Chokepoints: American Power in the Age of Economic Warfare

We usually think about economic statecraft really as a tool of behavior change, right? You impose some sort of economic pain, the other side changes their policy, you remove the pressure. And what I think was true during the first Trump administration, but we never put it in such clear terms, is that at least in some areas of U.S.-China competition, the goal is not behavior change. The goal is actually more like economic and technological attrition. We're trying to weaken certain areas of China's economy that make them competitive, make them threatening to the United States and our allies. That there's a certain set of technologies that will basically allow a country to control the commanding heights from which you can exert tremendous influence over the global balance of power. And the whole notion of export controls was, look, our private sector is going to have overwhelming incentives to sell those technologies into the enormous Chinese market if we don't put in place controls. And because China has a military civil fusion program, if those technologies diffuse to the Chinese commercial sector, it's tantamount to giving those technologies to China's military in ways that could undermine our national security. You have to relieve the sanctions at the end of a sanction program, or else there's no reason for a sovereign ever to change their policy. Welcome to the Irregular Warfare Podcast. I'm your host, Ben Jeb, and today's episode examines how the United States wages power not with bombs and bullets, but with dollars, sanctions, and supply chains. Drawing on Eddie Fishman's new book, Choke Points, American Power in the Age of Economic Warfare, we explore how tools like sanctions, export controls, and dollar dominance have become central instruments of U.S. statecraft. I'm joined by former Treasury Secretary Jack Lew, former Deputy National Security Advisor Dalip Singh, and author Eddie Fishman to unpack how economic warfare works in practice and what it means for deterrence, legitimacy, and America's strategic future. You are listening to the Irregular Warfare Podcast, the joint production of the Princeton Empirical Studies of Conflict Project and the Modern War Institute at West Point, dedicated to bridging the gap between scholars and practitioners to support the community of irregular warfare professionals. Here's our conversation with Secretary Jack Lew, Dalip Singh, and Eddie Fishman. All right, Dalip, Jack, Eddie, thanks for joining us on the Irregular Warfare Podcast today. It's great to host you. Thanks for having us, Ben. Great to be with all of you. Yeah, so nice to be here. All right, well, welcome to the show. It's a real privilege to have all of you here. Eddie, I'd like to start with you. What motivated you to write choke points and what story were you trying to tell about how economic power shapes modern geopolitics? Sure, Ben. So a great question given the folks who are here because both Jack and Dalip are part of the origin story of choke points. So it really comes out of my own experience working in government in the weeks and months following Russia's first invasion of Ukraine in February, March, 2014, that ultimately led to the annexation of Crimea and the occupation of part of the Donbas. And I remember vividly the meetings we would have in the situation room in the weeks and months that followed. And usually the discussions would really focus on two topics. The first part of the meeting would be about military force. Should we be arming the Ukrainians? Should we be training them? What are the different weapons systems we could potentially provide? And I remember being really impressed by the level of knowledge that everyone brought to the table, not just the joint staff and the Pentagon, but even the State Department, the CIA, really everyone around the table came incredibly well briefed with very impressive and I think useful perspectives on what to do. The second part of the conversation, which in retrospect actually was the more important one because President Obama decided not to arm the Ukrainians. He really decided to focus primarily on economic statecraft. The second part of the conversation was about economic statecraft. What sanctions should we do? How should we be supporting the Ukrainians financially? And oftentimes in those conversations, the room would kind of go quiet. And at most maybe one or two people felt like they had the requisite knowledge and understanding to pipe up. And usually actually one of them was deletion. So it's good to have deletion here right now. And I came away from that experience quite concerned because I already was seeing that we were living in an age of economic warfare. Me too, by the way, Eddie. Yeah. And I could see that we were living in an age of economic warfare in which sanctions, tariffs, export controls, they'd increasingly become the way that great powers were competing. And we just didn't have the language and the understanding to actually put together the best possible policies. And so when I left government, one of the first things I did was put together a class that I've been teaching at Columbia on the topic for the last five years on economic statecraft. But it was actually after the 2022 bigger Russian invasion of Ukraine that my students came to me and they said, Professor, it's great that you teach 20 of us every year, but how about everybody else? And so that's when I decided to try to write an accessible book that really could educate folks all over the world about how economic statecraft works. Well Eddie, if producing an accessible book was your goal, mission accomplished, congrats. And that's one thing the book does really well, right? It explains complex ideas and plain language. So to help orient our listeners, I do want to clarify a few key concepts. Would you explain what people mean when they talk about dollar dominance? Like what makes the US dollar so central to the global economy and how did it achieve that position? Well, first, but I want to say it's a joy to be here with Jack and Eddie. I've had the privilege of knowing Jack as being about the most decent boss, mentor, and friend a person can have. And I do think choke points, Eddie, it is, first of all, it's really good for my street cred, but it's also, I think, going to go down as the definitive first copy of history for the geoeconomic era. So congrats. Ben, what is dollar dominance? In plain English, I mean, I think of the dollar as the English language of the global economy. So it's the language of trade. If you think of a coffee company in Kenya that wants to buy a cargo ship in Korea, they don't use shillings or won to settle the transaction. They use dollars. It's the language of savings globally. If you think of a country like India that wants to put money away for a rainy day, they don't just keep it in rupees. They tend