But What About the Sanctioners?

Given the apparently limited impact of sanctions on influencing Russia’s territorial ambitions, we have to ask whether this form of financial warfare is a viable strategy, given the pain, the sanctions are inflicting on the nations who are applying the pressure.

To an arguable extent, the sanctions are cutting into profits for major companies, adding to energy insecurity in many European nations, helping drive consumer energy prices to historic levels, and contributing to inflation. All of this could prove to be the tipping point to send the world into a recession, which could trigger social/political unrest that creates even more uncertainty.

If these Russian sanctions had been imposed in a “normal” time, when economies weren’t recovering from the labor and global supply chain issues stemming from COVID, for example, they might have been far less painful to the inflictors. But that’s not the hand we were dealt. And who’s to say what the new normal will be, for that matter.

The History of Economic Warfare

Gaining influence and trying to gain an advantage in the international arena through economic means isn’t new.

This fascinating account documents how nations over the last few centuries used economic tools like embargos, blockades, currency devaluations, and other means to gain an economic edge over another. In the 18th and 19th centuries, this even entailed the use of military resources, ships primarily, to secure monopolistic trade routes at the expense of other nations.

This might be the first significant time, though, that sanctions were used on this scale to not only weaken an economy but drive leadership changes or at least changes of heart. We’ll see more attempts like this in the future and we’ll learn from the current experience how to do it even more effectively… maybe!

The Future of War

What we see in the destroyed cities and lives in Ukraine seems other-worldly to us. Let’s not get used to it. I can only hope this will be the last time we’ll see this kind of blatant, grind-it-out invasion on this scale. I doubt that Russia is eager to do it again as they’re learning the limits of this strategy.

Instead, bad state actors will take a page not from WWII but further back from the annals of 17th and 18th-century economic warfare in order to subjugate a nation or region. We and they will also learn from the West’s experience with the Russian sanctions, specifically:

1. Personal sanctions against political and economic leaders don’t have an impact. In fact, wealthy people around the world have been and will continue to plot ways to preserve, hide, and encrypt their wealth to avoid being targeted like the oligarchs in Russia.
2. Broader sanctions like access to financial markets, isolating businesses from international markets and expertise, and engaging in currency wars will be more thoughtfully planned out to predict likely responses and secondary impacts. They will be used more selectively and from a position of strength (which was not the case with regard to oil sanctions on Russia, for example).
3. The retrenchment from globalization to regional/national economies, driven in large part by supply chain challenges but also the concern about being held hostage by resource-rich potential despots, will make many economic sanction tools less effective.
4. The U.S. will emerge as the major active international economic player, meaning the U.S. Dollar will be the world currency of choice for the foreseeable future. This will be true as long as the Western bloc of nations as a whole can outperform China’s economy, which has taken a hit due to its oddly draconian COVID management approach. An internationally accepted cryptocurrency might supplant the U.S. Dollar at some point but that timeframe is slipping given recent turbulence in that market and the challenge of gaining international consensus on a single currency. All of this makes the U.S. a more formidable economic warfare foe in the years ahead.
5. While not the topic of this blog, cyber warfare will become the second leg of our bloodless warfare model, equally as critical as economic weapons.

We can only hope that Russia has learned some lessons of their own – namely that bloody infantry and artillery conflicts must once and for all be put in the past. But never say never. The advantage in war always tends to go to those who are willing to do what their opposition is not.

That said, the nature of war is definitely changing. If this approach proves to be successful, and it’s still too early to tell, we will see nations shift to a different kind of arms race – to accumulate global economic and cyber warfare advantage.

However, if war does become more “civilized,” we will have more wars – more frequent and more targeted.

We may not even call them “wars” anymore as we attempt to euphonize these battles with less war-sounding terminology. The immediate goal will be to extend influence as a precursor to extending boundaries.