What if the decisive battles of the 21st century aren't fought on battlefields, but in banks, supply chains, and payment systems? Today, power can be projected by freezing assets, cutting off chips, or rerouting trade flows, moves that can wound a rival nation without a single shot. If economic networks have become the new terrain of conflict, where does real power now lie? And how secure are we in a world where the systems we depend on can be turned into weapons overnight? Hi everyone, I'm Lynne Toman and this is Three Takeaways. On Three Takeaways, I talk with some of the world's best thinkers, business leaders, writers, politicians, newsmakers, and scientists. Each episode ends with three key takeaways to help us understand the world and maybe even ourselves a little better. Today, I'm excited to be joined by Eddie Fishman, a scholar at Columbia University School of International and Public Affairs and author of Choke Points, American Power in the Age of Economic Warfare. He previously served at the U.S. State Department helping design and implement sanctions and export controls. Eddie, welcome to Three Takeaways. Thanks so much for having me, Lynne. It is my pleasure. What is a choke point in real life and can you give a vivid example? Historically speaking, choke points have been geographic features like the Bosphorus or the Strait of Hormuz, this narrow strait where 20% of the global oil supply flows through every single day. And being able to cut off another country's access to one of those choke points, usually through military force, has always been a potent lever of statecraft. But what has happened in the last few decades in the wake of hyperglobalization when the entire world entered the dollar-based financial system and transnational technology supply chains is you've had the creation of these invisible choke points like the U.S. dollar, where 90% of all foreign exchange transactions have the dollar on one side or the other. And so what that means is even when two countries are trading with each other, neither of which are the U.S. So for instance, a Saudi company and an Indian company trading with each other, that transaction almost certainly is going to go through the dollar. You're actually going to have two foreign exchange transactions that go through the dollar, one from Burpee's to dollars and then another from dollars to Saudi Riyals. And so what that has done is it's enabled the U.S. government by virtue of controlling this fundamental choke point, the U.S. dollar, to impose hard-hitting economic pain on virtually any company or even country around the world. You say that economic power can rival military force. Where do we see that today? You used to have to use military force to impose substantial economic pain on another country. The canonical case of economic sanctions in the 90s was the UN embargo against Saddam Hussein's Iraq. The embargo went into effect in August of 1990, just a few days after Saddam Hussein invaded and annex Kuwait. And it lasted all the way up until 2003. So it was in place for 13 years. The goal of that embargo was to stop Iraq from selling oil on the global marketplace. The way that that was implemented was through a multinational naval blockade. So for that entire 13-year period, you had naval vessels commanded by an American admiral patrolling the Persian Gulf 24-7, inspecting every single Iraqi tanker coming in and out of an Iraqi port. That's what economic warfare looked like in the 90s. Today, it's very different. So when the US went about trying to stop Iran from selling oil in the 2010s, right before the Iran nuclear deal, there wasn't a single naval vessel deployed. Simply, it was the US government going around to banks and oil refineries in countries like China, India, and Turkey and threatening them with being cut off from the US dollar unless they reduced their oil purchases from Iran. And that was even more impactful from this oil embargo against Iraq in the 1990s. And it didn't use a single US military service person to implement it. You have a wonderful story about how a few paragraphs from the Treasury Department that almost nobody noticed disrupted a waterway halfway across the world. What happened? After Russia invaded Ukraine in 2022, the West had a substantial challenge, which was how do you stop Russia from profiting from its oil sales, which is ultimately the most important component of Russia's economy, without spiking the global oil price, without removing supply from the global oil markets, and increasing prices for everyone from motorists in the United States to companies who are using oil and gas to power their factories. And a solution that ultimately Western policymakers came up with was called the price cap, where they would allow Russia to continue selling oil. But if it tried to sell the oil for more than $60 a barrel, Western insurance companies would no longer provide insurance coverage. And this became extremely important, because if you think about oil tankers sailing halfway around the globe, they need a lot of insurance, because if you have a catastrophic accident or oil spill, you're in a lot of trouble. Well, when this price cap went into effect on December 5th, 2022, all of a sudden, Russian tankers that were trying to transit the Bosphorus, this narrow straight cutting