The Sanctions Trap
Forged in the crucible of World War I, modern economic sanctions have long been regarded as tools for preventing shooting wars and deterring international bad actors. But a closer look at the history suggests that such punitive measures amount to war by other means.
Brigitte Granville
LONDON – The point of historical study is to improve our understanding of ourselves and our world.
Some histories – especially those concerning remote times or narrow specialist topics – may seem relevant to our current concerns only as food for thought about the human condition.
But others, like Cornell University historian Nicholas Mulder’s The Economic Weapon: The Rise of Sanctions as a Tool of Modern War, face the opposite problem: the topic’s relevance risks eclipsing the historical analysis.
Yet Mulder steers a skillful course around this hazard.
His description of how “economic sanctions arose where the conditions of advanced globalization encountered the techniques of total war” reads like an autobiography of our age in its formative years.
Where some might have been tempted to cherry-pick the historical record to serve some contemporary polemic, Mulder has delivered a scholarly tour de force, reflecting a mastery of sources in diverse and complex areas – from economics, finance, and trade (including logistics) to administration and law (both domestic and international).
Tying all these elements into a history of diplomacy and politics, Mulder tells the origin story of the modern world’s “economic weapon,” which was forged through the Entente blockades against the Central Powers in World War I, and then applied more frequently in the decades that followed.
Mulder’s story ends with the re-forging of the economic weapon in the 1945 Charter of the United Nations.
WHAT ARE SANCTIONS FOR?
Amid the complexities that Mulder investigates, two crucial questions about economic sanctions’ nature and efficacy recur.
In contrast to armed conflict, sanctions exert force on their targets at a distance and through non-kinetic channels.
Hence, they have long been presented as a means of preventing or at least containing warfare.
Whenever some threatened or actual violation of the international order demands a response, sanctions are the usual preferred option.
Part of their attraction – shared, incidentally, with modern drone warfare – is that they can be imposed both easily and safely by desk-bound operatives.
In the early years, the human tolls associated with sanctions were well known.
US President Woodrow Wilson, an early proponent and architect of modern sanctions, acknowledged that while “war is barbarous ... the boycott is an infinitely more terrible instrument of war.”
The WWI blockades caused hundreds of thousands of deaths by starvation in Central Europe and the Ottoman Empire.
By contrast, Wilson’s modern-day successors tend to be less open about sanctions’ effects.
In a rare flash of emotion about our own times, Mulder notes that the attempted economic strangulation of Iraq in the 1990s “cost hundreds of thousands of lives and permanently damaged that country’s social and economic fabric.”
By avoiding open discussion of such matters, modern governments have maintained the implicit rationale that sanctions are a lesser evil compared to shooting wars.
One is reminded of Saint Augustine’s answer to Christian pacifism: that war can be justified only as a means of achieving peace.
But even if we accept the conceit that sanctions are the lesser evil, we still must ask whether they are an alternative to war or simply another form of it (albeit one that is more consistent with just-war doctrine).
For this reader, Mulder’s analysis left no doubt.
Whereas Clausewitz famously described war as the extension of politics by other means, the economic weapon is an extension of war by other means.
DO THEY WORK?
That brings us to the second question: What is the economic weapon’s track record in preventing shooting wars?
Mulder shows that, in the formative interwar period, sanctions’ effectiveness was quite limited, with only two cases of unequivocal success, both in the Balkans in the 1920s, when the mere threat of blockade derailed Yugoslav and Greek belligerence.
In other words, the economic weapon worked through deterrence rather than actual use.
Economic Weapon
In the cases where sanctions were used more or less successfully, as in World War II, they served not as an alternative to war but rather as an integral part of the war effort.
Here, Mulder emphasizes the importance of the “positive economic weapon.”
In addition to traditional negative sanctions like oil embargoes targeting the Axis powers (and neutral powers such as Francisco Franco’s Spain), the United States also deployed positive economic measures such as the Lend-Lease program, which furnished the United Kingdom and the Soviet Union with critically needed supplies for the war.
As for the occasions when the economic weapon was used on its own during the period that Mulder covers, its track record was worse than meager.
The most famous example is the League of Nations’ failure to prevent Italy’s war of conquest against Ethiopia in 1935.
But, as Mulder shows, many more failures can be added to the list.
Indeed, one of his most striking arguments is that the threat of sanctions counterproductively aggravated the interwar crisis by encouraging land grabs and seizure of resources in pursuit of blockade-preempting autarky.
His account of this “escalatory spiral” offers a necessary corrective to standard histories of WWII’s causes, most of which have neglected “the role of sanctions in shaping the aggression of fascist and militarist powers in the late 1930s.”
THE OTHER EXORBITANT PRIVILEGE
The main reason for the Italy sanctions fiasco was that the US, having refused to join the League of Nations, also refused to take part in the oil embargo to stop Mussolini.
This fact has a modern-day resonance that goes well beyond the irony, highlighted by Mulder, of the US flipping from being the leading pre-war sanctions skeptic to becoming the modern world’s most enthusiastic wielder of sanctions.
Mulder’s account of how sanctions emerged from WWI helps to make sense of this reversal.
When countries come to dominate global trade, they acquire the means to impose effective sanctions, and that capability whets their appetite.
Since the dollar succeeded the pound as the dominant funding and settlement currency for global trade and investment, the US has taken up the sanctions mantle, supplanting early twentieth-century British “internationalism.”
