The Malacca Myth: Lessons on Economic Warfare from the History of Naval Blockades

[Music] welcome everyone uh to I believe our last seminar of the Year unless we hold one right before Christmas Eve uh my name is Manny renon Cruz I'm the executive director here at the history working group uh it is my pleasure uh to introduce uh you know sort of the the rest of the panelists uh today um I I just wanted to make a few announcements remember as always to keep yourself uh muted during the presentation if you have any questions during Q&A uh you're welcome to use the uh hand rais uh icon on Zoom as well as to put uh some questions into the chat uh we have a just a very short number of announcements we'll be sending a longer email um I I believe uh later next week with the the rest of the events for the academic year uh through mark your calendars though for January 25 we'll have Neil Locker uh he'll be talking about cashing out the flight of Nazi treasure from 1945 to 1948 uh February uh 12 we'll have a zo Z Leo on Chinese Sovereign wealth funds there's more dates I could list them to you now but I'm sure you won't remember them so uh look out for email and so without further delay I'll now hand it over to our chair uh Neil Ferguson the milck family senior fellow here at the Hur institution thank you Manny and uh I'm going to make these uh introd brief because we are eager to get uh onto the subject matter our paper today uh is a co-author paper by Ike Fryman uh a ho fellow uh who joined us uh this Academic Year uh from the uh the uh University formerly known as Harvard and uh his co-author uh Hugo Bromley uh from a respectable University based in in a town called Cambridge and uh they are going to present uh their uh new paper the malaka myth lessons on economic Warfare from the history of Naval blockades um we're innovating uh here at the hu history working group we've decided to Institute uh some formal uh commentators uh so that uh before we get into the general Q&A uh we'll hear from Nicholas Lambert uh some of you may remember uh from an earlier uh seminar uh Nick's one of the leading authorities on economic Warfare uh whose work particularly his recent book The Warlords has been pioneering in helping us understand the economic Warfare of World War I uh with that I'm going to hand over uh to Ike and Hugo who will show some slides and have promised to keep their presentation to uh within 30 minutes over to you gentlemen thank you Neil um great to be here good good afternoon or evening everyone um so this paper looks or rather Begins by looking at a very simple question which is how can the United States deter China from attacking Taiwan the so-called strategy of denial aims to show that US forces could defeat a Chinese invading Force but as China's military modernizes the strategy of denial is losing credibility and many in Washington are now thinking about strategies of punishment unfortunately the policy debate about economic punishment against China often lacks historical perspective prominent commentators have made very extreme proposals including dollar sanctions and physical embargos of Chinese trade but often justify their recommendations with misleading and inaccurate historical analogies today we present a historical framework for thinking about the common features of great power economic Warfare and apply this framework to the case of china we're focusing on the Mala blockade because it is the most uh wellknown and most striking of these myths but our analysis sheds light on other economic Warfare scenarios as well including those in which the United States tries to force rapid decoupling through financial sanctions every time in history a great power has imposed a far blockade on another neutrals have resisted more effectively and in more organized fashion than the blockader anticipated indeed our historical analysis what might suggest that a us-led economic war against China is likely to fail and it harnesses the logic of the market to incentivize neutrals to comply before I hand over to I just want to begin with mayor kber by accident the circulated text is a slightly earlier draft than the one submitted to International Security and includes a number of small errors including in fact misattributing a quote of Nicks to someone else for which I can only apologize most sincerely you can imagine the horror when I saw that one um coming along the lines so on that note I will hand over to W thank you Hugo the notion that the United States could punish China by imposing a far blockade on Maritime Transit through the Straits of Mala is one of the most enduring myths in US foreign policy the idea is superficially tempting China Imports roughly two-thirds of its oil by sea which comes to about eight million barrels a day its economy is highly dependent on Maritime trade and a Malak blockade by interdicting Chinese oil Imports uh could also in the process screen China's Merchant shipping in general for Contraband uh as Hugo mentioned it would be an active economic Warfare and would not realistically be considered outside the context of a general us China War uh but on its face such disruption would threaten to harm China's economy and over time to degrade China's War fighting ability