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00:03Tonight, we're taking a look at the use of sanctions as a tool in war.
00:07The U.S. has long used sanctions against its adversaries,
00:10and Iran has retaliated to the U.S. in Israeli airstrikes by shutting down the Strait of Hormuz.
00:16Given that 20 percent of the world's oil moves through that critical waterway,
00:20the partial blockade of the Strait can be seen as a way of imposing economic sanctions.
00:24We'll have more on that in just a minute with our guest.
00:27But first, let's get the latest from Delano D'Souza.
00:32An abrupt reversal from Donald Trump as his own deadline for Tehran to reopen the Strait of Hormuz was fast
00:38approaching.
00:39The U.S. president now says he's delaying targeting Iranian energy infrastructure for a five-day period,
00:45following productive conversations to bring the war to an end.
00:49They called. I didn't call. They called. They want to make a deal.
00:53And we are very willing to make a deal. It's got to be a good deal.
00:56This will be peace for Israel. Long-term peace. Guaranteed peace.
01:01Trump didn't specify who Washington was in touch with, and Tehran denies talks are taking place at all.
01:07What is certain, however, is Trump changed his tune hours after a statement from the IRGC was carried on state
01:13media warning of a tit-for-tat.
01:16Tehran threatened to go after power plants in regional countries if its electricity infrastructure was hit.
01:22Since the U.S. and Israel began the war, Iran has been lashing out at Israel, striking targets across the
01:28Gulf, and closed off the Strait of Hormuz.
01:31Cutting the vital waterway has taken the global economy hostage, and efforts from Washington to secure it have backfired.
01:38According to a report in Axios, the U.S. president has been mulling taking over Iran's Karg Island to pressure
01:44authorities to loosen their grip on Hormuz.
01:47The rocky outpost off the coast of Iran is viewed as the crown jewel of its energy infrastructure, and over
01:54the weekend, officials in Washington refused to rule it out.
01:57Karg Island, I want to ask you about your statement. You said it could become a U.S. asset. What
02:02exactly does that mean? Could U.S. troops go into Karg Island to secure it?
02:07Again, as I said, all options are on the table.
02:10Iran's Defense Council says Tehran would respond to any attack on its coasts or islands by laying sea mines in
02:17shipping routes across the Gulf.
02:18While the Islamic Republic has so far refused to capitulate, the latest move from Donald Trump suggests the U.S.
02:25president could be looking for an off-ramp.
02:30And for more on this, I'm joined by Nicholas Mulder, an assistant professor at Cornell University and the author of
02:35The Economic Weapon, The Rise of Sanctions as a Tool of Modern War.
02:40Thanks for being with us here on France 24. You argue that Iran's actions in shutting down the Strait of
02:46Hormuz are much like Trump's tariffs.
02:48In other words, the Iranians are speaking a language he understands, using economic punishment as a tool.
02:55Can you just explain that some more?
02:58Yes, absolutely. And thank you for the invitation.
03:00So I think that the way to understand the effective blockade of the Hormuz Strait that Iran has imposed since
03:08the beginning of this war is as a way of retaliating against an American and Israeli attack that targets those
03:17adversaries in an asymmetric way.
03:19It also, of course, imposes costs on the entire world economy.
03:23And one of the things that we've seen in the last year of the second Trump administration is that the
03:28Trump administration is particularly sensitive to pressure from the markets, be that the bond markets, but also increasingly stock markets
03:36and oil markets.
03:38And I think that the actions that they have displayed in the last few days have really shown that they're
03:43trying to exert through a lot of statements, downward pressure on the oil price, trying to reassure people that there
03:50will be an imminent resolution.
03:52Whereas, in fact, what is happening materially is a huge supply interruption in the energy markets.
03:57And that has very big downstream effects that we're going to be experiencing to an ever greater degree in the
04:02next few weeks, as they also have big ramifications in industrial materials and in food.
04:08So that's really the way that Iran has begun to use the closure of the Strait of Hormuz as a
04:13form of economic pressure against its opponents.
04:16In general, how effective are sanctions as a tool?
