Sanctions and Western Deterrence

Do economic sanctions help or hurt Western deterrence?

When we speak about the decline of western deterrence we often speak, correctly, of the lack of effective military deterrence by the United States and by extension the entire West.  Israel learned this the hard way on October 7 and the US is learning it in real time in Europe and the middle east – and for the most part in the Indo-Pacific, too.  The lack of effective and credible military response is by definition the reason there is no deterrence.

But why is that?  Why has the West lost this important peace keeping strategy?  The progressive mindset that deems all violence as evil and has determined that the purpose of armed strikes is to “send messages” is most to blame.  However, the West in general and the United States in particular uses economic sanctions not as a prelude to military action but as its replacement.  What starts as sanctions against individuals and turns to sanctions against corporations and then turns to sanctions against entire countries and has lulled the West to sleep, thinking that “if I can’t manage to live without a credit card and Apple Pay – how will they manage”?   Sanctions have become a crutch that the West uses when in order to avoid the use of military force.

Sanctions against the Islamic Republic of Iran years ago were supposed to force the country to give up its quest for nuclear arms.   Iran continued in its nuclear project in spite of the sanctions as we all know and when some of them expired the US would sometimes renew them and sometimes not.   In its obsession to “engage” Iran both Obama and Biden have been lenient and allowed them to circumvent many of the sanctions.   The US has been rewarded by having its soldiers and seamen attacked by Iranian “proxies”. 

With Russia there was an assumption that without access to Swift and their USD reserves they would fold.  Certainly, after they were defeated military in the first battles the West assumed that sanctions and a few rifles would be all they needed to do in order to, at least, bring them to the negotiating table.   They assumed that pressure from Russian oligarchs on Putin would make him surrender.  

But the US and Europe didn’t count on Russia’s allies coming to their rescue.    Blinken probably thought they would be deterred by the threat of loosing access to Swift and that China and Iran would treat their allies just as Team Blinken treats its allies.    But that has not happened.  China and Iran have stood by the third part of their Axis (as has North Korea) by providing necessary weaponry to Russia. 

As for the oligarchs, they have figured out how to manage while being sanctioned by going to alternative financial centers.    While the major  financial centers in the world are New York, Tokyo, Singapore and London are closed to them (adding the post Brexit EU centers of Dublin, Paris and Milan) there are other countries that are slowly becoming centers that are not fearful of the West’s sanctions regimes.

One such center will not come as a surprise to anyone  and that is Dubai.   While the Russian monied class used to inhabit Cyprus – being an EU member they were able to setup firms that automatically were regulated in the EU  - ever since Russia’s invasion of Ukraine they have moved to Dubai.   The UAE has enough money and influence so that the West turns away when their AML (anti-money laundering) rules are not as strict as they should be. The Russian oligarchs and companies are welcome there and the money flows.

The problem here is not if Dubai and other centers are competing with western ones – that would be a good thing for the financial markets.  The question is if these new non-western centers will be the links between the Russian-Iran-China-North Korea axis that will allow them to circumvent currency and other controls in order to fund terrorism. Drug and human trafficking and chaos throughout the Western world.  The sanctions regimes have given the West comfort where none exists.  

Sanctions of autocratic, ideological or theocratic countries that leave the military and leaders in these countries immune does not deter them from spreading their power and threatening their neighbors.    This is not a case against economic sanctions per se, but if they are not backed up by a credible threat of military force – and credible means it will be used if sanctions don’t work – then they just become an excuse for the west to delay the inevitable. 

Sanctions backed by a real threat of military force can work and save lives – sanctions that are meant just to avoid military force will lead to wars more bloody than the ones the sanctions were supposed to prevent.