The art of economic warfare
Decide for yourself what consequences the different attempts at economic coercion have in the different areas using our handy summary.
The art of economic warfare
The Economics of Geography

The art of economic warfare

The sanctions did not incapacitate Russia (Photo: iStock)
Anita Faust 25/08/2023 05:00

As the saying goes, the proof of the pudding is in the eating, but a master chef plays safe as he knows what he is doing. Voices claiming that the sanctions against Russia do not work are gaining in strength, and that it is actually Europe, more specifically Germany, who is losing out the most from these sanctions. This form of warfare has its own gurus. Our analyses and case studies afford us some insight into their practices. Decide for yourself what consequences the different attempts at economic coercion have in the different areas using our handy summary.

Economic warfare is not something that was invented in modern times, we see examples of it even in antiquity, during the Peloponnesian War. The aim was to weaken the enemy or to change their behaviour. It is most often used before and during armed conflicts, although some suggest that it may bring about the intended result when applied instead of armed conflicts. This idea was probably the product of the pacifist hopes inspired by the terrors of the Second World War and perhaps also by the power opportunities created by globalisation.

Although there are ethical arguments in favour of economic war, if that means preventing people from accessing essential products, such an economic war can hardly be called a humanitarian action. For example hundreds of thousands of people can die if they do not have access to detergents and medicines, especially in hot regions, as was the case in Iraq before the war started in 2003. Of course, there are precisely targeted measures as well that can be used in addition to sanctions targeting the people. For example the sanctions that were meant to rearrange strategic positions in the aluminium industry, like the ones implemented by the Trump administration against the Russian Rusal company.

All in all, the target system and tools used in economic warfare can vary on a large scale. The question is what makes them successful? Who can use these tools? And when are they appropriate and effective? Against whom can we use them? And in what kind of economic environment? What happens when these economic measures do not bring about the expected results?

Rational action

Although conflicts, be it military, psychological or economic warfare, serve political objectives, there is one axiom that we need to learn, but not from politicians, rather from military strategists. Namely, that though narratives often accuse the enemy with being insane, each and every participant of these conflicts is actually a rational actor. This is what General Vincent Desportes, a trainer at the French Military Academy said in his expert report this September. He emphasised that the most basic strategic mistake is to assume that the other party is not acting rationally. Granted, we have to assess their criteria to understand their motives, ambitions and dedication. There are many compelling reasons for starting a conflict, even if it seems to be ignited by a single event — an assassination, as in the First World War, or a military action, as in the bombing of Pearl Harbor.

Before initiating any conflict, it is essential that the balance of powers is assessed, including our own and the opponent’s power: to see what strengths each have, and what are their weaknesses. We can apply the teaching of the ancient Chinese warlord, Sun Tzu as a guiding principle: one who knows himself and his enemy well, can expect victory. However, when we want to assess the economic power, we can easily be misguided by GDP data which is usually used to express such power. We could presume that if the GDP of a country is high, it can safely attack another country with lower gross domestic product, but war is not about GDP, it is about the ability to act. And one of the key factors of such ability is the lack of strategic dependencies, whether we are talking about dependence from raw materials, energy, infrastructure, industrial capacity or even export markets. It is through these dependencies that the other party can be coerced. A country that is self-sufficient while remaining functional to a relatively high level, and has enough room for manoeuvre, can hardly be brought to its knees by economic warfare.

Export and dependence

Dependence from export markets is an issue that needs to be considered separately. The geopolitician, George Friedman often uses Germany as an example because its economy relies on export to a substantial extent, and it is extremely dependent on the US market. Despite the fact that the German mark was replaced by a weaker euro, German industrial products are still expensive, meaning they can only be sold to highly solvent markets, especially in large volumes.

Russia, which has become the target of numerous sanctions, is also an export dependent country, yet its situation is quite different: energy and raw materials are not luxuries, everyone needs them. Whatever the European Union does not buy from Russia, will be bought by India, China, even by Saudi Arabia, countries that allegedly re-sell these products at a premium. The dual vulnerability of Germany, which is dependent both on the American market and Russian energy at the same time, is an interesting phenomenon.

Of course, the number of dependencies can be reduced. This can be done by mobilising internal resources which can be achieved by making additional investments or using new technologies, or even by diversifying export and import markets. The more places a country’s products are imported from or exported to, the more protected that country is both from economic coercion and from the effects of crises affecting its partners. The US is a good example of both ways of reducing dependence. While it was dependent on oil imports, it sought to find sources other than those in the Middle East, and this was how Venezuela became its main supplier. Later, the development of shale oil and shale gas extraction technology allowed the US to reduce its import dependence radically.


Criteria for success

Once a party satisfied itself that considering the current economic dependencies, it can, in principle, successfully use the means of economic coercion, the next question is what strategy to follow. In this regard, we are guided by the works of the world renowned practitioner and theoretician, Richard Nephew. Nephew is an expert on nuclear weapons and the use of sanctions. He is the programme director of the Center on Global Energy Policy at Columbia University, and played a key role in the 2015 Iran nuclear deal during the Obama administration. His book ‘The Art of Sanctions: A View from the Field’ provides a practical perspective on what makes sanctions work, and what happens when economic coercion fails.

