Weaponization of finance

The term weaponization of finance refers to the foreign policy strategy of using incentives (access to capital markets) and penalties (varied types of sanctions) as tools of coercive diplomacy.[1][2]

The term was first coined by political scientists Ian Bremmer and Cliff Kupchan.[1] It became one of the main themes of the Eurasia Group’s Top Risks 2015 report.

It is a reference to the new ways in which the United States is using its influence to affect global outcomes. Rather than rely on traditional elements of America’s security advantage – including US-led alliances such as NATO and multi-lateral institutions such as the World Bank and the International Monetary Fund – Washington is now ‘weaponizing finance’ by limiting access to the US marketplace and US banks as an instrument of its foreign and security policy.[1]

According to the US Treasury Secretary Jack Lew, the weaponization of finance offers to the US “a new battlefield...one that enables [the US] to go after those who wish [the US] harm without putting [US] troops in harm’s way or using lethal force.” [3] Instead of fighting countries militarily, the US can now “cripple them financially.”[4] Examples of the weaponization of finance include US economic sanctions against Russia, Iran, and North Korea.[4] The US sanctions program aimed at penalizing forcing cyberhackers and cyberespionage, launched in April 2015, is another example.[5]

In discussions on the weaponization of finance, Bremmer argues that, by excluding hostile governments and their senior officials from western financial markets, Washington and its allies “can pursue diplomacy with a streak of coercion.”[6] He writes of the way in which the weaponization of finance evolved from previous foreign and security strategies. “George Washington carried a musket. Franklin Roosevelt sent in heavy bombers. But for President Barack Obama, who must reconcile a weary American public with the demands of an increasingly unstable world, the armament of choice has been a weaponised form of finance.”[6] In this light, economic sanctions can be thought of as “trusty swords.”[6]

There is little evidence to suggest that the weaponization of finance is effective in changing the behavior of geopolitical actors. Moreover, western companies often suffer the blowback of Washington’s activity. BNP Paribas, for example, was fined $8.9 billion for US sanctions violations in Cuba, Sudan, and Iran.[7] Bremmer argues that, while it is deemed effective by US political leaders, the weaponization of finance has served to weaken America’s relationship with Europe.[4]

References

  1. 1 2 3 Bremmer, Ian and Kupchan, Cliff. , January 2015.
  2. ↑ Holodny, Elena. , "Business Insider", January 5, 2015.
  3. ↑ Chemali, Hagar. , US Dept. of Treasury, June 4, 2014.
  4. 1 2 3 Campione, Joanna. , "Yahoo! Finance," January 14, 2015.
  5. ↑ Bertrand, Natasha and Kelley, Michael B. , "Business Insider." April 1, 2015.
  6. 1 2 3 Bremmer, Ian. , "Financial Times," March 3, 2015.
  7. ↑ Stothard, Michael and Arnold, Martin. , "Financial Times,' February 15, 2015.
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