Focusing on Gorbachev and German unification, this article shows how the effectiveness of economic aid depends on ideas decision-makers hold about economics and identity. German economic statecraft worked in securing Gorbachev's support for German unification solely because of a specific set of ideas that animated Soviet decision-makers during that period. The weakness of the Soviet economy made economic assistance from Germany attractive, but Gorbachev did not bargain hard over the amount of aid because he thought it would ruin an anticipated close partnership with Germany in the future. The importance of the German economic incentives lay in their role as trust-building measures. In contrast, Japan's effort to use economic aid to persuade Soviet leaders to return the Kurile Islands during the same period failed, in part because Soviet leaders did not expect a friendly relationship with Japan. For cultural and political reasons, Soviet leaders were more oriented toward Germany and the West. The fact that Soviet leaders did not seek aid or technology from Japan a technology powerhouse and turned instead to Germany, shows that material pressures alone cannot account for the success or failure of economic incentives.