Backfire: How Sanctions Reshape the World Against U.S. Interests (Center on Global Energy Policy Series)

If you think this is a dry account of a technical subject, think again: it’s a story of geopolitical struggles, how naked displays of power are used by countries to enforce their will on others, and how so often a short term win turns into longer term defeat. It’s a page turner — you can’t wait to find out how the cat-and-mouse game turns out, and the unexpected consequences of that game.She begins with a lesson from history: how Napoleon’s embargo against British trade, designed to weaken Britain, simply led to extensive smuggling which deprived the French government of customs revenues while British exports rose by 20% during the embargo. An early failure in turning trade into a weapon.It doesn’t matter whether you’re pro-USA or pro anyone who’s on the receiving end of sanctions. The book is objective, explaining where sanctions have worked and why, and what happens to make them fail, which they do all too often. It explains why American allies are often reluctant to go along (hint: average fine for US company caught violating sanctions is US$2 million; average fine for foreign company doing the same is US$139 million). It explains why Iran is in no hurry to get back into the JCPOA. And it shows how sanctions on Venezuela almost turned CITGO into a Russia owned company.The author covers an impressive range, from Central Bank Digital Currencies to chip wars, commodity crises to the Nordstream II pipeline. The only error I found was her claim that Qualcomm, TSMC and Apple are all IDMs (Integrated Device Manufacturers). A pretty minor issue for a book that covers so much ground.

Sanctions as an instrument of policy are far more appealing than use of the military. However, Demaris cites these statistics: “A review of all U.S. sanctions programs since 1970 shows that targeted countries altered their behavior in the way that the United States hoped that they would only 13 percent of the time. In an additional 22 percent of the cases, the policies of sanctioned states became somewhat—but not fully—more palatable to Washington.” When they do not work, the US may be loathe to eliminate them for fear that targeted countries in the future would be more likely to wait them out. They can also be counter-productive: “when dictatorships fall under sanctions, their human rights record tends to deteriorate” and anti-American sentiment often increases; sanctions can hurt US competitiveness; finally, Demarais notes “Nowadays, about 15 percent of the staff of a major bank works in the compliance department” (but does this pertain to money-laundering as well as sanctions), and then there is the burden on US companies who face uncertainty and expend resources to gain exemptions. Sanctions are least likely to work against major countries, or if our allies are not on board. While Demaris does not make this point, increasingly countries who are not our allies support objects of our sanctions, e.g. China supporting Russia or India buying Russian oil. Demarais does discuss how countries like China or even India who might be objects of financial sanctions in the future, are increasingly creating the means to mitigate their power. Demarais notes with various examples that the US is less likely to be concerned when sanctions hurt our allies than when they hurt US companies. Moreover, when the specifics of sanctions are being formulated, “OFAC (the agency responsible) discusses sanctions plans behind closed doors with only a handful of well-connected American firms”, unlike plans for tariffs, export controls or anti money laundering procedures which are all subject to public comment. In a catch 22, “it is impossible for foreign firms to apply for sanctions waivers; only American businesses can. OFAC argues that granting such waivers to non-U.S. firms would fuel the perception that U.S. (secondary) sanctions are extraterritorial” which they effectively are. The book is written clearly and mostly at an appropriate level of detail. While not strictly germane to the subject, I was surprised to learn that since Russia annexed Crimea in 2014, and before the latest invasion, the European Union provided twice as much annual aid to Ukraine as the US, in addition to bilateral aid. In a classic case of misdirected actions, prior to the terrible US wildfires of the 2020, the US grounded its fleet of Chines made drones used to monitor controlled burns as well as actual wildfires; controlled burns were not carried out despite Dept. of Interior staff warnings and the drones stayed inactive during the fires.

In a fast changing world this is an interesting read. Not sure I agreed with all aspects of what was written but it gave me lots to think about.

