On February 24, 2022, when Russian President Vladimir Putin announced his support for the independence of separatist forces in eastern Ukraine and sent troops into Ukraine, after the Russian-Ukrainian conflict officially broke out, U.S. President Biden held an emergency meeting and threatened viciously, “The world will let Russia pay the price”.
The price Biden said mainly refers to economic sanctions.
Subsequently, the United States announced a package of sanctions against Russia, from the initial arms embargo and technology transfer restrictions, to freezing the assets of Russian oligarchs and powerful people, kicking Russia out of the international financial system, and then banning the import of Russian oil. Step by step to exclude Russia from the international trade, finance, personnel and technology flow system, Russia is becoming an “isolated island” in the world economy.
European countries such as the United Kingdom, France, Germany, Switzerland, and even Asia-Pacific countries such as Japan, South Korea, Singapore, Australia, and New Zealand have joined the sanctions against Russia. Germany suspended the Nord Stream 2 project, an important Russian gas pipeline, Switzerland froze assets of Russians, and Singapore blocked Russian-related bank transactions and suspended flights to Moscow.
Winter is coming for Russians and the Russian economy. On February 24, the Moscow Stock Exchange index plummeted 30%, the Russian stock market collapsed, and the ruble depreciated rapidly. It’s not just ordinary people who are affected, Russia’s rich are also not immune. Since February 16, Russia’s 116 richest people have lost about $90 billion.
But the U.S. and European countries imposing sanctions are not doing well either.
Russia is one of the main exporters of oil, natural gas, nickel and grain, and sanctions on Russia will undoubtedly push up the prices of those commodities. European gas prices doubled from February to March. As of March 10, international oil prices rose 30% to a 14-year high. Nickel, which is used to make stainless steel and electric car batteries, surged 177% in two days – Russia produces about 13% of the world’s nickel. Global food prices rose 20 percent in February from a year earlier, reaching a record high, data from the United Nations’ Food and Agriculture Organization showed.
Behind a sanction, the global trade and financial system is provoked, and it is bound to affect the people of various countries who originally thought it had nothing to do with them.
Paradoxically, the United States, the main force of the sanctions and the most keen to wield the economic “big stick” in the world, was the most staunchly opposed country in the early 20th century.
After World War II, the United States took over the mantle of European countries and began to widely use sanctions. Sanctions have expanded from the initial trade embargo to a variety of financial, technological, and travel restrictions. The goal of sanctions has also expanded from preventing war in the first place to counter-terrorism, combating cross-border organized crime, preventing nuclear proliferation, and safeguarding human rights.
Although sanctions have undergone earth-shaking changes from target to means, the dilemma it has always been unable to overcome is: sanctions can only “bully” weak countries, and sanctions against big countries, in addition to being very difficult to achieve, also exacerbate war. risks of.
Outsiders came in.
The U.S. States into wars—and then, what they feared finally happened.
In 1920, the then US President Woodrow Wilson, who had just won the Nobel Peace Prize and was proud of his spring breeze, encountered “Waterloo” in the domestic political arena. His painstakingly designed “League of Nations” dedicated to maintaining international peace and prosperity was ruthlessly rejected by the Senate.
The core reason for Congress’ refusal is that the League of Nations requires member states to automatically sanction “problem states” that threaten the peace, which violates the exclusive right to declare war in the Senate, which fears sanctions will draw the United States into war.
Americans also supported the approach of Congress, when a prevailing view was that sanctions such coercion were exclusive to continental Europe where imperialism prevailed and were not suitable for the emerging United States of America.
Hu Shi’s teacher, the American philosopher John Dewey, also opposed sanctions. Citing sanctions against Russia from 1917 to 1921, he said the sanctions did not change the regime in Russia. John Dewey said: “Even countries much weaker than Russia have the ability to back down and hold out until the sanctions storm is over. The notion that fear of economic damage will prevent emotional states from going to war has been refuted by all recent history. refuted.”
