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--:-- Noel King: Welcome to Today Explained. I'm Noel King.
--:-- Jeff Stein: Thanks for having me on the show.
--:-- Noel King: Today, we're talking about American sanctions. They can destroy a country's economy, and the unintended consequences are massive in places like Venezuela and Syria. Jeff Stein of the Washington Post wrote a big story about this. It's called The Money War.
--:-- Jeff Stein: Yeah, my reporting around this started because as part of my beat, I cover the Treasury Department. And as a reporter on the Treasury team, I get their emails and their newsletters. And what they send out is every entity that they've sanctioned and ends up in my inbox.
--:-- Noel King: That's a lot of emails.
--:-- Jeff Stein: Yeah, it's a lot of emails. And it led me down this rabbit hole of, wait, how many countries, how many people, how many governments are now subject to these U.S. economic penalties and what does that mean for both U.S. foreign policy but also how we shape and influence and affect the rest of the world.
--:-- Noel King: So, let's start with the basics. What is a sanction?
--:-- Jeff Stein: It's a little complicated, and I can get more technical than you surely want, but essentially a sanction is being told that you are persona non grata, that you are blacklisted from dealing with anyone else.
--:-- Noel King: That's a great way to put it.
--:-- Jeff Stein: The United States has placed sanctions on a religious school in northwest Pakistan. Saudi Arabia also joined us this week in placing sanctions on one of the most senior leaders of Hezbollah. UN sanctions, US sanctions, and EU sanctions as well.
--:-- Noel King: Being sanctioned actually isn't the same thing as being charged with a crime, but it is put on a list that says that if anyone wants to do business with you, they will be committing a crime if they try to do that.
--:-- Jeff Stein: That's right. So it's kind of like a timeout from being part of the global economic system. You're put in a space that nobody else can deal with you.
--:-- Noel King: The rise of sanctions is really about trying to figure out how we can get people who we don't like to do what we want them to do without having to spend money, send troops overseas, or just ask nicely.
--:-- Jeff Stein: If those options seem unpalatable or have failed, sanctions exist in this middle ground where we can simultaneously try to sort of control people around the world to do what we want them to do in a way that might be more effective than asking politely, but less costly than going to war with them.
--:-- Noel King: We've covered the history of sanctions on Today Explained, but as I remember, there are iterations. This evolves over time. Where does the latest or most recent iteration of sanctions originate? Where does this start?
--:-- Jeff Stein: Historians can debate sort of like the right cutoff here. But to me, I think it's really worth taking a step back and looking at how in the aftermath of the disasters of Iraq and Afghanistan, there was a massive political backlash to presidents sending American troops to die overseas in these bloody, ostentatiously deadly wars that cost trillions of dollars.
--:-- Noel King: After 9-11, the U.S. national security establishment had a really concerted push to figure out exactly how it was that al-Qaeda had moved basically close to half a million dollars through Western bank accounts to facilitate the 9-11 attacks.
--:-- Jeff Stein: And that led to the Patriot Act, which people are familiar with because of its impact on sort of domestic surveillance and civil liberties concerns. But part of that law enabled U.S. officials to look much more closely at financial flows all over the world.
--:-- Noel King: The bill before me takes account of the new realities and dangers posed by modern terrorists. For example, this legislation gives law enforcement officials better tools to put an end to financial counterfeiting, smuggling and money laundering.
--:-- Jeff Stein: This was also in part because the rise of sort of digital banking worldwide meant that this data was being created at a volume that it never had before. And suddenly, because of these changes, the U.S. government now had this like massive telescope that it could point at all these different banks all over the world and look inside their vaults and see what was moving where.
--:-- Noel King: And that was a huge change that allowed the U government to start saying, hey, we don't have to close down business with an entire country. We can hit the regime leaders in these countries.
--:-- Jeff Stein: And that was part of the justification for what became known as smart sanctions, really these target economic measures that were meant to be more limited in scope.
--:-- Noel King: But in part because they were in theory more limited, they've allowed the volume of them to really explode because each one, at least in theory, seems less impactful.
