Geostrategic Media Political Commentary, Analysis, Security, Defense
Lexi Reid
Economic coercion in the form of sanctions, tariffs and trade restrictions became a deliberate peacetime tool for global security after World War 1. They were normalised and expanded during the Cold War, then became a primary instrument of world-order enforcement in late modernity. Despite becoming a staple of statecraft, these coercive means’ effectiveness is seemingly declining; sanctions fatigue, energy weaponisation and the emergence of parallel financial systems are eroding the impact of these punitive measures. This erosion may signal deeper shifts in our global economic and geo-political order, as capitalism becomes globally fragmented and 19th century international trends regress to resemble their 18th century predecessors.
Sanctions Fatigue and Diminished Deterrence
States’ primary objective is survival. States are forced to adapt and evade when their survival is threatened by coercive economic tools. In general, sanctions can be circumvented through the use of alternative trade partners, through domestic economic restructuring and even through natural evolution – if faced with prolonged trade restrictions, their economy may naturally adapt in time even without targeted intervention.
A few of the countries facing the harshest international trade sanctions are Russia, Iran and Venezuela – each has its own specific style of resistance but there are notable similarities between the three. Russia deals with bans on its LNG exports and heavy trade and finance regulation. Yet, the Kremlin anticipated these sanctions and adapted policy accordingly. Deploying the ‘Fortress Russia’ economic programme, it ran tight fiscal and monetary policy, accumulated large foreign exchange reserves, repaid external debts and ensured a sizable current account surplus. These measures made Russia less vulnerable to external threats, and less interconnected with the global economy. They have combatted hostility from abroad with strength at home, and, when they do involve themselves in global markets, they replace Western trade partners with BRIC and emerging economy alternatives (China, India, Turkey, Brazil) to protect their export revenue streams.
This management is reminiscent of the Japanese wartime economy, it prioritises military needs over consumer goods, relies on heavy state involvement and planning without outright nationalisation, and maintains (relative to our other case studies) public support by framing harsh sanctions as proof of Western hostility. Though this ‘fortress’ management is keeping Russia’s economy afloat in the face of coercion in the short-run, the Japanese comparison warns us that, post-conflict, this type of economic policy requires costly and difficult structural reform.
Iran faces ‘snapback’ sanctions, for alleged nuclear non-compliance and humanitarian concerns, which come in the form of restrictions on weapons and trade, frozen assets and travel bans. Similar to Russia, they have to some extent built up a ‘resistance economy’. Trade has been diversified, mainly East to China but also with India and Turkey. Domestic industries have been expanded to reduce reliance on hostile international markets.
Consequences differ in Iran because of social context. Prolonged sanctions have hit the middle-classes hard, deepening intense divisions already at play as quality of life continually declines. As citizens take to the streets to protest repressive government, a lack of ideological unity may suggest the Iranians, unlike the Russians, will not endure the sanctions begotten by their leaders, and that forcible internal regime change may to catalysed by both the Ayatollah’s social and economic missteps. If this makes Iranian dissenters more open to Western involvement in regime change, we may see a situation more similar to contemporary Venezuela – which we’ll explore shortly.
Energy as a Geoeconomic Weapon
Energy-reliant exporters faced with economic coercion and trade restrictions have leveraged their resources to counter global pressure, reshaping global energy alliances and trade flows in the process. Iranian diversion to Asian buyers uses covert mechanisms like the ‘dark fleet’ to bypass financial restrictions and Russia has employed similar methods, creating an Eastern energy alliance to combat the entrenched power of the West.
Venezuela, sitting on the largest oil reserves in the world, followed this pattern while Maduro was in power. Dependency on Chinese trade was even more intense due to sustained economic decay arising from mismanagement. The Venezuelan economy relied on Chinese demand, sold at highly discounted prices and even taking some oil-for-debt deals. Now, Venezuela faces forcible regime change, a far cry from the more gentlemanly mechanisms of sanction and trade restriction. Since Maduro’s capture, Venezuelan oil has been controlled, marketed and sold by the US.
This is a chilling development which sets a startling precedent (or return to form): resource-rich nations with unfriendly leaders can be made friendly by force. In a colonially-reminscient coup-esque removal followed by an unabashed resource grab, one begins to worry that the days of peacetime security tools are over and realist rule-by-power has returned. A similar case of American unscrupulousness on the global chessboard was Mossadegh’s removal in 1953. Operation Ajax deposed Mossadegh, who wanted to nationalise Iran’s oil industry and end the inequitable trade agreement Iran had with Britain. Though Maduro was no liberal nationalist, he was pursuing oil policies that went against US interests. Venezuela used energy as a geoeconomic weapon against the USA, the historical sin of all sins, thus the nation now faces threatened sovereignty and potential effective annexation as a neo-colonial satellite state and resource pool for American benefit.
