Economic Warfare: Sanctions & Trade Wars

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Economic Warfare Sanctions & Trade Wars

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EDITORIAL The post-Cold War Western foreign policy dilemma between respecting UN guaranteed noninterference in nation’s internal affairs and following the moral imperative of humanitarian intervention is increasingly being dominated by new considerations, reflecting the unpopularity, cost and perceived lack of effectiveness of military intervention. In parallel, it is becoming clear that the model of a secular liberal democracy with market economy has not ushered in the end of history and the war of ideas on how to organise societies is in the post-crisis period as lively as ever. Economic warfare - sanctions, boycotts and embargoes - is emerging as the dominant tool of aggressive foreign policy, as the key mechanism for the West to propagate its normative visions. This VOX issue discusses various aspects of economic warfare: how and for whom it works and what it achieves.

In an interview with the Post War Reconstruction Unit of the University of York, VOX discusses the efficacy and morality of international sanctions. It emerges that there is no universally applicable model to conflict resolution and that sanctions sometimes are domestic rather than foreign policy tools. In the next essay, Law argues that the sizeable literature on ineffectiveness of sanctions ignores crucial considerations drawing from game theory and international law. Lavery offers in her essay an intriguing view on the economic sanctions imposed on Russia as an attempt of the U.S. to reassert its dominance in the international economy and world order. In a policy-paper styled piece, Empringham rejects military intervention to the Islamic State (IS) in Iraq and Syria, instead proposing a three step action plan to cut IS’s funding and nurture local grass roots insurgency. Farhad analyses the context of the international sanctions against Iran, arguing that the sanction regime was not merely a failed design, but also an immoral and illegal one. Finally, Alari argues that the WTO did not create a fair international trade system, but the growing negotiating power of emerging economies hints towards a change, eroding U.S. hegemony and introducing multipolar global economic order.

This is the last issue of this committee. We would like to thank everyone who has been involved with VOX in the past year for their hard work and wish the best of luck to the next committee.

Martin Kabrt and Phillip Jung Editors-In -Chief

EDITORIAL TEAM Editors-In-Chief: Phillip Jung Martin Kabrt Senior Editors: Raphael Reuben Hannah Bennet Front Cover -abc.net

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Katherine Tyler Thomas Tozer Thomas McAuliffe Nadia Setiabudi Ida Sjöberg Andrea Alari Thomas Giehm

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ISSUE XXVI - SUMMER 2015

CONTENTS INTERVIEW Sanctions and Embargoes Do they work and are they morally defensible?

Andrea Alari and Phillip Jung

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ESSAYS The US: Sanctions for Supremacy

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Orla Francesca Lavery The Capabilities and Limits of International Economic Law Enforcement Sebastian Law

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ISIL: Economic Warfare; Changing the way we address terror as commodity and threat

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Harry Empringham 33

Sanctions, Iran nuclear deal, and geopolitics Farhad Moshtagh Sefat Did the launch of the WTO represent a significant step towards the creaton of a fair international trade regime?

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Andrea Alari

VOX is an academic journal run by studentsthatprovidesaplatformforthe exchangeofideasandoffersinsightinto debates relating to Politics, Economics and Philosophy (PEP).

VOX is published triannually by the Club of PEP at the University of York and distributedonYork’scampusaswell as other universities world-wide.

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SANCTIONS AND EMBARGOES

DO THEY WORK AND ARE THEY MORALLY DEFENSIBLE? Andrea Alari and Phillip Jung The Post War Reconstruction and Development Unit (PRDU) of the University of York is an international centre of excellence for the study of conflict-affected societies and their recovery. Its committed staff researches conflict all around the world, both from York and on the ground. They experience the effects of embargos and sanctions in their work and the countries they advise and study.

In an interview with VOX, Dr Kenneth Bush and Dr Janaka Jayawickrama discuss the efficacy and morality of economic warfare.

VOX: Are trade sanctions an effective foreign policy tool? Do they achieve anything?

Bush: The honest answer to the question is the most unsatisfactory one: sometimes they do sometimes they don’t. In order to really appreciate the role of sanctions in international politics you have to put them into context.

If we look at the case of Bosnia Herzegovina, and the Bosnian wars, what we saw there was, first of all, an ineffective arms embargo. Those who were too gutless to step in on the ground to stop a clear and unambiguous slaughter said “well, we’ll do an arms embargo”. The problem with that is they completely ignored the fact that in the break-up of Yugoslavia, 80% of the weaponry went to the Serbs. So, if you in fact have an arms embargo in Bosnia, what you’re effectively leaving the Bosnian Muslims and the Croats undefended, waiting for the Serbs to pick them off. You’ve in fact done something that was morally reprehensible under the guides of being moral.

VOX: What about the argument that delivering more weapons into a conflict zone is just like pouring gas on

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a fire? Do more weapons not simply increase the violence?

Bush: How does the NRA in the US phrase it?

‘Guns don’t kill, people do.’ Weapons did not create this conflict. In no way am I saying we shouldn’t limit the amount of weapons at all.

What I am saying, is: once there are weapons, once the lid is off the Pandora’s box, you’re in a shitstorm. The question we have to ask is how you got to the point of the armed conflict in the first place. Who are you selling weapons to? Who are you supporting politically and economically? Sometimes it is immoral to impose an arms embargo when you’re not willing to step in to try to resolve a problem that you are essentially creating.

Jayawickrama: There are interesting aspects with cases which you don’t necessarily think about. For instance, what use is an arms embargo in the case of Rwanda in 1994 where almost a million people were killed merely with machetes? You can have as many trade sanctions and arms embargoes as you wish against certain governments today. They will continue to expand the security apparatus by taking away health services, education, shel-

ISSUE XXVI - SUMMER 2015 ter, and food from people to finance the security sector. So I think, if you try to think of arms embargoes and trade sanctions themselves as solutions, you can’t. They may be, in conjunction with other processes, as part of a methodology for dealing with a specific country or with a specific oppressor.

VOX: Is the sanction the stick and you need a carrot in order to make a difference?

Jayawickrama: You can’t really do that black and white analogy. Think of India. It was the jewel of the crown because the British were taking cotton from Indians and sold it back to them. So what Gandhi’s movement did was: they stopped the market. That was a sanction against an empire, which worked quite well in conjunction with other mechanisms. It’s not just this or that, it has to be a process of engagement, discussion, diplomacy, but also ground level activities that pushed somebody to stop what they were doing.

VOX: And what might be a scenario in which an arms embargo actually is an effective foreign policy tool?

Bush: We have first to figure out what ‘effective’ actually means. And the way I would define ‘effective’ in this context is when it induces the creation of space within which political dialogue takes place. It doesn’t have to do with the success of those negotiations, it’s just that it creates that space. An arms embargo is effective when it has the following characteristics: When you can actually control it.

When it’s part of a larger strategy.

When it is not a fig leaf for inaction.

VOX: Who in this day and age has the power and the autonomy to pick and choose who to sanction or embargo? And who do they target?

Bush: Clearly, that country or that group of countries that controls a major portion of the imports of the targeted country has the power to impose embargoes. We’re living in a

globalised world, though, and it depends on what kinds of imports are being choked off.

Borders are increasingly porous. Some types of embargoes such as weapons, and various types of very portable weapons, even semiportable weapons, are difficult to enforce. This also applies the other way around. What about the diamonds in Angola during the slaughter there? Who’s buying them? Certainly not Angolans!

Jayawickrama: Another aspect of enforceability of embargoes concerns third countries. If the embargo is effective, alternative export and import destinations are cut off but it may affect third parties. Coming from Sri Lanka, what I have seen during the second gulf war is that without any reason the whole Sri Lankan economy got affected. Sri Lankans were told not to sell tea to Iraq. There was no connection between the WMD and tea but suddenly there was a massive hit on the Sri Lankan economy.

The US was thinking they were punishing the Iraqi government, but somebody else was suffering.

A study by UNICEF found that between 1991 and 1998 the height of the blockade of Iraq, there were 500.000 excess deaths of Iraqi infants under the age of 5, because we blocked the yellow fever vaccination.

Bush: In the 90s, these inconvenient facts starting to come out that in fact sanctions were affecting the poor and the common person rather than the oligarchs and the corrupt, kleptocratic elites. The term coined at that time was that of ‘smart-sanctions’, just like the famous ‘smart-bombs’.

VOX: If we have a wide scope, we affect a vast number of presumably innocent people, but we have more of an effect. Or we have a very restricted scope, but then the question becomes whether we have an impact at all. Can a small scope change something or not?

Bush: I think it can. If you find their bank accounts, you can freeze them. That really annoys the targeted individuals. It might not sig-

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VOX | THE STUDENT JOURNAL OF POLITICS, ECONOMICS AND PHILOSOPHY nificantly affect the situation on the ground, but it does send a very clear message.

At this point however, we need to ask ourselves a question. How did we come to be in these situations where sanctions were imposed? The West has a lot to account for in creating these conditions within which they are now deciding: ‘I better be seen to be doing something.

Maybe I should do sanctions…’ If we start the conversation at the level of sanctions, we need to be careful that it does not let us off the hook for creating the conditions that created the need for sanctions in the first place.

Jayawickrama: If you look at people like Pinochet from Chile, even Robert Mugabe, even Saddam Hussain: we could have prevented them in the first place rather than impose sanctions and embargos on them now.

VOX: Thinking about the term ‘nonviolent direct action’. To what extent is a trade sanction nonviolent if people clearly suffer from it? Are trade sanctions non-violent? Or are sanctions hot form of warfare and can even be seen as ‘weapons of mass destruction’ as they can affect so many people?

Bush: What’s key to making sense of the question is what we understand violence to be. You have people talk about nonviolent communication. Are you going to tell me communication is somehow on a continuum down to the slaughter of 1.1 million people in Rwanda?!

Can sanctions be violent? I’m not sure about that. I think that sanctions can have profoundly corrosive effects on society, politics and the economy. They can affect levels of health and can cause people to die. When the Israeli government employs sanctions by calculating how many calories the average human being needs to survive and then cuts the calorie supply by twenty percent, and that’s what it’s letting in to Gaza: Is that violence? The regime is violent, the intention is violent. Can sanctions have a violent impact? If we accept an understanding of ‘structural’ violence, they can! It’s an increase in morbidity levels of disease. If we

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accept an understanding of ‘physical’ violence, then that’s something different. So it depends how you understand violence.

VOX: In the early 2000s, there was the AIDS epidemic in Africa and most people could not afford treatment which came under the umbrella of WTO TRIPS. Insofar as the WTO is the authority in the global trade regime, would you say that the western-imposed trade regime is a devastating force?

Bush: The WTO is a reflection of the power distribution of its members. Whether or not it has a devastating impact depends on the particular case you want to see. It’s a brilliant example of international cooperation amongst the powerful. We were talking specifically about patents, patents on medicine. You have countries like South Africa, Brazil, or India, that can produce retroviral drugs for peanuts. You have the big boys that happen to have the large pharmaceuticals like the UK, the US, Switzerland and others who wade in and say: ‘Listen you guys, unless you, governments of India, or Brazil, act against these companies that are demonstrably saving hundreds of thousands of live then we are going to impose sanctions, we will not give you any loans from the World bank’.

But you have to make a distinction between the sanctions we’ve been talking about and the WTO as the source from which the international economic system derives its structure.

The difference is, when we’re talking about the sanctions we’ve been talking about, we’re talking about sanctions that are extensively in pursuit of political interests, when we’re talking about the WTO we’re essentially talking about a global regime that is about sustaining private economic gains.

VOX: Are sanctions a western tool against western states? If the UK imposes a sanction on a different state, they expect the people to rise up against it because that is what would happen here. Do you think a

ISSUE XXVI - SUMMER 2015 state like North Korea can effectively be sanctioned?

Jayawickrama: In most developing countries, people do not necessarily depend on the state per se in the way we depend on the state here.

So there is that massive difference. People in North Korea have access to the basics and they can go on without the government’s support.

