How the United States turned the world economy into a battlefield

We’ve all experienced the illusion of knowledge. This cognitive bias leads us to walk around overconfident in the depth of our understanding of how the world works. We believe we know how zippers zip, the internet connects, and local politics work until someone asks us to explain. We then suddenly find ourselves fumbling for an answer that sounds plausible.

This happened to me last year when my son asked me to explain sanctions. I’ve been reading about them in the news for most of my adult life. Sanctions imposed on Iran to ice its nuclear program. Sanctions on Russia for invading Crimea. Sanctions on Venezuela for anti-democratic corruption. The list goes on, yet I barely stammered a respectable answer: “They’re economic penalties placed on a country to compel it to change something. I think they mostly have to do with the oil. So boats are probably involved … somehow. Maybe pipelines, too.” 

Okay, not exactly respectable, and truth be told, I left out the more embarrassing fumbles. Still, we don’t know what we don’t know until we know, you know? Thankfully, a good book provides a brilliant way to dispel the illusion of knowledge, so when I was given the chance to read Edward Fishman’s new book, Chokepoints: American Power in the Age of Economic Warfare, I took it.

Fishman’s book tells the story of how the United States turned the world economy into a battlefield by developing the economic weapons necessary to win international struggles before they expand into shooting wars. A leading authority in economic statecraft, Fishman works today as a professor at Columbia University’s School of International and Public Affairs; however, earlier in his career, he worked at the U.S. Treasury Department as a special assistant to the Under Secretary for Terrorism and Financial Intelligence at a time when the new rules for economic engagement were being written.

After reading his book, I sat down to talk with Fishman about this new age of economic warfare and what it means in our increasingly fractured, yet still globalized, world.

Economic warfare from Bosphorus to Baghdad

In defense of my stammerings, Fishman’s book opens with a boat. Many, in fact, all waging war across the 5th-century Aegean Sea. The skirmish pitted Athens against their Spartan rivals and marked the decisive moment in the 27-year-long Peloponnesian War.

With backing from the Persian Empire, which saw Athens as a mutual adversary, the Spartan leader Lysander constructed an armada large enough to destroy the ostensibly invincible Athenian navy. He then sailed victoriously to Lampsacus, a city strategically located on the Bosporus Strait. There, he seized the city and cut Athens off from the trade routes it relied on for its food supplies.

“The Bosphorus had been the Athenian’s lifeline, and the Bosphorus was where their empire met its demise,” Fishman writes.

The strait proved to be a chokepoint for the ancient Greek city-state — an economic gateway so critical that, as Fishman notes, “controlling it confers immense power” while “blocking it can bring your enemy to its knees.” Such chokepoints not only inspired Fishman’s title; they also served as the focal points of economic warfare for millennia. The Siege of Tripoli in the 12th century, Great Britain’s blockade of its rebellious colonies in the 18th century, the Union’s blockade of the rebellious South in the 19th century, and German U-boats prowling the Atlantic in the 20th century, all represent attempts to locate and squeeze a rival’s chokepoints in times of war.

And that’s how economic warfare went even up to the 1990s. To enforce international sanctions against Iraq for its invasion of Kuwait, U.N. coalition ships parked outside the country’s ports. For 13 lengthy and costly years, crews painstakingly inspected ships for banned goods. The most significant strategic update: Unlike in Lysander’s days, enforcement involved fines and impoundments rather than public executions in the city square.

As with so much else, everything changed after the 9/11 attacks. Iran’s efforts to develop a nuclear bomb stoked fears in Washington, yet the U.S. had already launched wars in Iraq and Afghanistan. The prolonged conflicts stretched the country’s willingness to enter another battlezone thin — and its credibility thinner after its justifications for Iraq proved unfounded. Meanwhile, Iran was getting closer to its goal.

“America was the most powerful country in the world, but here we were fighting these wars that were costing a lot of blood and treasure, but we didn’t have much to show for it,” Fishman said during our conversation. The prevailing question in some Washington circles became: “Is there another way for the U.S. to exercise its power and potentially get what it wants more effectively, cheaper, and less violently around the world?”

