My take on book 'Choke points'

I recently finished reading this book.

It is an excellent and very relevant book, especially in light of the current unfortunate war between the US and Iran. The author is a former senior American official who worked on sanctions, so he has deep knowledge of the subject.

The book explains how the US and its allies use economic sanctions and other tools as a form of economic warfare to weaken their adversaries. These methods aim to “choke” the financial and economic systems of adversary countries.

The US first used such large-scale sanctions against Iraq in the 1990s. Since Iraq depended heavily on oil exports for revenue, the US tried to stop its oil sales. The idea was that reducing Iraq’s income would weaken its military power and stop its aggression on its neighbours. The US used its naval forces to monitor ships going in and out of Iraqi ports. However, this strategy had mixed results. Ordinary people suffered the most, while the leadership continued selling oil through black markets and kept buying weapons. Because of this limited success, the US eventually had to take military action.

In the case of Iran, the issue was its secret nuclear program. The US and its allies imposed several strict sanctions. They discouraged countries from buying Iranian oil and stopped companies from investing in Iran’s oil sector or selling drilling equipment. The US also applied “secondary sanctions,” meaning even non-US companies and countries (including European ones) were punished if they did business with Iran.

The US went further by targeting Iran’s banking system. Major Iranian banks were cut off from the US financial system and the SWIFT network. They even sanctioned Iran’s central bank, something that had never been done before. This was seen as a very extreme step and raised questions about Iran’s sovereignty. However, the US could do this because the global financial system and oil trade are largely based on the US dollar (called petrodollars).

Additionally, the US blocked European tankers from transporting Iranian oil and stopped European insurers from insuring those shipments. Without insurance, oil transport becomes very risky and almost impossible, which further restricted Iran’s ability to sell oil.

The author clearly explains how much the world depends on the US dollar, making the US a very powerful player globally. He supports this with large amounts of data and examples of massive financial transactions.

The book also discusses the rise of Huawei. Huawei became a major global company in telecom and smartphones and started expanding into the US and Europe with its 5G technology. Established companies like Alcatel-Lucent, Ericsson, and Nokia struggled to compete with Huawei on price and service.

Many European countries partnered with Huawei for rolling out 5G infrastructure. However, the US claimed that Huawei equipment had security risks, including backdoors that could send data to China. The US repeatedly warned its allies. The United Kingdom supported the US position, but Germany continued working with Huawei.

To counter Huawei, the US used export controls by restricting the sale of microchips to Chinese firms like Huawei and ZTE. Since Huawei depended on US technology, this move was very damaging. The US also stopped other countries and companies using US technology from supplying chips to Chinese firms. These secondary sanctions pushed Huawei close to collapse. Only a temporary truce between US and Chinese presidents prevented a complete shutdown. The book goes into much deeper detail on these developments.

The book also covers the conflict between Russia and Ukraine. Russia invaded several Ukrainian cities, claiming Ukraine as part of its territory. Despite warnings from the US and NATO allies, Russia continued its invasion.

The US and Europe responded with sanctions similar to those used against Iran. They restricted exports of microchips to Russia, which affected upgrade of its military equipment. Russian companies were also blocked from accessing US capital markets (blocked from Wall Street).

Ruble was in free fall after all these sanctions. Further sanctions targeted Russia’s foreign exchange reserves, which were mostly held in US dollars and euros. This limited Russia’s ability to support its currency. Even then, the sanctions could not stop the invasion of Ukraine.

However, these sanctions did not include oil and gas exports. Due to the war, global oil prices rose, which actually benefited Russia by increasing its revenues. Russia also took steps to stabilize its currency by forcing exporters to convert foreign earnings into Rubles, increasing demand for the currency. As a result, Russia’s trade surplus reached very high levels.

Overall, the book shows that economic sanctions and export controls are effective to some extent but not completely. They can weaken economies and create long-term damage, as seen in Iran and Russia, but they do not always achieve immediate political or military goals.

This book is highly recommended for anyone who wants to understand geopolitics and how countries depend on each other. It shows how deeply interconnected the global system is, and how actions taken against one country can have wide and complex far reaching consequences that are difficult to fully predict.