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Is the USA making itself a target for sanctions?

Jefferson Galt

Far from providing leadership, the USA is increasingly creating friction with allies and alienating itself from countries that don't agree that ratcheting up sanctions against other countries is the best way to go. Add in the decision to recognise Jerusalem as the capital of Israel (and only Israel) and there is an increasing risk that the tables might turn and countries begin to apply sanctions against the USA. If that was to happen, what form could they take and which countries could be caught in the cross-fire?

The USA is taking an increasingly independent approach to sanctions. In the past three months, new or increased sanctions have been announced against Russia, Iran and North Korea.

In July, a Trump-originated law imposing sanctions on Russia passed both houses with remarkable alacrity, giving the administration until 1 October to impose sanctions. But the White House dragged its feet and, on 25th October, there were murmurings that Trump had "gone soft on Russia" and was undermining Congress. On 26th October, almost four weeks after the deadline expired, sanctions were at last announced - but they were not actually sanctions. What the White House actually did was send to Congress a list of proposed sanctions. Moreover, it specifically excluded overt and hostile action such as asset freezes and it also was described as "guidance," indicating that there would be far more flexibility than would be normal in US sanctions.The sanctions, issued under Countering America’s Adversaries Through Sanctions Act (CAATSA) 2017 were published by the State Department on 31 October, continuing to use the term "Guidance." See https://www.state.gov/r/pa/prs... . The State Department said "We continue to call on Russia to honor its commitments under the Minsk agreements, to withdraw from the Crimean Peninsula, and to cease its malicious cyber intrusions."

The list is, in essence, the Russian state-owned military industry. See https://www.treasury.gov/ofac/... . By now, there were prohibitions on dealings as the names were added to the OFAC list under type SSI.

Russia, of course, is less than impressed, as it is not impressed with additional sanctions against Iran and Syria. The EU is not happy with ever more sanctions against Iran, particularly as the USA has allowed some of its companies permission to deal in Iran. Similarly, the EU is not happy that the USA has maintained financial sanctions against Myanmar while allowing US companies to "invest" in the country, giving an easy ride to construction companies and hotel chains.

China is not unhappy at the sanctions against North Korea which remains highly isolated.

Around the world, the decision to allow support Israel's decision to make Jerusalem its capital is opposed by almost every government. Some of the media, and some politicians, are selling this as a Muslim issue but in truth the annoyance at the decision, and the USA's support for it, knows no such religious bounds. It is seen as further evidence of Israel's Netenhayu's determination to do as he pleases and then to blame someone else for the blowback.

When one considers Trump's removal of the USA from the climate accord and the Trans-Pacific Partnership, his America-First policy is beginning to look like an "only America" policy.

The question is what can be done about it. The USA is increasingly out of step with the United Nations, which Trump famously said the USA should also leave (that seems to have been abandoned) and so, because of the veto system, UN sanctions are not an option.

But there is nothing to prevent action against trade - including the use of the US dollar as a trade currency.

A group of nations, fed up with the USA telling everyone else what to do, would include China, Russia, the UK, the EU, most of the Middle East. If Trump had not backed down on his threat to reject the migrant resettlement deal done with Obama, Australia might be in that list, too.

Who would be hurt if trade in USD were to be banned? The first thing would be that US dollar assets would be, in effect frozen in situ in US banks. They would not be able to convert them. All US companies with trade in place would not be able to settle their bills. There would be no need to act against individual US companies, unless they were found to have substantial holdings in other currencies. Shipping would grind to a halt because all bunkering is paid for in USD but that is easily resolvable by switching to, e.g. the Euro. Airlines would be grounded the moment such sanctions came into force because they could not buy fuel. Their aircraft, unable to pay airport fees, would be liable to confiscation.

Zimbabwe, already using the USD as de facto currency, would be in deep trouble although notes in circulation would continue as tokens for as long as people trusted them. Inflation would rise rapidly, again. Nigeria, Malaysia and Indonesia would run into trouble in days without oil sales. The middle east, also dependent on oil for revenue, would find that their external income was constrained. But, again, a switch to an alternate currency would solve the problem.

Bitcoin might collapse in value because its holders would not be able to convert their holdings back into USD., which is apparently the currency most used for its purchase. Then again, they might just exchange bitcoins for something else.

If US ships were sanctioned, as the USA does to other countries, the result would, again, be severe. The USA's merchant marine has, due to various failures of large lines, grown in importance in recent months. The USA's military operations around the world would find aircraft and ships parked up for lack of fuel - and personnel stranded without pay or any means of getting home.

The USA has increasingly few powerful friends left. The question is how far away is the tipping point?

Noises off suggest that it's not close but it is this side of the horizon.