The new connectivity sanctions: momentum is everything

INTERNATIONAL: “How to get a handle on the axis: Financial sanctions have a big place in a tool-box designed to thwart the proliferators of Pyongyang and Tehran,” The Economist, 14 April 2007, p. 69.

The use of specifically targeted financial sanctions is clearly intriguing, because it gets right to the heart of the thin connectivity that rogue regimes must maintain, almost like criminals, to “launder” their transactions. Typically, these connections are very tightly concentrated at the top of the elite, like it was with Milosevic and his family cronies in Serbia (the first time I heard of these very personally-specific efforts to get at leaders’ money).

In short, these sorts of sanctions avoid the usual problem of enriching the elites and killing the poor, and they definitely get the bad leaders’ attention focused.

But as this article notes, in both instances, key outside enablers hold the key (by my definition: China in both instances, South Korea with North Korea, Europe and India and Russia with Iran). We can get old-school companies and banks in the Old Core to behave on this score, and with some effort, we can get some level of compliance/fear-avoidance from New Core companies (but typically less so).

So, you can almost imagine a sort of tipping-point in connectivity when the sanctions have the max impact: once the country or leadership in question decides the connectivity is worth more than the loss of political control. In the instances of both North Korea and Iran, I don’t think either country’s anywhere near there yet, meaning we can hurt them and we can certainly get their attention, but we can’t break them on this basis.

With the New Core enablers, our ability to crack our whips with them is caught up with their emerging ability to crack whips with us (e.g., Russia on energy in Europe, India on outsourcing services, China on currency reserves and manufacturing connectivity).

So while the sanctions seem far better than any we’ve used in the past, and while I advocate both their use and their expansion, I’m fairly suspect about any “silver bullet” effects. Part of the toolkit, yes, but not the hammer.