The United States did not participate in the successive sanctions imposed by the League of Nations between the two world wars, but has been watching from the sidelines.
In the fall of 1921, the Kingdom of Yugoslavia invaded Albania, the British-led League of Nations threatened to impose a trade embargo on Yugoslavia, and Yugoslavia quickly withdrew its troops in the face of a potentially collapsing economy and a shrunk currency.
A border war broke out between Greece and Bulgaria in 1925, which ended in October of that year after the League of Nations threatened to impose sanctions on Greek dictator Theodoros Pangalos. The League of Nations has had considerable success in using sanctions to prevent small nations from going to war.
The Outsider America entered the game, starting in 1940. As France capitulated and Hitler’s Nazi Germany swept across Europe, U.S. President Roosevelt, fearing the international balance of power would be disrupted, threatened an oil embargo on Franco’s regime, who had won the Spanish Civil War.
The United States was the most important oil exporter in the world at that time. Although Franco wanted to join the “Axis Powers” composed of Germany, Italy and Japan, he still chose to keep the people’s livelihood in the dilapidated state after the end of the three-year civil war. neutral.
Without this sanction, the history of World War II might have been a different picture.
The United States, which has tasted the sweetness of sanctions, decided to impose sanctions on Japan after Japan invaded China. In 1941, Japan took control of French Indochina, now Vietnam, Laos and Cambodia, in an attempt to cut off China’s access to international aid from the south, and its ambition to expand its sphere of influence in Southeast Asia angered. The Roosevelt administration, the United States imposed an oil embargo on Japan.
This time, though, what Congress feared most has happened. In order to obtain strategic materials such as oil and rubber, Japan, which was extremely scarce in resources, ventured to attack Pearl Harbor, launched the Pacific War, and invaded Southeast Asia, which was mainly controlled by the United Kingdom and the United States.
Since then, the United States has forged an indissoluble bond with “sanctions”. After World War II, as the leader of the Western world, the United States, which achieved political, economic, military and technological dominance, used sanctions more frequently. After the end of the Cold War, the United States became the only superpower in the world. With the acceleration of globalization, the effect of sanctions has become more obvious, and the use of sanctions by the United States has become more reckless.
The United States of America “sanctions” the United States When
Obama was president of the United States, he proposed a “return to the Asia-Pacific” strategy to shift the strategic focus of the United States from Europe to the Western Pacific. His former deputy, current Democratic President Joe Biden, is busy “returning to the world.”
After being sworn in in 2021, Biden is facing an increasingly volatile world. The Taliban has made a comeback after the U.S. withdrew from Afghanistan. Aung San Suu Kyi, leader of Myanmar’s democratically elected government, has been detained and charged by the military. Now, Russia has launched a “special military operation” in Ukraine.
The battered Biden administration has only two cards in hand, one for sanctions and the other for sanctions.
Sanctions are no alternative, a “third way” between diplomatic negotiation and the use of force. The American people are tired of war. The Iraq war that started in 2003 cost the United States $1 trillion, and the 20-year war in Afghanistan cost the United States $2 trillion.
What’s more serious is that Russia and the United States are the world’s first and second nuclear powers respectively, each with more than 5,000 nuclear warheads, enough to destroy human beings more than 20 times. A war between the United States and Russia is not going to start at all.
Sanctions are the most appropriate choice to express strong protest and make the other party feel pain when they can’t talk and don’t dare to fight.
The Biden administration has also been actively using sanctions. According to the website of the U.S. Treasury Department, in 2021, the United States has launched 1,552 new sanctions, mainly targeting Russia, Belarus, Myanmar and other countries. The sanctions focus on human rights, anti-terrorism, combating drug trafficking, and preventing nuclear proliferation.
The number of new sanctions imposed by the U.S. government every year increased from an average of 500 in 2001-2015 to an average of 1,000 in 2015-2020. Now, the Biden administration has refreshed this data, so that “Foreign Affairs” magazine joked, The United States is a veritable “United States of America ‘sanctioned'”.
