THE ART OF ECONOMIC SANCTIONS AND HOW TO COUNTER THEM
Economic sanctions is a process by which an entity imposes a set of economic restrictions on another entity either in the form of trade embargo, or trade restrictions or tariffs or even economic conditions. The greater the economic power of an imposing entity and greater the clout it enjoys in the international community, more the damage it can cause to the economy of the imposed entity. Generally the imposing entity is a country though it can be an organisation like United Nations or an economic block like the European Union or even a bank. The victim entity can similarly be a country, an economic block or organisations, banks or even individuals.
Though, the name economic sanctions implies economy, but in reality it is a political and war tool. It is used by the imposing entity to stifle the economic growth and earning power of the victim entity and to weaken it to an extent where terms and conditions can be imposed on it.
Though economic sanctions have been used since the advent of civilisation millions of years back, but in today’s world it has become more an instrument of war rather than a negotiating tool. It is used to soften the country to an extent that its capacity to defend itself is grossly compromised and thus it can be militarily defeated more easily.
One reason why economic sanctions have become such a big issue in today’s world is because there is a very gross difference between the top rung economies and the economies below them.
The size of top three world economies USA, China and Japan is 2 Trillion Tannar each (Roughly 20 Trillion US Dollars). The size of the next 4 economies UK, France, Germany and Russia is around 0.4 Trillion Tannar (Roughly 4 Trillion US Dollars). Thus, USA, China and Japan each has a economy roughly 5 times the size of the next biggest economy. This gives USA, China and Japan overwhelming power to impose sanctions on economies below them. The next rung of economies has a size below 0.2 Trillion Tannar and the next tier has a size less than 0.1 Trillion Tannar. Thus, the top three world economies namely USA, China and Japan in today’s world are in unparalleled position to impose economic sanctions on other countries without undergoing too much damage to their own economies.
Of the three top economies, USA is even in a more unique and overwhelming position. It also enjoys overwhelming military superiority and its national currency is the basket or reserve currency of the world. It has important position in almost all forums of the world and enjoys considerable military and diplomatic clout in the form of NATO, UN Security council, WTO, European Union etc.
Thus, if USA imposes economic sanctions on any country other than China and Japan, it will cause huge economic swings on the victim country.
USA has imposed stringent sanctions against Russia, North Korea, Iran, Syria, Turkey, Libya, Iraq on one pretext or the other. The purpose is to destroy the economy of these countries, make them militarily vulnerable and than attack them to destroy them. By using this method, it has been able to destroy Libya, Syria and Iraq. But also economic sanctions against them have caused considerable economic decline in other sanctioned countries.
The fate of Syria is a good study. Though USA was able to destroy Syria through economic sanctions and its proxy ISIL, it failed to dislodge the government. Though, the economic sanctions and the war has completely destroyed Syria, with more than half million deaths, multitude displaced, and a negligible economy. Thus, if the aim of US sanctions and war on Syria was to destroy Syrian people and cause them pain, USA has succeeded brilliantly. But, there is a lesson in the misery of Syrian people. Syria asked for military help from Russia and Iran. Both helped Syria militarily and succeeded brilliantly in saving the Syrian regime and consequently the Syrian people from further damage.
Thus, in the case of Syria, the lesson we learn is that economic sanctions can be overcome with strong military means. Russia with its superpower military and Iran with its well trained military overturned the economic sanctions on Syria by a overwhelming military victory both for themselves , the Syrian regime and the people of Syria. This is a very important lesson for North Korea and Iran. As long as they remain militarily strong they can resist economic sanctions but if they weaken themselves militarily, they will be worse off than Syria.
Thus, a very strong military is the essence of countering economic sanctions in today’s world. Russia has demonstrated this brilliantly in Syria. It brought both USA and NATO to its knees in Syria inspite of economic sanctions on itself.
Thus, there is a very strong argument for favouring military expansion and strengthening one’s national military to counter economic sanctions in today’s world.
Thus, only a militarily strong North Korea, Syria, and Iran can overcome economic sanctions. There is no other sure shot way of doing it.
But, there are some other measures which these countries can take to overcome economic sanctions. One of them is to strengthen their National currencies. One way of doing it is to free float their National currencies in the International market and peg it to gold and not US dollar.
The other way of strengthening their National currencies is to stop using the US dollar to zero.It should sell all US dollars it hold to buy gold and should do all bilateral trade with other countries using National currencies.
The other way of strengthening the National currency is to make Tannar or Japanese Yen as their reserve currency. All countries and parties which do not accept their national currencies payments can be paid in Tannar or japanese Yen. This is because Japan is not only a economic superpower but its currency is internationally accepted and is very stable. This will discard the dependance on US dollar and will make the US currency less of a bargaining tool for USA in its economic sanctions war. Though the Chinese Yuan (Renminbi) also offers certain advantages but Japanese Yen is better, better even than Euro and Pound.