In that sense, it is very difficult to expect people to grow angry against their government because of the situation induced by sanctions.

Despite all the sanctions, the regime still holds.

In that respect, sanctions in North Korea are not effective in the slightest.

VOX: Could a sanction have an adverse result, could they backfire?

I am thinking of Russia where the (self-imposed import) sanctions seem to be playing in the hands of the nationalist rhetoric of the ruling elite. Putin’s approval ratings are as high as they’ve ever been if not higher still.

Jayawickrama: Definitely, even in Sri Lanka, without having sanctions, but having a lot of pressure from Europe and North America, suddenly the president Rajapaksa became a hero within the country because he was seen as defending the country against the West. I’m sure it is the same thing with someone like Putin, or in Iran. You are fighting against ‘evil Western powers’.

statement.’ In reality, the inconvenience both to the one imposing and the one receiving is minimal. Some embargoes are being used as a fig leaf for inaction, rather than stepping forward and doing the right thing. We end up with this rather disingenuous tactic that is hiding a political unwillingness to do something concrete. To be clear here too, very few states in the world are going to impose embargoes that actually create suffering for the state that is imposing it. So, there is a whole politicaleconomical context that feeds into the way in which embargoes are imposed.

VOX: In the summer we’ve seen an ‘embryo’ of consumer driven sanctions basically a boycott of Israeli products during the conflict. Obviously it didn’t have a significant impact. Do you see consumer driven asymmetric sanctions becoming increasingly relevant in the future?

Bush: I think consumer boycotts can have political bite. But, in order to be effective, these kinds of actions should be part of a much larger repertoire of strategies used by common people against clearly authoritarian human-rights-abusing states. It can have an accumulated impact, but let’s not forget the importance in terms of political socialisation.

Call up your MP, your elected officials and say: ‘You can do this, but you’re not doing it in my name!’.

Bush: International sanctions are not going to happen unless you’ve got that level of either domestic support or domestic apathy that will allow you to get away with it.

Jayawickrama: It’s very much that discourse to me, let the people know what’s going on and they’ll actively contribute and participate and they’ll make the process their own. Effective consumer boycotts are really difficult, when you do not have a national movement, a national discourse. That’s why the Gandhi movement was so successful because it did have the mass mobilisation, the discourse at local community level.

We’re seeing that sanctions are being used ‘for domestic consumption’. The ruling regime or the elected regime is playing to the domestic audience. ‘We need to be seen to be doing something and so here we are we’ll make a

Bush: Effectiveness has to do with the increased awareness and politicisation of individuals. One of the consumer boycotts I quite liked was the boycott of Russian vodka in and around the summer Olympics in Russia, and

VOX: Sanctions do not require as much backing from domestic constituencies. Is that why we see more sanctions being used?

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VOX | THE STUDENT JOURNAL OF POLITICS, ECONOMICS AND PHILOSOPHY the strength and support this had in the LGBT community was huge — it was massive.

VOX: We talked about sanctions from one state to another, we talked about boycotting by non-state actors of states, what about the other asymmetric side? Can States effectively sanction individuals or nonstate actors?

Bush: Those are two different questions. The state can do whatever it wants against individuals. It can disappear them, it can throw them in jail it can give them tickets, it can force children away from their mothers. If you talk about the ability of the state to impose sanctions against non-state actors and organisation then the same argument that was put to the effectiveness of state based sanctions against other states comes back. You need to be able to control and you need to ensure that there are no ‘defectors’. Also, these sanctions need to be part of a larger strategy. IS, for example, will not be defeated by economic sanctions. There are a lot of states out there that are supporting IS directly or indirectly. Secondly, there are a lot of states that want to buy the oil that IS quite strategically has captured and is trucking out of there. It doesn’t work pragmatically and it doesn’t work politically, because it doesn’t meet those two criteria for effective sanctions.

Jayawickrama: Defectors are a problem. You might say: “I don’t like you, so don’t do that” and “If you do do it, I’m not going to feed you”.

It doesn’t necessarily work like that, because then somebody else might come and say “Ok, we’ll feed you, don’t you worry!”

VOX: Thank you very much for this insightful interview.

Bush: Thank you, too. There is one more thing concerning sanctions that is close to our heart.

When we think of sanctions, we tend to conjure up maps from our conformable cocoon of modernity and civilisation. However, they massively affect us here at the PRDU in our work on the ground in war zones. I have a USAID contract in my office telling me what I can and cannot do relating to counterterrorism policies of the US. “Oh look, someone’s bleeding on the ground!” - “Hang on a sec, is it a terrorist?” - “Mmm…not sure about that one…”

- “Well, he clearly is a terrorist! He’s been killed in a firefight…”

Jayawickrama: If you can’t bring people from Somalia, from Afghanistan, from Sudan here because of travel restrictions, how are we going to make friends? At the end of the day, if we want to solve problems, that’s how we can achieve progress: people to people. Sanctions block this progress. It is impossible to bring an Iranian student to study in the UK. So suddenly, you are burning rather than building bridges. So on the ground level, at our level, it becomes so difficult to keep that discussion, that dialogue going.

Dr. Kenneth Bush is the Al-Tajir Lecturer in Post-War Recovery Studies at the University of York. Throughout his career, Dr. Bush has worked within and between academia and conflict zones. His pioneering work on Peace and Conflict Impact Assessment (PCIA), and on-going work on evaluation in conflict zones, seek to bridge the gap between Peace and Conflict Studies and Evaluation research and practice.

Dr. Janaka Jayawickrama received his PhD in Social Anthropology and an MSc in Disaster Management and Sustainable Development from Northumbria University.

He is currently an affiliate scholar of the Center for World Indigenous Studies (CWIS) in the USA and acts as a reviewer for Medical Research Council in the UK as well as journals such as Social Science and Medicine and Third World Quarterly. Jayawickrama is a teaching member of the PRDU staff at the University of York.

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ISSUE XXVI - SUMMER 2015

THE US:

SANCTIONS FOR SUPREMACY Orla Francesca Lavery

Over a year on from the Russian annexation of Crimea the US is once again proving its capacity for generating economic turbulence. Arguably, the US-led sanctions on Russia have enabled the US to resurrect itself as the world’s most economically dominant power.

Western sanctions on Russian energy firms, driven predominantly by the US, have proved to be the most powerful weapon in the American arsenal for economic warfare. The essay examines the role of the international sanctions in the Rouble Crisis and argues that through its active role in the crisis, the US succeeded in reasserting their dominance in the international economy.

Over a year on from the Russian annexation of Crimea the US is once again proving its capacity for generating economic turbulence. Arguably, the US-led sanctions on Russia have enabled the US to resurrect itself as the world’s most economically dominant power. Sanctioning Russia not only provided the US with an unparalleled opportunity to gain dominance over their Cold-Warcounterpart but it also allowed them to

simultaneously reassert dominance on the international economic system. The Western response to the Russian support for separatists in East Ukraine and the subsequent annexation of Crimea, although not immediate, was a poignant example of Obama seizing his prime opportunity to reassert economic and political dominance. It is questionable whether this slow response was a matter of strategic timing or Post-Cold War cold feet.

It is not to be omitted that the slow response was widely perceived to have been a result of the Western responsibility for the crisis. Mearsheimer’s article on Western responsibility forcefully exemplifies “Putin’s pushback” as a warranted response after the “West had been moving in to Russia’s backyard” (Mearsheimer, 2014) for too long. In this 9

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respect, the US-led response to deploy sanctions against the Kremlin could be perceived as a heightening of the continual sequence of events, far predating the Russian annexation of Crimea.

However, the way in which events were largely engineered by the US will most likely ensure that this perspective receives little recognition, if any at all.

The broaching of the Geneva Convention indicated that tensions had escalated to a critical level. Regardless of the temporal parameters of the crisis, this demonstrated a shift in the dynamic of Western attitudes: from diplomacy to action. In his paper on ‘The EU-UkraineRussia Sanctions Triangle’, Emerson suggests that “Europe’s trust of the Kremlin [had] sunk to its lowest level since preGorbachev times” (Emerson, 2014, p.6).

In this sense, not only was intervention highly contentious, but the US was being provided with a unique and necessary opportunity to reassert its sphere of influence, reinstating itself as the leader of the international system. This begged the question; how could the US tactfully punish the Russian powerhouse to a point of economic impairment?

It took the US Treasury until July 2014, almost five months subsequent to the culmination of the crisis in March 2014, to take action. Washington, with the assistance of the European Commission, truly flexed its economic prowess and reprimanded Russia right to its economic core. The restrictions imposed 10

on major state energy firms had the most impactful effect. By targeting the restrictions on Russian energy firms, in particular Rosneft and OAO Novatek, the West finally began to assert sanctions that would transpire to be the most pressing of all their efforts. But it was what the US did next was perhaps their most tactful power play of economic warfare.

Coupled with their Saudi allies, they initiated the flooding of an already saturated oil market, thus allowing for the restrictions targeted at Russian oil firms to gain real traction. The sudden drop in oil prices, which have plummeted by 40% from June to December 2014 (The Financial Times, 2014) and specifically the drop in demand for Russian oil was undeniably a catalyst for the Rouble Crisis. The Russian minister for the economy admitted in November that “We’re losing around $40 billion a year because of geopolitical sanctions, and about $90 billion to $100 billion from oil prices falling.” (Reuters, 2014). Obama had facilitated the punishing of the Russian economy whilst benefiting the US oil market and consequentially the US economy. The US took full advantage of the circumstances; Washington had orchestrated a bilateral mechanism of reprimand and was able to simultaneously punish Russia whilst advancing its own political and economic standing.

The US has now continues redirecting its path towards increased output and its

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Photo Credit: franznolte

plight to reaffirm its title as an economic hegemon is successfully gaining momentum. The oil and shale gas industry is key to its success if US hegemony is to be coherent with what Wallerstein outlines as the first premise for economic supremacy and, ultimately, hegemony: a “capacity for production” (Wallerstein, 1971, p.59). The US is set to achieve exactly that. It has continued its production of shale gas and oil in coalition with Saudi Arabia, who alone controls an estimated 40% of the oil market (The Guardian, 2014). Despite Saudi Arabia maintaining high levels of oil exports, the US is set to overtake OPEC’s largest oil exporter in the coming year, becoming the world’s largest producer of oil and shale gas.

Indeed, with China overtaking the US in GDP (PPP) for the first time in the coming year (The Economist, 2014),

rebuilding its capacity for production through shale oil and gas exports it could strengthen its resolve against the potential advent of Chinese hegemony.

Nonetheless, this issue presents an entirely separate threat in its own right; one that Goldstein argues has the potential to develop in to its own crisis of a similar sort, “of the kind that defined the early Cold War” (Goldstein, 2013).

Perhaps we could even go so far as to speculate that this is the next threat to be addressed on the US agenda for economic supremacy.

However, despite the apparent strength of the US in maintaining its dominance in the international system over issues concerning Russia, it remains that the support of other global powers such as the EU and OPEC, is essential for successful sanctioning. This might not be the case if tensions of a similar 11

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manner were to arise with China. Murray and Herrington comment on the importance of external support for the US in sanctioning Russia, going as far as to suggest that it would cost “political capital for the hegemon to act unilaterally” (R. W. Murray and L. M. Herrington, 2014). It was essential for the US to maintain support from the EU and OPEC, in particular Saudi Arabia, in order to ensure their own safety. In doing so, the US has tactfully favoured a multipolar operation. Protecting its own interest whilst being perceived as maintaining an inclusive international system.

Nonetheless, the US has been the central instigator of the Rouble Crisis and if its own energy industry continues to grow in rapid succession, perhaps the question of US supremacy is no longer a question at all. The past year has seen a dramatic shift in the spheres of power of Putin and Obama and it has largely been in the US’ favour.

