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Proletarian issue 62 (October 2014)
Understanding sanctions as a means of economic warfare
Understanding the way sanctions are used is a key part of understanding the operation of imperialist domination in today’s world.
Economic sanctions are often presented to the populations of the imperialist countries as a ‘peaceful’, non-violent measure to constrain ‘rogue states’; to get pesky trouble-makers to ‘see reason’ and stop being a threat to ‘world peace’ – ie, to the unbridled ‘peaceful’ plunder of the world by the handful of imperialist states.

This widely-held and wholly erroneous and classless view of economic sanctions, promoted by our rulers and dearly cherished by Trotskyites, social democrats and peaceniks, is presented ad nauseam by the corporate media, but it could hardly be farther from the truth. Sanctions in most cases need to be understood as a method of collective punishment and a tool of economic warfare when they are used by imperialist countries against the oppressed peoples of the world.

In the present era of imperialist war and proletarian revolution, sanctions are often used to target rising economic powers that are encroaching upon the markets and resources of the imperialist powers and their colonies, and are even more ruthlessly pursued against socialist states and those independent anti-imperialist countries that have conducted or are conducting national-liberation struggles to free themselves from colonial control.

Taking Carl von Clausewitz’s famous dictum that “war is the continuation of politics by other means”, sanctions can be viewed as a very real weapon in the hands of the financiers, and one which is often used as a prelude to open armed confrontation to ‘soften up’ and weaken the enemy (such as those levelled in recent years against Iraq, Iran and Russia, for instance) or as a punitive measure to try to cripple the economy of a country that has is attempting to pursue an independent political and economic course (such as the DPR Korea, Cuba or Zimbabwe).

How do sanctions work?

There are a number of things to consider – for one, who imposes sanctions? In theory, any sovereign state (leaving aside for a moment the question of supra-national groupings with binding agreements – ie, the murky world of the cartel, syndicate, trust and monopoly capitalism in general!) can impose sanctions on another or on a group of others, whether this be a total embargo or limited to certain branches of business and industry.

However, in practice, sanctions (as opposed to mere boycotts and divestment) can only be carried out by powerful imperialist states, since they effectively control and monopolise the ownership, distribution and exchange of the overwhelming bulk of commodities on the world market.

At the present time, when the world economy is characterised by the domination of US imperialism, and when most world trade is carried out using the US dollar, sanctions are generally applied in such a way as to restrict and stifle as far as possible the target country’s ability to trade on the world market. US imperialism in particular has enormous power, since it controls the main world currency, to prevent a sanctioned country from bringing its own commodities to the market or from being able to pay money to or receive money from those who wish to trade with it.

Imperialism is able to achieve these ends by many means, but principally they are achieved by:

a. restricting access to the currencies needed for trade of any particular commodity,

b. restricting access to the services needed to complete the transaction (clearing houses and other financial institutions), and

c. restricting access to capital, to sources of investment and to finance from the major banks.

What does this mean concretely? Let us take a commodity such as oil. The price of oil is fixed in US dollars. The only currency that can be used to trade oil is the US dollar. For a country or company to sell its oil on the international market, the sale will usually take place through a clearing house.

A clearing house has various options for how it can clear (facilitate) a transaction, which are divided into two main groups: futures and securities or over-the-counter (OTC) exchange. The official purpose of a clearing house is to reduce the risk of either side reneging upon its part of the deal. Imperialist financiers monopolise the control of these clearing houses, making fortunes by taking a cut from each and every transaction. This also puts them in a uniquely powerful position, able to cut companies or even whole countries out of the system of world trade and prevent it getting access to the so-called ‘free’ market!

What does this mean politically? Sanctions are used by imperialism as a weapon to strangle its enemies. They are proof that imperialism strives for domination, not democracy; that the ‘free market’ is in truth a closed racket for the unbridled robbery and plunder of the oppressed nations by a small handful of powerful finance capitalists.

Today, unconstrained by any sense of shame, the modern-day servants of finance capital – the presidents, prime ministers, chancellors and other government flunkeys who manage the collective affairs of their respective national bourgeoisies – openly state that the aim of these sanctions is to achieve ‘regime change’. They hope to create enough poverty in the target country to foment popular unrest as the effects of the sanctions hit ordinary people.

This much is clear. That the careerist spivs in Whitehall are joined by their allies in the labour movement, however, is utterly shameful. Yet we are regularly treated to the sight of Trotskyists and social democrats decrying the ‘deteriorating living standards’ in an oppressed country that has been targeted by sanctions, and to the spectacle of them joining the corporate media in blaming a Mugabe or an Ahmadinejad for the suffering of the people there, rather than pointing the figure at the giants of finance capital.