Moving back to Iran, if the popular movement allows Western involvement (Trump promises ‘help’ is on the way) in regime change and statecraft, we may see similar monopolies on their resources. This is no guarantee, though. The Iranian insurgents have not yet addressed the rest of the globe, focusing on their own government’s misdeeds. As such, this emergence of energy-based bipolarity could swing either way: Iran may accept Western aid and open themselves up to Venezuela-esque resource extraction, or recognise the West’s role in facilitating their current regime’s existence and turn to the emerging Eastern alliance to oppose Western hegemony.
The Rise of Parallel Systems
Much of the global economy is influenced by financial markets; we need only look to 2008 to see their contagious reach and contemporary economic centrality. For this reason, nations facing sanctions will also find their access to conventional, Western-controlled financial systems limited. In the digital age, though, traditional finance is not the only way for states to ensure their revenue flows.
Conventionally, global transactions rely on SWIFT (for messaging), dollar-centric global payments systems, Western banking networks and IMF/World Bank-centred governance. Nations facing sanctions have utilised parallel systems for messaging (eg. China’s CIPS and Russia’s SPFS) to allow communication without Western oversight, de-dollarisation efforts in favour of yuan, rupee, ruble and dirham to reduce vulnerability to US secondary sanctions/dollar clearing restrictions, and BRICs-adjacent financial corporations offering marginal autonomy against the IMF. There is also an increasing use of cryptocurrencies to enable cross-border transfers and capital movement in the face of sanctions. While not a core pillar of interstate trade (due to volatility, public blockchain transparency, scalability limits), crypto ensures key financial players in, and intermediaries for, sanctioned nations are still able to move money globally. We are also seeing barter and counter-trade; this direct exchange of goods, sometimes even weapons-for-resources, bypasses financial transactions entirely – often being framed as “technical assistance”.
Importantly, these are clever workarounds, not a unified alternative global order to oppose dollar-backed financial Westernism. Rather, these are signals that other possibilities to Western financial hegemony exist. For emerging economies, especially those who are suspicious of Western intentions due to financial institutions often being used as vehicles for continued exploitation, these new emerging routes may become very attractive. This, in tandem with growing Eastern energy alliances, may herald the rebirth of the mid-century’s global bipolarity of competing systems.
Systemic Reshaping of Global Capitalism
These trends are not temporary adjustments, but fundamental movements towards a more fragmented world order and away from the era of (relative) peace we’ve enjoyed since 1945. At the end of the war, Western capitalist institutions (WTO, IMF, SWIFT) became embedded in our global model to depoliticise markets. We are watching them be actively re-politicised with trade, finance, energy and technology all being used to draw unabashed political fault lines around the globe.
This time, it is not capitalism versus socialism, but capitalism vs capitalism; emerging bipolarity with free market pluralism. A Western, finance-heavy and rules based bloc is now faced with the growing opposition and non-compliance of an Eastern/Southern, state-capitalist, sovereignty-first bloc. We are not witnessing deglobalisation, as such, but fragmentation into competing alliances of parallel supply chains, systems and standards. Capitalism is no longer the order being imposed by the West, but the means by which rivals can challenge Western hegemony.
Concerningly, we are also seeing some pre-World War Two trends come back into play. Where the 20th century outsourced violence to proxies and institutions, the 21st is increasingly housing direct intervention, seizures and enforced access to resources. Like the days of imperialism, markets fly the flag, and discard Westphalian sovereignty in favour of ruthless realism. Admittedly, we are not returning to the days of unmitigated conquest. Instead, we are seeing imperial logic executed using capitalist mechanisms; resource control through force, unequal integration into value chains and the subordination of self-determination to strategic utility. Power projection, not efficiency, emerges as the ‘invisible hand’ now guiding capital accumulation.
Conclusion
According to Organski and Modeliski’s models, global leadership systems and world orders last anywhere from 70-100 years. While I am not suggesting the imminent collapse of the US-led liberal order, it is important to note that it has been in power for around 80 years. As alliances shift and precious resources return as political instruments, global power is clearly undergoing some alterations. What is not clear, though, is what this means for the future of our globalised world. Will states emerge as US satellites following forceful intervention and resource grabs, as recent Greenland developments suggest? Will complex, novel financial technologies and systems emerge as the tools which define modern state power? As the East and West splinter and imperial logic returns, which states will be the first to abandon our collaborative peacetime economic instruments in the pursuit of power? Which states already have?
About the Author:
Lexy is studying Politics and International Relations at UCL, and hoping to complete a masters in political literature. My interests like in development studies and neo-colonialism.