to buy dollar assets like US Treasury Ponds. And it's also the language of debt. So if a company in Brazil needs to borrow money to build a factory, they often take out a loan in dollars. So the dollar, it's the dominant form of money in all the ways that money is used, just like English is the language. I think that the deeper and kind of urgent question is why first and foremost, I'd say trust. People have grown to trust the rules, the institutions, the stewardship that safeguards the dollar's value. So when something goes wrong in the world or even in the US, historically, the strong tendency has been to seek safe haven primarily in dollars. And then there's a lot of inertia. That's the second reason the dollars become a really incredibly powerful network. The more people that use it, the more valuable it is for everyone else to use. And the more devastating it is to be kicked off the network. So imagine how difficult it would be if you were banned from speaking English. It's the same way with the dollar. And the last reason is there is not yet a better alternative, one that people trust more, or one that has a network with comparable size. It doesn't mean that it won't ever be a viable alternative. All networks have tipping points. They collapse all the time in biology and technology, middle school lunch tables every day. So that's why we can never take dollar dominance for granted. And I know Jack and Eddie feel the same way. Yeah, well, dollar dominance was a central theme, at least in the opening chapters. And then Eddie, your book also discussed sanctions. So Jack, as a former Treasury secretary, you've worked directly with one of the main tools of economic statecraft. At a basic level, could you explain what are sanctions? How do they work? And why have they become such a common instrument of US foreign policy? Well, first, let me add and congratulating Eddie for producing a book that really does take a topic that for many seems like a technical and dry topic and turns it into an exciting story that people actually will want to understand. Sanctions are often misunderstood as punishment. Sanctions are a tool to try and have one sovereign influence the policy of another sovereign using a point of pressure to get them to do something they would not otherwise do. So it's not unlike a military cool in the sense that it's a tool that you're projecting your national influence to try and change the behavior of another sovereign nation. The reason I say it's often misunderstood as punishment is to be effective, sanctions have to do the right kind of harm in the right kind of places without having unintended consequences that undermine their effectiveness. For example, when Eddie and Dilip and I were working on the Russia sanctions after the Ukraine war, the question was how do you design a tool that will put enough pressure on Russia to get out of the Donbass or to stop moving forward, take more of the Donbass? Now, it was a moment in time when the United States was just out of the recession and it was not the goal to destroy the global economy and bring down the economies of Europe and the United States, which would have just empowered the opposition in this case, Russia. And Dilip played a crucial role because at that moment in time, we did something that had never, to my knowledge, been done before, which we brought together all the knowledge that we had at the Treasury Department of the wiring of the financial system in the United States, the wiring of the financial system in Europe, the risks of global spillover and where that would be. And we designed what we thought at the time were the most aggressive sanctions we could get cooperation from our partners in enforcing to put the most pressure on Russia in stages to try and get them to change their policy. Now, in retrospect, you look at it and you can say Russia's still in the Donbass, it didn't work. On the other hand, there was a Minsk Accord that might never have come about if Russia had not felt the pressure and we had a Europe that might not at that moment have kept the pressure up if we had done more, more rapidly. So it's a tool that has to be used with great care. And I'm going into some length about that story is that's kind of the origin of the modern use of economic sanctions. And if it's all right, I'd love to just jump in for a second because I think Jack has touched on something very important. Before the Russia sanctions, I started my career working on Iran sanctions at the Treasury Department. This was when Tim Geithner was the Treasury Secretary. And I don't think Tim would mind me saying that he almost never weighed in at all on sanctions. He was busy fighting the global financial crisis. It really wasn't until we were fighting an economic war with another major power like Russia that had systemic economic consequences that Jack, when he was Treasury Secretary, really did have to bring together that interdisciplinary group to really create a whole new toolkit because the toolkit we used against Iran would not have worked against Russia in 2014. And I think we were lucky that Jack had had experience in other agencies at the State Department, at the White House, that he had that differentiated background relative to other Treasury Secretaries at the right moment in history. It seems like sanctions have become a fairly ubiquitous tool of economic coercion. On the surface, that might seem like it's caused for alarm. I'd be curious to hear your thoughts on this from the group. Is it possible that sanctions actually provide maybe like a non-kinetic means of coercion that might make the world a little more safer by providing more contact surfaces or outlets for states to negotiate over? In some ways, Ben, the simple answer to your first question to me was that if one wants to project power without using military force, we don't have better tools to project U.S. power than sanctions. And they tend to be very much preferred in many cases to go into use force first. I must say that sitting in that same sit room at a principles committee level, the people in the room who most understood the importance of using sanctions strategically and effectively were the military because the military saw it as something that was not of infinite capacity and you didn't want to use it frivolously or lightly just like you don't project military power as if it's infinite. You have to use it with impact. I do think that with the absence of sanctions, the trigger point towards use of kinetic tools would be quicker. Yeah, I'll jump in there too. So when I was thrust into this effort to sanction Russia after it invaded Crimea, I was a relatively junior person. We didn't have an undersecretary for international affairs. Nathan Sheetz came a bit later, Jack, if you remember. So I was completely ignorant in the ways of the situation room when I first started to participate. Eddie may have noticed. But