On the latest episode of The President’s Inbox, Jim sat down with Edward Fishman, a senior research scholar and adjunct professor at Columbia University and author of Chokepoints: American Power in an Age of Economic Warfare, to discuss the United States’ expanded use of financial and trade sanctions in recent years and whether they have enabled Washington to accomplish its foreign policy objectives.

Here are three highlights from their conversation:

1) Conventional wisdom held that sanctions were a poor tool of statecraft. Trade embargoes failed to prevent Italy’s invasion of Ethiopia in 1935 or force the Soviet Union’s withdrawal from Afghanistan in the 1980s. From 1990 to 2003, the UN-backed sanctions on Iraq did not alter Saddam Hussein’s authoritarian policies or trigger regime change. These historical precedents shaped a narrative that sanctions were weak instruments, overshadowing rare successes like sanctions on apartheid-era South Africa. As Eddie put it, “The belief was that sanctions were costly, had humanitarian challenges, and frankly did not work.” As a result, policymakers often treated sanctions as symbolic gestures rather than strategic tools.

2) Globalized international finance gave the United States greater leverage to pursue economic warfare. By the 2000s, the increasing interconnectedness of the global financial system, coupled with the dominance of the U.S. dollar, allowed Washington to shift from traditional trade embargoes to more targeted and potent financial sanctions. This new form of economic coercion, pioneered by officials in the George W. Bush administration such as Stuart Levy, leveraged U.S. control over the dollar itself. By restricting access to the U.S. banking system and dollar-denominated assets, the United States could effectively cut off individuals, institutions, and entire countries from international trade and finance. Eddie explained: “What Levy discovered was that the global financial system itself was a choke point—and the U.S. controlled it." When Iran restarted its nuclear weapons program in 2005, the United States blocked dollar transactions and pressured global banks to sever Iran’s access to crude oil markets. By 2012, crude sales had been cut by 60 percent, plunging Iran into recession. Eddie argues that this economic pressure brought to power in Tehran reformist leaders willing to negotiate the 2015 nuclear deal. However, while U.S. sanctions can harm adversaries’ economies and potentially force them to the negotiating table, they may not produce major policy changes by themselves. The nuclear deal merely paused Iran’s nuclear progress, and financial sanctions against Russia and Venezuela have caused great economic damage without preventing territorial aggression from the former or restoring free and fair elections in the latter.

3) The growing use of U.S. trade and financial sanctions tactics may bring diminishing returns. Sanctions are not silver bullets, and Eddie argues that they are overused and underenforced. The United States and Europe imposed sweeping sanctions on Russia after its 2022 invasion of Ukraine and froze $630 billion in Russian assets. However, delays in targeting oil sales and secondary sanctions gave Moscow time to reduce its dollar reliance and secure alternative financing for its war. Beyond deterring aggression, the United States increasingly employs export controls and tariffs, targeting China to hinder its technology development and Canada, Mexico, and Europe to get policy changes and secure trade concessions. Eddie warned that “the more the U.S. weaponizes its economic power against everyone—even allies—the more incentive there is to diversify away from the dollar." Iran, Russia, and North Korea have already reduced dollar reliance while China has built out the infrastructure for yuan-based transactions, prompting regional powers to consider their own vulnerabilities. If this trend continues, U.S. financial sanctions will lose power, eroding America’s ability to exert economic pressure and limiting options to confront its adversaries.

If you’re looking to learn more from Eddie, check out his recent article in The Atlantic about the U.S. failure to deter Russia’s invasion of Ukraine, “How America Wasted Its Most Powerful Economic Weapon.”