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How World War I transformed economic warfare

Today’s sanctions regimes are a central legacy of the Great War

President Trump, flanked by Treasury Secretary Steve Mnuchin, left, and Vice President Pence, holds up a signed executive order to increase sanctions on Iran in the Oval Office in Washington on June 24. (Alex Brandon/AP)
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Though World War I officially ended 100 years ago today with the signing of the Treaty of Versailles, in its overwhelming influence on economic sanctions since 1919, the Allied blockade never really stopped. While it’s the narratives of destruction and change, from the bloodbath of the Somme to the triumph of Vladimir Lenin in Russia, that have captured the public imagination about the war, the way the war transformed economic warfare should also be seen as one of its central legacies, one that continues to shape international relations today.

In particular, the war launched a new style of economic blockade. Practiced most avidly by the United States, economic sanctions now include attempts to curtail North Korean coal exports, freeze the assets of Russian oligarchs and limit the ability of Venezuela to import equipment for its disintegrating oil industry. Economic coercion is now a widely accepted tool of first resort when dealing with foreign foes — though its utility and effectiveness are endangered by the Trump administration’s unwillingness to build support for sanctions among allies.

During World War I, the coalition warfare led by Britain, France and eventually the United States aimed to control access to international trade and finance, and relied largely on nonmilitary methods of enforcement. The “Inter-Allied Blockade” did not entail besieging enemy ports, but rather meant identifying and confiscating German goods on the high seas, denying credit on international bankers’ ledgers and using controls over global shipping assets and supply chains to attempt to permanently disrupt Germany’s commercial connections in overseas markets.

For example, jute importers and wool exporters in neutral Argentina avoided trade with local German merchants who were on Allied blacklists, fearing that otherwise they would be blacklisted themselves and lose access to shipping and international banking. As a nearly global effort against their enemies, the Allied economic campaign helped to undermine German resilience.

The blockade begun by the British in 1914 intensified as they drew their allies into the effort. It developed through official collaboration both at the highest level, in meetings in Paris and London, and also on the local level between Allied diplomats and business executives in Buenos Aires and Shanghai. Everywhere this Allied cooperation occurred, it ratcheted up pressure on German commercial and financial interests.

This strategy suggested warfare could happen without direct military action. For statesmen reeling from the carnage of the battlefields, this was a hopeful prospect. At the Paris Peace Conference that ended the war, wartime blockaders wrote economic war into the founding document of the League of Nations. Looking to enhance the possibility of peace between countries, the League’s “Covenant” envisioned automatic and universal economic sanctions against any peace-breaking nation.

The League of Nations successfully implemented these peacemaking sanctions, persuading Yugoslavia to back away from Albania in 1921, and Greece to withdraw from Bulgaria a few years later. But the Great Depression and the rise of the Nazis undermined League-based internationalism and crippled the effectiveness of economic warfare. Incomplete sanctions against Italy in 1935-6 failed to persuade Benito Mussolini to back out of his conquest of Ethiopia. This episode has long been the emblematic failure of economic sanctions as a tool of coercion, proving to cynics that aggressive regimes cannot be forced into peace without military action.

Undoubtedly at times stopping a war demands more than economic embargoes. But since the Second World War, and particularly since the end of the Cold War, most economic sanctions have had more modest goals than forcing belligerents to put away their guns. Many are “shots across the bow” aiming for specific but limited policy changes, not complete submission. Some are largely symbolic statements of values by those pushing the sanctions, without much expectation they will bring any change at all.

These nuanced goals of many international sanctions look quite similar to the Allies’ economic war during the Great War in their diversity and their focus on control of finance and transportation. Virtually unattached to military activity, economic sanctions today threaten connections to bankers, shippers, suppliers — the sinews of globalized trade — just as the Allied blockaders did to Germans around the world in 1918.

And often with a similarly powerful effect. According to the most comprehensive survey compiled by the Peterson Institute for International Economics, sanctions over the past century have succeeded in meeting their primary goal about a third of the time, with international sanctions more successful than unilateral ones.

In other words, since WWI, international economic sanctions have sometimes failed to stop war, but they have often worked to change a targeted state’s behavior, while also preventing escalation down the road. For example, just over the past few decades, sanctions supported by broad coalitions of global powers shuttered the nuclear programs of Iraq and, more recently, Iran.

Especially since emerging from isolationism during World War II, America’s economic warriors have often followed the First World War’s lessons of targeting sanctions against individuals and businesses, using them in ways disconnected to military actions, and building international coalitions to ensure the greatest chance of meeting their goals.

Until now. The Trump administration’s flurry of unilateral economic sanctioning has sometimes seemed crafted with the intention of repelling would-be allies, rather than persuading them to join U.S.-driven economic wars. For U.S. power, this is unfortunate. A century after the Allied leaders gathered in Paris to create the Treaty of Versailles and the League of Nations, ending WWI, the basic lessons learned from the Allies’ innovative wartime blockade still hold true.