“The Economic Weapon” Review: The Limits of Sanctions, from Abyssinia to Ukraine

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Be warned, Vladimir Putin told President Biden after their high-profile video conference on Dec. 7, and don’t consider imposing more sanctions on Russia over the Ukraine crisis, because that would just backfire. Convincing European states not to participate in the Nord Stream 2 pipeline project, which promises to supply them with Russian gas, does not scare us. But it will hurt some of your allies. NATO declarations of resolutions do not frighten us. Financial restrictions on Russian banks and large companies will not work. Their economic weapons are useless because we are either resilient enough or will find ways to circumvent them. Don’t you see, Mr. Putin seemed to be telling the world: sanctions are a hopeless tool of diplomacy, so why not throw them in the dustbin of history?

The Economic Weapon: The Rise of Sanctions as a Tool of Modern War

By Nicholas Mulder

Yale University Press

448 pages

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Should Mr. Biden follow this course – and there are currently no indications he will – he would turn away from policies that have been one of the main tools in Western liberal powers’ strategic toolbox for nearly a century. Because by the early 1920s, as Cornell University history professor Nicholas Mulder explains in The Economic Weapon, the politicians and officials of the victors of World War I—Britain, France, Italy, the United States—attempted a new way, the influencing the behavior of states. By using the international machinery of economic sanctions or by coordinating joint action by financial authorities, they hoped to deter or punish violators of the Western rules-based order of things. The main protocol and instrument of all this was Article 16 of the Pact of the brand-new League of Nations, which proclaimed that member states were obliged to cease all financial and commercial relations with countries which the League Council deemed to be engaged in acts of aggression against another state .

None of this was as easy as it looked (and it got even more complicated when America turned to isolationism and didn’t join the League of Nations). Mr. Mulder accordingly devotes much of his valuable book to showing how diplomats, Treasury officials and international jurists have grappled with the essential details of this important piece of the new Versailles system – and threatened economic punishment to ensure good behavior conditions .

Blockades and other interventions have long been used during active hostilities. Behind the renewed interest in economic sanctions, however, lay the nagging hope of liberal leaders that future catastrophic wars could be avoided through economic instruments alone. Though some internationalists winced at the idea, awkward things like cutting off trade and freezing financial assets would be done to make the world a more comfortable place. However, all of this rested on the critical assumption that the governments and societies of the transgression countries would be vulnerable to such outside nudges. If this was not the case, the sanctioning nations faced a difficult choice; either back down and admit failure, or take tougher action—military action.

Propaganda posters in Italy condemned the sanctions imposed by the League of Nations after the Italian invasion of Ethiopia in 1935.


Photo:

Keystone-France/Getty Images

Apparently, therefore, it was always easier to impose harsh economic measures on violators when the latter were small and almost powerless states like Bulgaria and Greece, whose struggles over a border incident in the fall of 1925 led the League to threaten a naval blockade against Athens and forced the Greek government to give in. But what if the troublemaker was a state with plenty of military might that wasn’t easily intimidated, like Mussolini’s Italy, which attempted a full-scale conquest of Abyssinia (now Ethiopia), a fellow League member, in 1935? What was in the tool box back then? The trade embargoes the League approved hurt Italy’s economy, but did not limit its military capabilities. No attempt was made to block oil imports for fear that doing so would be contrary to American business interests. And the idea that Britain would close the Suez Canal, barring Italian ships from passage to Abyssinia, was ruled out as a violation of international law. With very little to fear, Mussolini practically completed his conquest by 1936. The failure of the League during the Abyssinian crisis has been recounted many times, but Mr. Mulder’s account is superior in its use of American, British, French, German and League documents to reconstruct you this embarrassing story.

If the “economic weapon” could not be used to force Italy into line, what chance did it have of deterring Adolf Hitler from his various aggressions in East-Central Europe or forcing the Japanese to withdraw from their steady invasion of China? Clearly none at all. After 1937, Neville Chamberlain of Britain, Franklin Delano Roosevelt of the United States, and the French leaders were therefore left with two options: either appease (tolerating the aggression) or go to war. Sanctions were a failed flush, “the midsummer of madness,” as Chamberlain said of the Abyssinia affair. With the prime minister wanting to avoid war at all costs, arrangements had to be made to meet the needs of the various dictators.

The rest of this sad story is familiar to most readers. Hitler in particular could not be mollified. The Munich deal of September 1938 lapsed six months later when the Nazis invaded Prague – and then the attack on Poland was only six months away. In the parallel Far East crisis, the story was slightly different: in July 1941, the Western powers, led by Roosevelt, imposed a punitive oil embargo on Japan, but this economic aggression boomeranged, provoking Tokyo to start the Pacific War against the US

As Mr. Mulder shows in his final chapter (“The Positive Economic Weapon 1939-1945”), economic instruments could only be used when war was unavoidable to achieve the world order envisaged at Versailles. The first way that really worked was to initiate a little-known part of Article 16 of the Pact, which allowed the still-neutral US to ship vast amounts of arms and other supplies to allies fighting for the common cause – in a word, the “Lend-Lease” program. Finally, the second path was to use every conceivable destructive military and material tool, from the naval blockade to the overwhelming strategic bombing campaign, to reduce the Axis economies to a burnt-out rubble. This gory approach was indeed far from the visionaries’ expectations of 1919.

The Economic Weapon respects strict chronological boundaries but offers many lessons for today’s Western policymakers. History shows that sanctions simply don’t work when they’re “soft” sanctions, a pat on the wrist meant to show disapproval rather than punishment. Sanctions don’t work when there are huge financial or commercial loopholes in the economic chain to be imposed. Sanctions don’t work when another major power steps in to supply or buy from a country that’s being sanctioned—for example, Chinese supplies to North Korea today, or Russian purchases from Iran).

Sanctions are always threatened and often attempted. While they may actually succeed against a minor transgressor facing economic pressures, a large nation with an authoritarian regime will be able to persevere, controlling its own citizens and mobilizing all national assets to ease the strain carry. Rather than induce illiberal nations to improve their policies, sanctions could confirm the determination of a regime’s leaders to become more economically independent and reaffirm that being part of an integrated global system is a truly dangerous thing. That in itself is a pretty depressing thought.

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