In an interview with The Economist at the start of this year the chief economist of the IMF, Olivier Blanchard, stated that “without question” the US held the most hope for global economic recovery in 2015. As predicted, the dollar is currently experiencing its fastest ascent in decades with the dollar trade-weighted index increasing by 22% in the past year (The Economist, 2015). The US has been successful in simultaneously strength12

ening its own economy whilst being somewhat responsible for the destabilisation of the Russian economy. The Russian Rouble, by contrast, lost 40% of its value in the space of three weeks during the height of the crash and has seen interest rates rise as high as 17% (Bloomberg, 2014).

By enforcing impactful repercussions to one of the world’s most threatening political forces the US has demonstrated its capacity for economic supremacy through sanctions. Professor Sir Adam Roberts, a research fellow in International Relations at the University of Oxford holds the belief that “there are very few cases where you can definitely identify sanctions as having had a success, except sometimes in combination with other factors” (cited in Marcus, 2010). Conversely, the US has deployed sanctions as a means to regain political strength over Russia. Throughout the process the US has ensured its stability with the backing of other global powers, thus demonstrating both strength and diplomacy as an economic supremacy.

Orla Francesca Lavery is currently a PPE student at the University of York

References Blanchard, O. (2014). Money talks: December 29th 2014 End of year edition. Available: http://www.economist. com/blogs/freeexchange/2014/12/

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money-talks-december-29th-2014.

Emerson, M. (2014). The EU-UkraineRussia Sanctions Triangle. EU Foreign Policy, CEPS Commentaries.

Goldstein, A. (2013). China’s Real and Present Danger. Available: http://www. foreignaffairs.com/articles/139651/avery-goldstein/chinas-real-and-presentdanger Marcus, J. (2010). Analysis: Do economic sanctions work?. Available: http:// www.bbc.co.uk/news/world-middleeast-10742109.

Murray, R. W and Herrington, L. M. (2014). Russia, Ukraine, and the Testing of American Hegemony.

Mearsheimer, J. J. (2014). Why the Ukraine Crisis Is the West’s Fault. Available: http://www.foreignaffairs.com/ articles/141769/john-j-mearsheimer/ why-the-ukraine-crisis-is-the-westsfault.

Wallerstein, I (1971). World Systems Analysis: An Introduction. 4th ed. Durham: Duke University Press.

Bloomberg. (2014). Russia Defends Ruble With Biggest Rate Rise Since 1998. Available: http://www.bloomberg.com/news/2014-12-15/russiaincreases-key-interest-rate-to-17-tostem-ruble-decline.html

Forbes. (2013-2014) http://www.forbes.com/powerful-people/list/ Reuters. (2014). Russia puts losses from sanctions, cheaper oil at up to $140 billion a year. http://uk.reuters.com/article/2014/11/24/uk-russia-economy-oilsanctions-idUKKCN0J80P720141124.

The Economist (2015). Mismatch point http://www.economist.com/news/ leaders/21646749-rise-dollar-will-punish-borrowers-emerging-markets-mismatch-point The Economist. (2014). Russia and the rouble: As ye sow, so shall ye reap. http://www.economist.com/news/ leaders/21636747-collapse-roublecaused-vladimir-putins-belligerencegreed-and-paranoia-ye The Financial Times. (2014). Oil: The Big Drop. http://www.ft.com/indepth/livingwith-cheaper-oil The Guardian. (2014). Saudi and UAE oil ministers defend OPEC response to falling prices. http://www.theguardian.com/business/2014/dec/21/saudi-uae-oil-ministers-defend-opec-response-fallingprices

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THE CAPABILITIES AND LIMITS OF INTERNATIONAL ECONOMIC LAW ENFORCEMENT Sebastian Law Economic sanctions have been known as a tool of statecraft since the time of Sun Tzu and Thucydides (Drury and Peksen, 2009), but since the fall of the Soviet Union, the number of economic sanctions have skyrocketed to unprecedented heights (Drezner, 2011; Krustev et al. 2009) and, along with them, controversies concerning their utility. Cold war academics were optimistic about the use of economic sanctions to enforce a peaceful world order (Baldwin, 1985; Pape,

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Photo Credit: Tori Rector

1997), but the optimism faded as impositions of them proliferated.

Since academics deemed economic sanctions useless in the 1990s, very little empirical work has been done on the interaction between international law and economic sanctions.

In this essay, I argue that because of a lack of rationalist instrumentalist considerations within the field, and because the rationale of international law has been neglected, prior empirical studies condemning the use of economic sanctions have suf-

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fered from theoretical and conceptual shortcomings and stagnation in the field.

Barking up the Wrong Tree

Sanctions have been criticized for being ineffective in enforcing human rights by the lion’s share of recent studies (Allen and Lektzian, 2012; Drezner, 2011; Hufbauer et al. 2009; Pape, 1997; Peksen, 2009; Whang, 2011). It has been firmly established by analysis of the extensive data compilation by Hufbauer et al. (2009) (heretofore referred to as HSE) that sanctions that attempt to enforce human rights fail approximately 97 percent of the time, and Pape (1997) concludes that economic sanctions are useless unless accompanied by military force. Additionally, a study by Peksen (2009) found that sanctions incentivise human rights violating regimes to carry out additional atrocities. The study also observed that economic sanctions, paradoxically, had an even larger adverse effect on human rights atrocities if they were specifically aimed at improving human rights. However, it was unable to provide a solid explanation.

Most scholars have explained the failure of economic sanctions with reference to the target’s institutional structure. Non-democratic states remain impassive because

of the elites’ and the states’ ability to disperse the costs onto the general population (Peksen, 2009).

Moreover, a study found that economic sanctions tend to strengthen rather than weaken authoritarian regimes; military regimes breed an ‘us against them’ mentality, which they use to justify further repression (Escribà-Folch and Wright, 2010).

Thus, economic sanctions seem to be both ineffective and counterproductive in non-democratic regimes.

And even though it has been acknowledged that they are effective in liberal democracies and economically integrated states, these findings are claimed to be useless for policymakers who are attempting to utilize economic sanctions to enforce international laws such as human rights (Escribà-Folch and Wright, 2010).

Others scholars have sought for explanations on the imposing side.

Drury and Li (2006) concluded that economic sanctions do not work, but that they are useful for politicians and policymakers in that they demonstrate an ability to act. Moreover, they found that in the case of U.S threats of sanctions on China in the 1980s and 90s, the U.S. cared more about meaningless signals of accommodation from China and the significant positive impact on U.S. approval ratings, than about substantial change. Others such as 15

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Tentative analysis suggests that when comparing sanctions with low costs for the target to sanctions with high costs for the target, the success rate goes from 38 percent to a striking 94 percent Whang (2011) and Drezner (2011) have also acknowledged these effects, and largely regarded sanctions solely having such effects as utter or partial failures.

There are ubiquitous flaws in these conclusions for at least two reasons, the first pertaining to the lack of game theoretical considerations, and the second pertaining to the failure to utilize international law scholars’ insights into the mechanics of international laws, such as human rights laws. I shall address them in turn.

Empirical research on economic sanctions’ function as enforcer of international law suffer from a theoretical shortcoming by failing to recognize the insights offered by game theory. A brief version of the main argument goes as follows: It is reasonable to assume that target states are primarily rational, self-interested, and have the necessary information for agency. Accordingly, if threated with economic sanctions and the costs outweigh the gains of noncompliance, the potential tar16

get would comply even before the sanctions were imposed. Moreover, the sender would recognize that, if the target were inclined to surrender due to the sanctions, it would have done so before the imposition itself (Lacy and Niou, 2004). Relaxing the latter assumption concerning agency, we can assume that sometimes the targets do not realise the impact until they are imposed. Nevertheless, in such a situation, the target would be quick to comply. It is a simple yet powerful argument that prior studies have, completely or partially, overlooked by focusing on long lasting and ‘high-profile’ sanctions, thus giving disproportionate attention to sanctions that are likely to fail (Krustev et al. 2009).

Recently, this insight has been partially accounted for by the compilation of the database for threats and impositions of economic sanctions (TIES) by Krustev et al. (2009). TIES includes more data on short-lasting sanctions and ‘low-profile’ cases than the conventional HSE. Tentative analysis suggests that when comparing sanctions with low costs for the target to sanctions with high

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costs for the target, the success rate goes from 38 percent to a striking 94 percent (Krustev et al., 2009). The new results support the logic and are a stark contrast to the success rates estimated by Hufbauer et al.

(2009) and Pape (1997).

Failures to account for game theoretic considerations do not only have implications for data gathering, they also distort the conclusions derived from the data. Previous studies do not account for the fact that, ceteris paribus, the imposition of a sanction, when they are both imposed and ineffective, should not occur at all and since they do, everything is not equal. Other incentives must be in place. Numerous studies have pointed out that the sanctioning actor may have other, ulterior, motives such as speeding up regime change by destabilizing the incumbent and widening the bargaining range so that an agreement with modified demands can be struck (Marinov, 2005), increasing domestic approval ratings, or signalling other international actors of its standing in conflicts and

ideological questions (Drury and Li, 2006; Krustev et al., 2005; Martin, 1993; Whang, 2011). Additionally, senders have strong incentives to be dishonest about such motivations because it would be self-defeating and harmful for diplomatic, economic and military relations to be transparent about, for instance, economically coercing some other state to gain domestic popularity.

It is plausible that data of imposed sanctions merely represents the share of sanctions that were aimed at these ‘second tier’ objectives. Ulterior motives have been comprehensively discussed, but never, as far as I am aware, integrated into a wider coherent theory. Generally, researchers claim to reach universal conclusions about sanctions based on the assumption that the effects of sanctions are somehow detached from the underlying motives. It is likely that previous conclusions are not all incorrect, but it is likely that they apply only to a selection of cases instead of sanctions in general.

Notwithstanding game theoretic concerns, one puzzle remains: Re-

It would be self-defeating and harmful for diplomatic, economic and military relations to be transparent about, for instance, economically coercing some other state to gain domestic popularity.

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gardless of whether the study accounted for cases reported in TIES, human rights sanctions have a terrible track record (Allen and Lektzian, 2012; Hufbauer et al., 2009; Peksen, 2009). As mentioned, Peksen (2009) finds that, paradoxically, sanctions specifically aimed at enforcing human rights perform worse than sanctions with other motives with respect to human rights enforcement. This is where economic sanctions scholars should turn to the discernments offered by international law scholars.

Biting off more than you can Chew

To understand why economic sanctions fail to enforce international law, we must understand international law. An influential school of thought that has long been prevalent in international law argues that international law, like municipal law, has a moral force that induces states into compliance (Koh, 1997). A thorough argument against this case will not be made in this essay, for now I shall simply assert that: Because the introduction of a moral force is both controversial and redundant in explaining states’ actions, and there is little empirical evidence suggesting that states ever act beyond their self-interests, there is no such thing (see Goldsmith and Posner (2005) for further elaboration).

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Accordingly, international law is not law in the same sense as municipal law; it is chiefly a means for international actors to communicate their self-interests by stipulating expectations, disambiguating demands, and signalling intentions and commitments. A treaty, for instance, is a way for two states to clarify their expectations and their response if any trespassing were to occur. This arrangement is of mutual self-interest because they would both be able to act without worrying about triggering a conflict. International law is endogenous to actors’ self-interests and if it strays too far off the path of feasibility into the realm of normativity, it will lose its influence, legitimacy, and relevance.

