Book Notes: Chokepoints

[Chokepoints: American Power in the Age of Economic Warfare by Edward Fishman (2025).] There are different ways state A can make state B do something that the state B doesn’t really want to do. In the extreme, state A can attack state B. But wars are messy: people die, they can get expensive, and they aren’t really good PR, so the states usually shy away from them nowadays. More commonly, they resort to economic warfare: stuff like sanctions, blockades, or tariffs. However, history shows that wielding economic warfare properly used to be tricky, because it usually a) requires cooperation of multiple actors, b) requires a naval blockade, which is not that far from waging an actual war, c) tends to be costly not only for the targeted countries, but also the ones who start it, and d) doesn’t guarantee that the intended goals will be achieved and can even backfire. Of course, these points also apply to waging an actual war, but they did not disappear when the mode of coercion changed. As the world became much more interconnected in the years following the collapse of the Soviet Union, new areas in the world economy emerged where some states hold outsized influence, as the rest of the world depends on the part of the ecosystem they control. These areas – chokepoints – then became tools which could be wielded in waging economic wars. For example, the world economy sort of runs on the US dollar. Oil is priced in USD, it is used in nearly 90% of global foreign exchange transactions, and 70% of the foreign-currency debt is issued in dollars. Cutting a company off from the US dollar can be a death sentence. The emergence of these global chokepoints changed the calculus of economic warfare, as some of the historical drawbacks no longer apply. It made it easier for states to act on their own, without advance buy-in from their allies (the US could just unilaterally decide to cut dollar access without first consulting Germany or the UK). In addition, a naval blockade is no longer required for the sanctions to be effective. As the US recoiled from engaging in conventional warfare after the Afghanistan and Iraq campaigns, it resorted more and more to these new tools to achieve its geopolitical goals, ranging from stopping Iran from developing the nuclear bomb, through deterring Russia from invading Ukraine, to stunting China’s attempt to catch up in advanced technologies. But as the detailed accounts of these efforts in the book show, the main historical lesson seems to hold as strong as ever: engaging in economic warfare is a fickle business, and the outcomes are usually far from guaranteed. Below, I summarize two such episodes from the book, and then follow up with some common themes. Case study 1: Iran (2005-2015) When Iran restarted its uranium enrichment program in 2005 after the election of Ahmadinejad, it seemed that the US had run out of options to prevent it from developing nuclear bombs. There was already a bunch of sanctions on Iran, but they did not result in meaningful policy changes. The US imposed a trade embargo on Iran in 1995, but this didn’t stop companies from other countries from doing business there. The US then threatened these foreign companies with penalties if they invested in the Iranian energy sector, but this was not enforced in practice and served mostly to anger the foreign governments which didn’t really like the US telling their companies what is and isn’t allowed. It looked like there was not much else for the US to do, or as Bush put it in 2004: ‘we’ve sanctioned ourselves out of influence with Iran’. But there was a guy who decided to prove Bush wrong. Stuart Levey, Treasury’s terrorism-finance chief, was determined to craft a set of sanctions which wouldn’t require participation of other governments but would meaningfully hurt Iran’s economy. The idea was to cut off Iranian banks not only from doing business with the US (which was already the case), but from doing business in dollars (with anyone). When any two banks transact in dollars, this payment has to briefly go through the US financial system. This is because the dollars are ultimately entries at the Fed, and only US banks can have accounts at the Fed. So the way international trade in dollars works is that the banks outside the US need to have an open account at some US bank, which settles the dollar transaction for them. Now, the 1995 embargo made it illegal for Iranian banks to hold US accounts directly, but they still could hold accounts at foreign banks (in Europe or Dubai), which in turn had US accounts, so Iran used this extra step to use the dollar. Stuart Levey’s campaign was about persuading the foreign banks that they shouldn’t allow this, even if it was legal. The main argument was that doing business with Iran, which funds terrorist organizations and wants to build the nuclear bomb, is actually bad for their bank’s reputation. On top of that, the US may impose stricter sanctions in the future so it is actually bet