Enough with Sanctions Already

By Robert Delahunty, AM THINKIER

Before President Biden’s two-hour conversation last week with Chinese president Xi, the exchange was being billed as having “seismic ramifications.”  Biden was going to make it clear that China would suffer “severe consequences” for any financial or military aid it provided Russia in the face of U.S. sanctions.

But it doesn’t appear that Biden threatened Xi with “severe consequences” at all.  And if he did, Xi blew any such warnings away.  Instead, China admitted to nothing, implicated the U.S. and NATO in causing the war, insisted that Russia’s security needs to be addressed, and pressured Biden to help negotiate a settlement.

According to the Chinese Foreign Ministry, Xi told Biden:

The US and NATO should … have dialogue with Russia to … ease the security concerns of both Russia and Ukraine. … Sweeping and indiscriminate sanctions … [i]f further escalated, … could trigger serious crises in global economy and trade, finance, energy, food, and industrial and supply chains, crippling the already languishing world economy and causing irrevocable losses.

Even before the conversation, China was speaking softly but carrying a big stick: it sent an aircraft carrier through the Straits of Taiwan.  And to rub in the point, China’s vice foreign minister, one day after the presidents talked, denounced NATO and condemned U.S. sanctions. 

In other words, Biden’s call was a flop, like everything else he does.  How could it not have been?  Our foreign policy is incoherent.  On the one hand, a major purpose behind Biden’s Ukraine policy is to signal to China that it dare not invade Taiwan.  On the other hand, Biden needs China’s support if sanctions on Russia are to work.  He is therefore both threatening China and conceding dependence on it.  You cannot be unflinching and abject all at once.

Why Biden cannot sanction China

Xi knows that the U.S. will not impose any serious secondary sanctions.  Biden is heading into a November midterm election, and the U.S. is in dire shape economically.  The national debt stands at about $30 trillion.  Inflation is devastating not just the poor, but now the middle class.  Yet if the Federal Reserve Board seeks to tame inflation by raising interest rates, financial experts warn that the stock and housing markets may collapse.

If to this witches’ brew we added significant trade and financial sanctions on China, our action might well precipitate a deep recession globally and at home.  The World Bank forecast late last year that China’s growth would slow sharply in 2022, and our own growth is declining as well.  Depressing already slow growth while further inflating prices would mean a historic defeat for Democrats in November.   Both Xi and Biden know that.

Xi has the U.S. over a barrel.  He has nothing to fear from us.  He can unobtrusively aid Russia (while denying that he does) but posture as a peace broker.  He can subsidize Russia’s invasion while insisting on the sanctity of international borders.  He can blame the war on the U.S. but also embarrass it if it does not encourage its Ukrainian satellite to accept a settlement.  He has outflanked the U.S. (much as Nixon outflanked the USSR) by raising the specter that we might have to fight a war on two fronts — in Europe and the Pacific.  If we sanction him, it only hastens the day when he and Russia develop a de-dollarized payments system and create a Eurasian trading bloc.

And the U.S. already overuses its sanctions:  one in ten countries in the world is now subject to them.  At the same time, we expect foreign creditors to continue to buy our Treasury bills (even as the national debt soars) and foreign traders to transact in U.S. dollars.  Our policies simply do not cohere.  They are reckless.

The problems with sanctions

Economic sanctions have become an integral part of the liberal-internationalist way of war.  They leverage our powerful advantages in finance, trade, technology, and media propaganda.  They offer our political leaders the alluring option of seeming to be “doing something” while avoiding American combat deaths.  They have been a preferred instrument of American foreign policy for at least a century, since Woodrow Wilson.<
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But as Biden’s conversation with Xi shows, they have significant operational problems.  Even apart from the disasters they often wreak on vulnerable civilian populations, there are at least three reasons why sanctions usually do not work.

First, enforcement is difficult.  Napoleon’s “Continental system” (a boycott of Britain) was full of holes.  In the end, its flaws drove him into his calamitous 1812 invasion of Russia.  Russia can circumvent some of our sanctions;  its allies, like Armenia, are serving as conduits for trade.

Furthermore, the targeted country can develop substitutes for the products it is denied.  Deprived of their Malaysian rubber supplies by Japan in World War Two, the Allies developed synthetic rubber.  When Nazi Germany was short of petroleum, it manufactured oil out of coal.  Russia too can find substitutes; it may now be developing a rubles-to-rupees payment system with India to bypass currency restrictions.

Second, sanctions often backfire.  Thomas Jefferson’s Embargo Act of 1807, designed to cut off U.S. trade with the belligerents in the Napoleonic War, did more harm to the U.S. economy than to the Europeans and had to be abandoned.

U.S. sanctions against Russia, including freezing its Central Bank’s assets, could equally cause blowback for the West.  European, U.S., and Japanese banks face up to $150 billion in losses as a result.  Apart from banks, U.S. firms have about $15 billion of exposure to Russia, most of which will potentially have to be written off.

Most importantly, by weaponizing the world’s financial system, the U.S. is degrading the global commons.  The SWIFT payments system, hitherto thought to provide a global public good, may come to be perceived as a tool for promoting U.S. policy ends.  Longer-term, this can only be a strategic setback for the U.S.

Third, sanctions often require secondary, back-up sanctions, giving offense to neutrals.  In the current crisis, India is the leading case in point.  Biden is weighing sanctions on India under the 2017 Countering American Adversaries Through Sanctions Act.  India buys much of its weaponry from Russia, and the contemplated sanctions, which are subject to a presidential waiver, are ostensibly aimed at India’s weapons stockpile.  (No doubt the U.S. arms industry would like to replace Russian suppliers.)  Whatever the stated purpose of the proposed sanctions, in substance, they are designed to punish India for abstaining from the General Assembly’s vote to condemn Putin and to force India into compliance with our Ukraine policy.

India wishes to remain neutral.  It has powerful diplomatic and military reasons not to alienate Russia, including a desire to keep Russia as a check on a hostile China.  The Biden administration’s pressure on India is, however, estranging Indian public opinion.  The idea of sanctioning India — whose support for the U.S. in any confrontation with China would be invaluable — is, as Senator Cruz has argued, “extraordinarily foolhardy.”

To repeat: the hallmark of Biden’s foreign policy is incoherence.

Robert Delahunty is a Washington Fellow of the Claremont Institute Center for the American Way of Life.  He is the co-author, with Antonio F. Perez, of War: International Law, International Relations, and Just War Theory — An Interdisciplinary Approach (2017).