What Do Sanctions Accomplish?
Sanctions are aggressive measures that don’t work as intended.
Countries find a way around them if they can – and many can.
Russia finally says to America, “Your money isn’t good around here.”
Now that Nancy Pelosi has reaffirmed an “ironclad” defense of Taiwan, no doubt someone in Washington will mention sanctions against China.
This article is an update and reprint a piece I wrote from June 4, 2021, on the insanity of sanctions against Russia.
The same arguments apply in spades to China.
Why We Prefer Sanctions to War
Usually, when mass murderers die, their murder stops. Not so with Woodrow Wilson.
Wilson is one of the chief architects of the modern sanctions regime. That sanctions cause immeasurable harm to civilian populations is loathsome in and of itself. That they never accomplish the ends towards which they’re aimed makes them stupid, as well.
From a government’s point of view, you can understand their appeal. First, there are only two ways to pay for war: increasing taxes and printing money.
In democracies like the United States, how many wars do you think Americans would vote to engage in if they had to pay for it directly? That’s right: zero. So printing money it is.
There’s Money In War
In the over 5,257 trading days since 9/11, here’s how the money-printing helped our defense industry:
The little black bar on the right is the S&P 500, nearly a 300% return. Above it are Boeing, Lockheed Martin, General Dynamics, Northrop Grumman, and Raytheon Technologies. Their returns range from the obnoxious 470% to the obscene 1,844%.
Incidentally, this was one of the unsung great attributes of the gold standard. Once you ran out of gold, the war was over: win, lose, or draw. You couldn’t print your way to more supplies, munitions, and victory.
Then, there are the horrible images of fallen soldiers coming home in flag-draped coffins. The women and children don’t like that much, do they? So the US government had first instituted a ban on covering the return of those soldiers during the First Gulf War, that the Dubya administration was thrilled to uphold during the second one.
Dubya and his boys went to great lengths to hide the dead during the Iraq War. Senator Patrick Leahy of Vermont told the Senate at the time: “The wounded are brought back after midnight, making sure the press does not see the planes coming in with the wounded.” (Ref 1)
Sanctions: Awful On Paper, Worse In Practise.
Back to Wilson. This man ran on an antiwar ticket, only to enter the US into World War I a mere five months after his re-election. And you thought only modern politicians lie like rugs!
Like a White Castle-induced fart, Wilson described his sanctions as “peaceful, silent, and deadly.”
Wilson packaged sanctions as a peaceful alternative to spilling blood over a grievance as with his sleight-of-hand with the war. Except sanctions are entirely civilian affairs.
War didn’t use to be like that. Civilians were largely left out of it. And trading with the enemy was not only standard; it was seen as a way to compensate civilians who were wrongly harmed.
The late antiwar activist, Justin Raimondo, wrote in a post in 1998: (Ref 2)
The concept of economic sanctions as a weapon also assumes international economic regulations and enforcement agencies, setting up a cadre of bureaucrats who sit in judgment of “outlaw nations”: in effect, the apparatus of world economic planners. And contrary to Wilson’s predictions, real war has often followed the use of sanctions.
Over 500,000 Iraqi children died due to sanctions after the First Gulf War. That was the price old Maddie Albright was happy to pay, despite another authentic and costly war following soon after. (Ref 3)
The price for what prize? After another nearly two decades in Iraq, that prize, whatever it was, clearly eluded us.
Those Countries That Can Fight Back, Will Fight Back
Sure, the US can push around Iraq, Iran, and many South American countries. But Russia is another kettle of fish altogether.
After 30 years of suffering at the hands of US sanctions, or worse, US academics, (Ref 4) Russia has had enough.
Russia’s National Wealth Fund is its sovereign wealth fund. A sovereign wealth fund is a state-owned investment fund that invests in tangible and financial assets such as stocks, bonds, real estate, and precious metals, or alternative investments such as private equity funds or hedge funds.
