In a major development following Russia’s invasion of Ukraine, US President Joe Biden announced that the US and G7 would impose “devastating” economic sanctions on Russia.
Since last year, the US has threatened economic sanctions on Russia over the Ukraine issue. Biden warned in January that if Russia further advanced into Ukraine, he would impose unprecedented sanctions. US Secretary of State Antony Blinken had also said that a range of high-impact economic measures that the US has not used in the past — such as blocking the exchange of the Russian ruble against the US dollar and removing Russia from the international settlement systems — would be imposed.
But it looks like the economic threats are not having their intended impact. Actually, Russia has been subjected to harsh economic sanctions by the US and its Western allies over the past eight years without much impact on their decision making.
This raises a number of questions: will this round of “devastating” sanctions work? But more importantly, why is the US clinging to economic sanctions when they have been repeatedly proven to be ineffective? How does one square this contradiction?
This writer believes that by constantly harping on the “supremacy” of economic sanctions, the US fosters a "political righteousness" reminiscent of the ideological fanaticism of the Cold War that it got itself mired in.
Two sides of the same coin
Economic sanctions and military intervention are the two basic and increasingly de rigueur diplomatic approaches of the US following the Cold War. This is fundamentally rooted in the US’s mistaken view that it has emerged as the Cold War’s ultimate winner.
On the eve of the end of the Cold War, the US was like its nemesis an extremely exhausted superpower. Its understanding of the Cold War was reshaped by the sudden dissolution of the Soviet Union, while decades of US-Soviet military rivalry not only brought down the Soviet Union, but also plunged the US into economic and social difficulties.
After the Vietnam War, the US was forced to abandon the gold standard, leading to its diminished economic dominance. In the 1980s, the US suffered twin deficits, while Japan’s economy prospered and the US-Japan trade war popularised the idea of an “American decline”, as shown in the works of Paul Kennedy’s The Rise and Fall of the Great Powers and Aaron Friedberg’s The Weary Titan, to name a few.
During the same period, while Joseph Nye’s idea of “soft power” gained a lot of traction, it was in fact a silent admission by the US of its own diminishing power. However, the sudden dissolution of the Soviet Union buried the “American decline” under the delusion of the US as the “Cold War victor”.
Thereafter, the end of history, the hegemonic stability theory of the US unipolar system, the indispensable state and various other theories were developed. The resolution of the Cuban missile crisis was reinterpreted as the result of forced concessions by the Soviet Union under US military assertiveness, while the collapse of the Soviet Union was mainly understood as democracy’s victory over autocracy.
At the same time, the US grew increasingly dependent on economic sanctions to get the countries it deemed as “irresponsible” to toe the line. These were usually countries with relatively strong military power, where the US was reluctant to use military intervention.
Because the US believed that it had won the Cold War, it began to promote democracy around the world, and its methods — military intervention and economic sanctions — were thought to be the trump cards that led to its success in the Cold War. It identified strongly with the mission to spread democratic values to build a new world order. After the Cold War, it launched wars in Somalia, Kosovo, Afghanistan and Iraq. However, these military interventions all ended in failure and caused heavy casualties.
At the same time, the US grew increasingly dependent on economic sanctions to get the countries it deemed “irresponsible” to toe the line. These were usually countries with relatively strong military power, where the US was reluctant to use military intervention.
Consciously or otherwise, the US as the self-proclaimed Cold War winner made itself the embodiment and model of the global rules. It took a unilateralist stand in foreign relations — diplomacy seemed to become an optional item in US statecraft. Henry Kissinger’s Does America Need a Foreign Policy? can be viewed as concern over the future of US diplomacy in a globalised era. Whether Afghanistan or Iraq, the US’s crushing military victories within the first few months led it to start believing that any international problem could be solved with military force.
But for nuclear powers such as China and Russia, military strikes are not an option, and so economic sanctions seem to be the natural course of action. Neoconservatives firmly believe that they work faster and better than protracted diplomatic talks and political solutions. The air of distrust in dialogue and reluctance of participating in dialogue has led to the US gradually losing its status in political diplomacy in terms of foreign policy, with an increasingly obvious propensity for militarisation and sanctions in diplomacy. In that sense, economic sanctions and military intervention are two sides of the same coin.