It should be clear by now, however, that sanctions are a flagrant violation of a country’s sovereignty, and should be considered by all thinking people as nothing but an act of war.

If money, according to Augier, ‘comes into the world with a congenital blood-stain on one cheek’, capital comes dripping from head to foot, from every pore, with blood and dirt.” This is how Karl Marx described the inherent violence with which capitalism was born and on which it continues to rely. In the era of imperialism, this violence has only become more systematic and organised – and is carried out on an ever-greater scale. (Capital, Vol 1, Ch 31, 1867)

Mass murder in Iraq

That sanctions are in no way a ‘peaceful’ alternative to open war becomes clear if one takes a look at some recent case histories.

For example, the sanctions imposed on Iraq by the UN Security Council from 1990 until 2003 were described as ‘targeted’ sanctions, but the truth was that they badly affected not only the supply of food and medicines in the country, but also all the essential equipment that was needed for rebuilding the country’s devastated infrastructure after the Nato blitzkrieg of 1991.

The end result of the use of this ‘peaceful’ weapon was severe malnutrition and the gradual weakening of the health of millions who, besides a limited food supply, had no access to clean drinking water and were constantly exposed to the toxic chemicals left behind by Nato’s depleted-uranium missiles. Dysentery and cancer rates soared, but the medicines need to treat them were denied, as were the spare parts to fix water systems and the expertise and equipment to clean up the polluted environment. (See ‘Squeezed to death’ by John Pilger, guardian, 4 March 2000)

The entirely predictable outcome was the unnecessary and painful death of more than a million Iraqis, over half of whom were children. Sanctions were used deliberately and cruelly as a tool of collective punishment against the Iraqi people, to force them to bend their knee to imperialism. It might be instructive for the supporters of this ‘peaceful’ warfare to have to come face to face with some of the mothers who were forced to watch their children die in such a manner and ask them whether they considered the method of their children’s murder to be ‘non-violent’; to find out from them which ‘weapon of mass destruction’ they think the world’s people should really be worried about.

The economic strangulation of Cuba

The half-century-long embargo on Cuba is another fine example of economic warfare by imperialism.

The damage caused by US sanctions on the economy of the island has clearly been aimed at preventing the free development and full flourishing of Cuban socialism, while restrictions on basic medicines, soaps and other daily essentials are an obvious attempt to create hostility amongst the Cuban people towards their government and towards the socialist system itself.

But the Cuban people are quite well aware that it is not socialism that cannot provide for them, but capitalism. A recent article in the Guardian reported that:

US economic sanctions against Cuba have cost the island nation $3.9bn in foreign trade over the past year, helping to raise the overall estimate of economic damage to $116.8bn over the past 55 years ...

The figures were published in a report that Cuba prepares for the United Nations each year in requesting a resolution and urging an end to the comprehensive US economic embargo and other sanctions against Cuba’s communist government.” (‘Cuba estimates US embargo has cost island $116.8bn in damages in 55 years’, 9 September 2014)

Despite this, Cuba has made heroic efforts to overcome all the difficulties that have come in its way. The advantage of the socialist system become clear when it is seen how a planned economy, even in so small a country as Cuba, has enabled the whole of society to adapt to new situations and solve complex problems, while continuing to provide all the basic necessaries of life – food, clothing, housing, work, education and health care – to all its people.

Tiny Cuba, blockaded and isolated after the demise of its former trading partner, the Soviet Union, has survived in the new and even more hostile environment, adjusting its agriculture and continuing to develop and improve its excellent health and education services. It stands as a beacon of hope and inspiration against imperialism in the Americas.

Sanctions and apartheid

So what about the call for boycott and sanctions by anti-apartheid campaigners regarding states such as South Africa and Israel? Just as we differentiate between the violence of the oppressed and that of the oppressor, we must do the same for the question of sanctions. Lenin stressed this distinction when he wrote on the question of war in 1915.

The Great French Revolution ushered in a new epoch in the history of mankind. From that time to the Paris Commune, from 1789 to 1871, one of the types of wars were wars of a bourgeois-progressive, national-liberating character. In other words, the chief content and historical significance of these wars were the overthrow of absolutism and feudalism, the undermining of these institutions, the overthrow of alien oppression.

“Therefore, those were progressive wars, and during such wars, all honest, revolutionary democrats, and also all socialists, always sympathised with the success of that country (ie, with that bourgeoisie), which had helped to overthrow, or sap, the most dangerous foundation of feudalism, absolutism and the oppression of other nations.” (Lenin, Socialism and War)

Today, imperialism has become the new ‘absolutism’ that must be opposed at all costs, while those forces ranged against it, whether socialist or national-bourgeois in character, must always be supported by true revolutionaries. Thus, sanctions used against an imperialist oppressor country, especially of the settler-colonial type, are linked to the justified struggle for the liberation of the oppressed peoples from imperialist domination, and cannot be considered an act of aggression.