In addition to the increase in the number of sanctions imposed on the “seven weapons” of external sanctions
, the United States has also expanded the purpose and means of sanctions.
Before World War II, the sanctions imposed by the League of Nations were mainly to prevent war. After World War II, the purpose of sanctions was broader.
The United States has imposed sanctions on Iran and North Korea for developing nuclear weapons and delivery systems in defiance of international opposition. Sanctioning the big drug lord Guzman is out of consideration for cracking down on cross-border drug trafficking. After 9/11, in order to counter terrorism, the United States imposed sanctions on Al Qaeda and bin Laden. In addition, the United States has also imposed sanctions on individuals, organizations or government agencies on the grounds of “upholding human rights”, “promoting democracy” and “opposing cyber attacks”.
The means of sanctions are not just trade embargoes. Until the 1960s, the oil embargo was the most deterrent U.S. sanctions. However, after the rise of Middle East oil-producing countries such as Saudi Arabia and the United Arab Emirates, the United States lost its dominant position in oil. Correspondingly, the United States has developed a variety of sanctions, and it is not too much to call it “seven weapons”.
The “seven weapons” include trade embargoes, import controls, export controls, capital controls, freezing or confiscation of assets, travel bans, and airspace blockades.
Among them, the trade embargo refers to the prohibition of doing business with specific countries, and countries that are subject to this “care” include Iran, North Korea and Cuba.
The worst of them is Cuba. Since 1962, the United States has implemented a 60-year blockade against Cuba, which has dealt a heavy blow to the Cuban economy and people’s livelihood.
Export control refers to the prohibition of the export of specific goods, services and technologies to specific countries. This time, the United States has banned the export of oil drilling technology to Russia. Import control refers to the imposition of import restrictions on specific countries, regions or industries.
Trade embargoes, import and export controls are areas of international trade involving goods, services or technology. Capital control, freezing or confiscation of assets involves international finance. Because of the U.S.’s “hegemony” in the global financial system and the U.S. dollar’s dominance in the global monetary system, financial sanctions are the most “lethal” sanctions weapon for the U.S. today.
A strong dollar, the “old friend” of the
Chinese people, former US Secretary of State Henry Kissinger, who promoted Nixon’s visit to China 50 years ago, once said that whoever controls oil controls all countries; whoever controls the right to issue currency mastered the world.
Oil is the world’s most important energy and industrial raw material, and the U.S. dollar is the world’s most important storage, transaction and financing currency.
After the 1950s, the U.S. dollar replaced the British pound as the world’s dominant currency. Today, at least half of all cross-border trade is settled in dollars.
The central bank and securities market of various countries also love the dollar the most, and two-thirds of the world’s foreign exchange reserves and securities issuance use the dollar.
In addition to historical factors, another important reason why the dollar is so popular is the strong comprehensive national strength of the United States. The United States is the country with the strongest economic, technological and military strength in the world, and the U.S. dollar is also regarded by many countries as the safest currency in the world.
In addition to the dollar, the United States also controls the global financial system in other ways.
The Society for Worldwide Interbank Financial Communications (SWIFT), the main cross-border information exchange system used by banks, is controlled by the United States. SWIFT connects 11,000 financial institutions from more than 200 countries and regions around the world, and its members communicate with each other every day on average. Send about 32 million messages. In 2018, about half of the world’s large cross-border transactions used the SWIFT system.
Another U.S.-centric network is the New York Clearing House Interbank Payments System, a bill trading system that processes $1.5 trillion worth of payments per day.
The United States uses these systems to monitor global financial activities. If they are excluded from this system, any organization or individual will be kicked out of the international financial system and will easily fall into financial difficulties. One of the core measures to sanction Russia this time is to kick it out of the SWIFT system.
After 9/11, the United States showed its financial strength more actively. In addition to ordering banks around the world to freeze the assets of terrorist organizations and terrorists, the United States also punishes banks for alleged money laundering or evasion of sanctions. In 2014, BNP Paribas, France’s largest bank, was fined $8.9 billion for handling thousands of transactions in sanctioned countries and suspended its dollar settlement business in New York for a year.
