Viswanathan K's Thoughts

In 1935, Mussolini invaded Ethiopia. In response, the League of Nations (equivalent to the UN) imposed sanctions on Italy. Germany and Japan watched this closely: If sanctions were imposed on them, how would they fare? That is the theme of an interview with the author and European historian, Nick Mulder.   Let’s start with Germany. As they started to increasingly focus on militarization and industrialization in the 1930’s, they needed energy. Coal and oil. This need for coal was the reason they invaded the Ruhr eventually (apart from the point that it was theirs to begin with and wrongly taken by France after World War I). On oil, they got lucky with the timing. Thanks to the Great Depression, trade and thus prices fell, making it cheaper for Germany to import oil. The Germans realized that sanctions were unlikely to be imposed on them at a time of global depression – Germany not being allowed to buy oil would mean some exporter like the US would also suffer!   But i...

While America had found a new weapon (secondary sanctions and mafia diplomacy) to impose their will and policies on countries unilaterally, a new variable was growing larger and larger in the global economic equation. Yes, I am talking of China. China was the emerging economic superpower; and it lay outside America’s sphere of influence, says Jordan Schneider’s interview with Eddie Fishman.   Back then, the US and China weren’t hostile to each other. Yet, America had to be careful with its new weapon. If its unilateral sanctions hurt China, then China’s annoyance aside, there was another risk - since all manufacturing lines led to China, any (unintended) economic impact on China due to American sanctions on a 3 rd country could set off a rippling effect that might then get magnified into an economic tsunami that slammed into the world’s economy. So all such unilateral sanctions needed to make an exception for China.   Today, that list of exceptions has expanded to In...

If the US had such a powerful non-military weapon (secondary sanctions and mafia diplomacy), why didn’t they use it when Russia annexed Crimea in 2014 – the “first” Ukraine “war”?   Multiple reasons, explains says Jordan Schneider’s interview with Eddie Fishman. (1) It happened suddenly and without warning. The Americans were caught unawares, and thus had no strategy in place on how to react. They found themselves continuously reacting to events on the ground. (2) Russia was (is) a huge economy and the world’s largest exporter of fossil fuels, so the cascading effects of crippling the Russian economy were too risky. (3) The world was still recovering from the 2008 financial crisis, and Obama wasn’t sure if it was safe to rock the world’s economic boat. (4) Europe was entirely dependent on Russian oil and natural gas. “(The West) don’t know what kind of sanctions are tolerable to their own economies.” (5) Neither the US nor the EU was willing to risk all-out economic ...

For a while now, America has had the ability to impose unilateral sanctions. That means no UN or international consensus is needed, the US can cut off pretty much any country from international markets. How did that happen?   The knee-jerk response may be to say the powerful can do whatever they like. But the truth is a lot more interesting, as I found via this Jordan Schneider interview of Eddie Fishman.   As recently as 2003, America was finding even UN-authorized, naval blockade enforced sanctions on Iraq were not working. The other option the US had was to prevent American companies from trading with its enemies. This was crippling for many countries, but not say, Iran with who America had almost no trade anyway. Successive US Presidents found all this frustrating.   So what changed since then? Why is it now that the US is able to cut off anyone, from Iran to Russia, whenever it likes? ~~   It starts with how the US dollar stayed on as the int...

Since Russia has veto power at the UN, how have so many sanctions been imposed on them since the start of the Ukraine war? Surely, the Russians would have veto’ed it, right?   When Trump tore up the Iran nuclear deal treaty, we know none of the other parties to that deal – the EU, Russia, China – agreed. And yet, Iran was cut off from the international financial system. How could the US do that unilaterally?   I found the answer to this question – how the US can unilaterally impose sanctions on whoever displeases them – when I was reading De-dollarization .   That power, that capability is rooted in the fact that the US dollar serves as the “plumbing of the international financial system”. And since the dollar is owned by the US, they have the right to allow/disallow its usage by other countries – it’s their property, after all. And since international trade is overwhelmingly in US dollars, a country that can’t use the dollar can’t trade with anyone – it’s ef...