04:20You know, especially during a time of war, you seem to indicate here that this has been effective for Iran
04:24shutting down the Strait of Hormuz.
04:28Well, it's, of course, a weapon of last resort.
04:30Iran has long threatened to do this if there was going to be a serious war.
04:33The possibility that it would happen had been anticipated in a lot of studies of the war, but it seems
04:39like it didn't factor into the decision-making of the people who began this war three weeks ago.
04:44Now that it has happened, of course, the question is, will that pressure be enough?
04:48Can the American administration exert some sort of counterpressure to reassure the markets?
04:53And they've been doing so with some effectiveness the last few days.
04:57But ultimately, like I said, the physical shortages that are already taking place as a result of this war are
05:03going to translate into serious shocks in a variety of markets.
05:08The issue, however, is also that Iran is hitting a number of other countries with these forms of pressure.
05:15And so they will find themselves in a very difficult situation, developing economies, all sorts of other states that will
05:21suffer higher energy prices.
05:23The question is whether they can translate some of their pressure that they're experiencing into an increasing influence over the
05:31Trump administration.
05:32So far, it doesn't seem to be the case, but there might be ways that allies can come together and
05:37exert more pressure than they have been doing so far, at least.
05:41Now, this is a joint military operation between the U.S. and Israel.
05:44And there's a sense that the Israelis are much more willing to endure economic pain as this war goes on,
05:50more than the Americans.
05:51Is it your sense that there are limits to how much Donald Trump will allow in terms of economic pain?
05:59Certainly. And he's, of course, aware of the fact that his base is something to be managed.
06:05The administration has already imposed quite a serious cost on the American consumer by launching this huge trade war since
06:12the spring of last year.
06:13Now, on top of this, to have a historic energy shock is an extremely politically risky proposition.
06:18And I think that they're well aware of that.
06:20The issue is that they're running out of options with which to easily resolve it.
06:24So they managed to cushion some of the blow of tariffs with a big tax cut.
06:30Now, however, they have also tried to offset the energy shock effect with a very big release from the Petroleum
06:36Reserve.
06:37And they've also begun to lift sanctions on Russia and on Iran, not entirely, but for oil that is already
06:43out on the global ocean.
06:45And that really shows that there are limits to the degree that the U.S. can tolerate economic blowback from
06:51its own sanctions and that, indeed, it will have to or at least feels like it has to undo and
06:57dismantle some of its sanctions against other countries.
07:00So one of the things that we're going to be seeing, I think, going forward is as the U.S.
07:04tries to put more pressure on these states, it faces increasingly difficult tradeoffs.
07:08And it cannot do all these things at the same time.
07:11And that's something that this war has really shown to a very significant degree.
07:15Yeah, you mentioned this sort of strange twist of irony that the U.S. has actually eased sanctions on Iranian
07:20oil, which has already been shipped and is at sea.
07:23That moves appear, appears to be an attempt to ease the pressure on the oil market.
07:28But how do you read that in strategic terms?
07:32Well, I think initially it became clear that once there was a very large release from the strategic petroleum reserve,
07:39it was not immediately the case that traders felt reassured by that.
07:43In fact, because that release was so large, it seemed to be an indication that this was actually a very
07:49serious crisis.
07:50So there was further upward pressure on the oil price.
07:52Now, the American government is effectively treating the shadow fleets, which Venezuela, Iran and Russia have all been using in
08:00the last few years to evade and get around American oil sanctions.
08:05They're using that shadow fleet as a kind of extension of their own strategic petroleum reserve.
08:09And one of the things that you are also seeing is that China, of course, is important in this, both
08:16as a consumer of oil.
08:17So a lot of that Iranian and Russian oil will now find an uptake in China, but also in India
08:22and other Asian markets.
08:23But China has also shown that it is capable of using economic pressure itself.
08:29And that brings us back to the tariff events of last year, because China was one of the major countries
08:34that showed not only that it wouldn't yield to American tariff pressure, but that it had its own instrument with
08:40which to retaliate in the form of export controls on rare earths.