But the use of financial sanctions too often can also jeopardize the dollar’s dominance. More and more countries around the world advocate de-dollarization and establish a new international financial system by using national currencies, digital currencies and new interbank payment mechanisms.
For example, in 2019, leaders of Iran, Malaysia, Turkey and Qatar held a summit proposing the use of cryptocurrencies, gold, national currencies and barter for trade.
Russia, which has been sanctioned since 2014 because of the Crimea issue, is more actively promoting the de-dollarization of its financial system. As of 2019, the Russian central bank reduced the dollar share of foreign exchange reserves to 24% from 40% in 2013. Central bank holdings of U.S. Treasuries fell from $100 billion to $10 billion. Russia’s finance ministry has also been reducing the dollar’s share of the sovereign wealth fund. “It’s not that we are abandoning the dollar,” Russian President Vladimir Putin said. “It’s the dollar that is abandoning us.”
Russia has also been trying to de-dollarize energy and other commodities. . But the dollar is pegged to oil, the global benchmark currency for oil trading, and it is difficult to escape the dollar’s control. “The key thing to understand is risk management, the entire synthetic derivatives of oil, all in U.S. dollars.” The owner of a global energy company explained, “If you want to manage risk, whether as an oil producer, trader or buyer of last resort, you have to stay connected to the dollar.”
A double-edged sword
After the U.S. withdrew its troops from Afghanistan, a well-known “one-kidney village” appeared near the western city of Herat. In order to survive, a large number of local residents sold one of their own kidneys, and these organs were used by rich Afghan people in need. People and buyers from India and Pakistan bought it, and the price was even as low as 1,500 US dollars (about 9,400 yuan).
Behind the sale of kidneys to survive is the severe famine in Afghanistan. According to a United Nations report, more than half of Afghanistan’s 38 million people face hunger, and 9 million face severe famine, many of whom have to sell their children for survival.
The famine problem in Afghanistan is mainly because the country’s economy is heavily dependent on foreign aid and foreign consumption. But the US sanctions against the Taliban have undoubtedly exacerbated the humanitarian crisis in Afghanistan. After the Taliban came to power in August 2021, the United States froze $7 billion left by the Afghan government in the U.S. Federal Savings Bank, money that could have been used to buy food for the Afghan people. Former British foreign secretary and now CEO of the International Rescue Committee, a non-governmental organization, said the financial sanctions on the Taliban also cut off private capital flows in Afghanistan and were the direct cause of the famine in Afghanistan.
This is not the first time that sanctions have hurt innocents. The U.S. arms embargo on the former Yugoslavia in the 1990s inadvertently weakened the Muslim community, as Serbs and Croats had greater reserves of military supplies and were more easily sourced from outside, leading to the demise of the Bosnian War in Bosnia and Herzegovina. , a large number of Muslims were slaughtered.
Sanctions are meant to force a regime to change its behavior, but it can easily hurt innocents. The protracted sanctions on Iran and North Korea, although once brought the two countries back to the negotiating table, have also caused great harm to the people of both countries.
Empirical research shows that throughout the 20th century, about one-third of sanctions were “at least partially successful”, and even fewer cases where sanctions can clearly be attributed to their complete success.
The end of apartheid in South Africa in the 1990s is considered the most representative example of the success of sanctions. But South Africa is a democratic country, and although voters were limited to whites at the time, external sanctions were more likely to trigger protests from the public, which would then be transmitted to the government level, forcing the government to change its behavior.
As the number of sanctions increases, the success rate of sanctions also declines.
From 1985 to 1995, the success rate of US sanctions was as high as 35% to 40%, when the Cold War was coming to an end and the power of the United States and its allies reached its peak.
In 2016, the success rate of US sanctions dropped to less than 20%, which is related to the relative decline of US power and the increasing number of sanctions.
