In late January, Nicholas Mulder, an assistant professor of history at Cornell University visiting Taiwan for the first time, held an event at a bookstore in Taipei for his new book "Economic Weapons: The Rise of Sanctions as a Tool of Modern War."

That evening, not only were there book enthusiasts, but also representatives from Taiwan’s Financial Supervisory Commission, the Industrial Technology Research Institute, and personnel from the Democratic Progressive Party's think tank, who took turns raising their hands to ask questions. The day after the event, Mulder was invited to give a closed-door lecture at the Institute for National Defense and Security Research, a think tank under the Ministry of National Defense.

Why did he attract attention from Taiwan's political circles?

"Economic coercion is also a national security threat. Although it doesn't involve bullets flying, it can still cause enormous harm to civilians," said Chen Ming-chi, the CEO of the INDSR.

At 33, Mudde is a young face in academia, but his new book "Economic Weapons" boldly analyzes one of the most pressing issues of the present. Over the past two years, it has not only been selected as one of the annual books by The Economist and the Financial Times, but has also led to invitations to discuss economic policy in European and American think tanks: how does economic policy become a new battlefield? Can sanctions still deter wars?

His research into the history of economic sanctions is related to Mulder's upbringing.

His grandparents experienced the Dutch Hunger Winter at the end of World War II, during which Nazi Germany imposed strict food rationing in the occupied Netherlands as retaliation, leading to tens of thousands of people starving to death.

And his father, a Dutch journalist specializing in economics, frequently took Mulder with him on assignments to Brussels, focusing particularly on how the small country of the Netherlands survived within the order of larger nations.

"The big lesson of the last two years is that the West alone cannot effectively impose sanctions against a top 15 economy anymore," he said.

We inquired: How effective will economic sanctions be in deterring China from resorting to the use of force against Taiwan?

The following excerpt is from CommonWealth's interview with Mulder.

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Q: With Western sanctions on Russia failing to halt the war, can we pinpoint when sanctions are effective and when they might backfire?

Do sanctions work? The answer always depends very much on the specific country. Because every country that is targeted will have a different worldview, a different history. Countries that are deeply capitalist, do oftentimes conduct policy based on their economic interest in normal times. So they are quite susceptible, potentially, to economic pressure.

But then we also have other, of course, all countries also have a degree of nationalism, a degree of that they actually want to achieve something more than just wealth, they also have pride, and they have a desire for sovereignty and they are willing to suffer, sometimes, material damage. 
Like Japan (during World War II), even very recently, for example, the UK’s Brexit. They did something that is economically totally irrational, and they did it all to themselves.

And another good example is Russia. We now know that there were very public threats by the United States and Europe when Putin was preparing the invasion of Ukraine. They made it clear there were already packages of sanctions ready, and they would impose them if he invaded.
Putin was aware of this and he still chose to do it. It was a failure of deterrence because there was an objective behind it that must have been something else than maximizing Russian wealth. 

Q. Looking at the case of Russia, how does the economic size of a sanctioned country affect the sanctions' effectiveness?

The big lesson of the last two years is that the West alone cannot effectively impose sanctions against a top 15 economy anymore. 

Before the invasion, many people were saying Russia is going to absolutely collapse. But If you look only at the latest GDP growth figures, you could be forgiven for thinking that it is the Eurozone that is under sanctions, not Russia.

What became clear is that Russia, the 11th largest economy in the world, in fact is big enough that small countries, in particularly the rest of Asia, will happily act as a conduit for the trade to Russia and they are happy to even run some risk of having sanctions imposed on them because for them it's still very beneficial to supply things to a very large neighborhood.

Q: In recent years, you have had chances to talk to the U.S. officials about sanction policies. What have your discussions revealed about the current state of sanction policies?

All the US policymakers who are running sanctions today, and I've met most of them and talked with them, they all had their experience developing sanctions during the 1990s and the 2000s and the 2010s. The major cases there were Iraq under Saddam Hussein, North Korea, Iran, Syria, Myanmar and Venezuela. Those are all really small middle-income economies, none of them, with the exception of Iran, maybe. They had this mental model in mind of the targets, and that made them feel like we can do anything with sanctions.

But it becomes a totally different situation when it's Russia or China. One of the things I try and show in the book too, that the techniques of sanctions, you need to look at history and understand how history shapes our expectations, and sometimes that's good because we prevent things that went wrong in the past, but sometimes we become so focused on the past experience that we miss the novelty, and that is another sort of unintended consequence, that the instrument is designed to do something but the new situation doesn't lend itself to it. 

I think that intentions of American policymakers in the Biden administration are good, but they are limited by the perspective of actually being American. Because the United States is not a trade-dependent economy, the way that most European and Asian economies are. They do not understand the reluctance of other countries to weaponize economics and trade in the same way. And they have a difficult time placing themselves in the shoes of their own allies, and this leads to coordination problems. 

And the other thing is, they are often using sanctions to manage their domestic politics. You can do it with an executive presidential order. It's cheap, low-cost, and both economically and politically low-cost.

Q. Can economic sanctions deter China from its military actions against Taiwan or in the South China Sea?

To some degree, I think the answer is it depends on how important we think that economic prosperity is to the Chinese leadership. I don't think it's only about Xi jin-ping, but also about the other major players in the big institutions.

The story of China in the last 40 years or so seems to suggest that economic development is still the most important thing for them. If you think about what they're doing now, they go so all in on trying to conquer and expand new markets with electric vehicles, et cetera. 

That is not something that you would do, if you are truly preparing for a total destruction of all those relations. Actions speak louder than words.

Q. In the preface of the Taiwanese edition, you mentioned that global trade interdependence impacts the deterrent effect of sanctions. What’s the takeaway? 

Since the Ukraine war broke out, the first few months the oil price went up really dramatically, gas was even higher, LNG had not yet been developed as a substitute. In the spring of 2022, I shared these fears that there would actually be a global recession in 2022, a huge one. Because Russia's part of the global commodity exports is so big and there were too few alternatives. But what turned out to be the case is that there are substitutes even for large providers. 

The lesson for us is that autarky is not possible for most countries. Therefore the only rational response should be or the best possible response is to diversify.

I think we don't always know who our friends are, and whether they will stay our friends. So we should also have sources of supply outside of our friends. 

Diversification rather than friend-shoring is important, even though we have even larger networks than just allies. That is sometimes uncomfortable because it still means right with Europe that we have to look at a lot of LNG also from the Middle East, from Qatar , and some of these countries are not democracies. But I think if we're serious about economic resilience, we must diversify as much as possible. 

Q: If sanctions are losing their edge, what should we do to prevent war today?

I grew up in Brussels in the 1990s, and I think the European Union were to some degree naive about something. You can't just talk your way out of problems. You need to be prepared militarily. You need to have your own defense manufacturing capacity.

But right now, I think we're overreacting maybe to some risks. Overreaction causes things to deteriorate further. Because every country only assumes the worst intentions about the others. That’s what international relations scholars call a security spiral. And it has no end. Or the end is just a war. 

There's a lesson from the Dutch East India Company in the 17th century. They had a very zero-sum worldview, there's still a proverb in Dutch, it means one person's death is another person's bread.

But what seems very important, and this is what I also draw as a lesson from history, is that uneven economic development that's a big problem. You need to offer an economic order and also a political vision of the future, internationally, in which all countries can grow and have a place.

Because unequal growth is, I guarantee, going to be the source of conflict.

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