Applications of Economic Warfare
States use of sub-threshold economic warfare such as sanctions has proliferated and it is equally employable within conventional conflict via methods such as blockades. Less often discussed is its questionable effectiveness, disproportionate impact to the civilian population and mutual cost. This note aims to outline the methods, utility and limitations of this element of integrated action.
Often classed as ‘political warfare’, economic warfare is one of the most persistent methods used in the constant competition inherent to modern conflict. The UK alone maintaining over 2,000 sanctions targets over 26 financial regimes in 2018.[1] Defined as state efforts to control critical economic resources in order to deprive adversaries. It is conducted either to reduce their means to fight or to coerce behavioural change. Conducted during both sub and above threshold it allows states to shape the battlespace to prepare for, avoid or win a war.
Methods
Immensely flexible, economic warfare involves resources ranging from personnel, infrastructure, financial capital, material and access to markets to achieve a states aims. Its targets range from individuals, terrorist groups, states or ultimately society’s themselves depending on desired effect. Including direct means such restricting fuel supplies to delay military actions or indirectly coercing behavioural chance in elites by impoverishing populations. Or simply shrinking a adversaries GDP to reduce their means to fight. Planning timelines vary from long term brought about by financial sanctions or immediately delivered through kinetic action. Military contributions include intelligence, identifying key capabilities for disruption and delivering kinetic economic warfare once above threshold conflict begins. Common economic warfare which may be employed concurrently are outlined below. Lower level measures such as currency pinning (e.g. Chinese Renminbi) are excluded.
Targeted Sanctions. Sanctions targeted at named individuals or financial entities. Possible measures include asset seizure/freezing, denial of access to international financial system and travel bans. Often used against terrorist groups, drug cartels and their associates but over 300 individuals tied to the Russian state were targeted post Crimea.[2]
Smart Sanctions. Devised to limit costs to the targeted elites and supporters including measures such as travel bans, luxury goods imports, blacklisting and arms embargos.
General Sanctions. Imposed on the targeted state. Restricting all trade within specific economic sectors. Conducted by new legislation or modification of existing trade agreements/quotas. Or by the withdrawal of aid, such as the US with Venezuela.
Embargo. A full or partial trade ban with another country. Aiming to coerce or weaken states prior to potential future conflicts. Often placed by US against communist countries during the cold war.
Blockade. A militarily enforced embargo in one or multiple domains during war. Conducted to deny military material to an adversary. Noting that a total embargo of all material would amount to a war crime. Allied forces imposed a maritime blockade on Germany during WW2 and the Israeli interception of Gaza bound shipping may be classed as a modern blockade.
Economic strikes. Military action (normally air, maritime or cyber) conducted to disrupt an adversaries economy via specific targets or general destruction. WW2 strategic bombing of German ball-bearing plants to disrupt manufacturing was a specifically targeted economic strike. Peacetime means to achieve the same effect include establishing a monopoly of a niche commodity or preclusive purchasing the material via the markets. During WW1 the UK preclusive purchased Spanish Wolfamite to deny Germany the ability to manufacture common forms of armoured steel. Chinese restrictions to the supply of ‘rare-earth’ metals are often classed as modern economic warfare.
Utility
With its casualties near invisible and cost bloodless, sub-threshold economic warfare is increasingly prominent. Sanctions allow clear signalling to international and domestic actors of what a state is willing to accept without resorting to force. Despite this, their effectiveness in achieving state aims is disputed with estimated success rates varying from 5–40%.[3] Iranian sanctions are almost 40 years old and the regime remains unchanged, its conduct worsened and nuclear programme ongoing. Economies are adaptable and controlling a resource will often result in a ‘substitution’ being found even in wartime. As Nazi Germany did by developing synthetic oil to counter trade embargos. Despite all deterrence measures ‘Black Knight’ sanction breakers seeking profit will continue to act. Economic coercion is only effective when the behavioural change desired costs the target less than the impact of sanctions.
Whether effective or not economic warfare can be devastating. The brute force general sanctions imposed pre Gulf War 1 cost Iraq half its GDP, those post conflict $175–250 billion in oil revenues. The societal cost was the huge, a family monthly food costs increasing 250-fold in 5 years.[4] The 2014 smart sanctions imposed by the US and EU on individual and entities in RUS invasion of Crimea cost has been estimated at $40 billion in the first year and approximately 0.5–1.5% of GDP by 2018, reducing the funds available for military expenditure.
Legally economic warfare is regulated under the Law of Armed Conflict and if centralised via the UN through Chapter VII and administered by the UN sanctions committee. If conducted by individual states international law is “vague” and only limited by the custom of “non-intervention” that prevents removing states right to choose their political system. Their ethical legitimacy is debated as subthreshold measures beyond smart sanctions represent the deliberate and indiscriminate targeting of civilian populations. With the most vulnerable elements of society such as women and children bearing the brunt of the pain.
Limitations
Sub-threshold economic warfare has multiple limitations detailed below. Above-threshold measures are less limited as their risks are amalgamated into active armed conflict.
Mass or niche. Big is beautiful. Losing trade with your state or block must hurt the adversary sufficiently to change their behaviour. Equally the imposing state must be able to deter third parties from commencing trade. The US dominance of international financial markets and sheer mass makes it the most effective user of sanctions, for others allegiances such as the EU are critical. Only by controlling a monopoly on a material or product can this be avoided.
Mutual cost. Trade is not zero sum and its loss hurts both parties. The costs incurred by the EU of imposing sanctions of Russia following Crimea were estimated at up to $30 billion in 2015 alone.[5] For sanctions to be effective those imposing the sanctions must be able credibly withstand the costs imposed.
Societal resilience. General or brute force sanctions impact of the equality of life of normal citizens. The implementing state must maintain its will to inflict suffering longer than the sanctioned state can endure. Even individual or smart sanctions impact on society as elites such as North Korea make up their losses from their populations. Given the importance of popular opinion, severe general sanctions will come at a humanitarian and hence political cost.
Escalation risk. Even sub-threshold economic warfare impact is an act of conflict and adversarial counter-actions may not be in kind. Especially is economic warfare is beyond the actors means.. Japan’s attack on Pearl Harbour was partially in response to an untenable level of US sanctions, culminated in an oil embargo.
Lt Col Mike Smith is a father, engineer and oarsman in about that order. Currently a student on the UK Advanced Command and Staff Course he will next appear in the world of Capability and Acquisition.
The views and opinions expressed on Cormorants Nest are solely those of the original author and do not necessarily represent those of the Defence Academy or wider Defence.
[1] 2018 Office of Financial Sanctions Implementation
[2] Risk Advisory, ”Russian Stations list”
[3] Richard Hass, “Why Economic Sanctions do not Work”
[4] Elizabeth Rosenberg et all, “The new tools of economic warfare”
[5] CSIS Europe program, “A Year of sanctions against Russia — Now What?”