This perspective is useful in attempts to clarify why some international laws are effectively enforced whilst others are not. A state might obey certain human rights and environment laws, for instance, because it sends signals to other states that it is trustworthy and stable, but it would never either obey or enforce a law that is incompatible with its self-interests. States usually exclusively ratify international laws that coincide with its already prevailing practices, and when there is discrepancy, exceptions and sufficient vagueness avoid non-compliance (Goldsmith and Posner, 2005). Consequently, international laws that

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drift towards normativity, such as certain human rights, are useful in that they signal what is expected by ‘civil’ states, but they will likely not be enforced. Thus, economic sanctions do not fail to enforce human rights because of some intrinsic flaw, but because of the laws they aim to enforce are politically infeasible and the line between enforcement and signalling is both deliberately and by nature blurry. Since states have no reason to trust one another, economic sanctions are a good technique to convincingly stipulate and demonstrate commitment to mutually beneficial arrangements; ‘talk is cheap’. Human rights sanctions might be used to signal stability, by demonstrating that the state has humanitarian concerns, takes responsibility, and can be trusted by other states. This is plausibly why scholars of economic sanctions observe numerous impositions of human rights sanctions despite such a high rate of failure; it is the imposition itself that is important for the sender, not necessarily the outcomes. Sanctions with other motives that coincide with the sender’s self-interest are more likely to have a larger overall impact, which might cause collateral human rights improvements explaining the observations made

by Peksen (2009). Bearing in mind these considerations, it seems misinformed to deem human rights

sanctions as failures or even partial failures based on their effect on the target. Failures in international economic law enforcement is merely a manifestation of more fundamental limits in the current international system.

Conclusion

In this essay, I have addressed theoretical and conceptual flaws hitherto apparent in empirical analyses of economic sanctions and asserted that economic sanctions are effective when enforcing international law, insofar as they are politically feasible. The 94 percent success rate reported by the tentative analysis

by Krustev et al. (2005), probably reflect the effectiveness of economic sanctions as an enforcer of international law as it is understood herein.

According to this view, conclusions derived from the HSE database or other similar sources might be instructive solely in understanding the mechanisms of economic sanctions; it is unlikely that they reveal their effectiveness in the context of international law. A priori, it appears probable that perceived failures in human rights enforcements are failures in international law rather than economic sanctions in themselves, and that policymakers should focus on strengthening international law rather than refining techniques of economic coercion. However, fur19

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ther research is much needed in order to establish a solid empirical grounding for such speculations.

The ambition of this essay is neither to present economic sanctions as a panacea nor to pose it as a simple answer to a complex issue. It is rather an attempt to prod into a still highly unexplored field of international economic law enforcement and to explore where research on economic sanctions should head next in the light of recent methodological improvements undertaken

by Krustev et al. (2009). Economic sanctions have a great potential in the increasingly interdependent global economy to serve as an impending repercussion deterring international crimes and providing a tool for pressuring states into pacific settlements without military intervention (Baldwin, 1985). Thus far, economic sanctions scholars have all been blind men touching parts of an elephant, but through bi-disciplinary analysis, combining insights with international law scholars on how and why states enforce international law, meaningful and important progress can be made in both fields. Future research should combine discernments, whilst recognizing the limits of international law and their implications for international economic law enforcement.

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Sebastian Law is currently a PPE student at the University of York

References Allen, Susan H.; Lektzian, David J. (2012). Economic sanctions: A blunt instrument?. Journal of Peace Research. 50(1), 121-135.

Baldwin, David A. (1985). Economic Statecraft. New Jersey: Princeton University Press.

Drezner, Daniel W. (2011). Sanctions Sometimes Smart: Targeted Sanctions in Theory and Practice.

International Studies Review. 13(1), 96-108.

Drury, A. Cooper; Li, Yitan. (2006).

U.S. Economic Sanction Threats Against China: Failing to Leverage Better Human Rights. Foreign Policy Analysis. 4(2), 307-324.

Drury, A.; Peksen, D. (2009). Economic Sanctions and Political Repression: Assessing the Impact of Coercive Diplomacy on Political Freedoms. Human Rights Review, 10(3), pp.393-411.

EscribĂ -Folch Abel; Wright Joseph.

(2010). Dealing with Tyranny: International Sanctions and the Survival of Authoritarian Rulers.International Studies Quarterly. 54(2), 335-359.

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Goldsmith, Jack L.; Posner, Eric A. (2005). THE LIMITS of INTERNATIONAL LAW. Oxford: Oxford University Press.

Hufbauer, Gary Clyde; Jeffrey J. Schott; Elliott, Kimberley Ann (2009).Economic Sanctions Reconsidered. Washington: Institute for International Economics.

Koh, Harold Hongju. (1997). Review: Why Do Nations Obey International Law?. The Yale Law Journal. 106(8), 2599-2659.

Krustev, Valentin; Clifton, Morgan, T.; Bapat, Navin. (2009). The Threat and Imposition of Economic Sanctions, 1971—2000. Conflict Management and Peace Science. 26(1), 92-110.

Lacy, D. and Niou, E. (2004). A Theory of Economic Sanctions and Issue Linkage: The Roles of Preferences, Information, and Threats. Journal of Politics, 66(1), pp.25-42.

Marinov, Nikolay. (2005). Do Economic Sanctions Destabilize Country Leaders?. American Journal of Political Science. 49(3), 564-576.

Martin, Lisa L. (1993). Coercive Co-

operation: Explaining Multilateral Economic Sanctions. New Jersey: Princeton University Press.

Pape, Robert A. (1997). Why Economic Sanctions Do Not Work.

International Security. 22(2), 90136.

Peksen, Dursun. (2009). Better or Worse? The Effect of Economic Sanctions on Human Rights. Journal of Peace Research. 46(1), 59-77.

Whang, Taehee. (2011). Playing to the Home Crowd? Symbolic Use of Economic Sanctions in the United States. International Studies Quarterly. 55(3), 787-801.

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ISIL: ECONOMIC WARFARE;

CHANGING THE WAY WE ADDRESS TERROR AS COMMODITY AND THREAT

Photo Credit: FT

Harry Empringham

The tired libertarian rhetoric whimpers here at the evident reality of the asymmetry of market trade; how readily observable are the social perversions of the free market The Islamic State – rather, the caliphate branded ISIL/ISIS/IS/Daesh, has already been labelled the ‘world’s richest in terror’ (Wall Street Journal 2014) , which, while sounding a lot like the best Forbes article never written, genuinely reflects a sad economic truth: terror and 22

coercion are socially pervasive and functionally profitable. The tired libertarian rhetoric whimpers here at the evident reality of the asymmetry of market trade; how readily observable are the social perversions of the free market – however is it possible for an institution like the

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Islamic State to perpetuate a selfsustaining economy as it wages war on one of the poorest parts of the world? Trade is not, by definition, politically constructive and ISIL are, of course, famed more for tendencies of public beheading and senseless murder than for their thrifty wherewithal – but doubtlessly, an organisation of over 50,000 (Al Jazeera 2014) which despite unilateral political contempt manages to operate itself outside of the global neoliberal system of reganomic trade-expansion (with, it ought be mentioned, outstanding success) makes a most for interesting subject economic examination; what is the economy of ISIL, how does it operate and what is the violence of its economics? How might the Western Powers and their MiddleEastern allies under threat employ economic stratagem to put down the terror-state? My conclusion, following an examination of the relevant contexts, is that Economic Warfare and political manoeuvring is the superior tool of the Western Forces in aiding in the combat of ISIL. The most evident truth in examination of IS economics is that they are largely financed by market trade; the territory of their capture is rather resource-abundant, and hence it is those they wage war on – predominantly the Kurds and Syrians (both

the Assad regime and independent business men) who are responsible for their funding. Oil piracy and the marketisation of wheat and historical artefacts have formed a ‘grey market’ (wherein trade occurs through operationally legal distribution channels) through which they are able to undercut competition and sell high-value assets at a fraction of market price. Marketisation is made possible not only by the approval of trade partners but firstly by the forcible acquisition of assets: in June 2011 the organisation looted £256m from the central bank at Mosul (IBTimes 2014), and Katharyn Hanson at the University of Pennsylvania (The New Yorker 2014) reported that from the ISIL excavation and marketisation of antiquities, particularly in sites like Apamea, Dura-Europos and Raqqa, ‘you get these (archaeological) sites that look like Swiss Cheese, with all the holes’. Naturally, this is a more recent and sustainable funding route for the organisation – historically, however, there has been an argument in support of the supposition that US ally states are long-time supporters of the extremist movement, in respect to Iraqi Prime Minister Nouri al-Maliki’s claim (Reuters 2014) that Saudi Arabia and Qatar are openly funding violence in Anbar. This being, of course, a politically charged position which suggests Qatar, SA and 23

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even Kuwait (The New York Times 2013) are pervasively waging war with Iraq through proxy of ISIL. Such sentiment is not a lonely political manoeuvre; rather, Andrew Tabler (senior fellow at the Washington Institute for Near East Policy) said of IS funding; ‘everybody knows the money is going through Kuwait and that it’s coming from the Arab Gulf’ (Business Insider 2014). The third revenue stream for ISIL comes from the subjects of its occupation, especially in the form of taxes, price capping and extortion rackets (though such contributions make up a decent and self-sustaining portion of its funding, the FT reported that most Syrians under ISIL rule earn around $115 a month, claiming, ‘if ISIL’s “caliphate” were a state, it would be a country of the poor’ (Financial Times 2015)); analysts suggesting that Mosul itself brings the caliphate around $12M a month.

Therefore, it is not inaccurate to suggest that ISIL is participating in economic warfare – they are systematically funded by their enemies’ allies, have established a self-sustaining system of acquisition and marketisation and have, to moral dismay, a litany of trading partners. They boast resource abundance and engage in price warfare against their competition. It is almost certainly true that despite widespread violence the organisation’s existence is profit24

able for a small number of people – anyone who thinks that the priceless antiquities sold as scrap will be returned eventually need only turn to the Nazi example – and doubtlessly the chaotic sprawl of ideology and weaponry is both politically and economically beneficial to a small number of tacit participants.

Terror – in this package, at least – is a tradable commodity.

The toughest question is not how ISIL wages economic warfare and sustains its economy – but how, if at all possible, international socioeconomic cooperates can respond to the threat of ISIL without direct intervention. If economic manoeuvring was insufficient to combat the Assad regime, Qaddafi, the Yemen, Mogadishu, Saddam Hussein, Li-

Anyone who thinks that the priceless antiquities sold as scrap will be returned eventually need only turn to the Nazi example beria, Colombian insurgency, Abu Sayaff, Albania and so on (in fact, the US government has intervened militarily in over 17 events, across 11 different nations, in the last 15 years (Evergreen 2014)), what is the supposed efficacy to be against the

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ISIL campaign? Arguably, there is no dichotomy here, and any attempts

by Western powers to combat the ISIL regime ought to be dually military-economic. The question of addressing the Islamic state is arguably the most important question in contemporary foreign policy.

The US treasury has, since October (The Financial Times 2014), announced plans to bankrupt ISIL, to economically starve the organisation IBTimes (year?) references as ‘the wealthiest terrorist network of all time’ . The question of a potential finance war with a state which is reportedly self-sufficient, has access to trade partners and high-value resources, as well as abundant domestic capital, is one not easily addressed. It is not as simple as cooperating with donator regimes in Kuwait and Qatar to locate and cut off foreign funding – not only is there large political risk, but equally there is a significant difficulty (and danger) in attempting to manoeuvre the banking system of a foreign entity of significant trading power. One suggestion is that military force is exercised exclusively or at least primarily in the targeting of production, i.e. oil facilities, not only causing loss of capital formation but also alienating a number of independent trade partners. Bloomberg reported that these tactics have, in recent times,

been rather effective – cutting ISIL oil production down 50,000 bar-

And herein lays a fundamental problem with almost any (domestic) economic attack on the organisation: how do you attack the (quasi) government, without damaging its citizens? rels per day (from 70,000 to 20,000 (Bloomberg 2014)). These hits not only cause trade breakdowns between ISIL and its partners, but also decrease the caliphates capacity to functionally operate its weaponries (vehicular). However, the local population is equally reliant on fuel for heating, energy and agricultural machinery. And herein lays a fundamental problem with almost any (domestic) economic attack on the organisation: how do you attack the (quasi) government, without damaging its citizens? One position suggests that this sort of attack is likely to incite revolt in the domestic population (in Syria, 6-8 million), that ISIL stands to lose the faith of the citizens under its control, and that there is a point at which the situation is untenable for even the most indifferent denizens of the 25

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‘Islamic State’. Hence, supporting a grass roots alternative to intervention may be preferable to military intervention on the part of Western powers.