Nephew identifies seven key criteria for the success of effective economic warfare. All these criteria need to be implemented simultaneously in order for the party initiating the economic coercion to achieve something:

  1. The goal to be achieved must be clearly identified, and it must be communicated to the coerced party saying that if that goal is achieved, sanctions will be lifted. So the goal must be defined in a way that makes the coerced party see that the goal is specific enough to be able to establish when it is achieved, and whether it is/can be worth cooperating with the coercion. The most difficult aspects of economic warfare are actually defining the goals and establishing their achievement, i.e. lifting the sanctions.
  2. The political goal and the sanctions must be proportionate. If the sanctioning party imposes a requirement that would be self-destructive for the opposing party, the coercive measures cannot be expected to have any effect. However, if the claim is disproportionately small, the action warns the attacked party that it should prepare itself for future economic coercion. This may immunise the coerced party against most of the means used in economic warfare.
  3. The selection of the targets and means of the economic attack requires a thorough knowledge of the attacked party and the coercing party’s own position. The coercing party needs to understand the dimensions of the economic processes in the target country, and see the bottlenecks that can be effectively attacked even with only a little effort.
  4. If the economic goal is limited, the economic attack can be targeted, but if the goal is to achieve a regime change, such pain must be caused to the society that it would decide to overthrow its own government in the hope of getting rid of it.
  5. It is extremely important that the economic attack can be escalated if it fails to achieve the pre-defined goal right from the start.
  6. The pace of the above escalation is particularly important: it must be fast enough so that the attacked party cannot adapt to the blockade or other economic coercion, and primarily that it does not have enough time to effectively address its society and to set the psychological grounds of resistance against economic coercion.
  7.  Economic coercion can only be successful if the attacked party cannot find any loophole in it. If no other countries join in the sanctions, the attacked party may find a way out of the sanctions. Therefore, it is fortunate if the coercing party can organise a coalition to enforce the sanctions or if it has sufficient power to implement secondary sanctions against those who assist the attacked party in finding a way out of the sanctions.

Qatar and Afghanistan

Though economic warfare has its own general rules, each case is a unique one, and the economic wars we have seen in the part few years have taught us plenty of lessons.

In 2017, Saudi Arabia and its allied states terminated their diplomatic relations with Qatar at the same time as cutting the country off from land, air and sea transport. It promised to be a very sensitive attack against Qatar considering that Qatar’s food import dependence is substantial, and its global importance as an air traffic hub in addition to its dominance of the gas fields. Demands included the closing down of Al-Jazeera and other media outlets, the severing of ties with Iran, and the closing down of the Turkish military base. However, Iran and Turkey helped Qatar successfully find a way out of the Saudi blockade, and in time the conflict subsided.

The situation is very different in Afghanistan. After the US forces withdrew in 2021, it imposed strong economic sanctions against Afghanistan. During the two decades of occupation, the country became highly dependent on aid. The country that came under the rule of the Taliban after the withdrawal, was cut off from aid and had its currency reserves confiscated. This, along with the loss of the majority of its educated population, has resulted in a humanitarian disaster for those who remained in the country, according to both Amnesty International and the UN.

Afghanistan has a central location, but in this almost ungovernable state, it can hardly be integrated into the Eurasian region. In the spring of 2022, USA Today published an opinion stating that the US withdrawal was not the end of the war, rather only a change in arms. In the autumn of 2022 we saw some regional attempts at providing aid. However, humanitarian aid is not enough to achieve a breakthrough. What is needed is for the country to become governable again and to replace its lost intellectuals.

The foundations of a new world order

In the case of a sanction campaign against Russia, the fact that it is a country rich in raw materials and with its own industry, and also that it has its own technology, though not on the full spectrum, must be taken into consideration. Previous sanctions have been immunised: Russia has stepped up its self-supply, and from a food importer it has become one of the world’s most important grain exporters. It also has some influential partners which afford the country some room for manoeuvre.

The sanctions resulted in four well-defined and clearly visible consequences. One of them was the emerging economic and social crisis in Europe that was highly dependent on energy imported from Russia. Rising energy prices, and the lack of chemical fertilisers and cereals caused by the sanctions, may also bring instability to countries outside Europe. Russia’s position of power has also changed. While Europe’s dependence on Russia is slowly dwindling, Russia’s dependence on its partners outside Europe is growing stronger. Since a partnership with Russia brings substantial benefits to the relevant countries, their willingness to cooperate promises to be long lasting, though they may even ask a price to be paid for it. Due to the fact that a great power with allies was forced to find a way out for itself, we see the fundaments of an alternative, non-Western world order forming, with its financial, trade, diplomatic and organisational frameworks being built as well.

Given the goals defined in the narratives, the sanctions did not incapacitate Russia, they did not cause the collapse of the country, nor did they bring an end to the armed conflict in Ukraine. If anything, they accelerated the separation of the West and the non-West. Instead of or in addition to the unipolar American world order and the transnational world order intended to replace it and accepted by the majority of the West, we now see a third alternative taking shape which could mainly be called a bipolar world order in which the world is divided into the West and the multipolar non-West.

After all this, we can only hope that the powers that decided to wage war on the Russia they thought to be economically weak and militarily strong, will not decide to change arms. Should these nuclear powers which they are, opt for war, that would have unthinkable consequences.

The author is a research fellow at the Eurasia Center of John Von Neumann University.

This article was originally published in our Hungarian-language magazine Eurázsia in 2022.

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