what was clear to me, my background was in the financial markets. I kind of grew up after grad school on the trading floor at Goldman Sachs. And I had raised my hand after the financial crisis because I wanted to help. I didn't know I would help in this way. Adam Zubin, our friend, at some point in the dungeon of the treasury said, hey, can you take everything that you know about financial markets and think about how to flip it in order to achieve a geopolitical objective without having to use troops? And so that was kind of trippy for me. But I kind of began to think about ways that we could advance the goal. And one obvious kind of reflection at that moment was the world has never been more connected through trade linkages, through capital flows, through technology diffusion. And so if you want to use sanctions or other forms of economic weaponry to break those linkages or to threaten doing so, that could be quite powerful. The other observation was America happens to have disproportionate strength. We supply things that our potential targets of sanctions need and can't easily replace like the dollar or like cutting edge technology. I began to talk about that as an asymmetric strength. And that really matters because that gives you a chance of delivering a lot of impact on the target without a commensurate amount of blowback and spillover to the US economy and the global economy. But look, I mean, that was, I don't know, almost more than 10 years ago now. And the use of sanctions, the use of tariffs, the use of export controls, I mean, all of them have grown exponentially. And to your question, Ben, there is a very serious risk that we overuse these weapons. And I think we've all probably used the analogy that sanctions and tariffs and export controls are kind of like antibiotics. The more you use them, the more resistance you build, the more linkages you break. And ultimately, it can precipitate what you're trying to prevent, which is a race to the bottom in which the US is the dominant economic force in the world has the most to lose. That's what I lose sleep over now. Well, to tie it all together, I'd like to return to kind of the central idea from Eddie's book. Eddie, your book revolves around the idea of choke points, the hidden infrastructure that gives the United States leverage in the global financial system. Could you explain what exactly are choke points and why do they matter for international politics? Sure. So I'm sure some of the military listeners in the audience are familiar with geographic choke points, like the Strait of Hormuz, where you have 20% of global oil flow going through every single day. And throughout history, those geographic choke points have been essential, really, to geo-economic and geopolitical power. I think what happened in the wake of the 1990s, this period of hyper-globalization, with the deep integration of international financial markets, supply chains, technology, ecosystems, we got these invisible choke points that can be weaponized by countries that possess them. I think it's helpful to break down different sort of criteria that you need for something to be a choke point, because you hear the word used a lot today, which, you know, of course, as someone who's written a book with that title, I'm happy about it. But I think it's important to be disciplined, because not everything is a choke point. There really are three criteria you need. The first is you need a dominant concentrated market share. So, DELETE mentioned the dollar. The dollar is used in 90% of all foreign exchange transactions. I actually think that's the most important metric for the dollar, because FX transactions, it's the biggest financial market of them all, $7 trillion in daily turnover, and it captures a lot of the various activities that DELETE mentioned earlier. Rare earth minerals. China has 90% of global refining capacity. AI chips, you know, U.S. companies like NVIDIA, AMD are producing effectively 90% of the global supply of advanced AI chips. These are dominant concentrated market share. It's not just being a market leader, it's being effectively a monopolist. So, I think on the flip side, when you look at tariffs, which I don't think are an effective geo-economic weapon, the U.S. is weaponizing the size of our consumer market. We are the world's biggest importer, but we only account for 13% of global imports. We're actually underweight as a trading power relative to our overall economic power, right? We're 25% of global GDP and 13% of imports. That's why I don't think our market itself is a choke point. But aside from dominant market share, you need a couple other things. You need to have a difficulty of substituting the specific product, right? Because even if you have 90% of a specific market, but it's incredibly easy to substitute, it's not a choke point. And the comparison, either sort of the example I think that best illustrates this, if we all remember early 2020, China imposed export controls on medical masks. At the time, the U.S. was importing around 90% of our medical masks from other countries, mostly from China. And we all panicked. But within two months, we had plenty of masks. And that's because our domestic producers quadrupled production within a few months. It's not rocket science to make medical masks the same way that producing a Blackwell ship is quite challenging. But even if you have dominant market share and sort of lack of substitute ability, you need one more thing. And I think this is arguably the thing that's missed the most, which is you need the ability to weaponize a choke point with asymmetric pain. Because if imposing sanctions on one of these choke points, if using a choke point for economic leverage is going to hurt you just as much or as the adversary, it's not useful. And so I think maybe the way to illustrate that, you look at Canada, right? So Canada is selling 75% of their exports to the United States. And there's no way for them to substitute that in any near term way, right? Geography, the direction of oil and gas pipelines, they've got to sell most of their exports to the US for at least the next decade or two. But still, I don't think that a trade embargo from the United States is a viable strategy. The US cannot weaponize our consumer market effectively against Canada. Why? If we were to impose embargo level tariffs on Canada, it would put the US into a recession. It wouldn't just hurt Canada. And so I think, despite the fact that Trump 10 days after coming into the White House and posed a 25% tariff on Canada, if you look at the data in 2025, the effective tariff rate on Canadian goods in the United States was 3% lowest in the world, because it's politically impossible for the United States to impose that kind of a level of tariff on one of our top trading partners. All right. So we've covered a lot of the basic terminology, which is great, dollar dominance, sanctions, choke