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Sol Sanders Archive
Monday, November 26, 2007

Washington's quiet but effective new geostrategic lever: economic warfare

In its dying months, the Bush Administration has waked up and smelled the coffee of globalization: not the well flogged arguments over free trade, the flight of industrial jobs versus low cost imports, not even the torturous dispute over “a level playing field”.

But even the not always real world inhabitants at Foggy Bottom have discovered that globalization cuts both ways. For at the same time that it commits the U.S. to opening its doors to low cost [often subsidized] imports the American multinationals create with jobs in other climes, the growing integration of world finances as well as trade gives Washington a new geopolitical weapon. [There could be no doubt about that with the ripple effect of the U.S. subprime mortgage defaults now trickling through foreign banks and financial institutions.]

The news that the U.S. government has just named as a "designated terror group" a Tamil Tigers "charitable" organization with operations in Sri Lanka and 17 other countries won’t turn up even on Fox News. But it is important for it falls into a new pattern of political action that could be the most important element in American foreign policy in decades.

Also In This Edition

President Bush signed a law six years ago that permits the Treasury to block "support, services, or assistance to, or otherwise associate with, terrorists and terrorist organizations." It has been used in some recent efforts of the Homeland Security Department to smoke out Islamofascist sympathizers and networks in the U.S.

Now the Administration has moved on Tamils Rehabilitation Organization, a front organization for the Liberation Tigers of Tamil Eelam [ITTE]. The mother organization are terrorists who have waged a civil war against the Sri Lanka government for almost 30 years demanding independence of the heavily Tamil areas of northern and eastern areas of the island. But in fact, their aim is dismemberment of neighboring India for they clandestinely advocate a Tamil nation through a union with India’s southern state of Tamilnadu with its 70 millions, sixth most populous and one of the most prosperous of India’s 28 states.

It was, in fact, the Tamil Tigers who “invented” the modern version of suicide bombers – having knocked off fellow Tamils and Sri Lankan officials who opposed them. Some 80,000 died in terrorism and guerrilla warfare in the 1983-2001 period; another 6,000 since violence picked up again last year. The victims included in 1991 former Indian Prime Minister Rajiv Gandhi, husband of Sonia Gandhi, chairman of the Indian Congress Party and power behind the throne of the present New Delhi governing coalition. Through ethnic appeals and extortion the Tamil Tigers have raised enormous amounts of money throughout the Tamil diaspora in Southeast Asia, Europe, and North America. Nor is New Delhi effective in protecting its Tamil citizens from the blackmail. That’s why the Tamil Tigers are able to continue to supply themselves with the best in arms and ammunition from outside, and why their “air force” – small Italian executive planes – were able earlier this year to bomb the government’s Katunayaka air force base near the country’s international airport only 25 miles from the capital.

New Delhi’s incompetence and paralysis in dealing with this problem in its backyard is not new: it was after all, Indira Gandhi’s looking the other way in the 1960s, that permitted Yasser Arafat’s Palestine Liberation Organization and others on the Soviet payroll, to train the first Tamil Tigers in camps in south India. Gandhi was worried that the Sri Lankans were moving from neutralism toward the Americans with the possibility that port and the one time British naval base at Trimcomalee, central to European dominance of the Indian Ocean for three centuries, might become an American base.

Later, having thought better of it, India’s two-year military intervention on the side of the Sri Lankan government turned into a minor disaster with the Indians withdrawing with their tail between their legs; some said an Indian ”Vietnam”. And ever since, all the Indian government has been able to do is wring its hands while the Norwegians – those Nordic sheikhs whom their oil wealth has freed to try to solve the world’s problems in the great Nobel Peace Prize tradition – have arranged off and on armistices and cease-fires.

The little country is one of those place in the world which is blessed were it not for its political culture. Now its 20 million people are war weary. Its once thriving tourism [hit hard by the 2004 tsunami] has been decimated. Government debt jumped by 16 percent last year, partly from rising defense spending which has reached 8 percent of gross domestic product. Inflation rate is running around 20 percent.The government reimposed the Prevention of Terrorism Act with police powers for the armed forces in 25 districts throughout the country.

Depending on how much moral fortitude can be mobilized in Foggy Bottom, a financial squeeze on the Tigers could help produce the kind of negotiated settlement of their legitimate claims for equality with fellow Sinhalese — and perhaps autonomy — that has long escaped them. For it is not just the results of direct unilateral American economic sanctions can produce so much as it may be on enforcing those sanctions on third parties dealing with the targeted terrorists can effect.

The U.S. got results when, after decades of watching the North Koreans flaunt their illicit activities – from drug running and counterfeiting to tie-ups with Japanese organized crime – Washington moved on an obscure, family-owned bank in the Chinese gambling enclave of Macao. The U.S. Treasury Department in September 2005 sanctioned Banco Delta Asia, a front for Pyongyang. Even Beijing was forced to cooperate in pulling the plug when the U.S. threatened not only that bank but anyone doing business with it or Pyongyang. It was this action, accompanied by the Japanese drawing the noose on ethnic Korean operations as well, that most observers believe brought Pyongyang to seriously negotiate the end of their nuclear armament drive.

It remains to be seen if Washington is removing the tourniquet too soon. Tokyo is perplexed that at this stage of the negotiations to close down the nuclear facilities, Washington would consider – as the American State Department chief negotiator Christopher Hill has hinted – relaxing these sanctions by removing North Korea from the list of terrorist sponsoring states. But whatever the progress of the North Korean negotiations, the point was made: sanctions do work when they are pinpointed and applied with vigor in the world of globalized finances.

The same sort of effort is now being tested in the effort to force Tehran, a rogue state, to abandon drive for nuclear weapons. But, again, it would take more than just the unilateral actions of the U.S. against the major Iranian banks. It means that Washington has to get tough with German banks and companies [in 2006 some $5 billion trade with Iran was backed by German export guarantees, that is, subsidies].

The U.S. has recently begun to bring diplomatic pressure on Singapore, where much of the loot of the avaricious military gang running Burma is hidden out. Singapore, as the rest of the Association of South East Asian Nations [ASEAN], to which Burma belongs, has refused to turn its back on these despots. Washington’s bilateral sanctions, recently ratcheted up against the individual Burmese generals, would not be very effective with the relatively small U.S. commerce with that country. But if secondary sanctions were to be imposed on banks and companies – there is a problem that America’s Chevron’s Unocal subsidiary’s gas is a major source of income for the generals – their efficacy would be of a different character.

There will be loud squawking from parts of the business community about interfering in the halls of commerce as the sanctions weapon is wielded. There will be the old cliché “sanctions do not work”, often voiced by those who supported, successfully, sanctions against apartheid in South Africa. But like the even more complex problem of the leaking of high technology to potential enemies – an effort virtually abandoned since the Reagan Administration and the implosion of the Soviet Union – the use of economic warfare is going to be an important part of future U.S. diplomacy if new resorts to blood and treasure such as Iraq are to be avoided.

Those critics of the Bush Administration’s policies, particularly on the other side of the aisle in the Congress, who constantly call for more subtle forms of statecraft and collaboration with our allies in the pursuit of countering terrorism with more than firepower, would do well to perceive these new diplomatic tools – and support them.

Sol W. Sanders, (, is an Asian specialist with more than 25 years in the region, and a former correspondent for Business Week, U.S. News & World Report and United Press International. He writes weekly for World and

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