Economic Warfare: Sanctions and Trade Embargoes as Tools of Modern Conflict

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Economic tools, including sanctions, trade embargoes and financial restrictions, are increasingly central to modern conflict, forming a parallel battleground to military operations. These measures, aimed at achieving political objectives, can reshape global economic strategies and impact civilian livelihoods.

The use of economic measures in modern warfare includes financial and trade sanctions, asset freezes, and restrictions on access to international banking systems. Embargoes, both comprehensive and partial, are also employed to disrupt essential supplies of food and energy. Tariffs and secondary sanctions can penalize entities that continue to engage with targeted nations.

Some powers manipulate currency by restricting access to foreign reserves or pressuring exchange rates, targeting global supply chains, and controlling investment flows. This transforms the economy into a theater of engagement alongside military actions.

According to historian Nicholas Mulder, the concept of the “economic weapon” is intended as a deterrent, threatening targeted countries with complete isolation from trade and finance, thereby imposing significant social and economic costs. In his book, “The Economic Weapon: The Rise of Sanctions as a Tool of Modern War,” Mulder explains that this approach is more than symbolic punishment.

U.S. President Woodrow Wilson described sanctions in 1919 as “something more terrible than war,” isolating and stifling a nation without firing a shot. Mulder traces this idea back to the naval blockade imposed by Britain and its allies on the Central Powers during World War I, which led to the exhaustion of targeted societies and weakened their ability to sustain themselves.

Historical experience, however, indicates that this weapon does not always function as intended. Economic pressure applied against Fascist Italy, Nazi Germany, and Japan in the 1930s did not prevent escalation. Instead, these measures accelerated policies of self-sufficiency and regional expansion to secure resources such as coal, iron, grains, and oil. In these instances, sanctions shifted from deterrents to catalysts for the realignment of economic strategies.

The United States and the European Union have imposed strict financial restrictions on Iran since 2006, targeting its banking system and oil exports, leading to economic contraction and a sharp decline in the local currency. Following its annexation of Crimea in 2014, Russia faced extensive sanctions, which expanded after the war in Ukraine to include the freezing of central bank reserves and the exclusion of banks from the SWIFT international payment system.

China has also leveraged its trade influence to penalize countries perceived as politically adversarial, imposing restrictions on agricultural or industrial imports, as seen with Australia following diplomatic tensions. The trade war between Washington and Beijing exemplifies the shift of conflict to tariffs, supply chains, rare earth minerals, and semiconductors.

These instances demonstrate that the economy is no longer merely a backdrop to conflict but a primary arena. Currency, credit, energy, and technology are deployed as weapons of pressure, rivaling the impact of hard power tools. This reflects a transformation in the function of the economic weapon within the arsenal of major powers, serving as a tool of pressure alongside military engagements or security threats, rather than a complete substitute.

According to Mulder’s analysis, the economic weapon carries a structural paradox. Its strength lies in its ability to exert broad and coordinated pressure, but its effectiveness diminishes as it becomes a routine tool. Limited sanctions often fail to effect substantial political change, while comprehensive sanctions may drive targeted countries to adopt counter-strategies, such as diversifying trade partners, enhancing self-sufficiency, or developing parallel financial and trade systems.

Overuse of this weapon may accelerate the fragmentation of the global economic system into competing blocs, undermining the interconnectedness that has underpinned globalization in recent decades.

Economic researcher Mustafa Youssef contends that the economic weapon has become one of the most effective tools in modern warfare, as the economy represents the “lifeline” of any country engaged in conflict. He points to the 1973 oil crisis as evidence of the ability of economic tools to effect broad strategic shifts through supply cuts and trade restrictions.

Youssef adds that the sanctions imposed on Russia during its war on Ukraine have contributed to the exhaustion of the Russian economy. The freezing of assets and restrictions on financial transactions have placed significant pressure on the ruble and public finances, forcing Moscow to redirect its oil exports and offer discounts to maintain its market share. Control over raw materials and technological restrictions, such as limiting semiconductor exports to China, are strategic pressure tools aimed at slowing industrial and military development.

Political economy professor Abdel-Nabi Abdel-Muttaleb argues that the economic dimension is the most critical pillar of any military operation, asserting that many wars throughout history have been primarily motivated by economic gains or control over resources. He notes that policies raising tariffs and imposing trade restrictions in Europe contributed to the deepening economic imbalances that paved the way for World Wars I and II.

In contemporary conflicts, Abdel-Muttaleb explains that economic constriction and threats to livelihood security can trigger conflict, as in the Palestinian situation, where restrictions on economic activity, land confiscation, and limitations on agriculture and fishing have led to a state of tension linked to economic security.

Regarding the Russia-Ukraine war, he emphasizes that sanctions have been a major pressure tool, with the Russian ruble initially declining from about 80 rubles per dollar to nearly 120 before regaining some stability. The gross domestic product has also been affected by restrictions on oil and the financial sector.

Abdel-Muttaleb concludes that directing resources toward war efforts in conflicts negatively affects development paths within warring countries, rearranging spending and investment priorities away from civilian sectors.

In light of these factors, economic warfare appears to be a central tool in managing modern conflicts, reflecting a gradual shift from direct military confrontation to a protracted struggle over the joints of the global economy, with its effectiveness remaining contingent on its ability to achieve clear political objectives without causing humanitarian and economic repercussions that are difficult to contain.