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INTRODUCTION
There are places in the world that, owing to geography alone, appear repeatedly across the pages of history. The Bosphorus, the narrow waterway that cuts through the center of Istanbul and marks the boundary between Europe and Asia, is one such place. It is the passageway from the resource- ich Black Sea to the ports of the Mediterranean and the oceans beyond. It is a vital crossroads, a place where civilizations trade and jostle for power, where empires rise and fall.
In its golden age in the fifth century BC, Athens, the leading city- state of ancient Greece, depended on free navigation of the Bosphorus for access to food. Ships loaded grain from the fertile fields of Ukraine and dried fish from Crimea and sailed south through the Bosphorus toward Athens, protected on their journey by a string of imperial outposts and the fearsome Athenian navy. This fact was not lost on Athens’s biggest rival, Sparta. The twenty- seven- year Peloponnesian War came to an end when the Spartan navy destroyed the Athenian fleet at Aegospotami and seized control of the Bosphorus, severing Athens’s food supply and starving it into submission. The Bosphorus had been the Athenians’ lifeline, and the Bosphorus was where their empire met its demise.
Seven centuries later, on the banks of the same strait, the Roman emperor Constantine founded the city of Constantinople, known today as Istanbul. Constantinople grew into Europe’s largest and wealthiest metropolis, its skyline punctuated by the Hagia Sophia’s majestic dome. It served as the capital of the eastern branch of the Roman Empire for more than a thousand years until coming under Ottoman attack in the fifteenth century. After a protracted siege, Constantinople fell, extinguishing the last embers of the Roman Empire. From its new capital on the Bosphorus, the Ottoman Empire flourished for centuries to come. The Ottomans, like their predecessors, fought hard to fend off other great powers that coveted the strait, from the Crimean War to World War I.
That history has so often been made in this one spot is no accident. The Bosphorus is the epitome of a chokepoint: a gateway so critical to international trade that controlling it confers immense power— and blocking it can bring an enemy to its knees.
On December 5, 2022, with Russia’s brutal war against Ukraine raging a few hundred miles away, an ominous scene unfolded at the mouth of the Bosphorus. As far as the eye could see, a line of colossal oil tankers, some nearly a thousand feet long, formed a maritime traffic jam. Their transit through the strait was blocked. News of the standstill spread quickly. The Bosphorus is one of the busiest shipping lanes in the world today and an essential artery for the energy and food trade. Closing it for any prolonged period would unleash chaos on the global economy.
What was causing this gridlock?
It was not a hostile gunboat or battleship. Nor was it a shipping accident— an ever-present risk in the Bosphorus, whose sharp bends and fierce currents make it one of the world’s hardest waterways to navigate. Gumming up the works on that December day were new regulations, issued by the United States and its closest allies, which had gone into effect at 12:01 a.m. that morning.
Under the regulations, U.S. and European firms could no longer ship, insure, or finance cargoes of Russian oil sold for any price above $60 per barrel. The policy, known as the “price cap,” was intended to cut the Kremlin’s oil revenues and thereby undermine its war effort in Ukraine. The price cap packed a punch because trading oil without using Western services and institutions was next to impossible. A typical barrel of Russian oil was shipped aboard a European tanker whose insurance was British and whose cargo was paid for in U.S. dollars. The West had a near- monopoly on maritime insurance, in particular: its insurers covered more than 95 percent of all oil cargoes. Now, Western governments were exploiting this dominance to stem the flow of petrodollars to the Kremlin.
Turkey did not formally support the price cap, but the Turkish officials monitoring traffic through the Bosphorus were acutely aware of its implications: if a tanker was in violation of the policy, it would likely lose its insurance coverage, leaving the Turkish government vulnerable in the event of an oil spill or any other catastrophic accident. As a result, skittish Turkish officials were demanding extra proof that each tanker was fully insured before it could transit the strait, a requirement that led to the mounting congestion. A few paragraphs of regulatory jargon, published on the website of the U.S. Treasury Department in Washington, had ground traffic to a halt at a vital waterway more than five thousand miles away.
It was the latest in a series of moves by Western governments to squeeze the Russian economy in the wake of Vladimir Putin’s grisly invasion of Ukraine. Every economic penalty levied against Russia in this pressure campaign was like the price cap: simple regulations, issued at the stroke of a pen by little- known American and European bureaucrats. But their effects rippled far and wide. The measures reshaped trade and financial flows, rewiring the global economy. They restructured relationships between world powers, sketching the blueprints of a new international order.