The Iron Bank of Davos

Enter Stuart Levey, a lawyer at the Justice Department who would go on to become the Treasury Department’s first undersecretary for terrorism and financial intelligence. Levey recognized that the 60 years since World War II had left the U.S. in a historically remarkable position. Its dollar had become the world’s reserve currency and the lifeblood of global trade. That and a lack of equally powerful geopolitical rivals gave the U.S. immense economic sway.

In hindsight, Levey’s plan seems obvious. The U.S. would go beyond sanctioning a few visas here and embargoing a specific export there. The country would also persuade the world’s banks to cease their business with Iran. CEOs would be shown declassified information about how Iran funded its nuclear program and terrorist proxies. They would then be given a choice: Cut ties with Iran or lose access to the all-important American dollar. The endgame was to isolate Iran from the international financial system and weaken the country’s economy. If enough economic pain accumulated, Iran would be compelled to negotiate without a single shot fired.

As Fishman writes: “Trying to navigate the global economy without access to the dollar is like trying to travel the world without a passport. […] The dollar’s importance in the global economy gave the United States a chokepoint of unparalleled strategy value.”

Of course, enlisting the private sector and other countries to support Levey’s plan would be no simple task. From this jumping-off point, Fishman’s book begins in earnest — though not in the way you might expect. His is no cold financial analysis nor a whittling down of the history to shape a clear moral lesson. Instead, Fishman chronicles the pivotal moments in this new era of economic warfare — from the Iranian sanctions to those imposed on Russia for its invasion of Crimea and the technological freeze-out of Huawei — by following the public servants who built America’s economic arsenal.

Yes, the odd graph makes an appearance (you get the sense talking with Fishman that he isn’t one to say no to a curvaceous area chart). But it’s the people behind the scenes who take center stage. The book even features a cast of characters that wouldn’t feel out of place in the appendix of a George R.R. Martin novel. It’s a welcomed inclusion given how many people come in and out of the various stories.

Readers explore this history through the eyes of people like Levey, David Cohen, and Daleep Singh. Thanks to Fishman’s thorough research and personal interviews, readers experience the dismay of an emerging complication, the relief of a long-delayed victory, or the frustration of a thwarted plan. These details create the atmosphere of a backroom political thriller without tipping into full-on drama. It remains a history book to its core.

Through this narrative choice, Fishman aims to demystify the confusion surrounding our new age of economic warfare for a wider audience. A more traditional analysis may give readers the knowledge to pass a multiple-choice test on these events. However, Fishman doesn’t want his readers to merely know the history of this new economic arsenal. He wants them to understand the people who built it and why they made the decisions that led history to play out as it did.

“It is very easy to go back and look at something that happened 10 years ago and say, “Oh, they were so stupid,’” Fishman says. “But the key thing is empathy. You want to understand what people knew at the time and the different competing pressures they were under. I thought that was the best way to tell the story in an accurate and engaging way.”

A poor statesman who blames his tools

Fishman is no polemicist, though. His goal isn’t to paint the U.S.’s economic arsenal as the savior of the free world nor as the smoking gun of an overreaching police state. He treats them as policy tools, pure and simple. Used wisely, they can prevent conflict from escalating into a war or humanitarian crisis. Used carelessly, the same tools can intensify international strife and weaken the case for bargaining.

To help me better understand the nuances, I asked Fishman what he considers an effective sanction versus an ineffective one. For him, the Iranian sanctions (2005–15) demonstrate economic warfare at its best. The goal wasn’t “economic pain for pain’s sake” but to target the precise pressure points that would successfully translate into diplomatic gains and eased tension.

“By the time Iran held a presidential election in 2013, their economy was reeling from these sanctions, and they effectively elected a president whose platform was, ‘We need to get the sanctions lifted.’ That led to [an interim] deal in late 2013 to freeze Iran’s nuclear program. This program, which had been inexorably advancing for almost a decade, is frozen without military force or a single loss of life in the United States.”