--:-- Jeff Stein: And if I were to broadly say the big difference between a smart sanction and the old dumb sanctions is what?
--:-- Noel King: Yeah, the best example of a dumb sanction would probably be what we did in Iraq.
--:-- Jeff Stein: Tonight, I am pleased to report that we are on course. Iraq's capacity to sustain war is being destroyed. Economic blockades against Iraq under Saddam Hussein led to tremendous civilian casualties, the inability to rebuild that country's electrical system and horrific diseases that followed as a result.
--:-- Noel King: Iraq is the richest country in the world, but has not been able to use its resources.
--:-- Jeff Stein: Governments come and go, but the citizens are paying the price.
--:-- Noel King: During the Cold War, there was kind of a limit, an upper limit to how impactful U.S. economic blockades could be because in a sort of multipolar world where the Soviet Union was a counterweight to U.S. power, countries that like Cuba were cut off from the Western financial system could turn to that dominated by the Soviets.
--:-- Jeff Stein: But after the fall of the Soviet Union and in the 90s, the rise of American hegemony, both militarily but also financially, which is so crucial to the story, economic blockades meant a total strangulation of a country's economy, which is what we saw in Iraq.
--:-- Noel King: There was no Soviet Union really for Iraq to try to turn to.
--:-- Jeff Stein: And what that meant was that these dumb sanctions, a lot of experts would say, led to an untold number of children, for instance, being killed.
--:-- Noel King: What crimes have we committed to deserve all this? Are we going to make a bomb out of this medicine? We just need the medicine.
--:-- Jeff Stein: Yeah, I remember that being a very big story when we were younger. Just the idea that kids in Iraqi hospitals didn't have medicine. They were dying of easily preventable things.
--:-- Noel King: And so the United States says, we don't have to do this in a dumb way. We can do this in a smart way. We can avoid some of the what we call collateral damage, right? We can avoid some of the real tragedy.
--:-- Jeff Stein: Where and when does the U.S. first put the idea of smart sanctions to the test?
--:-- Noel King: Earlier this week, the government of North Korea proclaimed to the world that it had conducted a successful nuclear test.
--:-- Jeff Stein: In around 2003, the North Koreans suddenly withdrew from a ballistic missile treaty that sort of alarmed the world.
--:-- Noel King: We all agree that there must be a strong Security Council resolution that will require North Korea to abide by its international commitments to dismantle its nuclear programs.
--:-- Jeff Stein: Rather than try to cripple the entire North Korean economy, officials at the Treasury Department realized that there was a bank in Macau that was processing a huge percentage of North Koreans' financial transactions.
--:-- Noel King: And what the U.S. did was to say we will impose sanctions on anyone that deals with this bank, this Macau financial institution.
--:-- Jeff Stein: And that seems to have worked. It was a way of saying that we will not restrict the flow of goods in and out of North Korea or medicine or food, but we'll sort of narrowly target a key economic choke point.
--:-- Noel King: And for a lot of people at Treasury, this was sort of a big success story. They were really kind of proud of this moment because it led the North Koreans to backing down and sort of further the thinking that sort of all of this new financial data that Treasury was suddenly able to have access to after 11 could be used to be more surgical about how to achieve U.S. foreign policy ends around the world.
--:-- Jeff Stein: And how did it go?
--:-- Noel King: You saw with each passing year, presidents increasingly be interested in this tool because it allows them to suggest that they're being tough without actually doing anything that they would see as too risky to their domestic political fortunes.
--:-- Jeff Stein: And so by the time the Obama administration rolls around, you have huge new sanctions on Iran. You have sanctions spreading to Syria after the horrible civil war there. You have sanctions on the Democratic Republic of the Congo.
--:-- Noel King: And then year after year, they just pile up.
--:-- Jeff Stein: To the point at which I reported in the story, there's a Christmas party and the director of the office responsible for sanctions sang a song to the tune of the police's Every Little Thing She Does Is Magic with the title Every Little Thing We Do Is Sanctions.
--:-- Noel King: The song recounted the different sanctions programs that the Obama administration was pursuing.