So central was the dollar in the expansion of international trade that no commercial bank in the world offering services with any cross-border features (which means all banks of any significant scale, including Chinese institutions) can afford to defy the US Treasury’s sanctions directives.
But the temptation to use this power has proved so irresistible for successive US governments that, by 2021, the Treasury’s Office of Foreign Assets Control had an enforcement portfolio of more than 16,000 sanctioned entities and individuals.
As large as this explosion of sanctions activity was (representing a quadrupling since the first three post-war decades), it pales in comparison to the thoroughgoing sanctions packages rolled out against Russia in response to its war of aggression against Ukraine.
That shock came just months after Mulder completed his book, and he probably was relieved to have been spared from having to make last-minute adjustments to account for the historical echoes of such a fast-moving situation.
BACK TO THE PRESENT
Still, most readers of The Economic Weapon inevitably will have the Ukraine war top of mind.
The conflict – and the transatlantic response to it – makes Mulder’s history seem all too familiar, with the failure of sanctions in the Abyssinian crisis of 1935 offering a particularly rich trove of revealing comparisons.
Then as now, key players in the global economy did not participate in the sanctions regime, though for quite different reasons.
While the League of Nations’ efforts were hobbled by the absence of the US, virtually the entire world now belongs to the United Nations, and therefore accepts the obligation to respect and enforce UN-mandated sanctions.
But UN sanctions can be vetoed by any of the five permanent members of the Security Council, including Russia.
In the absence of UN-mandated sanctions, the US has had to forge its own coalition of the willing – a group that notably does not include major powers like China and India, both of which have continued to purchase Russian energy.
That said, the US-led sanctions regime’s inability to bind the rest of the world is not its main handicap.
Owing to their global financial dominance, America and its allies faced no obstacles in separating Russia from half of its foreign exchange reserves (around $300 billion) and excluding it from the dollar trading system.
Yet this latter “win” may prove counter-productive in the longer term if it weakens the dollar’s position as the global reserve currency.
Another lesson to emerge from Mulder’s history is that in the rare cases when sanctions were effective, they targeted small states.
When used against large powers, they were often counter-productive.
Just as sanctions may have intensified fascist militarism in the 1930s, their boomerang effect today stems from many countries’ dependence on Russian commodities – above all hydrocarbons, but also metals, grains, and fertilizers.
Because Western sanctions against Russia have yet to undermine the Kremlin’s war effort in real time, the burden of saving Ukraine has fallen to the modern-day equivalent of Lend-Lease.
Both America and Europe have been providing the Ukrainians with billions of dollars in military hardware and financial aid.
But the disruption of Russian exports caused by sanctions (actual and threatened) has fueled stagflation within sanctioning countries – and in many other, much poorer countries.
The blowback of the economic weapon is recession, which may weaken European and American public support for continuing to underwrite the Ukrainian war effort.
Mulder’s brief remarks on modern-day sanctions highlight the contrast between sanctions’ pre-war focus on interstate war and the post-1945 trend toward using sanctions to coerce states into changing their domestic policies.
And in the case of many US-led (as opposed to UN-mandated) sanctions, the often-implicit goal has extended to replacing the targeted countries’ despotic regimes.
THE QUIET PART
To be sure, this potential use of sanctions was seeded in the formative years that Mulder covers.
Wilson, he points out, “was the first statesman to cast the economic weapon as an instrument of democratization.”
Since the thinking has always been that democracies do not go to war with each other, promoting democracy through sanctions-induced regime change came to be seen as a way to prevent war.
Yet in a recent analysis contrasting this “democratic peace theory” with the “world system theory” developed by American political scientist Kenneth Waltz, Robert Skidelsky concludes that the reverse causation is more plausible: peace causes democracy, not vice versa.
If true, the economic weapon may be more likely to heighten, rather than lower, the risk of war, unless its use is limited to the positive version of aid and trade.
In a notable development last year, the US Treasury published its own incisive critique of America’s sanctioning habit.
Among the various reasons listed for sanctions’ poor track record, the report highlights their frequently imprecise goals and the related lack of clear conditions for lifting them, which in turn weakens their leverage.
But let us translate the cautious bureaucratic language of the Treasury report into blunter terms.
The goal of regime change that lurks behind the details of so many sanctions packages is also the only real condition for reversing them.
The 2015 nuclear agreement with Iran is a perfect example.
Part of the deal agreed by US President Barack Obama was that sanctions against Iran would be lifted in exchange for Iran’s renunciation of uranium enrichment to weapons-grade levels.
But three years later, President Donald Trump unilaterally reimposed and escalated sanctions against Iran.
Mulder ends his book with the thought that “stitching animosity into the fabric of international relations is of little use in changing the world.”
He is right in the sense that omnipresent and ever-expanding sanctions have become an integral feature of America’s “forever wars.”
Yet the modern use of the economic weapon may indeed change the world, by accelerating the creation of rival power blocs, economically and financially sealed off from one another.
That is a dismal prospect, as it ultimately will set back the security and prosperity of everyone.
Brigitte Granville, Professor of International Economics and Economic Policy at Queen Mary University of London, is the author of Remembering Inflation (Princeton University Press, 2013) and What Ails France? (McGill-Queen’s University Press, 2021).
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