The economic offensive against Russia is part of an extraordinary evolution in U.S. foreign policy. To address the most pressing global security challenges, the United States has come to rely on an arsenal of economic weapons, chief among them sanctions, over the use of military force. Economic weapons have existed for centuries, but in the past two decades, their sophistication and impact have grown by leaps and bounds. In a world economy interconnected by half a century of globalization and neoliberal reforms, the actions of U.S. officials can send shock waves across the globe at breathtaking speed.
This is economic warfare. It is how America fights its most important geopolitical battles today. From thwarting Iran’s pursuit of nuclear weapons to checking Russian imperialism and China’s bid for world mastery, the United States has reached into its economic arsenal to get the job done.
In the process, the world economy has become a battlefield. Its weapons take the form of sanctions, export controls, and investment restrictions. Its commanders are not generals and admirals but lawyers, diplomats, and economists. Its foot soldiers are not brave men and women who volunteer for military service but business executives who seek to maximize profits yet often find they have no option other than to obey Washington’s marching orders. And America’s strength in these battles stems not from its gargantuan defense budget but from its primacy in international finance and technology.
This is a new kind of war. But economic warfare itself is as old as history.
In 1958, Thomas Schelling, the Nobel Prize– winning economist and nuclear strategist, defined economic warfare as “economic means by which damage is imposed on other countries or the threat of damage used to bring pressure on them.” As Schelling pointed out, the distinction between economic and conventional war is how each is waged: Sanctioning an adversary’s bank is an act of economic war, whereas bombing that same bank is an act of conventional war. Both may aim to shut the bank down, but they seek to accomplish this goal in very different ways. Herein lies the main reason policymakers are so tempted by economic warfare: its tactics are inherently nonviolent. What makes today’s economic wars novel is the highly interdependent world economy, which amplifies their impact and makes their aftershocks hard to contain.
When asked which candidate he supported in America’s 2008 presidential election, Alan Greenspan, the recently retired chairman of the U.S. Federal Reserve, neatly summarized the prevailing economic wisdom of the time. “National security aside, it hardly makes any difference who will be the next president,” he said. “The world is governed by market forces.” The post– Cold War neoliberal order was built by and for multinational corporations. Their CEOs were the new titans of history. Officeholders in Washington, Beijing, or any other world capital were mere onlookers and occasional administrators.
Greenspan was not alone in this assessment. The “galloping new system of international finance,” the American financier Walter Wriston wrote in 1988, was “not built by politicians, economists, central bankers or finance ministers, nor did high- level international conferences produce a master plan.” On the contrary, it was built by “the men and women who interconnected the planet with telecommunications and computers” and the bankers who “immediately drove their trades over the new global electronic infrastructure.” Wriston was the most powerful banker of his time, leading Citibank from the late 1960s to the mid- 1980s. He twice turned down offers to serve as the U.S. secretary of the treasury: as the top CEO on Wall Street, he knew public office would not confer any economic or political privilege he did not already enjoy.
In his 1992 manifesto The Twilight of Sovereignty, published a year after the collapse of the Soviet Union, Wriston predicted that national governments would grow obsolete as the twin forces of finance and information technology took command of the levers of history. Multinational corporations would stitch together global supply chains, further locking in the dominance of industry over politics. “As these alliances grow and strengthen over time,” Wriston argued, “it will become harder and harder for politicians to unscramble the emerging global economy and reassert their declining power to regulate national life.” Wriston was describing a process and system that we now call “globalization.”
The globalized economy was a seemingly autonomous machine, operating beyond the reach of traditional state institutions, but it was by no means decentralized. The system that neoliberal reformers such as Greenspan created was centered on the U.S. dollar, whose role in everything from buying oil to investing capital would continue growing long after America’s post– World War II dominance in trade began to decline. Meanwhile, CEOs such as Wriston built a centralized financial network that enabled banks and companies to move money around the world at the speed of light. Wriston’s motivation, like that of other executives who try to build infrastructure and set standards, was simple: to collect a kind of toll and reap outsize profits. But in developing and connecting these systems, Greenspan, Wriston, and other globalizers like them created something else, too: chokepoints. And these chokepoints, it turned out, lent themselves to political exploitation.
Great powers once rose and survived by controlling geographic chokepoints like the Bosphorus. American power in the globalized economy relies on chokepoints of a different kind. Among them is the U.S. dollar, the default currency for international trade and finance. Other chokepoints include the main banks and networks that move money around the world and the intellectual property and technical know- how that underpin a vast array of essential technologies, notably the advanced computer chips at the core of the digital economy. The United States has used its hold over these chokepoints to pioneer a new, hard- hitting style of economic warfare. The result has been a stunning resurgence of state power in a world supposedly governed by market forces.