Given the formulation of the primary ISIL revenue streams as: 1.

Marketisation; oil piracy & asset acquisition 2.

Private donorship; particularly from Kuwait, Qatar & Saudi Arabia 3.

Taxation and extortion

It is possible to formulate a series of policy prescriptions intended to, if not bankrupt, economically disrupt ISIL revenue without Western military intervention.

1.

Marketisation While it is practically impossible to stop asset acquisition without extreme cost and military intervention – it is possible to locate trade partners and sever not only communications but effective asset transfer.

The warfare here occurs on two fronts; firstly, the attempt to make ISIL an unviable trade-partner; secondly, to criminalize grey-market channels through reinforcement of financial infrastructure. Rather – vindication and deterrence.

While it is admittedly difficult to 26

track grey-market trades, there is already satellite surveillance of archaeological sites in the region by the Penn Cultural Heritage Centre (The New Yorker 2014) (and, probably by others); so it should be relatively operable to demarcate looted antiquities. The hard part, I accept, is not knowing what is missing – but rather – to find where the loot goes.

I would suggest increased funding and foreign support of taskforces in the surrounding regions dedicated to the preservation and location of databased (as looted) artefacts on both ends of the trade – to increase the risk on the behalf of individual traders and receiving-end consumers by increased monitoring and regulation, to appropriate what is looted and what is not, to demarcate legitimate trades from illegitimate ones - not only to cut the flow of capital to and from ISIL, to deter, but also to locate the traders and their proxies. One difficulty in locating trades is that ISIL, like most criminal organisation, trades largely in supplies and cash. Informal markets are, of course, difficult to trace and monitor – however, implementing domestic policies, in banks, of monitoring large cash withdrawals ought to be standard procedure in the neighbouring regions. Excessive drone-strikes on oil resources should be avoided for the burden it lays on the citizens of ISIL-controlled regions, and provoking grass-roots

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insurgency seems at least questionably moral or effective. Supporting naturally-occurring insurgencies, or direct encouragement and financial support may prove far more effective.

It would appear (Mail Online 2015) that the Market for looted antiquities is primarily in the Gulf and across Europe – extra precaution should therefore be standard in the Western-side locating of smuggled Syrian artefacts. The evidence for Western involvement in the funding of ISIS via such market participation stands out as contributory to the question of Why? Rather; simply by being geographically dislocated from the region ISIL directly impacts, we are not automatically blameless in its funding and proliferation. If ISIL are being at least in part funded by European citizens, we have a responsibility to locate and vindicate these consumers.

So what exactly can the UK and the Western powers do, when policy mobilisation in Middle Eastern states does not fall within their sphere of direct influence? The West can work with the Middle Eastern states of ISIL occupancy; it can provide financial support for specific policy areas and encourage particular lobbies. To solve the ISIL problem, the West ought to strengthen

political ties with local governments and attempt to find ways of resolving international conflicts which minimize violent fall-outs.

2.

Private Donorship Again, the combat of private donorship can only occur within the reference frame of transnational political cooperation. As significant trading partners and political allies of a number of countries known to either tacitly (governmentally) or privately (as of individuals or collectives within nations) support financially and politically the ISIL campaign, Western powers need to, if the choice is made to intervene, re-establish our bond with said nations in the capacity of financial regulation. Greater regulation in countries threatened by insurgency and greater governmental transparency would, of course, go a long way in combatting private donorship – however, these sort of macroscopic socio-economic goals are not realistic in the short term economic combat of Middle Eastern terrorism. The West ought to take a firm stand against all financial supporters of ISIL, in supply of oil and capital and political machination , and make this stance indubitably clear to its allies and those elements within them who seek to direct resources towards their political or ideological proxies in ISIL. How do 27

we apply economic pressure on Gulf States to this effect without weakening political ties? First of all, the European Commission ought to make analyses of potential AID restructure and well as options for trade negotiations between ISILneighbouring regions in Saudi, Jordan, Iran and Turkey (and to a lesser extent Lebanon & Israel) – the goal is not to create political tension but rather to find ways of supporting particularly effective policies in the area and take a hard stance against inaction. The problem here is largely one of radicalisation; indeed, stemming radicalisation not only stems financial support for ISIL but also pragmatic/physical support. It is the contention of Noam Chomsky , amongst other contemporary liberals, that foreign policy, parPhoto Credit: AP

28

ticularly US foreign policy, is largely responsible for anti-western sentiments and radicalism in the Middle East. Whether they are right or not, the long-term solution to curtailing the spread of extremism – be it Al-Qaeda, Mujahedeen of any kind; Boko Haram or ISIL and so on – is to structure foreign policy away from historic turbulence and towards future common prosperity: increase trade and political allegiance, decrease military and ideological intervention.

There is a sentiment, perhaps, which might say – if it is the nations who are under threat, who are in part also responsible for their funding, is it really any business of ours, to intervene even economically or politically? I believe this question

is entirely legitimate, but puts forward the difficult question not only of ought we to intervene at all? But also what exactly is the threat of ISIL? I presuppose, in this paper, the position that ISIL presents a threat to allies of the Western Powers, that we are tied to the Middle East politically, and also that a number of these Powers, the UK and the US in particular, are largely responsible for the formation of ISIL given previous grievous errors in military intervention and foreign policy establishment. Let’s not forget that the Taliban were armed to drive the Soviets out of Afghanistan; that the power vacuum left by wars in Iraq and Afghanistan brought about vehement anti-west radicalism, that this is the primordial soup of the caliphate. Indeed, the relative success of western intervention in ‘the cradle of civilisation’ is one of dispute and broad pessimism; which is precisely why the discussion of topics in the paper is both important and distinctly relevant – it is my position that, as a democratic force, the world is now more equipped institutionally and inter governmentally than ever before, more integrated and hence more able to enact policy which can be conditioned as not destructive but constructive, to find new modes of combatting threats – through economics and culture. It is about time to move towards postviolence.

How, precisely, do we do this? Well the solution is not immediately clear – rather, the goal is half the battle.

However, we are not entirely helpless in terms of moving towards solution: look at grass-roots solutions – direct communication between peoples is perhaps the most effective policy in strengthening political relations. Look at intergovernmental microfinance; promote movement of labour between the West and the Middle East. Strengthen the process of mutually beneficial trade: reduce barriers to entry by lowering import duty and tariffs – finalise negotiations with the GCC (EEAS 2013) in regards to the almost 20-year project into EU-Gulf free trade (allow for an increase in transparency; i.e. aids in antiquity location). Expand the role the EU/Middle East Peace Process outside of Israel and into interregional relations throughout the Middle Eastern. Consider the efficacy of removing banks in certain Middle Eastern regions from the sanction list – of course we have to consider national financial security and possible proliferation of ISIL funding as a priority.

3.

Taxation and Extortion; grass roots finance.

Is there really anything the West can do, or encourage allies to do, to combat ISIL taxation and extortion of their constituents? Even if we somehow manage to sufficiently 29

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The onus here is not on exporting Western culture or ideology or might to the middle-east, as we have appeared to do for the last hundred-or-so years; rather, support the growth of the area as itself...

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cut off their external trade, and regulate the grey market, can we actually cut off ISIL from its internal funding, if its economy truly is ‘selfsustaining’?

certain mind-set: is it really ours to say that proliferation of violence, civilian casualty and so on is really justifiable where there are viable alternatives?

I see potential approaches to this particularity as limited; indeed, the only way to properly cut off this revenue stream is to either; 1. Intervene militarily or 2. Promote revolt/ grass roots/domestic upheaval.

While the West is no stranger to Agent Provocateurs and revolutionary tactics – I would argue that this sort of movement ought to be natural and not procedural; it is not our place to motivate civilians into war, nor to force them into a position wherein they have no choice.

I would refer again to the relative poverty of the occupation – without significant external revenue streams, I fail to see how the IS can expand (without trade – I doubt it can even sustain itself, given that its stated mission is one of perpetual expansion). Military intervention as mentioned earlier, has a history of violent repercussion and is effective only to certain analysts of a very

Thus far the prescribed strategy for economic, political and cultural warfare is as follows: regulate the grey market, track large cash withdrawals/injections, satellite-track missing antiquities and introduce taskforces for the preservation of archaeological institutions, encourage political negotiation and integration, avoid finance of dangerous regimes by greater transparency and bilateral action – rather, use finance as incentive; support healthy regimes, invest socially in the Middle East; detract from military intervention, withdraw from localised drone-strikes and rather invest in deterring and vindicating ISIL trade partners and financiers. The onus here is not on exporting Western culture or ideology or might to the middle-east, as we have appeared to do for the last hundred-or-so years; rather, support the growth of the area as itself, promote the pro-

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liferation of human rights via economic/financial and social methods. Withdraw from religious and ideological vindication. The goal of this economic war against ISIL is not to localise one article of combat against one threat; but rather to establish a framework for not only equipping the middle-east to combat its own threats, but also to work towards creating a social and economic environment in which future threats are avoided. This, I believe, is the potential of economic intervention, and the capability of the modern super-structure of institutional integration.

Harry Empringham is currently a PPE student at the University of York

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Eeas.europa.eu,. ‘European Union - EEAS (European External Action Service) | EU Relations With The Gulf Cooperation Council (GCC)’. N.p., 2015. Web. 12 Apr. 2015.

Eeas.europa.eu,. ‘European Union - EEAS (European External Action Service) | The EU And The Middle

East Peace Process’. N.p., 2015. Web. 12 Apr. 2015.

Grossman, Zoltan. ‘History Of U.S. Military Interventions Since 1890’.

Academic.evergreen.edu.

N.p., 2015. Web. 12 Apr. 2015.

Hubbard, Ben. ‘Private Donors’ Funds Add Wild Card To War In Syria’.

Nytimes.com. N.p., 2015. Web. 12 Apr. 2015.

Kohn, David. ‘ISIS’S Looting Campaign - The New Yorker’. The New Yorker. N.p., 2014. Web. 12 Apr. 2015.

Mail Online,. ‘The ISIS Smugglers Making Up To $1Million Per Looted Ancient Antique’. N.p., 2015. Web. 12 Apr. 2015.

Malas, Nour, and Maria Abi-Habib.

‘Islamic State Economy Runs On Extortion, Oil Piracy In Syria, Iraq’. WSJ. N.p., 2014. Web. 12 Apr. 2015.

Moore, Jack. ‘Mosul Seized: Jihadis Loot $429M From City’s Central Bank To Make Isis World’s Richest Terror Force’. International Business Times UK. N.p., 2014. Web. 12 Apr. 2015.

Parker, N. ‘Iraqi PM Maliki Says Saudi, Qatar Openly Funding Violence In Anbar’. Reuters. N.p., 2015. Web. 12 Apr. 2015.

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Philips, Matthew. ‘Islamic State Loses Its Oil Business’. Businessweek. com. N.p., 2014. Web. 12 Apr. 2015.

Solomon, E. ‘The Isis Economy: Meet The New Boss - FT.Com’. Financial Times. N.p., 2015. Web. 12 Apr. 2015.

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SANCTIONS, IRAN NUCLEAR DEAL, AND GEOPOLITICS Farhad Moshtagh Sefat Introduction

“.. Just wait until the beggars need the money badly enough; that will bring them to their knees.” This was the British attitude, reported Grady the US ambassador in Tehran towards Iranians during the “oil standoff” (Grady, 1952, p. 57), of Anglo-Iranian Oil Company (British Petroleum)1 (BP, First Oil), (Gasson, 2015) (Abdelrehim et al., p. 3) and the democratically elected Iranian government of Dr Mosaddegh in 1951-53. And the British Foreign Secretary advised his American counterpart that “a bad agreement

would be worse than no agreement” (Abrahamian, 2001, p. 190).

And the Economist called it “the Middle East Munich” (Beck, 2006, p.

