The Economic Weapon: The Rise of Sanctions as a Tool of Modern War

Abstract

When Britain and Russia went to war in Crimea in 1853, they continued to service each other’s debts. In the summer of 1934, when the German Reichsbank held barely a week’s worth of hard currency to finance foreign exchange transactions and sanctions might have toppled the new Nazi regime, British banks opposed sanctions due to a risk of default and losses on their holdings of German debt. In 2022, the Office of Foreign Assets Control of the US Treasury has by turns permitted and blocked Russia’s use of sanctioned accounts to make payments on its sovereign debt, of which the US-based asset manager PIMCO holds at least USD 1.5 billion. The more things change, the more timely seems Nicholas Mulder’s formidable new history of the design, application, legality, and effectiveness of blockades and sanctions. Mulder’s work is chronological in organization. He describes the birth of modern sanctions in the Allied blockade of the Central Powers during World War I and how this blockade shaped the economic sanctions designed at the Paris Peace Conference. He proceeds to trace sanctions in the development of treaties, grassroots public activism and international crises through the end of the Second World War, drawing on the historical literature and archival sources. The issues of the interwar years are eerily contemporary. There was a similar sense of threat from terrorism (as the word was then applied to communism). There were similar challenges in foreign policy (balancing sanctions with the risk of escalating conflict). And there were similar tensions between international commitments and domestic chauvinism (before the Brexit movement demanded freedom from the European Court of Human Rights, many Americans opposed League of Nations membership out of fear that the Permanent Court of International Justice could strike down racist US laws against Japanese immigrants).