It is no accident that, despite their gung-ho approach to using sanctions against oppressed peoples who are striving for national liberation and independence, the imperialists become suddenly very squeamish about the possible effect on the masses when the call for boycott and sanctions comes from the people themselves and is targeted at really oppressive regimes that happen also to be allies and props of imperialism.

Politicians in the imperialist world like to pretend now that they were always ‘anti-apartheid’, but the truth is that Britain’s politicians and corporations were happy to maintain excellent relations with apartheid South Africa, and did everything in their power to resist and undermine the mass movement to boycott the apartheid system. They only joined it when it became obvious that their allies were going to lose anyway, proving once more the famous adage that imperialism has no permanent friends, only permanent interests!

This same pattern can be seen in the case of Israel. While punitive sanctions are constantly being levelled against the leading anti-zionist country in the Middle East, Iran, without even the pretence of some handwringing over the consequences for the ordinary people of the country, we are nevertheless told by champions of this ‘peaceful’ weapon that to boycott or use economic weapons against Israel – a country that commits war crimes on a daily basis, and where racist apartheid goes hand in hand with the slow genocide of Palestinians – would be ‘counter-productive’ and not conducive to ‘constructive dialogue’ – besides, of course, leading to terrible suffering for ordinary people.

And this despite the fact that the call for boycott and sanctions has originated from Palestinians and progressive Israelis themselves, in the full knowledge that, in the short term, they themselves are likely to suffer shortages and difficulties as a result.

As with so many other questions, it seems that we cannot really understand sanctions unless we understand imperialism. Without a class perspective, it is almost impossible to find our way through the double-speak and ‘humanitarian’ clap-trap and get to the heart of the matter.

Taking on Russia

Now that the western-imperialist bloc has decided to impose sanctions on Russia, which is itself a sizeable economic power, the limits of this particular weapon of mass destruction have become clear.

They can be extremely effective at creating havoc and deprivation in small or underdeveloped countries, which may be less abundant in natural resources and have control over a very small proportion of commodities for sale on the world market. But Russia is in quite a different league.

For a start, is has become a hugely profitable avenue of investment for western capitalism since the collapse of the USSR – a source of profits that those investors would be very sorry to lose. Moreover, Russia produces 10.55m barrels of oil a day, and is home to the world’s largest combined oil and gas reserves. This means that western corporations, in particular BP, are particularly exposed to the punitive sanctions that are now being imposed on the Russian economy.

BP is one of the most exposed to the Russian market, after the UK-based company bought a 19.75 percent stake in the state oil company Rosneft, a company already on Obama’s sanctions list.

Previously, BP insisted it was ‘business as usual’ with Russia, but the sectorial sanctions could derail the company’s strategy in Russia, where it sources nearly one-third of its global oil production.

“‘Any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation,’ BP said on Wednesday, before the heavy-handed sanctions were announced.” (‘How sanctions will affect the West’s $35bn invested in Russian oil’, rt.com, 30 July 2014)

As the Russian economy began to climb out of the crisis that followed the collapse of socialism, its commodities markets attracted significant investment from western capitalists. A 2008 financial report published in the Guardian noted:

The critics say Russia’s economic boom is down to one thing alone – the surge in oil prices. The country produces nearly as much oil as Saudi Arabia and has huge untapped reserves. But Russia is not just rich in oil – it also sits atop extraordinary reserves of other minerals.

It has a commanding position in many metals markets, such as nickel, platinum and palladium, and produces nearly a quarter of the world’s uranium. It is also about to catch up with South Africa in the league of world gold producers.

Polyus Gold is a name few western investors will be familiar with. Yet it is already the world’s fourth-largest gold producer and is hoping a £1.2bn open-cast development of a huge new find in eastern Siberia will triple output and propel it to the top of the global rankings by 2015.

The company’s share price has gone from 981 to 1,545 roubles over the past year as the gold price jumped from $650 (£328) to more than $1,000 an ounce, although in recent weeks it has traded lower. Unlike other producers, Polyus did not ‘hedge’ its gold sales and has benefited directly from the price rise.

It is one of the largest holdings in Neptune’s Russia fund, and was spun out of Norilsk Nickel ... Like so many of today’s mammoth Russian companies, it was sold in the 1990s for a song by President Yeltsin to politically connected bankers.” (‘Why big guns back the new Russian revolution’ by Patrick Collinson, 24 May 2008)

In addition to oil, metals and other easy investment opportunities for western firms, Russia is also home to a sizeable consumer market for western goods. At present, Russia is Europe’s second-biggest consumer market; with 144 million people, it is expected to eventually become the largest in Europe. Between 2000 and 2012, retail spending in Russia grew at a compound rate of 20 percent every year. This extraordinary boom in consumer spending has run its course; the growth rate was down to about 5 percent last year. But the trend is clear.