The Iran deal showed that sanctions could work and work effectively, ushering in what Fishman calls the “new age of economic warfare.” Over the last 25 years, each administration, Democrat and Republican, has roughly doubled the amount of sanctions as its predecessor. And if the first month of the second Trump administration is any clue, it may be more than double again by the time the next administration rolls in.

“You got a situation where officials at the Treasury or State Departments could sign a few documents and impose sanctions that were much more dramatic and impactful than when you used to park a ship outside someone’s port,” Fishman says. “It both supercharged the impact of sanctions while lowering the barriers to using them.”

Low barriers made applying unwise sanctions, including those imposed during the Venezuela crisis, easier. These sanctions began through congressional legislation during the late Obama administration and escalated during the early Trump years. The goal seemed to be repurposing the economic weapons used successfully against Iran and Russia to punish President Nicolás Maduro for his corrupt regime and violating human rights.

To be sure, Maduro is an authoritarian. He has been accused of stealing elections, committing crimes against humanity, and pursuing policies that have worsened the country’s already fraught economic troubles. However, sanctions have proven an ineffective tool for initiating regime change. As Fishman points out, leaders cut from such a cloth “are not going to commit political suicide to obtain sanctions relief for their people.” Instead, most of the blowback was felt by the very people Maduro oppresses, which only intensified the humanitarian crisis by further impoverishing the general population and arguably strengthening Maduro’s dictatorial grip.

“That’s when you run into real problems with sanctions: economic pain devoid of any realizable political objective,” Fishman adds. 

Big stick-and-carrot ideology

Fishman’s other hope for the book is to give readers the knowledge necessary to dispel their illusions and discuss these issues reasonably. That’s important because this new age of economic warfare won’t end soon. It’s just getting started, and as the last American election cycle made clear, things like sanctions, tariffs, and export controls will be at the forefront of foreign policy. 

“This is how great powers compete today,” Fishman says. “It’s not just the United States using these tools; it’s adversaries like China and Russia, and our allies like Europe and Japan. It’s paramount that we understand these tools because they are only going to become more important in the years ahead.”

Looking toward those years, I asked Fishman what might be in store as we leave the kumbaya geopolitics of the 1990s behind us. He envisions two potential scenarios. 

In the first, the United States strengthened its relationships with its closest allies: Canada, Mexico, Japan, and the European Union. Although the world economy has become far less globalized, integration remains vital. This future requires tending economic carrots to go along with our sanction sticks, and on that front, Fishman sees mixed signals.

The current Trump administration has proposed creating a sovereign wealth fund and supporting the country’s International Development Finance Corporation. However, the same administration has paused foreign aid and has gutted the Agency for International Development (USAID). That’s worrisome because not just economic weapons win wars before they begin. Disaster relief, development assistance, trade agreements, and environmental protections also help keep other states from tipping toward disaster while spreading diplomacy and American soft power.

This is the very reason President John F. Kennedy gave for creating USAID. As he said in 1962: “The people who are opposed to AID should realize that this is a very powerful source of strength for us. It permits us to exert influence for the maintenance of freedom. If we were not so heavily involved, our voice would not speak with such vigor. And as we do not want to send American troops to a great many areas where freedom may be under attack, we send you.”

It’s the second scenario that keeps Fishman up at night. Policymakers continue to “shoot from the hip” and use their economic arsenal to respond haphazardly and shortsightedly to crises without strategic planning. In this future, mistakes will pile up, tensions will escalate, and competition will spill out from the backrooms and spreadsheets.

“I worry about this not just for the economic reasons, and I think there would be significant inflation, unemployment, and economic pain,” Fishman says. “But I worry about it for the broader geopolitical ramifications because, as history has shown, if states can’t secure markets and resources through free trade, the temptation of conquest and imperialism will rise. I worry that today’s economic wars could become tomorrow’s shooting wars.”