Weaponising the US dollar’s dominance
With the deepening of economic globalisation since the Cold War, international trade and investments grew rapidly and the US dollar was widely used as the de facto currency for international trade, which gave it control of the global financial system. The US leveraged this financial dominance, so that its Department of the Treasury had easy access to all information about international trades conducted in US dollars, which essentially became a list of who the US could impose economic sanctions on.
Following the September 11 attacks, the US ramped up its sanctions framework, to counter terrorism and combat the financing of terrorism. It imposed sanctions on countries that purportedly supported terrorism, and developed secondary sanctions for countries, companies and even individuals that had business dealings with these countries — the so-called long-arm jurisdiction. The US “weaponised” the financial system and made it difficult for financial institutions operating in US dollars to trade with sanctioned governments and companies. At the same time, the US Department of Justice could prosecute sanctioned entities and individuals based on domestic law.
According to data from the US Treasury, from 2000 to 2021, the number of US economic sanctions increased nearly ten times.
As a result of the US’s belief that it had won the Cold War, as well as the strong reliance of the global economy on the US and confidence in the strength of the US dollar, over the past 20 years, the US has increasingly used economic sanctions. According to data from the US Treasury, from 2000 to 2021, the number of US economic sanctions increased nearly ten times. During the Obama administration, the US imposed sanctions on an annual average of 500 organisations and individuals; during the Trump administration, the figure was nearly double. And soon after Biden took office, he imposed new economic sanctions on Myanmar, China and Russia.
Over the past 20 years, the most prolonged and severe US sanctions are probably on North Korea and Iran. However, whether the intensifying unilateral economic sanctions on North Korea under Obama’s policy of “strategic patience”, or the comprehensive sanctions under Trump’s “maximum pressure” campaign on Iran, they did not work as expected.
Since sanctions were ineffective against North Korea and Iran, would they be effective on Russia? After the Crimea incident in 2014, the US already imposed strict sanctions on Russia, including freezing assets as well as imposing travel bans and financial and trade restrictions. However, the US did not assess the results of these measures.
While sanctions have undoubtedly affected Russia’s economy, the past eight years have proven that Russia has adapted with its domestic development and diverse economic partnerships, and has even grown its foreign exchange reserves to become the fourth largest in the world.
Sanctions easy to impose but hard to lift
People note that there are often news of the US sanctioning a country, but hardly any of the US lifting them. Why is it so difficult to lift sanctions?
Economic sanctions and military intervention are fundamentally the same — easy to initiate but difficult to lift. Lifting sanctions could damage the so-called international credibility of the dominant country. Regardless of whether weapons or sanctions are used, apart from getting the target country to change its ways, the more important objective is to establish authority in the international community.
To remove economic sanctions on countries that the US has distinguished in highly ideological terms is a risky business for US domestic politics.
Such a question of “face” usually means the US is not satisfied or even indifferent with the small changes in the sanctioned countries. The US wants the sanctioned countries to either unreservedly acknowledge its unilateral failure or beg for mercy, because only then would the US government be able to raise its political status domestically and establish more authority internationally. However, this is a difficult feat as sanctioned countries are unlikely to follow the US’s bidding.
Besides, Congress must approve any US actions or sanctions before they can be implemented, as is the case with removing them. The bipartisan nature of US domestic politics makes it much more difficult to lift sanctions than it is to impose them. Hence, the sanctioned countries are completely uninterested in holding talks, as they know that any concessions made are useless, because even if the US government commits to anything, it can still be easily rejected by Congress.
To remove economic sanctions on countries that the US has distinguished in highly ideological terms is a risky business for US domestic politics. For example, for over 20 years, the US has defined Russia as an authoritarian state and vilified Putin, making anti-Russian sentiment a form of political righteousness. As economic sanctions are considered the most important tool to reprimand Russia, the US can only ramp up sanctions instead of easing them. In other words, there is no mechanism to undo economic sanctions.
The future of economic sanctions
The Ukraine crisis and the fresh round of US sanctions will further exhaust US financial dominance. In the international financial scene, the most important thing is in fact trust. From the time the US abandoned the gold standard, the US dollar has fundamentally become paper money that is not backed by gold, and people are still using it because it is liquid and many countries still trust in it.
But if the US keeps abusing this trust, other countries will believe that a global financial market that is over-reliant on the US dollar is unreliable and unbalanced, or even dangerous, and they will find other ways to avert the risk of the US abusing its financial privileges, such as developing new payment systems and local currency settlements. This would hasten the demise of US dollar dominance.
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