Juan Zarate wrote recently that “Companies subject to western sanctions are making moves to circumvent the restrictions. Rosneft, the Russian oil company, is set to buy 30 percent of Norway’s North Atlantic Drilling, enabling it to access offshore drilling capabilities in the Arctic despite technology export bans and financial restrictions.

Meanwhile, Russian investors deepen their economic interests in London, Frankfurt and New York. And the Russian sovereign wealth fund will be tapped for billions of dollars to shore up necessary capital requirements for its banks hit by sanctions.

In June, it ended flows of oil and gas to Ukraine, and it is restricting exports to other European customers as winter approaches. The Kremlin has banned agricultural imports from countries that have participated in the sanctions. It has closed four McDonald’s restaurants, using health inspections as a pretext, and it is flirting with a national payment system that could replace Visa and MasterCard. Western airlines may find themselves unable to fly over Siberia, forcing flights to Asia to take big detours. American consulting and accounting firms may be prevented from operating in Russia.

Russia has more cards to play. It could cut off supplies of engines to the US space programme. It is a big exporter of titanium and other resources needed by western companies. Moscow could emerge as a sanctions-busting financial partner to a country such as Iran, at the height of nuclear negotiations. The Kremlin could also enlist criminal networks to attack the computer systems of western targets, including major banks.” (‘After the sanctions, prepare for the Russian counterattack’, ft.com, 24 September 2014)

When Moscow introduced its own sanctions on the EU this summer the corporate media was quick to play down the significance. Industry magazines however, paint a rather different story.

In addition to the value of the exports to Russia, there are also concerns about the fate of the money that has already been invested by British firms in the Russian market – particularly for agricultural businesses and similar industries.

Russia is a huge market for exports from the EU, receiving 1.5 percent of total milk production. That sounds small, but in light of the recent trade embargo it adds up to a billion-euro headache for producers. Dairy experts such as Mr Dillon believe the ban has two purposes: to penalise the West and to encourage investment in domestic dairy production, which has been chronically under-invested. ‘I think the Russians are calculating that the ban will invigorate their own industry, on the milk production and processing side,’ he says.

But given that Russia barely supplies half its own cheese consumption – the country accounts for about a third of all EU cheese and butter exports – filling the gap left by EU imports will take time.”(‘How to milk gains out of the dairy industry’ by Julia Bradshaw and Mark Robinson, investorschronical.co.uk, 20 August 2014)

Russia’s commercial power is nowhere near at the same level as that of the imperialist countries. Like China, Russia may well be an economic powerhouse; it may well export and import huge quantities of natural resources, fuel and materials to power its economy and turn the wheels of industry, but this is very different from the vast export of capital and superexploitation of the oppressed peoples that is carried out daily by Britain, the USA, France, Germany and Japan.

The sanctions that Russia has retaliated with have hit the EU economies hard, not only because they are currently heavily dependent on Russia for energy, but also because Russia is the market for a significant proportion of their agricultural and industrial exports. And now the EU and many of its national governments are feeling the pressure from both progressive mobilisations and significant sections of their ruling classes, whose business dealings are already being seriously affected by the sanctions.

It is the job of communists in the imperialist countries to expose the lie being pushed in the West that Russia and the rest of the BRICS countries (Brazil, India, China, South Africa) are at worst expansionist powers threatening world peace and at best irresponsible polluters of the world’s seas, rivers and forests. This propaganda is eagerly lapped up by liberals and Trots who, as ever, are all-too willing to find common ground with imperialism; sharing as they do the bourgeoisie’s world outlook.

In any war waged against Russia and China, we will stand firmly on the side of those countries that oppose imperialism, and against the aggressive, expansionist warmongering of the actually-existing imperialist powers, including and especially our ‘own’ imperialists in Britain.

In order for British workers to understand what is really going on in the world, and to help them cast aside the blinkers created by corporate propaganda and come down on the right side of history, it is the job of progressive people to expose the imperialist-imposed sanctions regimes for what they really are – a weapon of mass destruction in their own right, and a prelude to a shooting war.

By spreading such understanding, we hope to prepare ourselves and our class for the coming world war, with the aim of either preventing the war completely or of turning it into a civil war here in Britain. Ultimately, our goal is to transform the imperialist drive to war for plunder abroad into revolutionary upheaval for liberation and the birth of socialism at home.
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