It was called a barricade in the old days. The attacking army would camp around the fort of the defending state and prevent food and water reaching in to starve the residents into surrender. No need for using weapons. When President Trump unilaterally instituted tariffs against imports from China, and China retaliated with its own actions, papers screamed that this was the start of a trade war. The actions resulted in price rise of some items as importers scrambled for alternative sources or swallowed the higher cost. From starving food supplies and trade wars, we have graduated to an economic war.

The weapons for this war have been building over time. The Super 301 provision of the US Trade Act of 1974 gave it extraterritorial powers. By denying the ability of other countries to trade or undertake business transactions with US companies, the US government could pressure those countries to change their laws or actions. India tasted this when it exploded a nuclear device. In addition, the US passes laws and issues executive orders giving itself power to deny access to the US financial system, limiting transactions involving US individuals, etc.

The power stems from its $21 trillion economy that everyone wants a piece of, facilitated by the global economic integration, and fastened by WTO. Countries were seduced to sign on to lower tariffs and reduce barriers, buy into increased trade, and the smart ones who took advantage of it kept inflation low and benefited. Global supply chains spread the benefits.

Action against Russia

Denying Russia the ability to trade with other advanced countries has become a weapon. This time, it is not just the US but others have joined in. Putin faced sanctions before, such as those that were imposed after his occupation of Crimea in 2014. This time is a new ball game.

The US has sanctioned specific entities in the financial, energy and defense sectors. Not allowing Russia to access the SWIFT messaging system, which is a Brussels-based cooperative, is an EU initiative. It will affect the ability of Russians to take out loans, make payments, credit card transactions, etc.

Russian billionaires, who love London, are finding it inhospitable. The British government ordered Chelsea, a football club owned by Russian Roman Abramovich, to stop operations. The owner has been banned from the UK and his assets frozen. Some companies have stopped exporting goods to Russia out of concern for payments, hurting the Russians’ ability to produce and consume goods.

Russia holds about 40 per cent of its reserves in overseas banks which have been frozen affecting the country’s ability to support its currency which has fallen by 40 per cent. Canada has closed its airspace to Aeroflot, the Russian airline.

By targeting the lifestyles of Russia’s rich and well connected, a new front has been opened, to increase discontent amongst the influential supporters of President Putin. Companies like McDonald’s and Starbucks are shutting operations because of concerns about payments, fund transfers and supplies making the Russian middle classes uncomfortable. We are seeing the use of multiple economic tools as weapons in a war. This is experimental, as such a widespread action has not been seen in the past.

The economic actions are ostensibly meant to be a punishment and create domestic pressure to make Putin reverse his actions. It would certainly hurt the people but in an autocratic society, the people have little influence on the government. Sanctions have failed to change regimes in Cuba and Iran.

One consequence of this experiment would be a big push to create parallel systems for trade and payments and not be completely dependent on Western-based ones. China has been building the yuan as a reserve currency; Russia and China want to develop an alternate internet.

Perhaps this economic war will also serve as a wet-run for what can be effective in the next big conflict — when China decides to invade Taiwan.

The writer is an emeritus professor at Suffolk University, Boston