across the center of Istanbul, they had to be checked by maritime employees who said, well, do you have insurance coverage? And they said, well, of course we do. And they'll say, well, how much is your oil being sold for? And they couldn't produce the documentation. And so in the week after that price cap went into effect, which after all, was just a few paragraphs of regulatory jargon published by the Treasury Department in Washington, you had this massive queue of 1000 foot long oil tankers piled up at the Bosphorus. So something that in previous decades and centuries would have required military force, you actually would have had to park a Navy destroyer in front of the Bosphorus to cut it off, just by publishing a document at the Treasury Department, you were able to accomplish the same thing. Can you share other moments when US economic moves sent shockwaves across the globe? Probably one of the most remarkable was in the lead up to the Iran nuclear deal. The problem with Iran was one that devastated the United States for many years. It really bedeviled policymakers because you had this country who was developing an industrial scale nuclear program, but you didn't want to go to war with them. And you had a similar problem with Russia where Iran is selling oil all around the world. And the fear is, if you take that oil off the global marketplace, you might spike prices and hurt American consumers. And so the Obama administration really came up with an ingenious idea, which was instead of telling the buyers of Iranian oil in China or India or Turkey or Japan that they had to go to zero overnight, they basically said they could continue buying oil from Iran under two conditions. One was they had to significantly reduce their purchases every six months. And the other was they had to pay into an escrow account that could only be used for humanitarian trade. They could only be used to buy refrigerators or food from China. It couldn't be used to finance terrorist groups like Hamas and Hezbollah. And the reason this was so ingenious was that it did two things. One was it sent a signal to drillers in places like Texas and Pennsylvania and Oklahoma that in the next six months there's going to be demands that's not served by Iranian oil. So they needed to actually increase their production. And so this in many ways wound up accelerating the shale revolution in the United States, which happened in the mid-2010s. And then on the second part, normally you think about sanctions as this really adversarial situation where you're threatening a Chinese company with either you're with us or against us, either you're doing business with Iran or the United States, but not both. In this circumstance, because you were forcing them to actually pay for their own Iranian oil in escrow accounts, they could only be used to buy goods from China, it actually gave an incentive for companies in China to comply because it meant that Iran, if anything, was going to boost their imports from China. So it provided both a stick and a carrot and wound up providing substantial leverage to negotiators to get the Iran nuclear deal. So interesting. The sticks are so much more common than the carrots. Yes, it is true. And I think in some ways this has been the biggest deficiency in American economic statecraft that in the 21st century, the United States has become very adept at imposing substantial economic pressure on other countries. The United States has done it to Iran, to Russia, and even China. We've become less good, though, at providing economic incentives. You have to go back all the way to the 1940s with the Marshall Plan to think of the United States really using economic carrots in a strategic and effective way. And I think that's been one of our big problems, frankly, of U.S. foreign policy in the 21st century. Before Russia's invasion of Ukraine, President Biden famously threatened that if Russia did invade Ukraine, the country would pay a steep price. But Russia invaded anyway. Have sanctions and other economic warfare measures worked against Russia? The Biden administration did have an unusually favorable historical opportunity, where the intelligence community, months before Russia invaded Ukraine, provided early warning that this invasion was going to happen. So it gave the Biden administration several months to try to deter Putin, putting out the threat of the most severe sanctions that have ever been imposed to try to change Putin's mind about the wisdom of invading. Ultimately, when Putin invaded, deterrence failed. That strategy clearly failed. I think the tragedy of it, though, Lin, is if you look at the assets in Russia, the number one strategy Russia had to insulate its economy from sanctions was accumulating central bank reserves, accumulating hard currency. And by the time the U.S. and Europe imposed sanctions on the central bank of Russia, which was only 48 hours after the invasion started, Russia had about half of its central bank reserves sitting in Western bank accounts, sitting in Belgium and France and the U.K. and the U.S. And what that says is that Putin underestimated the seriousness of the threat that Biden put on the table. So I think that one thing we really have to ask ourselves is could we have been more credible in advance? Could we have potentially been