points. But to understand how the United States became an economic superpower, I do think the audience needs a primer on the institutions and organizations behind the power. Right. So Eddie, in the early chapters, you described how agencies like the Treasury Department and OFAC evolved over the course of the 20th century. Could you briefly summarize what these organizations do and how their roles have expanded over time? Well, I would defer to Jack on some of this, given that he oversaw the entire Treasury Department. But I can give you my limited perspective. So, you know, OFAC really originated the predecessor during World War II, when Nazi Germany was invading and conquering countries in Europe, the US government started freezing assets of those occupied countries in the US so that the Nazis couldn't use it for their own gain. The more modern use of sanctions dates really to the nice when the Clinton administration started cracking down on drug kingpins and created what then was called la lista clinten, which was basically their way of sanctioning drug lords in Latin America. It eventually became the SDN list, which still to this day is sort of our main list for freezing other countries and individuals and entities assets and blocking them from transactions in the US financial system. The big sort of institutional transformation happened after 9-11. That's when we realized that even the Al Qaeda terrorists had been using the US financial system really without incident. You know, they'd opened bank accounts in the United States, they'd moved money around, and we really didn't want that ever to happen again. And so we really beefed up the laws that were related to counter terrorist financing and created sort of this new infrastructure at Treasury called the Office of Terrorism and Financial Intelligence overseen by an Undersecretary. To this day, that is still sort of the main institutional machinery we use for sanctions. OFAC is within this overall part of the Treasury Department. And I think that maybe one future direction that I know Jack and Dilip and I were all part of a task force that we recently started at Columbia University to look at economic statecraft, we have not yet updated that institutional architecture since 9-11. And so even though we are fighting fundamentally different economic battles today, no longer against small terrorist groups, but actually against other great powers like China, Russia, and others, I think it's actually very important for us to think about what our economic statecraft apparatus needs to look like in this new period of geo-economic competition. And Jack, I'd love to get your perspective on how you see the Treasury Department's role in national security and how that role has changed over time. Look, I've seen the role change just from sitting in different seats at the table over several decades. Eddie is totally correct that sanctions that OFAC was created in the Treasury Department. One thing I would add is it was created in part because it was a way of freezing the assets of Norway and Denmark so that Nazi Germany, which had occupied Norway and Denmark, couldn't get access to their money. So it was a pretty, it was a very smart instrument of economic statecraft, but it was different from the kinds of things that we're talking about today. When I was in the Clinton administration, we had a number of occasions where there were suggestions of different kinds of sanctions regimes. And I remember the Treasury Department position was very arm's length when it came to putting anything in motion that would interfere with a central bank or the international financial system, in part because of the fear that Eddie described that it was exposing us to countermeasures where we had asymmetric exposure. So there was a real reluctance. Now fast forward to when I'm at Treasury and we're sanctioning the central bank of Iran. And there are all kinds of things that we're doing that get into financial systems around the world. I think that Treasury is inherently cautious about risks. And it's not that the State Department is not cautious, but partially because the risks are not risks that they're familiar with. They tend to have an easier time saying we just have to send a message. We have to be as strong as we can be. If you look at the Iran sanctions, to me, they're a perfect example that less can be more. What do I mean by that? There was a choke point oil, but the choke point had two directions to it. We had allies like India and in this context, even China, who agreed that there should not be an Iranian nuclear capability. Both India and China were highly dependent on oil, much of it from Iran, but certainly affected by the availability of oil from Iran on the price of oil. And one of the techniques to try and increase pressure on Iran was to block their sale of oil. And because it's sold in dollars, we had enormous capacity to do that. There was a debate, which I think was resolved in the right way, to have a very gradual reduction of China and India's reliance on Iranian oil, rather than going all the way to zero, because if they had been driven to zero, they wouldn't have cooperated. If they hadn't cooperated, the cheating in the sanctions regime would have undermined its effectiveness. And the reason I say it's a model is by keeping in that case China and Russia on side in the pressure on Iran, we ended up in a negotiation where Iran agreed to terms that it would not have otherwise agreed to. One can debate whether they were good enough or not good enough, but there was no question they only changed their policy on nuclear enrichment because they were hurting from sanctions. And if you had done more, it would have been less. I think that's the kind of stuff that Treasury worries about quite a lot. We've been discussing some fairly abstract concepts, which is great, don't get me wrong, but I'm always interested in the processes that turn ideas associated with things like economic coercion into practical reality. So, Dalip, you've worked out the intersection of economics and national security at the White House. And from your experiences, what does interagency coordination look like in practice? And how do you translate economic tools into actionable foreign policy? Well, again, Jack will know this better than anyone having been Chief of Staff and also serving at the highest levels of the State Department and Treasury and OMB. But from my perspective, in practice, what you have, you have a foreign policy objective set by the president. And the purpose of the interagency process is to recommend a strategy to the president on how best to achieve that objective, using a combination of tools, military tools, diplomatic tools, economic tools. And that recommendation typically includes an assessment of risks, trade-offs, uncertainties. And those uncertainties are typically enormous because we're talking about, we're