08:43So both Iran and China in various ways have shown that the United States no longer really has a monopoly
08:48on the use of this economic coercion and that they have very physical ways, whether that be rare earth materials
08:55that are incredibly important in industry or a global energy price shock as tools that they can use to exert
09:01countervailing pressure.
09:02You mentioned Trump's tariffs.
09:04You know, there were countries who capitulated and those that didn't to those tariffs.
09:08As you take a step back and take a look at that, what's the lesson for countries that were facing
09:14threats from Donald Trump, that it's better to resist or to give in?
09:20Well, I think that we can see from the record of the last year which countries have done best.
09:25The countries that chose a trade deal very early have not obtained any relief.
09:29In fact, the Trump administration has come back for more.
09:32It's demanded a say in weakening their domestic regulation, whether that's on AI or data protection.
09:37It has continued to exert pressure, particularly on the EU, which thought that it could avoid tariffs by having a
09:44quick deal, right?
09:45Low tariffs in exchange for pleas to invest more in the United States.
09:50And what we've seen is, in fact, that the United States has continued to threaten European countries, including Denmark, with
09:56the annexation of territory.
09:58That's only two months ago that that took place.
10:01So we see that countries that have quickly yielded, in fact, invite further pressure, whereas those that have not yielded,
10:09notably India, but also Brazil, China, and a number of other countries, have, in fact, done relatively well, much better
10:16than many people had assumed that they would.
10:19So one of the lessons is that there is safety in numbers.
10:22I might add Canada and Mark Carney's very clear spelling out, right, of a middle power strategy to avoid this
10:30pressure.
10:31As another example, that seems to be a much more promising way forward.
10:35And I think finally, leaders in other countries are beginning to realize that there is strength in numbers.
10:40But there has to be some sort of common approach to dealing with this pressure.
10:43If sanctions don't work effectively as a tool, what does?
10:47Is it that we just have to go back to good old-fashioned diplomacy?
10:52Well, there needs to be a whole range of options.
10:55And the difficulty and problem is that sanctions have became the foreign policy tool, really a first resort for the
11:02United States for a long time.
11:04Now it seems like this administration also has embraced open, direct war again and military action as an alternative.
11:10But the European Union as well has, since the Russian invasion of Ukraine, of course, embraced economic pressure as a
11:17way of compensating for the fact that it doesn't have a very strong conventional military army, at least in relative
11:23terms.
11:24So as a result of that, a lot of faith was placed in sanctions.
11:28And sanctions can, under certain circumstances, achieve things.
11:32They're better than a lot of alternatives.
11:33But they have serious drawbacks.
11:35One of them is that they have these second-order effects.
11:37They oftentimes have unintended consequences.
11:41Oftentimes, they don't work very quickly.
11:43And in the long run, they can actually harden the attitudes of the target states or even bring together different
11:49countries that are all exposed to them.
11:50And that's one of the things that U.S. sanctions have done over the last few years.
11:54They've driven closer together, China and Russia, two countries that, in fact, have many points of disagreement.
11:59And rather than trying to deal with these countries by themselves, American sanctions have really forced them closer together and
12:06also brought Iran, Venezuela and other countries into that coalition, North Korea as well.
12:12So this has, in fact, created more problems.
12:15And diplomacy, ultimately, is a very important key to this.
12:19Sanctions can play a role together with diplomacy.
12:21And the best proof of that was in 2015 when the Obama administration negotiated a very successful nuclear deal using
12:29sanctions pressure and then credibly delivered sanctions relief.
12:32The problem is that that credibility of offering sanctions relief now has been weakened dramatically.
12:38And that's one of the reasons why we find ourselves in this really tragic and calamitous situation of a major
12:44shooting war and a global energy crisis.
12:46Okay, we'll have to leave it there.
12:47Nicholas Mulder, assistant professor at Cornell University and author of The Economic Weapon, The Rise of Sanctions as a Tool
12:53of Modern War.
12:54Thanks for being with us here on France 24.
12:56We appreciate your insight.
12:58Thank you very much.
12:59Thank you very much.
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