Recently, the United States’ closest European allies, Britain, France, and Germany, proposed “fresh” economic sanctions on Iran as an effort to force Tehran to comply with both the letter and the spirit of the 2015 “Joint Comprehensive Plan of Action” meant to delay the Islamic Republic’s development of nuclear weapons. But the real target of the EU action was in Washington: President Donald Trump wants European help to “fix the terrible flaws of the Iran nuclear deal” negotiated by his predecessor, and Trump has threatened to pull the United States out of the agreement if he doesn’t get his way.
The flurry of diplomatic activity says a lot about how modern, liberal Western governments have thought about sanctions and their strategic efficacy. In the simplest terms, there is widespread belief that economic sanctions can be a powerful tool of statecraft; the Obama Administration argued that “crippling” sanctions had brought Iran to the bargaining table in the first place, and these leading European powers now hope that renewed strictures can not only constrain the Iranians from further technical violations of the deal and push the regime to moderate its drive for regional hegemony but ameliorate the wild man in the White House.
The problem with the arguments in favor of economic sanctions is not so much that they are incorrect but that they are taken out of context. Absent a larger strategy—that is to say, one grounded in military power—trade is a weak means of compelling a competitor to do one’s bidding. To begin with, targeted states have historically proven themselves to be mothers of invention in escaping from sanctions regimes—even the Kim dynasty in North Korea and Saddam Hussein could do it. But more profoundly, it is in the nature of trade to flow.
The modern myth of sanctions efficacy originates in the collapse of the South African apartheid regime. Alas, the South African story was not so simple, as Thomas Hazlett explained in a 1998 article in Reason magazine. The sanctions imposed in the 1980s did “lower South African trade flows from their previous levels,” he wrote, “but GNP growth actually accelerated after the European Community and the United States imposed sanctions (in September and October 1986, respectively). Perversely, South African businesses reaped at least $5 billion to $10 billion in windfalls as Western firms disinvested at fire sale prices between 1984 and 1989.” Where the West was unwilling to invest, others were. And indeed, it seems more likely that accelerated economic growth contributed to the end of apartheid—economic expansion in South Africa could not sustain itself on white labor alone—rather than the other way around.
However, history does offer options to strategists seeking to maximize geopolitical advantage through economic means. A more illustrative approach to restricted trade is to be found in Napoleon’s “Continental System” or, better yet, the British Navigation Acts from the 1650s onward. While not even the British mercantile system was eternal or foolproof—it was an important cause of the American Revolution and the War of 1812—it was durable and it was hardly the principal motivation for the colonists’ revolt. The imperial system of preferences resurrected itself and survived into the 20th century.
What made the British system work for so long was that it did not balance security and prosperity while affording, by the standards of the day, a high standard of political liberty. What it sacrificed in economic growth it repaid in other ways. It was protectionistic and nationalistic—the English got the best of the deal—but not so narrowly so that it crippled other parts of the empire.
A modern analog to the Navigation Acts might be an American-led “Free Trade Among Free Nations” system, giving preferential economic status to those states with more representative governments or allies. And, in practice, the post-World War II economic order amounted to something like that, and could tolerate mercantilistic behavior even within a mostly-open system. Thus, for example, the Japanese economic policies of the 1980s posed no threat—except eventually to the prosperity of the Japanese themselves—since Tokyo was a strategic client of the United States. China’s current practices may be more economically egregious, but they also serve to enrich an American adversary. Mass-produced goods made, say, in Indonesia—not only a struggling democracy but the world’s largest Muslim state—might cost a bit more than those made in China, but the strategic effect might well be worth the cost.
In such a context, both sanctions and preferences might make geopolitical sense—although the Trump steel and aluminum tariffs would not meet this test. The problem is that the United States and its industrialized allies have come to see sanctions as a replacement for harder tools of power rather than as a supplement. The effects on today’s autocrats won’t be much: you don’t rise to a leadership position in the Quds Force or Chinese Communist Party or the Russian oligarchy without learning how to hide your money or being willing to let your own people suffer the consequences of your actions.