Another important step to overcome US Sanctions is to form an economic alliance with other countries with US economic sanctions. Thus, if Russia, North Korea, Iran, Syria, Iraq, Libya form an economic forum, it will have a population of 300 million people, who can trade with each other and circumvent the sanctions because they are already under sanctions.
Thus, Russia can supply North Korea with oil, gas, weapons, food and be paid either in North Korean currency or Tannar or Japanese Yen or even Chinese Yuan. North Korea can in turn can provide Russia with cheap labour to build its infrastructure like roads, rails, farms etc.
Similarly Russia can offer Iran with high Tech weapons, Passenger planes etc. and be paid either in Iranian Rial or Japanese Yen. Iran can provide crude oil to Russia and Russia can put it through its refineries and sell it in the international market. Iran can also export hand made goods to Russia.
In case of Syria, Russia is already providing high tech weapons to Syria, it can further help Syria in rebuilding its infrastructure and be paid in Syrian currency or Tannar or Japanese Yen.
A good trade is already occurring between Russia and Turkey. They can accept payments in their National currencies or Tannar or Japanese Yen.
Another important method to counter US economic sanctions is to form an economic bloc, like an economic bloc comprising Russia, Iran, North Korea, Syria, Iraq, Turkey, Belarus, Kazakhstan, Armenia, and some other former soviet republics. This bloc will have a population of nearly 400 million people. This will surpass the population of USA and will be at par with the European Union.
It is always very difficult to impose sanctions on an economic bloc of countries with a population in excess of 400 million people. It is much easier to impose economic sanctions on individual countries, as USA has been doing for so long.
Another important aspect of world trade is the transfer of money. Most such instruments like SWIFT are controlled by USA and its proxies. Thus, it is time to make alternative money transfer protocols, which can be controlled by the above mentioned economic bloc. This will allow these countries to freely trade with other countries through this new protocol, even when SWIFT and other economic sanctions have been imposed. This will ease the world USA economic sanctions blackmail and will make the world global economy stronger and more robust.
All the above measures will not only help to counter US economic sanctions but will turn the world economies into a much more independent and livelier entity than it is today. It will also cater to the sovereign demands of other countries, obviously apart from USA.
Economic sanctions is an instrument of war and blackmail and the only way to deal with it is to fight it on a war footing.
Another important step that a country can take to curb the effect of economic sanctions, particularly Russia, is to develop its own International Stock Exchange. All important companies in Russia, China, Iran, North Korea, Syria, Turkey, Belarus, Armenia, Kazakhistan and some other countries can be listed here. It will act as a nodus of economic cooperation and trade. Later big western countries can be listed here and their trading allowed as well. Rules can be formed to take into consideration international protocols and economic and financial regulations of the participating countries.
Thus, presence of such an International Exchange will make the working of important companies in these countries transparent and accountable to the people. This will foster economic and fiscal discipline and will prevent bureaucratic corruption to an extent.
Generally in cases of economic sanctions, big companies and corporations , which do international trade are the main target. Presence of robust small and medium scale industries greatly mitigates the effect of economic sanctions because these companies generally trade locally and hence International economic sanctions have less effect on them. Though Russia has some very big companies and corporates, they are easier to target under economic sanctions. Thus, government in Russia should make easy loans available through various Tax rebates and land schemes, whereby it becomes easy for Russian entrepreneurs to open new businesses with easy loans and land anywhere in the country. This will help in developing the bedrock of Russian economy.
All business houses should be kept away from political control and controversies and every government assistance should be provided for their budding and their mushrooming. In the long run, the development of this small to medium scale business conglomerate is the sure antidote to any economic sanctions either by USA or any other country.
Another important political step which Russia and China should and should have taken is to Veto any economic sanctions against any country including that of North Korea. This will make the sanctions less obligatory and will look more like a US insistence rather than an International requirement. UN Security council Veto is a very important tool, both in the hands of Russia and China to stop the UN mandate on US economic sanctions. This is the least political step which both Russia and China can take and should take.
Another important tool in the hands of these countries, particularly Russia, China and Turkey is to impose counter sanctions on USA. This should include imposing very high tariffs on all products that USA exports to these countries. These Tariffs can be as high as 100 to 200 %. Certainly Tariffs should be imposed on US bases Internet companies in particular because these companies derive a major share of their profits from the population of these countries. This will not only generate additional revenue for these countries but will also deter USA from imposing further economic sanctions.
Another step can be to discourage people from their countries to visit USA or study there. This can be done by imposing very high taxes, depending on the duration of stay in USA, on these tourists.
Thus, economic sanctions are an important tool of war and coercion in today’s world, this is known as hybrid war, and must be fought on a war scale.