Trans-Pacific View | Security | East Asia

Can the US Strengthen Its Economic Arsenal in Asia?

Revisiting the “lethality” of sanctions — and figuring out an endgame.

Robert Farley
Can the US Strengthen Its Economic Arsenal in Asia?
Credit: CC0 image via PXHere

The Center for New American Security has issued a report titled “Strengthening the Economic Arsenal,” designed to refine thinking on the economic toolkit that the United States can use to achieve its goals in the international community. Elizabeth Rosenberg and Jordan Tama caution against the new consensus on the lethality of sanctions, which has reversed a decades-long consensus on the weakness of blunt economic measures. But they also provide a series of arguments on how to make U.S. sanctions more effective.

The report focuses heavily on sanctions, and in particular the increasing sophistication and “lethality” of sanctions over the past two decades. The authors draw a stark contrast between thinking on sanctions in the 1990s, when Iraq and Cuba offered glaring examples of failed sanctions regimes, and the much more carefully targeted regimes of the 2010s, which have directly attacked the sinews of national economies, as well as the finances of regime elites.

Rosenberg and Tama argue that the United States needs greater clarity on how sanctions end in order to generate more effective compellence. Sanctions cause pain, with the point being for the target to change its behavior in order to relieve that pain. But while the United States can readily decide to inflict pain, the mechanisms for relieving pain (both executive and congressional) often fail to end sanctions even after the target has capitulated. This criticism cuts deep, as the foreign policy community in the United States can rarely agree on whether the goal of coercion is to change the behavior of Iran/North Korea/Russia/China, or to fundamentally undercut the regimes that rule those countries. But when leaders do not believe that the pain will end even if they change behavior, they are unlikely to go to the trouble of changing their ways.

Rosenberg and Tama also call for an understandable escalation ladder, referring to the body of nuclear theory developed in the United States during the Cold War. As recent experience with Iran has demonstrated, managing escalation requires a great degree of attention and care. While we may have a grip on some aspects of military escalation, escalatory ladders in the financial and economic domains are novel enough that we haven’t developed a good vocabulary for figuring out what comes next, and where we should stop.

Finally, Rosenberg and Tama ask for greater transparency in the infliction of financial and economic sanctions. As with other weapons, the United States resists excessive scrutiny into the functioning of its financial tools. Much as with cyber, revealing the nature of the tools can degrade or eliminate their effectiveness. But for coercive (as apart from destructive) purposes, target states and third parties need to understand what is happening and why.

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The use of tools from the economic (and financial) arsenal is evocative of the idea of Weaponized Interdependence, a concept developed by Henry Farrell and Abe Newman. States, and in particular the United States, can use control of particular nodes of the international economy to inflict pain on their economic and financial partners. This hints at the bigger, and perhaps more interesting, context of placing this report within the contemporary ecosystem of U.S. foreign policy thinking. The United States has grown bored with framing the liberal international order as a collective good, and is now focused on how the U.S. can use interdependence to inflict pain on its enemies. The tension between the “commons” as an area in which states can achieve the collective good and an area in which they can strike at each other is familiar to both air and naval strategy. Increasingly, the United States is focusing on this kind of thinking in the financial domain; the commons is wonderful and ought to be used by everyone, but it also offers us avenues to inflict pain upon our enemies. This represents a chilling evolution of thinking on U.S. power in the post-Cold War period.