By Tom Fowdy
"We want to make clear here today that no one is above the reach of U.S. sanctions," boasted US Secretary of Treasury Scott Bessent, vowing to launch "an economic onslaught against Iran's financial connections around the globe, in what has been described as "Operation Economic Outcast." The operation is described as a campaign of secondary sanctions which will be designed to pressure countries and businesses to cut financial ties with the Islamic Republic of Iran in order "to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone."
The newly hyped sanctions operation is a subtle admission of the failure of "Operation Epic Fury", wherein the Trump administration at the beginning of this year attempted to military force a regime change in Tehran. The war quickly proved to be a catastrophic misjudgement which imposed severe costs on the US and the rest of the world. Peace negotiations attempting to end the war failed because Iran held too much leverage to capitulate to US demands, leading to the current situation. As I wrote last week, this isn't an innovative new strategy at all, but is the product of failure and desperation.
While the US dollar remains the world's most powerful currency, and no serious commercial or financial institution can afford to be excluded from it, its utilisation as an economic weapon is increasingly dated in the current geopolitical environment and attempts at overreach will only promote further hedging. The emerging international order is a "Multipolar" one, which is described as a world where there are multiple, competing great powers as opposed to just one (unipolar) or two (bipolar).
In a multipolar system, international law, order, and rules become contested and fragmented as many states seek to enforce their will, which subsequently creates insecurity and accelerates a push to secure national sovereignty. While unipolar and bipolar systems, such as the Cold War order (US vs. USSR) or the post-Cold War order, see states more readily submit to superior powers in order to affirm their security, multipolar orders provide much less guarantee of stability, and this incentivises behaviour of states to "survive by playing the game" by maximising capabilities.
This scenario describes the current world climate, wherein the world has become multipolar for the first time since pre-1945. While the United States is a very powerful incumbent power, the international system has changed due to the rise of China, India, a revisionist Russia, but also the rise of the global south with many middle power states likely to emerge in the coming decades such as Vietnam, Indonesia, Nigeria, Bangladesh, Pakistan, etc. While we are nominally used to imagining these countries as poorer, we should recognise they have extraordinarily large population bases, and when they become more developed, their capabilities may far outstrip legacy Western countries, and will without a doubt become economic engines of the future.
The United States of course, has based its entire foreign policy premise on remaining as the "core" of the global economy in key sectors, and while we should not be naïve in assuming it will go "anywhere", one must ask, as the world's economy develops and diversifies, will other countries readily accept Washington being able to use its financial power in order to unilaterally intervene in their own domestic affairs? Or to harm their national interests? The question has already long been answered, and the answer is "no." While there are many sceptics of de-dollarisation, due to the economic difficulties of doing so, it nonetheless has become an increasing sovereign imperative of states to seek alternative systems and payment mechanisms. After all, one must ask, if you do not have sovereignty over your own payment systems or who your country can trade with, do you really have sovereignty at all?
Many countries have watched how, over the years, the United States has demonstrated its ability to completely cripple the economies of target countries simply through the utilisation of dollar sanctions, which in turn render every single form of transaction, or trade-related service, unusable. In Syria, this went as far as causing famine. One does not have to be a target of the US to see the potential trouble in this. Of course, some countries have economic leverage of their own to the point that widespread dollar blacklisting would actually have the reverse impact of harming the United States itself, which is why Washington has been traditionally cautious of using it against Beijing in any broad way.
This of course also shows us that as the global economy diversifies, America's leverage will become less punishing. It might be easier to cripple a small economy, such as Syria, or to isolate a regime like North Korea, but we can already see from the Ukraine war how such sanctions cannot even cripple a relatively large economy, provided they have commodities and assets to back up their economy, such as Russia. Who can forget how EU President Ursula Von der Leyen infamously vowed to "cripple" Moscow's "global exports" in 2022? There's a warning story here.
So thus while I do not deny that Washington's sanctions against Iran, in place for years already, are extremely damaging, there is a certain hubris here on the assumption that such unilateral sanctions can feasibly bring down the regime or hold the kind of worldwide enforcement UN ones were capable of against Saddam Hussein's Iraq (a textbook example of how unipolar and multipolar era coordination differs). Instead, this war is going how I forecasted it to be, a long, cold, and unresolved stalemate lasting years. We are merely hearing about such a sanctions campaign precisely because the President has midterms ahead and cannot accept the humiliation of a defeat. It is purely to give the "appearance" of doing something and having the initiative, as opposed to being a solution, and global receptiveness to American unilateral sanctions will continue to follow inasmuch as states continue to acquire leverage of their own.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Tom Fowdy:
Opinion | Trump's 'Economic D-Day' for Iran is more like 'Don't have a clue' day
Opinion | Are Trump's latest threats to South Korea another 'nothingburger'
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