more credible with our threats? And I think that that is one of the shortcomings. What I will say, though, is in the years since sanctions have gone into effect. Clearly, they've had a significant impact on Russia. Where we are right now, the Russian economy has sky-high inflation and zero economic growth. They're in the midst of stag inflation. There's basically no hope for Russia's economy so long as they're under these sanctions. Should we have turned up the pressure sooner? I think we should have. Should we have done a better job of deterring Putin before the invasion started? Undoubtedly. But the idea that sanctions haven't worked, it only hasn't worked if you judge it against the best possible outcome, where Putin turns around and decides the invasion isn't worth it. But certainly, if you didn't have sanctions in place, Russia's economy and their military industrial complex would be much stronger and much more dangerous than they are today. What are the most critical economic warfare tools today? I think the best way to view economic warfare isn't through necessarily the legal levers like sanctions or export controls. It's really through choke points. It's through these areas of the global economy where one country has a dominant position and there are few of any substitutes. Still, the most powerful lever for economic warfare, the most powerful choke point in the global economy is the dollar. I think after the dollar, you have a number of key inputs and supply chains like advanced AI chips. You've got 80% plus that are produced by a single Silicon Valley company, which is NVIDIA. If you look at rare earth minerals, which are required for everything from electric vehicle engines to drones to fighter jets, 90% of global refining capacity is in China. And I think that's why the single biggest geoeconomic event of 2025 was when China cut off America's access to those rare earth minerals and forced companies like Ford to idle factories in the American Midwest. So I think that those three still are probably the most potent, the dollar, advanced semiconductors, and China's rare earths. But there are other choke points that are sitting waiting to be exploited and very well maybe in the months and years ahead. What are those choke points waiting to be exploited? One that the Europeans and Chinese fear quite a bit is America's dominance of the cloud. So US cloud service providers, Amazon, Google, Microsoft, Oracle, provide 75% plus of global cloud services. And so if you think about it, really the entire global internet is being run through American companies, which theoretically could be turned into a weapon of economic warfare. For China, China now is by far the world's biggest manufacturing power. What that means is there's a number of inputs in various supply chains that China could weaponize as choke points. I think really anything in the electric vehicles supply chain, whether it's the batteries, the rare earth minerals, even the vehicles themselves could be turned into a weapon of economic warfare if Beijing decides to do so. So interesting. Eddie, as you pointed out, sanctioning a bank versus bombing it, one is economic warfare, the other is military warfare. What's gained and lost with economic warfare? I think it's very easy for sanctions to get a bad rap. And look, sanctions are not a friendly tool of statecraft. They can cause really substantial devastation economically in the countries that are targeted by them. But if you think about it, there really are very few tools of coercive statecraft at the government's disposal. When it comes to economic warfare, it's usually your best option in between just words of condemnation and actually using kinetic force. So I think it's incumbent upon policymakers to try to figure out how to do economic warfare effectively, because oftentimes the alternative isn't peace. It's actually fighting. And we'd always prefer to be able to settle conflicts nonviolently than using kinetic force. The other big change to me is that it used to be governments acting through the military. And now it's governments acting essentially through private companies, through businesses. I think that's a really important observation, Lynn, because one of the big differences between economic warfare and military force is that even if the government is setting policy, which it often is with sanctions or export controls or tariffs, it is private companies who are on the front lines. Private businesses are the ones implementing these policies. And so it's really incumbent on the government to work with the private sector to try to figure out how to accomplish its shared goals. And so it's a different relationship than we're used to in the United States between government and business. But it's a really important one, because this is not going away anytime soon. Can using sanctions and economic warfare too much backfire? Certainly. I think that there's a very clear pattern that once you weaponize a choke point against another country, that country is going to expend a lot of time and resources to try to insulate themselves. A great example is post 2014, when the US first imposed sanctions on Russia. Both Russia and China have invested a lot of time and effort to try to reduce their dependence on the dollar. They've created alternative systems to