--:-- Jeff Stein: Is that on tape anywhere?
--:-- Noel King: I've been asking and nobody has either shared with me or wanted to share with me.
--:-- Jeff Stein: Sanctions.
--:-- Noel King: When we're back, Jeff's going to tell us what American sanctions can mean for Americans. A hint. Have you been wondering about Venezuelan migrants lately? Stay tuned.
--:-- Noel King: Welcome back to Today Explained. We're talking about American sanctions with Jeff Stein of the Washington Post.
--:-- Jeff Stein: So by the time the Trump administration comes in, the sort of laid-on sanctions use has been completely blown off.
--:-- Noel King: One of the most controversial examples of sanctions being implemented under President Trump was the case of Venezuela.
--:-- Jeff Stein: You had some targeted limited smart sanctions imposed by the Obama administration on members of the regime of Nicolas Maduro, who was accused credibly of jailing dissidents and torturing political opponents.
--:-- Noel King: But by the time Trump rolls around, pressure has grown to do something about Maduro's illegal handling of elections in Venezuela.
--:-- Jeff Stein: And the Trump response is to do what was then and now called a maximum pressure campaign.
--:-- Noel King: We're going to announce sanctions against Petrolias de Venezuela, Sociedad Anima, or Peta Vesa, as it's known by its Spanish acronym, the state-owned oil monopoly.
--:-- Jeff Stein: We have continued to expose the corruption of Maduro and his cronies, and today's action ensures they can no longer loot the assets of the Venezuelan people.
--:-- Noel King: It's breathtaking to me as I did this story how few Americans are really aware of the scale of the suffering of Venezuela and the role that the U.S. had in that suffering.
--:-- Jeff Stein: Rotten beef is also sold here in this market. It smells strong. It's got flies all over it. The situation is so critical here that people are buying anything. They can't afford a kilo of beef, pork, or chicken.
--:-- Noel King: In Venezuela, that country endured the single worst decline of any economy not at war in the modern era. Even more than many countries at war.
--:-- Jeff Stein: So the Venezuelan economy contracted by more than Iraq's economy contracted after the 2003 invasion. It contracted by more than the Ukrainian economy contracted after the 2022 invasion by Russia.
--:-- Noel King: This is a 71% economic collapse.
--:-- Jeff Stein: And it might not grab as much attention as, you know, U.S. Army going into Fallujah.
--:-- Noel King: But we are looking at massive increases in malnutrition, in poverty, in hunger.
--:-- Jeff Stein: And all of those things were exacerbated, many critics will say, by U.S. financial penalties that Trump imposed to really choke off Venezuela from world markets.
--:-- Noel King: So when Americans hear about Venezuelan migrants coming to the United States and kind of want to understand the context, there's obviously a lot of different things going on.
--:-- Jeff Stein: But are American sanctions on Venezuela's government going back before Donald Trump? Are they part of the reason we're seeing folks come here?
--:-- Noel King: Yeah, we had a story about this. Sources described to us that in the period of 2017 to 2019, during the Trump administration's massive increase of U.S. sanctions, the Department of Homeland Security had a division that was producing classified internal assessments warning the Trump White House that their sanctions policies could exacerbate out-migration out of Venezuela.
--:-- Jeff Stein: And I'll be careful here because I think it's quite clear that the Venezuelan economy had lots of problems, not all of which at all were caused by the U.S., some of which were entirely caused by decisions made by the Maduro regime.
--:-- Noel King: But that said, when we look at the devastation in Venezuela, it's hard to see how the U.S. is not at least partially culpable.
--:-- Jeff Stein: This is really fascinating. We understand that there's criticism from inside of various administrations saying, guys, we may in fact be doing too much, too much, too much.
--:-- Noel King: And then Joe Biden is elected president. And what does he do?
--:-- Jeff Stein: So as we report in the story, when in 2021, a group of Treasury staffers, we were told, wrote an internal report that stretched over 40 pages long and was really devoted to this question of how do we reform sanctions?
--:-- Noel King: So we don't just like throw them like peanuts to the birds and just have more and more and more every year.