I try not to be unkind, which is why I'll refrain from saying "how not surprising" to learn the author has advised the French government given what an abysmal failure the French government's policy has been vs f.ex. Russia.Forest for the trees. Before getting lost in the details of all the pros and cons of sanctions, it makes sense to take a much more first principles approach. First and foremost, sanctions are a moral not geopolitical or economic measure. Regardless of how much or little sanctions hurt Japan and Germany during WWII, we'd put sanctions on those countries as a simple declaration, that we can't have business as usual with countries actively involved in genocide.Given that sanctions under those circumstances express a moral imperative, we really don't care about the supposed economic impact or details of trade policy. Were the author alive during WWII, would she really try to tell us all the ways in which fine points of economic or policy possible impact and how therefore we should conduct business as usual while the ovens are firing? Really.If sanctions are a moral imperative, when faced with brutal aggression and genocidal war - as is the case of Russia's vicious attack against Ukraine, we really don't care to continue business as usual with Russia. Hence sanctions as an expression of our moral stance, regardless of *any* supposed political consequences. Case closed.That said, let's look at sanctions again from a broader perspective. Of course sanctions will result in the targets looking to evade them and collude with each other. That's an insight on the level of "water is wet". But so what? Should we no longer fight crime, because criminals will attempt to evade the police? Thieves work together, OK, so should we now tell them, oh pretty please, we'll forgive all, keep criming, and here's a cookie, just don't work together! No. They evade, and you continue pursuing them and tightening where necessary, just as police don't give up just because a criminal is on the run. Yes, criminals work with each other, water is wet and criminal gangs are a thing. A thing we fight, not complain about. And I find it highly amusing that the author so underestimates the old saying "there is no honor among thieves". Take a closer look at that great cooperation between Iran, N. Korea, China and Russia. The amount of backstabbing and mutual betrayal is epic - for how that works, just take a look at the whole oil trade dynamic between Russia, Iran and China. Backstabbing, exploitation and taking advantage are the key concepts operating during 2022 till today in that trade. No, we shouldn't fear cooperation between the outcasts - for how that's worked historically, please examine the great results of the cooperation of the vaunted Axis during WWII.And what is ultimately the aim of sanctions? Surely not the silly notion that sanctions "will change the polic of the sanctioned nation". No. The aim of sanctions is to limit the power of the sanctioned nation - their military, economic and geppolitical potential. Which has worked splendidly historically. Sanctions have not changed the behavior of Cuba, N. Korea, Iran and so on. But have sanctions impacted their economic potential? Have you looked at those economies - the question answers itself. And if the economy is weaker, it has less ability to support a military. Would you prefer a vicious regime like N. Korea or Iran to have a much stronger economy - do you imagine with a stronger economy they'd have a weaker military? And so too with geopolitical implications. Iran and N. Korea are international parahias, with Russia now joining them. Do you think they'd be more or less outcasts if sanctions were lifted? Again, the question answers itself - they are parahias in great part because of sanctions. So for economic, military and geopolitical reasons, keep the sanctions on.And let's not talk nonsense about China. Instead, look at the facts, not projections pulled out of you know where. Look at the facts. From fear of secondary sanctions and losing markets, China has been ultra careful in supporting Russia militarily. Don't think for a second, that they are being so careful for any other reason than landing on a *worse* sanctions list. It is a stick, and a very effective stick. Look at the nature of trade and investment between Russia and China and we see the effects. Russia has re-oriented their trade away from the West to China (because they had no choice!). As a result trade between them has boomed. But note, how virtually absent Chinese long term capital investment is in Russia, how exploitative the relationship with the progressive vassalization of Russia, and general failure of the supposed "limitless friendship", where now China is coldly peeling off Central Asian former republics from the Russian sphere to their own... as said, there is no honor among thieves.The author has oodles of details and suppositions. What she's lost among all those trees is any vision of what the forest looks like. I'd recommend going back to square one, and reconsidering everything from first principles, because this work so far has been a gigantic exercise in wrong-way-Corrigan.