clear payments. And recently, just a few weeks ago, even the Chinese government came out and said that they're explicitly trying to make the RMB a reserve currency to rival the dollar. I think a lot of this is driven by fear of being sanctioned by the United States. And of course, it cuts both ways. You've seen in the last year, the US invest billions of dollars in domestic critical minerals resources to try to reduce our reliance on China. So it's incumbent upon the United States to use these tools judiciously, to not make them a tool of first resort. Because ultimately, it's the private sector. It's the dynamism of our economy that suffers if they become a knee-jerk reaction to every single crisis. And how about other countries besides China and Russia? Is that leading them to also make themselves less vulnerable? Definitely. And I think the virtue of doing economic warfare alongside allies is you wind up protecting your most important business relationships from this hedging phenomenon. So an example is when the US imposed sanctions on the central bank of Russia in 2022, it wasn't just the US that did this. The United States did it alongside the European Union and the UK and Japan and Canada. And so what that meant was the dollar didn't have some unusual geopolitical risk premium attached to it. Because the dollar was just as risky as the euro and just as risky as the yen as the pound. It was all of the global reserve currencies acting together. On the flip side, during the last year, the United States has been primarily using its economic weapons unilaterally. It's been imposing unilateral tariffs and sanctions on most countries around the world. And what that has meant is that even America's allies in Europe and Canada have been hedging. I was just in Canada last week and the biggest discussion in the Alberta business sector is how do we build pipelines to the Pacific coast so we don't have to export all of our oil and gas to the United States. European leaders just had a summit last week to talk about how they can build economic sovereignty, how they can have their own payment systems, their own technology platforms that they're not dependent on the United States. So this is a more recent phenomenon, but it is one that has come to the fore in the wake of some of the uses of economic warfare the United States has engaged in in the last year. Before I ask for the three takeaways, you'd like to leave the audience today. What advice do you have for a future president using economic power and economic warfare? The number one piece of advice is that the reason the U.S. has this leverage is because businesses all around the world and in fact countries all around the world have opted in to the American system because they thought it was the safest and best place to hold their assets. They opted in to using U.S. technologies because of the value they provided, but also the comfort that they wouldn't be frivolously weaponized against them. And I think what that means is it's not never to use economic power to advance geopolitical objectives. I think sometimes you have to. You know, if you're confronting an imperialist power like Russia, you do have to, but you don't want to use it frivolously because if you do use it frivolously, you do wind up risking that you're actually undermining the sources of American economic power itself. And what are the three takeaways you'd like to leave the audience with today? First is that we are living in an age of economic warfare. Sanctions, tariffs, export controls, they're now the primary way that countries compete with each other, and this is going to be the case for almost certainly the coming decades. The second takeaway would be that this geopolitical phenomenon of the age of economic warfare is actually now gotten to the point that it's reshaping the global economy itself. We are seeing this phenomenon of geo-economic fragmentation in which the financial system, energy markets, and supply chains are fracturing along geopolitical lines. This is not a choice. It's a reality. And I think it's incumbent upon business leaders and the government to accept that and to think of ways to channel it in a profitable direction. The third takeaway would be that given how important this phenomenon is of economic warfare and geo-economic fragmentation for our businesses, for our governments, for our national security, really for our everyday lives, it's incumbent upon us to educate ourselves about it. It's important for our democratic discourse, for people to feel like they have the requisite knowledge to pipe up and actually weigh in in the democratic process about how the United States is using its economic power around the world. Eddie, thank you so much. Thank you for our conversation today, and I very much enjoyed Choke Points. Lynn, thank you so much. I really enjoyed our conversation. If you're enjoying the podcast and I really hope you are, please review us on Apple Podcasts or Spotify or wherever you get your podcasts. It really helps get the word out. If you're interested, you can also sign up for the Three Takeaways newsletter at threetakeaways.com, where you can also listen to previous episodes. You can also follow us on LinkedIn, X, Instagram, and Facebook. I'm Lynn Toman, and this is Three Takeaways. Thanks for listening.
