In the early morning hours of October 3, 1935, Italian forces in Eritrea and Somalia crossed into Ethiopia, launching a war of aggression to extend Benito Mussolini’s imperial ambitions in East Africa. As a consequence of the invasion, Italy faced significant economic sanctions from the League of Nations, not unlike the international response to Russia’s imperialistic aggression against Ukraine almost a century later. Ethiopia, however, fell the following year and faced Italian occupation until 1941. As Nicholas Mulder recounts in his 2022 book, The Economic Weapon, the League’s sanctions on Mussolini’s Italy were both the most ambitious attempt to implement multilateral economic sanctions on an aggressor since World War I and the culmination of two decades of work by internationalists in Europe and the United States to develop economic sanctions as a weapon to deter aggression.
The League’s economic campaign against Italy failed to save Ethiopia or deter a revanchist Germany from subjugating its neighbors. However, one year into the war in Ukraine, amid intensifying U.S. debates about how to deter an invasion of Taiwan by the People’s Liberation Army, Mulder’s book contains important historical lessons for the geopolitical challenges facing the United States and its allies in the coming decade.
The use of economic sanctions in the interwar period demonstrated that sanctions campaigns are only as effective as their implementation and scope. The details—including participating states, affected economic activities, and economic dependencies between participating states and the target—do matter. Sanctions against one aggressor can also incentivize states to reorder their economic policies to pursue autarky and make themselves less vulnerable to future international sanctions, as Imperial Japan and Nazi Germany did after the League sanctioned Italy. Finally, the original conception of the “economic weapon” included both sanctioning aggressors and provisioning economic aid to victims of aggression and allies facing economic pain from participating in the sanctions campaign. Efforts to influence or constrain the behavior of China and Russia through economic means must keep these lessons front of mind or risk failing to achieve their aims over the short and long term.
A Race Against Time
The League’s sanctions against Italy were an unprecedented attempt by an international coalition in peacetime to utilize economic tools to deter and punish an act of aggression by a great power. As Mulder highlights, France, the United Kingdom, and other members of the League threatened Mussolini with wide-ranging economic sanctions if he invaded Ethiopia. After Italy attacked despite these threats, the League followed through with 52 member states imposing an arms embargo, a freeze on financial relations with Italy, an import embargo, and other measures. The goal was to deprive Italy of arms and foreign exchange earnings and eventually prevent Mussolini from supplying his army. However, the sanctions campaign did not include an oil embargo, and the war did not last long enough for the League’s sanctions to reach full effect.
The sanctions were hamstrung by America’s non-participation and their focus on undermining Italy’s finances as opposed to commodity access. In 1935, the United States accounted for the majority of global oil production. Without its support, the League could not prevent Italy from obtaining foreign exchange and fuel from American trade. Mulder notes that after the war, British officials concluded that Italy avoided financial catastrophe by maintaining access to key commodities and concluding the war in Ethiopia before foreign reserves ran out.
This dynamic has important parallels to the current sanctions campaign against Russia. In 2022, Moscow’s oil products exports increased compared to 2021 despite Western sanctions, providing a foreign exchange lifeline that has given the Central Bank of Russia the ability to blunt some of the sanctions. This does not mean Russia will not suffer severe long-term consequences; restrictions on technology transfers, new efforts to cap the price of Russian energy exports, and continued financial sanctions could leave Putin’s regime unable to sustain a protracted war in the future. Still, these measures failed to deter or constrain Russia’s war machine in a meaningful way during the crucial early months of the conflict.
Efforts by Imperial Japan and Nazi Germany to make themselves less vulnerable to sanctions following the League campaign against Italy foreshadow how China could respond to the Russo-Ukrainian War. While League sanctions did not cripple Italy’s economy, they still inflicted significant damage. Mulder details how Berlin and Tokyo concluded from observing the League’s sanctions against Italy that securing blockade-proof access to strategically important commodities was necessary for national survival. To that end, Hitler launched his Four-Year-Plan in 1936 to prepare Germany economically for war, with blockade resilience playing a major role. Japan’s search for secure sources of raw materials and an escalating Sino-Japanese War contributed to the 1941 decision to attack the United States and conquer the Western Pacific. This history and today’s Western response to Russian aggression is likely to give new urgency to China’s ongoing efforts to attain self-sufficiency in advanced technology and shore up resource security with its Belt and Road Initiative.
Finally, wielding the “economic weapon” against an aggressor successfully requires both punitive sanctions as well as economic aid. As Mulder points out, the League did not provide Ethiopia with the material assistance necessary to sustain its resistance against Italy. In contrast, the United States and its allies have provided Kyiv with significant military and economic assistance to hold off Russia. However, prior to Putin’s invasion, the West was insufficiently prepared to provide aid to nations highly dependent on Russian energy, thus delaying the imposition of sanctions on Russia’s energy sector and risking political support in several key European states.
Can Economic Sanctions Help Deter China in the 2020s?
As U.S. policymakers consider the role of economic policy in deterring Chinese aggression against Taiwan, they should heed the examples in The Economic Weapon and real-time lessons from Western sanctions against Putin’s Russia. The successful use of economic tools will require significant planning and coordination between the United States and its allies, both in the Indo-Pacific and Europe. Otherwise, a conflict could be over or too far advanced for sanctions to have an impact by the time they are developed and put into effect.
The effectiveness of American sanctions would be determined not only by planning across the executive and legislative branches but also by long-term trends in U.S.-China economic ties. To maintain the strategic value of potential sanctions against China, policymakers should heed the recent admonition by Matt Pottinger, Matthew Johnson, and David Feith to shape economic ties between the United States and its allies with China to “maintain a favorable balance of dependence in a wide range of areas,” thus making any areas economic interdependence a strength, not a weakness. Washington must balance between stymieing Beijing’s technological and economic ambitions while preserving its ability to use key dependencies as leverage to deter war.
Economic resilience among allies in the Indo-Pacific will also be essential for deterring China from an invasion of Taiwan. A U.S.-led collective resilience bloc could leverage China’s trade dependencies and the bloc’s economic strength to resist Chinese economic coercion in peace and war while also blunting the blowback effects of any sanctions campaign against China.
Like in the interwar period, these elements—well-designed and comprehensive sanctions planned in advance, favorable economic dependencies with a potential adversary, and coordinated multilateral economic resilience—will all bear on the success or failure of future efforts to wield the “economic weapon.” But a close reading of the history laid out by Mulder makes clear that economic measures alone are unlikely to deter a determined aggressor. Nonetheless, this book is an important read for understanding how great power competition and conflict could unfold in this era.