--:-- Jeff Stein: And what happens with that report is sort of the story of the rise of sanctions in a nutshell.
--:-- Noel King: Because people start saying like, oh, well, not really comfortable with the scale of the drawdown that you're suggesting. What if we want to use them for this or that?
--:-- Jeff Stein: And so that ambition, that report gets essentially shelved.
--:-- Noel King: It gets massively pared back to sort of only the more toothless recommendations.
--:-- Jeff Stein: And in October 21, it's published.
--:-- Noel King: And then only a few months later, a few months after this report is published, Russia invades Ukraine.
--:-- Jeff Stein: And any thought of sort of paring back or moderating the rise of sanctions is essentially thrown out the window in favor of using every tool available to respond to this crisis.
--:-- Noel King: Who in the Lord's name does Putin think gives him the right to declare new so-called countries on territory that belong to his neighbors?
--:-- Jeff Stein: This is a flagrant violation of international law and demands a firm response from the international community.
--:-- Noel King: 2024 is an election year. We have two potential administrations, a Trump administration, a Harris administration.
--:-- Jeff Stein: How possible is it that this really could change?
--:-- Noel King: I think, unfortunately, it seems unlikely to me that either candidate would do much to change.
--:-- Jeff Stein: We've seen Democrats under Biden take an increasingly hard line against China, and many people say that that's necessary given the state of the Chinese regime.
--:-- Noel King: But it's really hard for me for domestic political reasons to see Harris sort of pulling back on the attempts to push China out of Africa, out of Latin America and out of Europe.
--:-- Jeff Stein: And so as the sort of economic battle between China and the U.S. intensifies, I think it's likely that a Democratic administration would continue to apply more and more sanctions.
--:-- Noel King: One other important fact maybe to keep in mind about Kamala Harris is that one of her new top policy advisors is a guy named Brian Nelson, who was until recently in charge of the Treasury office that was pushing out many of these sanctions.
--:-- Jeff Stein: And Trump, I mean, Trump said something the other day that he, quote, doesn't like sanctions.
--:-- Noel King: It was a kind of a tossed out thing he said to Bloomberg in an interview.
--:-- Jeff Stein: I have no idea what he's talking about because as president, he just massively increased this tool.
--:-- Noel King: And they honestly fit with Trump sort of wheeling and dealing. I'm going to maximally leverage my sort of zero sum mentality to punish other countries in the easiest way possible.
--:-- Jeff Stein: I think for people who are hoping that this policy abates, there's not a lot of reason for optimism.
--:-- Noel King: Everything you've laid out feels a bit hopeless. It feels like a bit of a runaway train, even as there are train engineers saying, guys, we've got to slow this down.
--:-- Jeff Stein: Where do you think this ends?
--:-- Noel King: You know, one thing I've been talking to some experts about, mostly sort of off the record for now, because a lot of them aren't really ready to go public with this.
--:-- Jeff Stein: But there's, I think, a truly scary possibility that everything that we've talked about is, in some ways, just a small little preview of the economic war to come with the second biggest economy in the world, which is China's.
--:-- Noel King: We are maybe looking at a period of economic sanctions, of economic warfare with China, which would make all of this stuff we've been talking about maybe look quaint.
--:-- Jeff Stein: And instead of countries with GDPs and the hundreds of billions, we're talking about potentially, you know, trillions and trillions of dollars of the world economy now being this battleground for control of the world.
--:-- Noel King: And while China has certainly been incredibly accused of many human rights abuses and undermining U.S. manufacturing and trade and a litany of problems that U.S. policymakers have identified, the prospect that we are looking at a full-blown economic war with China and what that would mean for sort of countries caught in the middle all over the world is I think a really humbling thought and one that emphasizes the importance of getting these tools right.
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--:-- Noel King: Jeff Stein of the Washington Post. He wrote The Money War. Today's episode was produced by Amanda Llewellyn and edited by Amin El-Sadi. It was fact-checked by Laura Bullard and engineered by Andrea Kristinsdottir. I'm Noel King. It's Today Explained.