As a college student in the years after 9/ 11, I grappled with a contradiction. The United States was the most powerful country on earth, but it struggled to translate that power into solving global security problems. Few foreign policy disasters laid bare this paradox better than the U.S. wars in Afghanistan and Iraq, which cost America and its opponents untold blood and treasure with little to show for it. There had to be a better way.
“The acme of skill,” Sun Tzu wrote in The Art of War, is not “to win one hundred victories in one hundred battles,” but “to subdue the enemy without fighting.” I have devoted much of my career to exploring how economic power can advance this goal. I served on the teams at the U.S. State Department that designed and negotiated Western sanctions against Russia after its 2014 annexation of Crimea, and whose economic pressure campaign against Iran led to a landmark nuclear deal in 2015. I’ve advised the secretary of state, the chairman of the Joint Chiefs of Staff, and the top sanctions official at the Treasury Department. I’ve written widely about economic warfare, counseled companies on how to navigate the sanctions landscape, and taught a graduate- level course on the subject at Columbia University. Through these experiences, I’ve participated directly in some of the history recounted in these pages and worked closely with many of the main characters.
But this book does not rely on my own memories. It blends research, analysis, and extensive interviews with more than one hundred of the key players in the events described, highlighting inflection points, interpreting their significance, and pulling back the curtain on the places where economic wars are fought— places like the windowless warren of the White House Situation Room, the gilded diplomatic halls of Europe, the gleaming banking headquarters of Wall Street and the City of London, the sprawling compounds of the Kremlin and Zhongnanhai, and the Strait of Hormuz, where tankers carrying one- fifth of the world’s oil supply slip uneasily past Iranian warships. The narrative follows the protagonists in their moments of decision, as the fairest and most instructive way to assess choices made in the past is to do so without the benefit of hindsight. To that end, the book is structured chronologically.
Part One answers some of the most basic questions about economic warfare against the backdrop of globalization— Why does the world economy work this way? How did we get here?— with an emphasis on the people and events in the second half of the twentieth century and the early years of the twenty- first that created the system we have today. Parts Two through Five detail four consequential episodes between 2006 and the present, a period I call the Age of Economic Warfare. These years saw the development of the most significant and novel economic weapons, which the United States first deployed against Iran (Part Two), then Russia (Part Three), then China (Part Four), before combining them in overwhelming fashion against Russia again in 2022 (Part Five). The book ends by exploring the fragmented world economy left in the wake of these events (Part Six).
Economic fragmentation was not part of the plan. Indeed, America deployed its new economic weapons with an unspoken assumption that it could use them at relatively low cost— that they would not, for instance, remake the global economy itself. This assumption came under increasing strain throughout the 2010s and shattered on the anvil of Putin’s 2022 war against Ukraine.
That war— and the massive economic penalties levied by the West in response— marks a hinge in history. In the years ahead, economic weapons will grow more pervasive and powerful. Economic warfare, now a baseline feature of our world, will permeate other areas of foreign policy, global economics, domestic politics, and business. The result will be a scramble for economic security that redraws the geopolitical map and ends globalization as we know it. Those who fear U.S. economic warfare and seek to insulate themselves from it will be pitted against those who harbor greater fear of China’s potential to wield economic weapons of its own. A third group— the “swing states”— will try to straddle both camps, giving its members significant influence but also exposing them to danger.
The United States must prepare for this future. America’s economic arsenal has demonstrated that it can inflict tremendous damage, but it has not proven that it can reliably advance U.S. strategic goals. Part of the reason for this mixed track record is that American economic warriors often shoot from the hip, forced to react to crises without much advance planning. While this ad hoc approach had few global repercussions when the targets were small and isolated adversaries such as Cuba and North Korea, today’s economic wars against China and Russia are a different matter. America’s current economic weapons are durable but not indestructible. If used recklessly, they could be broken forever or trigger unforeseen economic and political repercussions that come back to haunt us. It’s little wonder that some veterans of America’s economic wars have been urging caution: former Secretary of the Treasury Jack Lew, for one, has warned that the “overuse of sanctions could undermine our leadership position within the global economy.” Yet simply discarding these powerful tools would leave Washington at a grave disadvantage in a world of intensifying geopolitical competition. For the United States to prevail in future economic wars, it will need to pair its economic might with strategic wisdom.
In 405 BC, stopping traffic at the Bosphorus required a stunning Spartan naval victory and the destruction of the once- dominant Athenian fleet. In 2022, all it took was a regulation posted online by the U.S. government. That is a fearsome power, made all the more chilling by its seeming inscrutability. This book aims to demystify that power by explaining how it came to be, how it works, and what it means for the world. It is also a book about the choices America has made— for good and for ill— and how it can do better.