often talking about the fog of war, and it can feel chaotic. But once the strategy is set, the interagency focuses on execution. But that's never a linear process because there's a continuous process of recalibration, depending on how the strategy plays out, how does the target respond, how does the economy evolve, how does the domestic political climate change, its multiplayer multi-stage game theory at that point. Now, in terms of how do you actually translate economic tools into foreign policy, the way I always thought about it as you work backwards, sanctions and their kin, any other kind of economic weapon, they're all tools in service of a geopolitical objective. So you start with the geopolitical objective. What is it? Are you trying to prevent something from happening, like Russia invading and terrorizing its neighbor? Are you trying to prevent China from acquiring cutting edge AI capabilities that could tilt the global balance of power? Well, based on that objective, you then design a strategy that might deter Russia or degrade China's capabilities, X-Anti. But if you're responding to something that's already happened, let's say Russia's already invaded Ukraine, well, then you have to propose a strategy that's designed to change ongoing behavior with overwhelming costs, subject to the amount of spillover risk that you're willing to incur. Or at least you want to create a demonstration effect to prevent copycat strategies from emerging. So that's why the objective really matters. But you have to have an idea of how much economic force is sufficient to plausibly change the calculus of the target. And that's where, to me, economic analysis needs to get married better with political intelligence. You know, to an economic neophyte like myself, it almost sounds kind of like the targeting cycle. You start with the goal or the objective, then you brainstorm what effects do you want to achieve, then you work backwards through risk. And finally, what tools do we have at our disposal in order to achieve the objective? Jack, I'd like to hear your thoughts. Yeah, go ahead, Delet. One more sentence. I mean, specifically when it comes to the choice of instruments and tools, I think something we've all been hinting at in this conversation already, but just again to underline it, we are constantly in the practice of economic statecraft looking for tools that might plausibly get the job done in a way that maximizes the impact on the target while minimizing the blowback on the US and the global economy. And that requires knowing where your economic strengths and those of your coalition intersect with the target's vulnerabilities and vice versa, because it's a repeated game. Ben, I think your analogy to targeting is very appropriate. We thought of it in similar terms to what you described. And I assume in the case of targeting, in the military context, you worry very much about what's going to come back at you because there's two actors in all of these situations. If you look at the use of tariffs, as Eddie was describing before, and you look at the range of exposures like critical minerals, I think what we're seeing today is a confluence of different forms of vulnerability, different kinds of vulnerability that put us at more risk in some ways than we've ever been before. What do I mean by that? Massive tariffs against China, as Eddie described, turned out not to constrain China that much because it's a big world and they could export to other countries and fill the hole that was created by not selling to the United States. There aren't that many sources of certain rare and critical minerals. By shutting down our access to those critical raw materials, they demonstrated that they had a way to respond that was causing us more pain than we were causing them. You saw a reversal of our tariffs fairly quickly. More importantly and conceptually, what it exposed is what we're talking about in terms of the need to be careful on how you use the tools of economic statecraft to accomplish a goal and not to expose a weakness where your adversary can get the better of you. You're weaker if you're transparently less able to apply the kind of unilateral pressure that we have the unique ability to do with the dollar and access to the US markets. The lesson to me, and I've written and spoken over the years about misuse and overuse of these tools, is to treat them with more care. To treat them with every bit as much care as you use when you use military force, it's not directly a matter of life and death. Though indirectly, people do suffer when you don't have access to necessities of life, it's not infinite and it can backfire, so you need to be careful. So we've covered terms, we've covered translating ideas and turning them into practice, but now I'd like to use several case studies to really illustrate the point in greater depth. So let's cover the examples of Iran, China, and Russia in that order. Jack, starting with you, how did the Iran sanctions campaign shape Washington's broader approach to economic warfare? In the case of Iran, there was broad agreement in Washington that Iran should not have a nuclear weapon. There was broad global agreement that Iran should not have a nuclear weapon. The challenge was to design a set of tools that put enough pressure on Iran, keeping together a global coalition so that Iran would feel the pain and it wouldn't weaken the pressure being put on Iran. So we didn't just do things unilaterally, we went to the United Nations and we got global sanctions against Iran. We dealt with oil, we dealt with access to U.S. markets and the dollar, we designated specific targets. It took a long time for the pain to become sufficient for Iran to actually come to the table and there was a lot of skepticism that it could work. Many ways is the model of how a sanctions regime can work to achieve the diplomatic end of bringing an adversary to a negotiating table and having a diplomatic solution where one otherwise would not have been available. It's never going to be the case that they think you're right or they're doing it because they want to do it. Almost by definition, they're doing it because you pressure them. So it's a negotiation. The end of the sanctions regime is in some ways the hardest part. You have an adversary like Iran. They're doing lots of bad things. They're not just building nuclear capabilities. They're also doing things in the region that threaten our closest allies and spread destabilizing proxies. They're doing things that are human rights violations. That you have to relieve the sanctions at the end of a sanction program or else there's no reason for a sovereign ever to change their policy in response to a sanction. So we had to roll back the nuclear sanctions, which we did with extreme care only to remove nuclear sanctions, not to remove sanctions that were for other nefarious behavior. The result of it was that it