526, fn.7). The similarity of positions, wordings and examples then and now is astonishing.2 The comprehensive economic sanctions and oil embargo imposed by Britain and her allies backed up by military presence in the Persian Gulf at the time, had a devastating effect on Mosaddegh’s government budget and the lives of ordinary Iranians, but it did not bring them to their knees. Instead, it brought them to

1

The Anglo Iranian Oil Company was a British company initially registered as Anglo Persian Oil Company in 1908, but following the change in official name of the country from Persia to Iran in 1935 it was renamed accordingly. Following nationalization of oil industries by the Iranian parliament in 1951 and eviction of the Company from Iran, it was renamed British Petroleum Company Limited, BP, in 1954 after the joint British and American Coup of 1953 overthrowing the legitimate government of Iran. Although the oil concession was granted to a private individual, the British Government had secretly acquired 53 per cent of the stocks, allowing the British navy to switch from coal to oil in 1914; a decisive factor not only in preserving British Naval supremacy during WWI, but turning control of oil resources into a critical military strategic objective that surfaced in WWII again. The same issue is still a critical element in the currents events in the Middle East and it is also directly related to the current “nuclear standoff” between Iran and the West. Nuclear energy could free up a large portion of Iran’s domestic consumption of oil and gas, reducing her reliance on revenues from exporting crude oil and gas, greater control of its energy marketing/exporting strategy and hence more influence on world energy markets. This obviously is not welcomed by the giant multinational energy companies.

2 A coalition of Europeans, Americans and Israelis has been advancing the same position almost with same wordings about the Iranian and 5+1 nuclear negotiations. For example see: “Sen. Mark Kirk likens Iran deal to Nazi appeasement, warns of nuclear conflict” at http://www.politico.com/story/2015/04/mark-kirk-iran-deal-react-nazi-116632.html; “An Agreement Worse than Munich; American Jews Serve as Enablers” http://www.jewishmediaresources.com/1742/an-agreement-worse-than-munich-americanjews; “No, the Iran nuclear negotiations aren’t Munich in 1938” http://www.washingtonpost.com/blogs/plum-line/wp/2015/04/01/ no-the-iran-nuclear-negotiations-arent-munich-in-1938/; “Rice on Iran: ‘A bad deal is worse than no deal’” available at http://www. washingtonpost.com/blogs/post-politics/wp/2015/03/02/rice-on-iran-a-bad-deal-is-worse-than-no-deal/; “Netanyahu Is Said to View Iran Deal as a Possible Trap” at http://www.nytimes.com/2013/09/23/world/middleeast/netanyahu-is-said-to-view-iran-dealas-a-possible-trap.html?_r=0; “A bad deal is worse than no agreement” at http://www.friendsofisraelinitiative.org/uploads/alerts/ pdfs/18.pdf ; “Stephens: Worse Than Munich”http://www.wsj.com/articles/SB10001424052702303281504579219931479934854; “Time to Attack Iran” http://www.foreignaffairs.com/articles/136917/matthew-kroenig/time-to-attack-iran

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the United Nations Security Council and the International Court of Justice (Speller, 2003, p. 39) where they received two favorable judgments from the newly established international institutions, legally and politically defeating the British by their own rules, popularly perceived as a vindication of their national sovereignty (Heiss, 1997, pp. 93-134).

Instead of accepting and complying with the judgments of their own initiated international organizations in charge of promoting global peace and security, Britain and the USA engineered a covert military coup in August 1953 that overthrew Mosaddegh’s government and reinstated the Shah to his peacock throne; an act that some have considered the root of all political violence in the Middle East (Kinzer, 2008).4 The cost of the operation for Britain was handing over of 40 per cent of their Iranian oil share to American companies (Gasiorowski, 1987, p.

275). Regardless of the justifications and implicit apologies offered by politicians and academics (Albright, 2000), this was a defining moment for development of Iranian public understanding of International

politics and the United States’ position and behavior within that order.

In simple terms, the 1953 Coup for the Iranians seems to have been the moment of recognition that their perceived Prince Charming, “the United States of America”, that they had baptized and nurtured as their last and only hope of avoiding the Scylla and Charybdis of the Anglo Russian Great Game (Fromkin, 1980) since the early years of their Constitutional Revolution of 19056 (Shuster, 1912, Introduction,Ch. I) (Bernstein, 2007) and specially after the American support of Iran’s territorial integrity, sovereignty and independence in Paris Peace Conference of 1919 (Katouzian, 1998pp.

19-23) (Sabahi, 2005, pp. 133-34) (Bast, 2004, pp. 260-81) (Bonakdarian, pp. 12-13)4 against reducing Iran to a British Protectorate and the subsequent British coup of 1921 inaugurating the Pahlavi rule in Iran, had been turned into a “changeling” by the declining British colonialist “elf” (Kinzer, 2008, pp.ix-x). This must have been a moment of deep collective political trauma that gradually brought the Iranian intellectuals, politicians, and even some

Although there are still many unanswered questions in the events pre and post 1953 Anglo American coup in Iran, there are a number of relatively reliable standard sources that have been established as closest approximation to what may have happened.

A list of the sources, recent documents and explanation is offered in Abrahamian’s “The 1953 Coup in Iran”. Gasiorowski , M. J. 1987, “The 1953 coup d’etat in Iran” is another authorative source. The CIA “declassified” documents are also available at http://nsarchive.

3

gwu.edu/NSAEBB/NSAEBB28/ 4

The paper by Bonakdarian is a summary of the evolution of the US- Iran relationship from its inception in 19th Century. Although the content of the essay is referenced and open to verification and the author’s organizational affiliation is known, the essay lacks the required information of its date and publisher. Therefore should be treated with extra care.

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Photo Credit: Al Arabiya

religious leaders to down to earth “realism” of global politics: power and wealth on one side, survival and security on the other. For Iranians it was a moment that the words of Morgan Shuster, the American Treasury General of Iran in 1911, resounded loudly, once again, that “The Constitutionalists of Modern Persia will not have lived, struggled, and in many instances, died entirely in vain, if the destruction of Persian sovereignty shall have sharpened somewhat the civilized world’s realization of the spirit of international brigandage which marked the weltpolitik of the year 1911” (Shuster, 1912, p. xiv).

By killing the “hope’ and “trust” that Iranians had placed both in the democratic government of Dr Mosaddegh and the post WWII International Organizations, the CIA

and MI6 representing “the civilized world”, not only displayed the naked contradictions between the preached ideals of Western Liberal Democracy and its practical manifestation in world politics (promoting and killing democracy at the same time!), but also, in directing and staging a tragic national drama by flagrant breach of Iran’s sovereignty, taught Iranians that “you’ll be brought to your knees, if you do not stand up on your feet”! It seems this lesson, the struggle to regain, uphold and exercise their national sovereignty, echoed in their repeated loud call for “independence” (along with freedom and Islamic government) in pre revolution mass demonstrations, has been the main driving force behind the Iranian revolution and the formulation of post revolution “official” foreign policy with varying degrees of success or 35

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failure in different political and economic areas. This is the context and background against which the Iranians (and certainly a large section of world population in developing countries who more or less have similar stories to tell) will assess the behavior of the US and the European governments in their treatment of Iran in the nuclear negotiations.

Political and economic sanctions and coercion of Iran has been the most consistent and persistent element of the US and some European countries foreign policy since the Iranian revolution of 1979. A brief review of the sanctions could shed some light on the potential consequences of their further intensification or imposition of new ones.

Iran Sanctions

Despite over 30 years of unilateral (e.g. the USA, Japan, Korea, Canada, Australia), regional (the EU) and international (the UN),“stringent economic measures” relating to “Iran’s nuclear, missile, energy, shipping, transportation, and financial sectors” orchestrated by the United States (U.S.StateDepartment) (U.S.Treasury)5 and her allies along with the usual implicit military threat of “all options are on the table” and

the more open and explicit Israeli threat of “bomb Iran” and “bunker buster” air strikes , Iran did not show any sign that it was prepared “to adjust its aspirations with respect to either its nuclear program or its claims to regional power” (Takeyh and Maloney, 2011, p. 1297) (Pollack and Takeyh, 2011, p. 12). Despite intensive factional politics amongst its powerful cleric leadership, Iran’s “right” to develop peaceful nuclear technology is amongst the very few issues that they have been unanimous. Therefore, the failure of the sanction in producing the desired outcome, more than anything else demonstrates the lack of understanding of the sanction designers or the policy makers of the relationship between the target and the means to influence it. To coerce someone who has already been subjected to all possible sorts of coercion with no positive outcome is as irrelevant as it is immoral and illegal. Regardless of all criticism that one could quite justifiably have against a political system or regime, a “good talk” (Amirahmadi and ShahidSaless, 2013, p. 156) (Cordesman et al., 2012, p. 4) may have been the source of the outcome, the Joint Plan of Action announced on 2 April 2015 as the framework of nuclear

The US Department of Treasury website provides the long list and details of the sanctions that have been imposed and are currently in place against Iran starting. The first is dated Nov. 1979 clearly showing that sanctioning Iran started long before Iran nuclear program and in some sense and to some extent along with other reasons may have encouraged Iran in initiating its nuclear program.

5

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agreement between Iran and 5+1, that thirty years of “stringent sanctions” failed to produce. By coming to negotiating table and making concessions, Iranians have demonstrated that a change in the attitude of the Americans and Europeans

When, survival, security and sovereignty of a country are at stake...accepting to negotiate as a result of “economic sanctions” without exercising the “rights” related to those issues, becomes a self defeating measure that no “rational actor” can adopt. has been the missing factor in the last three decades. Reverting back to the old approach could as easily send them away again. Economic sanctions and trade warfare may produce outcomes where “economics” is the issue. When, survival, security and sovereignty of a country are at stake (Greenwald, 2012), accepting to negotiate as a result of “economic sanctions” without exercising the “rights” related to

those issues, becomes a self defeating measure that no “rational actor” can adopt. Although Iranians have unilaterally relinquished their right to develop nuclear weapons, their predicament and suffering should raise a serious question in international relations: how rational is “the international community” to allow a country that possesses thousands of nuclear weapons that can fry the planet many times over, and has not hesitated to use them at least in two occasions for her military and strategic “interests” (Stimson, 1985)6 , and is suspected of its covert use (Brentjes, 1999, pp. 277-86) and threat to use (Wastell, 2002) in other occasions, in alliance with another state reportedly possessing 80 clandestinely developed nuclear warheads (SIPRI, 2014)7 , that never joined the Non proliferation Treaty (NPT), and never has had any international inspection of its nuclear facilities, to put a member of NPT, with every right to develop peaceful nuclear technology, under so intensive and extensive sanctions lest it develop the same weapon that they themselves possess? Isn’t that an attempt to abuse an international treaty designed to encourage peaceful development of nuclear

In making the usual cost benefit analysis of economic approach in military decision making, Stimson acknowledges that “. . . my chief purpose was to end the war in victory with the least possible cost in the lives of men in the armies which I had helped to raise” (p. 15). In other words he is claiming both “rationality” and “morality” of the decision to use atomic bomb. Would he (and the like) hesitate to do the same again?

7 This is the most conservative estimate reported; some sources put the figure at 300 and 400 warheads.

6

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energy and universal disarmament as an instrument of monopolizing nuclear power for coercing other states? And would it not support the argument that in the anarchy of international relations “might is right” (the message delivered by the coup of 1953), and therefore states not only vie for power but will resort to every possible means (including economic sanctions) to deny other states (perceived as enemy) access to sources of power?

Economic sanctions, rather than punishment for breach of law, has in the Iranian case been used as a foreign policy tool to advance political and strategic rebalancing of power disturbed as the result of the Iranian Revolution of 1979 that threatened to recreate a politically unified Middle East endangering security and strategic concerns of some states, and political and economic interests of many powerful groups in Europe and the USA. This rebalancing has been financed by a huge price differential imposed on Iranian economy by the over three decades of sanctions. With re-establishment of the Sunni/Shiite Arab/ Persian divide, the balance could now be maintained with the cost paid by the warring parties which in turn guarantees the steady flow of oil and gas from the region. Others shall be compensated through their support of either sides and recon38

struction projects and contracts.

