Financial Warfare

Armin Steinbach*

The claims advanced in this Article pertain to the operational, legal, and institutional idiosyncrasies of financial sanctions, rendering this sanction type both an empirically relevant and normatively unconstrained foreign policy tool. First, the pivotal role of financial intermediaries transforms sanctions in various dimensions: from sanctions on trade in goods to sanctions on transfers of capital; from state-centric to market-centric enforcement; and with the extensive exercise of currency power and monetary sovereignty. Second, the coercive potential of financial sanctions contrasts with the absence of an adequate legal framework. Specifically, on the level of international economic law, most common types of financial sanctions are effectively unregulated. Third, financial sanctions employ the superiority of the monetary sovereignty nexus over territorial sovereignty to the extent that sanctions leverage financial dominance. On this latter point, we connect to the scholarship of monetary sovereignty by arguing that over-compliance by financial actors with sanctions indicates the resilience of the state-centric order, though in an asymmetric (or hegemonic) design in the sense that financial sanctions coercion is a state-steered lever in the hands of reserve currency holders.

*Jean Monnet Professor of Law at HEC Paris; non-resident fellow at Bruegel (Brussels). Competing interests: The authors declare none. steinbacha@hec.fr