Economic warfare, double-edged sword

On November 21, 1806, in Berlin Napoleon issued a decree banning trade with the British Isles. This decree establishes a well-known continental blockade aimed at choking “disgraceful Albion.” Napoleon was unable to defeat the British by landing on their land, so he decided to engage in a major economic war. If this blockade was one of the most important in history, it wasn’t the first. One of the oldest listed by historians actually dates back to the Peloponnesian War (431-404 BC). From the siege of Constantinople to the embargo on Iran and North Korea, others who passed the German blockade during World War II followed.

The trade sanctions package implemented against Russia is unprecedented

The embargo, and more broadly, economic sanctions, is a double-edged sword to penalize both parties, the country subject to the sanctions, and the people behind them. They disrupt the production circuit and have a huge impact on the people involved. They provoke a chain reaction by taking retaliation. It is often difficult to assess the success of such devices. The effectiveness of the embargo assumes that all players accept the rule. The blockade of the Napoleon continent against England was never blocked, and some countries, including Russia, had not played the game, especially since 1811. Faced with a significant decline in sales of traders and industrialists, the emperor was forced to relax his orders several times and accepts the resumption of trade with Britain. Conversely, the British economy is becoming more resilient, which facilitated takeoff during the first Industrial Revolution.

Since the beginning of the Ukrainian invasion, a series of trade sanctions imposed on Russia are unprecedented without evading diplomatic rules. These remain graduated to avoid extreme rises. In order to use Clausewitz’s formula, we must remember that “war is a continuation of politics by other means.” This clearly applies to economic warfare, especially those involving Ukraine and Russia.

The latter did not decide to practice the scorched earth operation by turning off the oil and gas faucets, as it did by burning Moscow in 1812 after the arrival of Napoleon and robbing all of its survival. To avoid the emergence of divisions, Westerners carefully excluded these two products that are essential to their economy from sanctions.

In the name of prioritizing life over economy, the fight against the covid-19 epidemic has brought about the greatest recession in the last 70 years. Today, Western nations are facing new economic shocks as a result of the war in Ukraine and the sanctions imposed on Russia. Rising prices threaten the growth of many countries and threaten developing countries in the first place. In many countries, household purchasing power and corporate margins are declining. The consequences of this war should not let us forget and underestimate that the latter constitutes a moral and physical test for those directly involved.

Recently, rising grain and energy prices have caused many riots and revolutions, especially in the poorest countries. A trade war with Russia should not lead to justification of protectionism in the name of economic sovereignty. In that case, emerging and developing countries will be sacrificed. In this case, the embargo can quickly lose power and lead to a division of the world.

War in Ukraine guides the state not to disarm the exceptional measures enacted during the health crisis

While consumer and producer short-term problems need to be addressed, Western governments should maintain “whatever the cost” indefinitely without risking a financial crisis in the long run. Cannot be determined.

The health crisis experienced as a war has led authorities to increase aid and meet the needs of the people, thereby interfering with the management of the private economy. The war in Ukraine guides the state not to disarm the exceptional measures enacted during the health crisis. It tends to go from temporary to permanent. For the administration, it was always necessary to be careful about returning to the previous situation and the pre-crisis situation. It is difficult to take away the means of pressure from yourself.

  • Philippe Crevel is a specialist in macroeconomic issues. In addition to being a specialist in economics, he is the founder of Lorello Ecodata, an economic research and strategy company, as well as leading Cercle del’Epargne, a center of research and information dedicated to savings and retirement.

    See his article

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