Farhad Moshtagh Sefat is currently a PhD student at the University of York

References Abdelrehim, N., Maltyby, J,. & Toms, S.‘A pretty good deal just now’The Anglo-Iranian Oil Company, Oil Nationalisation and Managerial Response: 1951.

Abrahamian, E. 2001. The 1953 coup in Iran. Science & Society, 65, 182215.

Albright, M. 2000. Remarks before the American-Iranian Council as released by the Office of the Spokesman, U.S. Department of State [Online]. Washington, D.C.: US Dep of State. Available: http://www.fas. org/news/iran/2000/000317.htm Amirahmadi, H. & Shahidsaless, S. 2013. Avoid Repeating Mistakes toward Iran. The Washington Quarterly, 36, 145-162.

Bast, O. 2004. Putting the Record Straight: Vosuq al-Dowleh’s Foreign Policy in 1918/19. In: ATABAKI, T. & ZURCHER, E. J. (eds.) Men of Order: Authoritarian Modernization under Ataturk and Reza Shah. London: I.B. Tauris.

Beck, P. J. 2006. The lessons of

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Abadan and Suez for British foreign policymakers in the 1960s. The Historical Journal, 49, 525-547.

Bernstein, M. F. 2007. An American hero in Iran [Online]. Available: http://www.princeton.edu/paw/ archive_new/PAW06-07/13-0509/ features1_heroiran.html.

Bonakdarian, M. US-Iranian Relations, 1911-1951.

BP. First OiL [Online]. Available: http://www.bp.com/en/global/corporate/about-bp/our-history/history-of-bp/first-oil.html [Accessed 06 April 2015].

cessed 07 April 2015].

Grady, H. F. 1952. What Went Wrong in Iran? Saturday Evening Post, 5.

Greenwald, G.. 2012. The true reason US fears Iranian nukes: they can deter US attacks [Online].

The Guardian. Available: http:// www.theguardian.com/commentisfree/2012/oct/02/iran-nukesdeterrence?newsfeed=true.

Heiss, M. A. 1997. Empire and Nationhood: The United States, Great Britain, and Iranian Oil, 1950-1954, Columbia University Press.

Brentjes, B. 1999. Oil, dollars and politics: 7000 years at the AraboPersian Gulf, Rishi Publications.

Katouzian, H. 1998. The Campaign Against the Anglo‐Iranian Agreement of 1919. British Journal of Middle Eastern Studies, 25, 5-46.

Cordesman, A. H, Mausner, A. & Nerguizian, A. 2012. US and Iranian strategic competition, Center for Strategic and International Studies.

Kinzer, S. 2008. All the Shah’s Men: An American Coup and the Roots of Middle East Terror, New Jersey, Wiley.

Fromkin, D. 1980. The Great Game in Asia. Foreign Affairs, 58, 936-951.

Pollack, K. M. & TAKEYH, R. 2011.

Doubling down on Iran. The Washington Quarterly, 34, 7-21.

Gasiorowski, M. J. 1987. The 1953 coup d’etat in Iran. International Journal of Middle East Studies, 19, 261-286.

Gasson, M. 2015. The BP Archive [Online]. Available: http://www. abh-net.org/archive5.htm [Ac-

Sabahi, H. 2005. British policy in Persia, 1918-1925, Routledge.

Shuster, W. M. 1912. The Strangling Of Persia, New York, The Century Co. Sipri, 2014. Table of world nuclear 39

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forces, 2014 [Online]. Available: http://www.sipri.org/research/ armaments/nuclear-forces/tableworld-nuclear-forces-2014/view.

Speller, I. 2003. A Splutter of Musketry? The British Military Response to the Anglo-Iranian Oil Dispute, 1951. Contemporary British History, 17, 39-66.

Stimson, H. L. 1985. The decision to use the atomic bomb. SAIS Review, 5, 1-15.

Takeyh, R. A. Y. & Maloney, S. 2011.

The self-limiting success of Iran sanctions. International Affairs, 87, 1297-1312.

U.S. Stated Department Iran Sanctions [Online]. Available: http:// www.state.gov/e/eb/tfs/spi/iran/ index.htm.

U.S. Treasury. Iran Sanctions [Online]. The U.S. Department of the Treasury. Available: http://www. treasury.gov/resource-center/sanctions/Programs/pages/iran.aspx.

Wastell, D. 2002. US plans for firststrike nuclear attacks against seven countries [Online]. The Telegraph.

Available: http://www.telegraph. co.uk/news/worldnews/nor thamerica/usa/1387333/US-plans-forfirst-strike-nuclear-attacks-againstseven-countries.html [Accessed 12 40

April 2015].

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DID THE LAUNCH OF THE WTO REPRESENT A SIGNIFICANT STEP TOWARDS THE CREATION OF A FAIR INTERNATIONAL TRADE REGIME?

Andrea Alari Introduction

The end of the Cold War resulted in a historically-anomalous unipolar international system characterised by overwhelming western power and the global projection of its ideology. This fundamental rearrangement of the global community induced the enlargement of the General Agreement on Trade and Tariffs (henceforth, GATT) with the establishment of the World Trade Organisation (henceforth, WTO) and its enshrinement as a pervasive feature of global politics. However, it is questionable whether the current international trade regime and, as the ultimate authority in the matter, the WTO is organised so as to promote fairness in the conduct of global trade or whether, as will be argued, it attempts to crystallise the power relations that lead to its creation. Is the WTO a tool for the fair enforcement of an economic doctrine? Or should the WTO be understood as the Cold War’s economic Nuremberg court, where rulings reflect the interests of the winning powerful few?

The Oxford English Dictionary assimilates the concept of ‘fairness’ with those of “honesty, impartiality, equitableness, and justness”. The vagueness surrounding the term allows for many contrasting understandings. However, two conceptualisation prevail in the discourse surrounding the international trade regime: fairness in outcome and fairness in process (Narlikar, 2006).

In accordance with the former, a fair trading regime promotes international convergence of GDP per capita levels. On the other hand, the latter notion — procedural fairness — promotes an international trade regime in which every nation is regarded as equal and, consequently, is required to adhere to the same policy prescriptions.

Given said distinction, the WTO’s impact on the international trade regime needs to be assessed under both understandings of the concept. The organisation may be said to significantly promote fairness only if found to have significantly reduced the pre-existing economic gap between developed and developing countries, or if found to have 41

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impartially promoted international trade liberalisation. Otherwise, the WTO cannot be considered to significantly promote any notion of fairness and rather as a power tool of industrialied western countries.

Despite common perception, recent trends observed in inequality coefficients seem to suggest that international economic convergence has not yet picked up. Inequality, as measured by the global GINI coefficient, has been reported to have been rising consistently throughout the past decades. Indeed, over the past two centuries, “global inequality has increased at about the same rate as maximum feasible inequality” (Milanovic, 2009, p.24) and, somewhat surprisingly, “[inequality] is today overwhelmingly determined by the differences in mean country incomes” (p.13). Despite the negligible downwards trend observed by Dollar (2001) between the 1980s and the turn of the century, inequality levels have been roughly stable since 1950, and so has the proportion derived from inequalities between (as opposed to

within) countries (Milanovic, 2009).

If fairness is understood as equitable outcomes, and if one accepts global inequality measures as reliable indicators of income gaps, one can confidently conclude that the WTO has not significantly promoted a fair international trade regime.

Hence, if the WTO is to abide by any notion of fairness, this will have to be understood as procedural. Thus, given the above definition, if the organisation exhibits a significant degree of ‘procedural inconsistencies’ (observed in the form of recurrent preferential treatment towards certain members) we can establish that it does not abide by any notion of fairness. Indeed, according to the neorealist framework of analysis described below, the case studies reviewed support this thesis.

Analytical Framework

The very essence of the WTO as an international organisation regulating trade needs to be understood in the wider context of geopolitical competition. At a fundamental

If fairness is understood as equitable outcomes, and if one accepts global inequality measures as reliable indicators of income gaps, one can confidently conclude that the WTO has not significantly promoted a fair international trade regime.

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level, nation-states are concerned with their survival as relevant political institutions and with the power relations they establish with each other (Waltz, 1979). Furthermore, as fundamentally rational actors, they will attempt to ensure relative and/or absolute gains from their behaviour in the wider international arena. Insofar as international relations can be described in this way, WTO dynamics can be explained as resulting from the interaction of aforementioned forces to which every member is subject, albeit to different degrees.

Firstly, since every state bears some accountability to some sectors of society upon which it depends for the perpetuation of its rule, the interests of said groups will somewhat affect international state behaviour.

Indeed, a state will pursue policies (both domestically and internationally) aimed at the protection of its domestic power-base hoping for continued future support (Putnam, 1988). The ‘domestic constituency pull’, as this force may be dubbed, is most relevant in countries that display a high degree of economic specialisation and in which institutional legitimacy crucially depends on a single interest group (the former usually comes with the latter, although the reverse is not necessarily true). Hence, in the context of the WTO, countries will tend to

adopt protectionist stances towards liberalisation of industries upon which they rely for domestic political support.

Secondly, since both the WTO and the GATT rest on neoliberal preachings of free trade, unobstructed market access, and competitive markets, states are expected to frame their arguments within said ideological boundaries. The ‘ideological pull’ has become gradually more binding since the end of the Cold-War given the absence of a relevant alternative ideology to which a state may appeal in defence of its negotiating positions. Hence, in virtue of the ideological environment underlying the negotiating forum, states can perceive varying degrees of compulsion to adhere (maybe just rhetorically) with said neoliberal principles.

Finally, in virtue of the essential nature of states described in the opening of this section, the dynamics observed in the WTO will be sensitive to changing global power relations and their perceptions by different actors (Waltz, 1979). Indeed, it would be surprising if such a key global institution were found unresponsive to geopolitical issues and tensions. In the WTO context, said ‘geopolitical pull’ will be manifest as incentives for the creation of coalitions and disincentives for open 43

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confrontation with major powers.

Case Study 1: Brazil’s Cotton Case

Dating back to 2002, the WTO dispute settlement case DS267 — later dubbed ‘Brazil’s cotton case’ — saw Brazil (later supported by a number of other developing countries) denouncing a number of US agricultural support programmes to be incompatible with WTO agreements. The Step2, GSM-102, GSM-103, and SCGP programmes supposedly breached the 1995 Agreement on Agriculture (GATT, 1994) by restricting market access, supporting domestic production, and providing export subsidies (Schnepf, 2010). Despite the legal distinction between a subsidy and Photo Credit: AP

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said programmes, Brazil’s claims were found to be mostly true (WT/ DS267/ARB/1). In October 2014, 12 years after Brazil’s formal “request for consultation” with the US, a mutually acceptable solution to the dispute was reached: some of the programmes were abolished, some reformed, and Brazil was generously compensated. However, the case cannot be heralded as evidence of the WTO’s intrinsic institutional fairness. Conversely, the degree to which Washington’s influence was felt throughout the case testifies in favour of the WTO being, essentially, yet another arena for geopolitical neorealist competition.

The degree of American interference can be inferred from the duration of the process and its outcomes.

Whereas a dispute settlement case

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normally yields a resolution within 12 to 15 months, “the WTO dispute settlement process that reviewed Brazil’s charges against the US cotton programme has extended well beyond” (Schnepf, 2010, p.5).

Indeed, a final decision was only taken on the 31st of August, 2009 — nearly seven years after Brazil’s initiation of the case. Moreover, a mutually acceptable resolution was only reached in October 2014.

Demonstrating a clear interest in mothballing the case, the US tried in numerous occasions to avoid a definitive decision by appealing against panel rulings and stalling their implementation by means of bilateral provisional agreements.