became a little bit of a political issue with Shinton because we were giving money back to the Iranians. Well, yeah, that's what happened when your sanctions work. You give money back to the bad guys. The Iranians, on the other hand, thought we were completely undermining the agreement because we didn't unwind all of the sanctions and they were having trouble getting the economic benefits they thought they had bargained for in the deal. So I think we actually threaded the needle the right way, but you don't get a lot of at a boys for it because it's much easier to say you shouldn't give them anything and for the other side say you didn't give us enough. That seems like an infinitely complex problem. So let's move to something a little simpler and discuss China. Eddie, the strategic competition between the U.S. and China is increasingly economic as well as military, right? So how has this rivalry changed the way you think about America's economic relationship with China? And I'd also be curious to hear where you think U.S. policy has been effective and where it falls short. Sure. So I think we discussed earlier the experience in 2014 and having to create a whole new set of tools against Russia because the playbook that we had for Iran would not work for an economy that was an order of magnitude bigger. Well, when you are contending with China, that's another order of magnitude bigger, more complex, more difficult than Russia. U.S. policy toward China really did start pivoting, I think, during the first Trump administration. And I think Bob Lighthizer, who is the U.S. trade representative, deserves a lot of credit for really being the one who engineered that shift, probably more than anybody else. Initially through a section 301 investigation that really wound up undergirding a lot of the U.S. tariffs on China, but actually also wound up serving as an intellectual foundation for a broader tech competition with China. Because if you look at what the 301 talked about, it was about China threatening American technology and technological supremacy through IP theft and other unfair practices. And it was during the first Trump administration that the U.S. started creating novel export control tools, specifically the Foreign Direct Product Rule, which the Trump administration created in the summer of 2020, which was sort of the extraterritorial version of export controls deployed against Huawei. It said that not only was Huawei cut off from buying goods from the United States, but that even chip fabs in Taiwan, like TSMC, couldn't produce chips for Huawei if they were made using U.S. technology. And these big chip fabs use a lot of software and tooling from companies in the United States. The Biden administration, when Dilip was there, took those export controls and expanded them dramatically to cover the entire Chinese economy. They took the FDPR that had just been on Huawei and said, well, if we're doing this against one big Chinese tech company, why not do it against everybody? And I will credit former National Security Advisor Jake Sullivan with actually being very clear in what the goal was. He said, quote, the goal is to maintain as large of a lead as possible. And I think that's really interesting and novel, because as Jack said, we usually think about economic statecraft really as a tool of behavior change, right? You impose some sort of economic pain, the other side changes their policy, you remove the pressure. And what I think was true during the first Trump administration, but we never put it into such clear terms, is that at least in some areas of U.S.-China competition, the goal is not behavior change. The goal is actually more like economic and technological attrition. You're trying to weaken certain areas of China's economy that make them competitive, make them threatening to the United States and our allies, and simultaneously through incentives, industrial policies, and the CHIPS Act and other programs, strengthening the U.S. side in semiconductors and artificial intelligence. So I think it is in some ways a fundamentally different campaign in objective than we had against Russia or Iran, where you really were imposing economic pain, trying to get them to change their behavior. I think in terms of what we have now, and Jack captured this well, and what makes things really complicated, is when Lighthizer did the 301 investigation in 2018, China didn't have a playbook to respond. They said, okay, well, we're just going to respond to the U.S. tariff for tariff. Back when they did the sort of famous export controls on rare earths to Japan in 2010, there was no regulation. They just kind of informally imposed these sanctions, and the rare earths kind of didn't go to Japan for a little while. What they did post-2018 was they developed an entire suite of economic weapons. They basically took the architecture that we talked about at OFAC, at the Commerce Department, and copied and pasted it for the Chinese system. So now they have an unreliable entity list. They've got an export control law. They've got an anti-foreign sanctions law. They have all kinds of different laws and institutional architecture to deploy economic warfare. And I think that it has fundamentally changed the game, because now the United States isn't just worried about, well, how do we maximize pressure on the specific part of China's economy while minimizing blowback on ourselves? It's also how do we do this in a way that doesn't actually incite retaliation that's going to be painful to us? And I think this is actually something I'll be honest. I'm a little bit confused about myself. I don't have a strong view, because generally speaking, I think incrementalism and sanctions is a bad idea, because it just gives the other side the opportunity to adapt over time. But if you look at it in retrospect, the Biden administration's incremental expansion of export controls did actually prevent China from retaliating aggressively, whereas Trump, coming out guns ablazing with 145% tariffs, and he got a full scale embargo on rare earths that shut down Ford factories in the Midwest within a matter of weeks. So I think that that's an area where I don't think we actually have a very clear strategic paradigm just yet. You know, Eddie, I want to just ask a quick clarifying question. Were you kind of making the point that we've used economic tools to maybe scope or shape specific behavior with some adversaries, but with China? And I'm asking this because I just taught a block on realism to a bunch of undergraduates. It's more about this question of relative gains and trying to maximize America's economic power relative to its primary adversary? That's how I see it. I do think we don't like speaking in these terms, but I think that the logic of Jake's comments is that there are certain areas of the US-China relationship that are zero sum. I think the challenge is, can you prosecute such a