Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

The United Sanctions of America

As of 2018, the US has been installing sanctions against allies, neighbours, frenemies and enemies. Sometimes it feels like every country is on the US sanctions list. Recently, a Russian representative to the UN tweeted: “Let us welcome the United Sanctions of America!” (Guardian)

A recent FT article (“Donald Trump takes deployment of sanctions to new level”) sheds some light: “White House aims to achieve powerful impact while avoiding military entanglements”. Hence, the Chinese, Russian and Turkish claims of an “economic war” by the USA.

An Iranian remark in that same FT article may explain why US sanctions against the EU have not (yet) been installed: “The US has to rehabilitate its addiction to sanctions & bullying or entire world will unite — beyond verbal condemnations — to force it to.” Note: italic markings by LO.

Sanctions work better when applied by many countries (multilateral), and may easily fail when applied by just one country (unilateral). A few days ago, the US ambassador in London took the unusual step to publicly urge Britain to rethink its position on (not) joining sanctions against Iran after the UK’s recent criticism of US sanctions on Iran (GuardianThe Telegraph).

The US aims to exercise maximum pressure to bring the sanction target to the negotiation table. FT: “Many experts — including some former Obama officials — concede that the strategy against Pyongyang succeeded in bringing Kim Jong Un to the negotiating table.”

The heavy use of sanctions by the Trump Administration takes away the surprise. Any country could prepare avoiding US sanctions list (eg, different currencies, different suppliers). The FT article quotes a former US state department official on the longer-term risks of sanctions: “We risk over-using sanctions, and over-using sanctions in turn weakens the policy tool.” 

Sanctions hurt both economies: sanction target and USA. The target’s economy will however often be (much) smaller than the US economy, apart from China and the EU. China imports little from the US and exports much to the US. Hence, the 2016 US-China trade deficit amounts to $385 billion. This trade deficit explains the economic war with China through US import duties.

Sanctions are supposed to work as a turning point in the target’s decision-making. The US sanctions on Turkey show that sanctions may also result in a tipping point for the target’s economy. The Turkish Lira sank heavily since the mere announcement of US sanctions.

It should be stressed that even before last Friday’s announcement of sanctions, there were speculations of an imminent meltdown of the Turkish economy (DW, NYT-1, NYT-2, Time, Wiki).

The emerging Turkish financial crisis may well become the tipping point in the predictions of a 2020 recession (AP, Independent, my February 2018 blog, USA TodayWSJ). Trump, being arsonist-in-chief, is putting out fire with gasoline (eg, Fox, Oxan, USA Today)

Putting Out The Fire (with gasoline) from 1982 movie Cat People by David Bowie

artist, lyrics, video, Wiki-1, Wiki-2, Wiki-3

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

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