uh Chinese observers are aware of this vulnerability General Secretary hentau famously mentioned the malaka Dilemma in a 2003 speech and several CH prominent Chinese commentators have written in depth about the scenario one even calling it the quote Achilles heel of China's energy policy uh to mitigate the malaka Dilemma Chinese analysts have proposed a range of measures China has dramatically invested and expanded its domestic oil production it's expanded its strategic petroleum reserve and many in China have argued that the Mala dilemma is a strategic justification for the belt and Road initiative however uh starting in 2007 uh an alternative school of Chinese Scholars associated with prominent party think tanks began to push back arguing that these meth these methods and measures were largely unnecessary because the malaka Dilemma was exaggerated in fact they argued Market pressures would incentivize new neutral countries to help China break the blockade and as a result as one scholar put it quote although a US blockade or embargo cannot be completely ruled out the possibility is not very likely quote the overall impact of such risks on China's energy security is relatively limited argued another and we show that Western Scholars have almost entirely overlooked these sources but when we conducted our own analysis we found that they're probably correct our study begins with a definition of terms uh we then turn to a discussion of the five cases in question and I'll hand them over to Hugo to take us through them in more detail all were conducted by the British royal Navy between 1770 and 1945 so um let's start by distinguishing blockades from other types of economic Warfare uh sanctions and embargos are legal rather than physical operations they aim to deny the target State access to shipping routs products or markets within the national jurisdiction of the sanctioning power or its allies they're not acts of War they're not enforced by military threats but they often escalate to war the problem with embargos and sanctions is that they hurt domestic exporters and in an integrated global economy embargos on enemies can turn friendly trading partners into collateral damage next on the ladder of aggression is the close block blockade which involves policing Waters immediately off the target States Coast to control its access to the Sea European powers imposed dozens of such close blockades uh between the 18th and 20th centuries mostly against smaller States and territories one example is the Pacific blockade of 1827 which aimed to confine the ottoman Fleet to Harbor so it couldn't interfere with the Greek war of independence now sometimes as we see here great Powers impose close blockades on other great Powers um but they tend to work only when Naval power is highly asymmetrical uh the union blockade of the Confederacy or the Japanese blockade of China in World War II uh illustrate as we will see shortly that such close blockades have more in common with h far blockades against Great Powers than they do with close blockades against small states in the tenin incident of uh 1939 for example uh Japan uh embargoed excuse me imposed a closed blockade on British treaty ports uh in China almost precipitating a war with Britain and though it was difficult the British and Americans found a way to resupply nationalist China with heft through the Himalayas and eventually with the Burma Road uh as well next on the latter of aggression at least in terms of the uh impact on uals as the far blockade uh which is an administrative operation to screen Maritime trade uh the problem with far blockades is that they are acts of War under international law and they are costlier to enforce both because of the naval resources involved in the operation and the difficulty of smoothing out diplomatic ructions uh with neutrals uh finally the most extreme form of economic Warfare with respect to impact on neutrals would be C denial which aims to stop all shipping through the exclusion Zone regardless of the flag of the ship and its cargo and destination and sea denial is obviously backed with the threat of indiscriminate violence uh the canonical example being Germany's unrestricted ubot Warfare uh during the world wars now some have suggested that the US may use C Denial in a Taiwan contingency but that is not our Focus here uh finally one recent case Falls between these definitions and requires a brief word uh between 1990 and 2003 the UN Security Council authorized the maritime interception operation or Mio on Iraq's exports through the straight of Hormuz and the Mi is the best blockade analogy in the post-war era some Scholars using it as a benchmark to estimate what a potential operation in Mala would require but the Mi strategically is a bad analogy for Mala saddam's Iraq was neither a military nor an economic race power uh and the Mi was authorized by international law and enforced by a broad International Coalition it also targeted Iraq's oil exports not its Imports in short to sum up to restrict we have to restrict our historical sample to cases that resemble Mala in these three critical respects first it must be a blockade imposed by one great power against another second it must seek to interdict shipping