The final ruling itself reflects pervasive US meddling. On August 31st, 2009, according to the arbitrator’s final pronouncing, the retaliatory measures allowed to Brazil were significantly reduced from 4 billion US$ to 0.3 billion US$; prompting a rather pleased comment by the office of the United States Trade Representative (USTR, 2009). Moreover, Brazil’s entitlement to cross-sectoral retaliation was ruled to be allowed only if the overall retaliatory measures were to exceed a certain variable threshold (WT/DS267/ARB/1); hence diminishing the exposure of non-agricultural US exports to the possibility of non-compliance. Furthermore, Step2 reforms, designed

to bring the programme within the boundaries of WTO legality, continued to covertly subsidise American producers. The reforms abolished export subsidies and decoupled payments to domestic cotton users from the commodity’s origin. However, since US cotton demand is almost entirely satisfied by domestic supply, the payments primarily stimulate American production (Schenpf, 2010, p.33).

The Bush administrations which saw the case unfold had large incentives in being perceived as protecting the interest of the American cotton industry from which they received substantial political support Washington’s pervasive interference throughout the process can be explained by strong domestic political dynamics resisting ideological and geopolitical pressures for liberalisation. Despite merely accounting for 0.52% of American exports in 2012 according to The Atlas of Economic Complexity, the American cotton industry is highly politicised due to its sizeable contribution to national employment, its historical role, and the involvement of partisan politics.

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Given that the industry employs approximately 200.000 people, and since major cotton producing areas are firmly in Republican hands, the Bush administrations which saw the case unfold had large incentives in being perceived as protecting the interest of the American cotton industry from which they received substantial political support. As a result, the case had not yet been resolved when the Obama administration took over in early 2009.

After the panel’s ruling in later that year, however, the case became less relevant in the context of domestic American politics (given the change in administrations) but grew in geopolitical importance given the Latin America’s block-like geopolitical reorganisation around Brazil’s leadership. Hence, the US struggled to reassert regional dominance and, to some extent, managed to tame Brazil’s growing aspirations with the bilateral agreement of 2014. Finally, other factors also played a decisive role in the outcome of said case.

Indeed, the traditional transatlantic disagreement over agricultural liberalisation (which culminated with EU sanctions in March 2004) played in Brazil’s favour. Furthermore, strained bilateral relations would have hindered penetration

by American goods and services of the growing Brazilian market consequently upsetting other important interest groups.

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Case Study 2 s: GATS and TRIPS

The liberalisation agenda’s enlargement, fundamental to the WTO’s creation, is itself expression of ‘realpolitik’. The GATT’s nature and functioning were largely shaped by the post-war global economic order in which western economies emerged as manufacturing powerhouses. On the other hand, reflecting the postCold War global economic environment which saw the tertiary sector gradually overtaking manufacturing as the lion’s share of developed economies, the WTO’s very creation revolved around liberalisation of trade in services and rigorous enforcement of intellectual property rights (henceforth, IPRs). Indeed, both the General Agreement on Trade in Services and the Agreement on Trade-Related Aspects of Intellectual Property Rights (henceforth, GATS and TRIPS respectively) evidently bow to the vested interests of powerful industries in western developed economies.

The liberalisation of international trade in services first appeared on the GATT agenda in 1982 following intense lobbying by (largely American) interest groups. Despite initial inconclusive results, the issue reemerged throughout the Uruguay Round yielding, in 1994,

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the GATS. The final agreement had been argued beneficial for both exporter and importer, by stimulating economic activity in both, driving down prices in importing countries, and promoting development by contributing to international diffusion of technical know-how.

The thesis has solid theoretical and empirical groundings (Mattoo et al., 2006). However, since OECD countries account for approximately 80% of non-tourism trade in services, the GATS was opposed by numerous developing countries throughout the Uruguay Round. Facing them

was a coalition led by the US which “perceived it had a comparative advantage in services, and sought to link further liberalisation of ‘old trade’ to progress in liberalising trade in services” (Hoekman & Kostecki, 2009, p.318). Indeed, deregulation allowed for increased penetration by western companies of service-importing developing economies. American foreign direct investment (FDI) outflows steeply increased following the GATS (Hoekman & Kostecki, 2009, p.321) and, two decades later, the ‘US-EU axis’ still has the largest stock of FDI, both at home and abroad (CIA, 2014).

Negotiations regarding international enforcement of IPRs can be traced back to the 1883 Paris Convention for the Protection of Industrial Property. Since international commitments to the enforcement of IPRs already existed, the TRIPS “was not about freeing trade, but about getting developing countries to implement existing international IPRs conventions” (Hoekman & Kostecki, 2009, p.378). Insofar as the agreement sets minimum requirements for IPRs legislation, it distinguishes itself from other WTO directives by promoting ‘positive’ integration as opposed to ‘negative’ integration which involves restricting the use of trade-distorting policies (Tinbergen, 1954). As for the GATS, the issue of IPRs was included 47

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in the Uruguay Round agenda as a result of corporate pressures on western governments (Sell, 1999); the audiovisual and pharmaceutical industries were especially adamant supporters of international IPRs harmonisation. Indeed, the US and the Franco-German European political backbone emerged as the largest winners from the agreement (McCalman, 2001). Paired with eased market access for foreign service providers, the TRIPS conferred locational advantages to western foreign affiliates by increasing sales and licenses relative to ‘knowledgeintensive’ goods (Smith, 2001). As Finger and Nofues (2004) noted, the recurring theme underlying the TRIPS was that of easing western knowledge export, rather than facilitating general knowledge diffusion.

Conclusion

As hypothesised, the case studies show significant WTO favouritism towards the ‘global North’. This is due to the rather weakly binding compliance commitments, rhetorical and legal manipulation and, ultimately, appropriately designed institutional fallacies. These allow for increased penetration of developing markets by foreign goods and services whilst, on the other hand, allowing covert protectionist policies to persist in developed markets.

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Hence, the launch of the WTO does not represent a significant step towards the creation of a fair international trade regime, conversely, the Marrakesh Agreement of 1994 can be seen as a political measure aimed at the perpetration of an international system overwhelmingly skewed in favour of the rich few at the expenses of the many poor.

However, the analytical framework provided above allows for a rectification of said system. Indeed, the ever-growing political and diplomatic clout of emerging economic powerhouses such as the BRICS suggests that a reorganisation of the international trade system so as to fit their interests is possible and, indeed, under way. As Waltz succinctly put it, “the structure of a system changes with changes in the distribution of capabilities across a system’s units” (p. 97). The first case study is a clear example. WTO negotiations will continue to be subject to domestic, ideological and geopolitical pressures. However, the changing power relations both within the international system and within the domestic political context of major powers will influence both negotiations and outcomes.

The duration and inconclusiveness of the current Doha Development Round can be interpreted as a sign of the pivotal change in the international structure, as evidence of the

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gradual erosion of US hegemony and the reemergence of multipolarity as a predominant feature of the global political and economic system.

“The Politics of CAP Reform: Trade Negotiations, Institutional Settings and Blame Avoidance,” Journal of Common Market Studies, Vol. 45:1, pp. 1-22.

Andrea Aleri is currently a PPE student at the University of York

Daugbjerg, C. & Swinbank, A. (2009) “Ideational Change in the WTO and its Impacts on EU Agricultural Policy Institutions and the CAP,” Journal of European Integration, Vol. 31:3, pp.

311-327.

References [Official WTO documents are available at http://docsonline.wto.org/ under a simple search using the specific document code] Bureau, J.C. et al. (2012). “US and EU Farm Policies: The Subsidy Habit”, In 2012 Global Food Policy Report, Chapter 6, IFPRI. CIA. (2014). The World Factbook.

Stock of Foreign Direct Investment at Home. Available at: https://www.cia.gov/library/publications/the -world-fac tbook/ rankorder/2198rank.html CIA. (2014). The World Factbook.

Stock of Foreign Direct Investment Abroad. Available at: https://www.cia.gov/librar y/pub lications/the -world-fac tbook/ rankorder/2199rank.html?

Clapp, J. (2006) “WTO Agriculture Negotiations: Implications for the Global South,” Third World Quarterly, Vol. 27:4, pp. 563-577.

Daugbjerg, C. & Swinbank, A. (2007)

Dollar, D. (2001). Globalisation, Inequality, and Poverty since 1980.

Oxford: Oxford University Press on behalf of the World Bank.

Finger, J. & Nofues, J. (2006). “Implementation of the Uruguay Round Commitments: The Development Challenge’, The World Economy, Vol. 23, pp. 511-525.

GATT. (1947). Initial Agreement, Available at: http://www.wto. org/english/docs_e/legal_e/ gatt47_01_e.htm GATT. (1994). Agreement on Agriculture, Available at: http://www.wto. org/english/docs_e/legal_e/14ag_01_e.htm Hoekman, B. M. & Kostecki, M. M. (2009), The Political Economy of the World Trading System: The WTO and Beyond, Third Edition. Oxford: Oxford University Press.

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Mattoo, A., Rathindaran, R. & Subramanian, A. (2006). “Measuring Services Trade Liberalisation and its Impact on Economic Growth: An Illustration”, Journal of Economic Integration, Vol. 21, pp. 64-98.

McCalman, P. (2001). “Reaping What You Sow: An Empirical Analysis of International Patent Harmonisation,” Journal of International Economics, Vol. 55, pp. 161-186.

Milanovic, B. (2009). Global Inequality and the Global Inequality Extraction Ratio: The Story of the Past Two Centuries. World Bank.

Narlikar, A. (2006) “Fairness in International Trade Negotiations: Developing countries in the GATT and WTO,” The World Economy, Vol. 29:8, pp. 1005-1029.

Putnam, R. D. (1988) “Diplomacy and Domestic Politics: The Logic of Two-Level Games,” International Organization, Vol. 42:3, pp. 427-460 Schnepf, R. (2010) “Brazil’s WTO Case Against the U.S. Cotton Program”, CRS Report RS22187, Order Code Rl32571, Washington, DC. Sell, S. K. (1999). “Multinational corporations as agents of change: The globalization of intellectual property rights,” In A. C. Cutler, V. Haufler 50

& T. Porter eds. Private Authority and International Affairs, New York: State University of New York Press, pp. 169-97.

Smith, F. (2009). Agriculture and the WTO: Towards a New Theory of International Trade Regulation, Cheltenham, UK: Edward Elgar Publishing Ltd. Smith, P. (2001), “How Do Foreign Patent Right Affect EU Exports, Affiliate Sales, and Licenses?”, Journal of International Economics, Vol. 55:2, pp. 411-439.

Tinbergen, J. (1954). International Economic Integration, Amsterdam: Elsevir.

Undisclosed Authors. (2012) The Atlas of Economic Complexity. Available at: http://atlas.cid.harvard.edu/ explore/tree_map/export/usa/all/ show/2012/ USTR. (2009). “USTR Statement on Awards in Brazil Cotton Dispute,” Available at http://www.ustr.gov/ about-us/press-office/press-releases/2009/august/ustr-statementawards-brazil-cotton-dispute Waltz, K. N. (1979). Theory of International Politics, New York: McGrawHill.

WTO.(2009) United States—Subsidies on Upland Cotton: Recourse

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to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS267/ARB/1.

WTO. (2009). United States— Subsidies on Upland Cotton: Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement, WT/DS267/ARB/2.

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Identities

Political - Social - Cultural Vox are calling for submissions for the upcoming issue: Identities. We welcome student and academic essay submissions Suggested Topics: Do you choose your identity?

Cultural identity and conflict Was the Scottish referendum about identity?

Is there a European demos?

Identity Economics - How do identities shape our preferences?

Is there a Protestant work ethic?

Buying British - Identity in our Shopping baskets Can ‘one nation under God’ be secular?

Is neo-liberalism America’s identity?

Does class define our identity?

A title of your choice!

Deadline for submissions 31st July 2015 Essays should not exceed 2000 words in length and should be properly referenced using the Harvard system. For submissions and other queries, email vox@clubofpep.org 52