policy effectively without inadvertently making the entire relationship zero sum? That's the challenge. This was sort of embodied by small yard high fence. I'm seeing Dilip wanting to weigh in and I'm curious what he has to say. You're doing great. I mean, I think you've put it very well, but I think, yes, what we're talking about here with China is qualitatively different than what we could discuss in the Russia sanctions regime because the export controls on China, the small yard high fence, was not put in place after an event had occurred. It was prior to China gaining capabilities using what we consider to be foundational technologies. By foundational technologies, technologies that are foundational to economic growth potential, but also national security like AI, like quantum, synthetic biology, even something like fusion, that there's a certain set of technologies that will basically allow a country to control the commanding heights from which you can exert tremendous influence over the global balance of power. The whole notion of export controls was, look, our private sector is going to have overwhelming incentives to sell those technologies into the enormous Chinese market if we don't put in place controls. And because China has a military civil fusion program, if those technologies diffuse to the Chinese commercial sector, it's tantamount to giving those technologies to China's military in ways that could undermine our national security. Therefore, we need to put on controls, not to punish China per se, but to change the terms of competition so that we're competing on our ability to innovate, our ability to build a coalition around a set of controls, and our ability to attract ideas and investment to our country. Those are the terms of competition. We liked our chances. And the concern we had was, we don't want those controls to have unlimited dimensions. So the metaphor of the small yard, high fence, is we don't want the yard to become wider and wider and the fence to become higher and higher. We want to really think hard about what are the technologies that are truly foundational and of those technologies, where do we now or will we perspective have a lead? And for those technologies we may wish to control, can we build a coalition around those controls so that China can simply supply AI chips from another country that also makes them in the same amount that we do? And then the last kind of strategic anchor around the controls was let's actually think about an escalatory tit for tat in which we put on controls for cutting edge technologies where we have a lead and for which we can build a coalition and China does the same, are we net better off relative to the next best policy alternative? So we wanted to have a strategic anchor around these export controls and we called that the small yard, high fence. Without going into all the details, I worry right now, we're kind of mowing down that small yard, high fence and creating maybe the right metaphor is like a tall drawbridge. If the company is willing to pay for it, if the US government can monetize Nvidia selling second generation chips to China, we're willing to give away our crown jewels, our key choke point on the AI ecosystem, which is computing power. China has plenty of energy, plenty of land, not much regulation. What they were missing was AI computing power and now we've given China a generational leap in ways that I don't think locks in China at all. They're going to purge US silicon as fast as they can and I don't think this is going to allow Nvidia to innovate faster and further. They're in no way capital constrained. I think all we've done is taken the most finite, the most important strategic asset on the globe, a finite asset, AI chips, and we've decided to allocate some of it to our fiercest competitor. It's a multi-generational mistake if you ask me. The sanctions tools are all different. Export licenses or limitations on what we sell, nobody would expect us to give our most advanced fighter aircraft to an adversary. If you think about an export license and the way Dileep was just describing it, saying we're not going to give our adversary the ability to take what we know how to do and they don't know how to do and use it to get ahead of us, that's different than freezing bank accounts and seizing assets and closing markets. What Dileep was just saying in terms of where we've ended up, we've probably undermined the legitimacy of the national security argument. What do I mean by that? Biden administration said we're not going to sell you chips because we have a national security concern and the Trump administration put a massive tariff on China and then a negotiation to roll it off agreed to sell more chips to China. You fell behind in terms of keeping China from getting the chips, but you also raised the question of was your national security argument real, which I believe it was. It's a little abstract, but if you don't have that theoretical underpinning, how are your adversaries going to understand what you're trying to do and take seriously your threats and respond in a way that you want them to respond? I think we're in a challenging spot right now, having merged these streams and on both Huawei and on chips, we've seen national security issues negotiated away for trade access to sell American beef and other things in China. That's not a great place to be. All right, well, with that, we'll turn to Russia here. So, Dili, you appear as a central figure in the book and later helped coordinate the economic response to Russia's full-scale invasion of Ukraine. What lessons did you take from organizing that response and what did it reveal about the strengths and limits of economic statecraft? Oh gosh, how long do we have? I mean, that would be like a three-hour Joe Rogan podcast to unpack all of it. I'm kind of still processing it four years later. Okay, let me just give you a lightened round of reflections. In terms of strengths, I think it validated that economic tools are potent. We're no longer in the era of hyper-globalization, but the world is still near peak levels of connectivity, which means America is the dominant economic power. We can deliver enormous economic pain if we choose to break those linkages. And we did with Russia. Its economy didn't implode, and yes, it adapted, but there's no doubt it's smaller, weaker, more isolated, less sophisticated because of sanctions. Secondly, I would say diplomacy worked. We were able to mobilize countries that make up more than half of the world's GDP to deliver the most forceful economic sanctions in history within 48 hours of the invasion. And that includes the economic equivalent of the nuclear option, which is freezing Russia's central bank assets over 300 billion of them that were held in the EU. And that was a massive force multiplier, both in terms of the direct impact, but also the signal that this wasn't just