, although many agencies are focusing their donations to well-
governed, impoverished countries, many are not. This indicates that donor governments must be
basing their decisions, at least partially, on other factors.
In this paper, we examine whether European nations are basing their foreign aid lending
decisions on factors other than poverty. We examine whether European donors are using
development assistance as a foreign policy tool. Specifically, we argue that European donors are
channeling disproportionately large sums of money to Muslim countries due to these countries’
strategic importance.
Theory
The jury is still out on exactly why states give foreign aid. Most studies argue that
foreign aid is principally motivated by donor state interest, whether for the sake of maintaining
colonial ties, strengthening international economic relations, or providing support to allies in the
1
For a discussion of soft power, see Nye, 2004.
2
See Dollar and Levin 2004.
Convention