In addition to easily hurting innocent people, sanctions are also a game of “injuring others first”. It also explains why sanctions are more effective against relatively weak countries: they depend far more on international markets than other countries depend on them. The aforementioned League of Nations succeeded in sanctioning Yugoslavia and Greece in the 1920s, not least because they were relatively weak.
Sanctioning a big country is much more complicated. A major country like Russia has a strong ability to fight and counter sanctions, and it is difficult for sanctions to change its behavior. Worse still, doing so could increase hatred and heighten the risk of war. Sanctions against major powers can be called the “Achilles’ heel” of sanctions.
The American philosopher John Dewey opposed sanctions, not only because they would be ineffective, but also because Dewey feared that sanctions would “renew old grievances between nations and accelerate war.”
In 1941, the United States imposed an oil embargo on Japan due to its aggression against China, which to a certain extent accelerated Japan’s launch of the Pacific War.
Imposing sanctions on major powers is a delicate trade-off. Simply fearing war and not taking action may not necessarily lead to a compromise by a great power.
In 1935, Italian fascists under Mussolini invaded the African country of Ethiopia. The international alliance led by Britain and France has been reluctant to impose too severe sanctions on Italy. One of the main considerations is that Italy’s strong economic strength makes it difficult for the sanctions to be effective, and may instead stimulate Italy to expand the war.
However, for a country that wants to start a war, although sanctions may not be able to effectively prevent its actions, it is even more reckless without sanctions.
The League of Nations, which was careful and compromising repeatedly, could not prevent Italy from joining the Axis powers and waging the Second World War.
To impose or not to impose sanctions on a major power is a dilemma.
What’s more troubling is that sanctioning major powers does more damage to itself and its allies.
After the Soviet Union invaded Afghanistan in 1979, U.S. President Jimmy Carter imposed a massive grain embargo on the Soviet Union, trying to force the Soviet Union to choose between cannon and butter. As a result, the grain embargo did not cause the Soviet Union to withdraw its troops from Afghanistan. Instead, it affected the export of American grain and hurt farmers in the Midwest. Losing the votes of the Midwest states was an important reason for Carter to step down.
Such examples abound. In 1982, U.S. President Ronald Reagan tried to sanction the Soviet oil pipeline to Western Europe, which was strongly opposed by European allies. British Prime Minister Margaret Thatcher and German Chancellor Schmidt refused to cooperate. 40 years later, in 2022, before Russia sent troops to Ukraine on February 24, German Chancellor Scholz had been hesitant to suspend the Nord Stream 2 gas pipeline.
Scholz’s hesitation is not unreasonable: 30% to 40% of the natural gas supply in Europe comes from Russia, and the sanctions will have a huge negative impact on the German economy. Sure enough, after the United States and Europe imposed round after round of sanctions on Russia, European gas and oil prices skyrocketed.
The well-known financial institution JPMorgan Chase predicts that the inflation rate in the euro zone will rise by 2.5 percentage points in 2022 because of the sanctions. On March 10, European Central Bank President Christine Lagarde predicted that inflation in Europe would be as high as 5.1% this year, while economic growth is expected to slip by 0.3 percentage points to 3.7%. This is adding to the trouble for the euro zone economy, which is working to recover from the epidemic.
The embarrassment for Europeans is that 100 years ago, they were “loyal users” of sanctions, and Americans were just watching on the sidelines as outsiders. 100 years later, the situation has reversed. The United States has increasingly favored sanctions, while European countries have been skeptical and hesitant to move forward.
This change of reality also implies the complex attitude of the great powers towards sanctions – they need this weapon to replace or even avoid war, but they know clearly that sanctions cannot solve all problems.
Sanctions play a significant role in combating terrorism, transnational crime and nuclear non-proliferation. They can also prevent some small countries from declaring war on their neighbors. However, they “injure others first” and easily harm innocent people. Sanctions against major powers are difficult to achieve the desired effect and increase the risk of war.
This time against Russia, known as the “largest sanctions since World War II”, has just been launched. The impact it will bring to Russia and the world pattern will only gradually become apparent in the future.