the unilateral exercise of American brute force. It was a collective defense of principles that underpin peace. But, you know, I spend more time thinking about what we did wrong, especially what I did wrong, and there were many, many shortcomings. I think one is, I've mentioned this term already, we didn't play multiplayer game theory particularly well. You know, this is chess. Our first move was strong, but it was obvious from the start that if we didn't cut off Russia's energy exports to the world, not just to the G7, it would continue to earn enough hard currency to fuel the war machine indefinitely. And it was also predictable, I think, that China, as Russia's no limits partner, would likely become the factory to Russia's war machine, you know, by supplying the components that became missiles and tanks and drones on the battlefield. So we could have done a better job of anticipating those countermoves and preemptively blunting them. For example, by striking a deal with the Gulf countries with spare capacity to surge oil supply and give us more will to go after Russia's energy exports, or sanctioning a mid-sized Chinese bank without globally systemic consequences that would generate a chilling effect within the Chinese financial system to no longer intermediate the flow of those components to Russia. So the second failure, again, this is I'm speaking personally more than anything else, we lost the global narrative. I mean, more than two thirds of the world's population lives in countries that didn't join our sanctions regime. And a few counterparts told me they didn't join the regime because they were worried about the efficacy of sanctions, that the costs of breaking linkages with Russia were likely to exceed the benefits. Fair enough, we can talk about that, but the deeper, deeper failing had to do with legitimacy. Many of my counterparts said, look, these sanctions are an illegitimate exercise of American economic force. And so that's why, you know, I am such a huge proponent, along with Jack and Eddie, of adopting something akin to a doctrine of economic statecraft with limiting principles and rules of engagement for why we use these tools, how we use them, when we use them, and to what extent, so that we can reestablish legitimacy. Then the last thing is what I already said, we didn't yet, we didn't integrate economic analysis sufficiently with political intelligence. So we know how to impose economic costs, we know how to do that. But costs are never an end to themselves. The purpose was to change Putin's calculus about continuing this tragic and senseless war, but we didn't know how much cost was necessary to change his calculus. And those of his partners in China and North Korea and so on. And none of this is science, but sometimes it felt to me like we were flying blind. I feel like there's an entire conversation that we had about deterrence and deterrence by punishment there. But I think we need to wrap up here. So we'd like to end the show by discussing practical takeaways for policymakers and practitioners. Eddie, could you briefly summarize the most important takeaways based on today's conversation? I think probably the first is to know your leverage and know your vulnerabilities. I think if we try to weaponize parts of our economy that frankly are not choke points, we're not going to be successful. On the flip side, if we allow ourselves to have vulnerabilities to Chinese economic warfare, Russian economic warfare, and by the way, critically, also our allies to have those vulnerabilities, we're not going to be fighting from a position of strength. I think the second one, even beyond just sort of understanding the sources of your power and where we're weak, is and Dileep captured this well, is really understanding the goals of any economic state craft policy. I think too often we wind up sanctioning first and asking questions later. I think it would be much better off for us to at the beginning say, well, what are we trying to achieve? And then sort of building an economic statecraft strategy that leads to that goal. And Jack, for you, what are the most important takeaways? Look, I'd start where Eddie did that we have to have our eyes wide open about our vulnerabilities and proceeding as if we have an infinite ability and no exposure ultimately undermines our effectiveness. I agree on the point of goals. I would add our very privileged position in the world is unique in terms of our ability to project strength through economic pressure. We have to be careful about self inflicted wounds, both in terms of how we run our economy and how we carry ourselves in the world. So Dileep's point about legitimacy, it really matters. It really, really matters if you're seen to be doing it with a foundation that is clear, that is backed by principles and which your allies can justify why they should absorb some pain if necessary to be with you. Because there is always some pain to using these tools. Somebody pays a price. It might be a dairy farmer in France, or it might be a process fuel user in the middle west. Somebody is going to pay a price and you have to be able to say we did it for purpose and this is why it's the right thing to do. And then Dileep to round us out. I'd summarize it by saying less improvisation, more institutionalization. We've spent hundreds of years writing down and refining doctrine for the use of military force. Now we need an analogous effort to lay down guiding principles, rules of engagement, a code of conduct for the use of economic force. And the second and last thing is I think we need to strike a better balance in our conduct of economic statecraft between the use of punitive tools like sanctions and positive tools like supply chain agreements or trusted zones where technology can diffuse freely between countries playing by the same rules. I think the positive tools are ultimately America's most potent ones because they draw on our our enduring strengths, which is the power to create and inspire and attract. So I'd like us to focus more on the positive side. Well, to Jack Lew, Dileep Singh and Eddie Fishman, that was a remarkably stimulating conversation about economic coercion and economic warfare. And I want to thank all three of you for joining us on the podcast today. Thank you, Ben. The pleasure. Yeah, it was great to be here, Ben. Thanks so much. Thanks again for joining us for the Irregular Warfare Podcast. Be sure to subscribe to the Irregular Warfare Podcast so you don't miss an episode. If you enjoyed today's show, please leave a comment and positive rating on Apple Podcasts or wherever you listen to the Irregular Warfare Podcast. It really helps expose the show to new listeners. And one last note, what you hear in this episode are the views of the participants and do not represent those at Princeton, West Point or for any agency in the US government. Thanks again, and we'll see you next time.