The National Wealth Fund will cut its share of dollar assets to zero from 35%. The $186 billion fund will then keep most of its assets in euros, yuan, and gold.
To be perfectly frank, this will not crash the dollar. The fund is one of the smaller sovereign wealth funds on the planet.
If you count the funds of the countries, Russia has the 10th largest stash of national wealth in an SWF. For instance, Norway’s SWF, the Government Pension Fund, has over $1.1 trillion in its coffers. That’s about 10x what Russia has.
But it’s still a blow struck in the name of freedom. You read that right; Russia is fighting US dollar oppression.
It is insightful to watch a video in which Putin bragged about how sanctions made the Russians use their brains. (Ref 5) [The video is not available in Australia (and the comments have been turned off. Thank you for the censorship, Google) and probably other countries, too. However, you can read his comments on the News.am website (Ref 6)]
And if you doubt Putin’s word – I don’t blame you for that – that sanctions helped Russia become the world’s number one wheat exporter, have a look at this chart from Progressive Farmer: (Ref 7)
Russia had never built helicopter and marine engines before. It does now. And while it doesn’t dominate the world stage, watch this video (if available in your country) with the captions on to see Putin brag about how the Ruble is now more stable because they’re not just an oil and gas country anymore. (Ref 8)
The blue bars represent the USDA’s forecast for 2020-21 wheat exports by country, measured against the primary vertical axis. There is a tight race for second place. The black line with markers represents the percent change from each country’s five-year average, as shown against the secondary vertical axis.
[Ed. comment: As with the previous video of Putin, it is not available in Australia. If the video is not available where you are, there are multiple reports online from New York Post, Deutche Welle, Next News Network, etc, that provide the information.
The same search that revealed news coverage of this, also showed other articles from New York Post and CBS explaining that the Ruble is the strongest currency in the world this year.
Amusingly, Australia’s 9News chose to print an article by CNN explaining “How Putin ‘destroyed’ the ruble and brought Russia to the brink of default”]
These Sanctions Aren’t Fit For Purpose. No Sanctions Are.
Though Donald Trump loved tariffs – especially against China – the European situation was ridiculous to him, with good reason. The US was and is funding NATO to protect Europe from Russia. And all the while, Europe is buying Russian oil.
The sanctions against Russia hurt Europe more than Russia because Europe prohibited themselves from selling their wares to Russia. How the EU Council extended the sanctions until July 2023 is beyond me.
Donald Trump realized the absurdity of it all concerning Nordstream 2. Nordstream 2 is a pipeline Russia built that runs under the Baltic Sea to Germany.
I think it’s very sad when Germany makes a massive oil and gas deal with Russia, where you’re supposed to be guarding against Russia, and Germany goes out and pays billions and billions of dollars a year to Russia,” Trump told Stoltenberg. “So we’re protecting Germany, we’re protecting France, we’re protecting all of these countries. And then numerous of the countries go out and make a pipeline deal with Russia where they’re paying billions of dollars into the coffers of Russia. And I think that’s very inappropriate.
We need a complete rethinking of Western sanction policy and the types of relationships we want to have with other sovereign nations.
Not only are sanctions needlessly aggressive, they often accomplish the exact opposite of their aims.
This article is a reprint from Rude Awakening on 03 Aug, 2022
Sean Ring is the editor of Rude Awakening
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Ref 2 – Mises Institute – https://mises.org/library/evil-sanctions
Ref 3 – YouTube Madeleine Albright – https://www.youtube.com/watch?v=RM0uvgHKZe8
Ref 4 – The Nation – https://www.thenation.com/article/world/harvard-boys-do-russia/
Ref 5 – YouTube Putin on Russians “using their brains” – https://www.youtube.com/watch?v=eTsOpZ2elHk
Ref 6 – NewsAM Putin interview on Russians “using their brains”- https://news.am/eng/news/395474.html
Ref 8 – YouTube Putin on the ruble – https://www.youtube.com/watch?v=uV5KTHDm1J0