that goes through specific waterways but not all Maritime Transit entering and leaving the target States ports and finally it must deploy Naval forces to block the transit of merchant ships from the target State and inspect all vessels suspected of carrying Contraband with a threat to sync or impound non-compliant vessels Hugo will now walk us through the cases which we argue reveal that a malaka blockade would be unlikely to work and in fact might backfire in ways that the United States may not expect thanks AE so the the cases as we present them in the paper are reduced from vast literatures and supplemented with archival research we're keen to make the cases as accurate as possible as part of a work of real applied history in the light of the Mala case we're seeking to understand the broad Arc of the history of Roy Navy blockades and we're using a definition of blockade that is Broad within the framework we've just set out and when we're looking at this superficially the two world world wars are the logical place to start and let's begin with World War I before World War I the admiralty had planned to leverage Britain's advantages at the and the globalization of trade to rage a quote economic war on Germany however in the event as Nicholas Lambert has outlined British business interests refused to accept the damage caused by locking Germany out of global financial markets because other economic Warfare methods were too painful Britain fell back on the most politically expedient op a far blockade initially targeting both German and neutral ports in Europe and impounding German Merchant ships the United States was strongly opposed and ultimately was able to successfully undermine Britain's policy working with domestic interests the reason was not so much because it was politically sympathetic to Germany but because in the context of a global economic crisis it could not afford to lose access to some of its most important overseas markets in October 1914 under us pressure Britain agreed to lift many aspects of the blockade as they worked on neutral European ports as soon as they could the Netherlands the Scandinavian countries and initially Italy began to reexport to Germany in large quantities I'll give an example of this in January and February 1914 just before the war the US exported $2 million in Goods to Sweden in the same period the following year it exported 24 million by 1916 5 million gold marks of food were entering Germany from the Netherlands every day Imports of food feed Metals cotton and similar Commodities into Scandinavian countries jumped five times above pre-war averages to crack down on re-exporting Britain introduced the navasard system which said quotas on how much neutrals could import based on estimates of their domestic consumption and navets did have some impact on the German economy but not Germany's War making potential food deprivation resulting from the blockade did not forc Germany to Armistice and May in some cases in fact have strengthened German resolve one expert on the German economy economy told the British cabinet in 1916 and I quote even those in Germany who a year ago condemned the sinking of the litania and similar Horrors now feel that all was Fair since the Allies were ready to starve Germany German morale did not collapse until American troops were on their way to their doorstep and the Allies had so many more men in the field the consensus view of German military government was that quote although the public were willing to endure great hardships while they saw chance of Victory once that was lost rapid demoralization would set in the important point though is that the Allies found much more success when they combined aspects of the far blockade with embargos based on their vast American African and Asian Empires these measures did contribute to Germany's eventual defeat and the confusion we have is the difficulty of disentangling that from the impact of to far blockade on the eve of War British India was Germany's largest source of rape seed and natural Rubber and Russia was Germany's largest source of grain before the war Germany's main oil suppliers were neutral Romania and the United States but by 1917 Germany was at war with both the global economy was also small enough that Imperial embargos could be supplemented by purchase agreements with neutral States in in March 1915 Washington agreed to limit manufactured rubber exports in return for commitments by France Britain and Russia to absorb excess us production in short if the German military by 1918 did face shortages of key Commodities and we know it did the reason was not or not only Britain's far blockade but the fact that Berlin had foolishly declared war on all its suppliers within an imperial system so let's move forward to World War II and when Germany invaded Poland on September 1st 1939 Britain reimposed the blockade and the two main neutral were the United States and USSR and the story was initially much the same European neutrals the United States and the Soviet Union worked together to help Germany skirt blockade this is a reflection from Adolf bur the US assistant Secretary of State which captures some of the reaction I think the US exported cotton wheat and oil to the Soviet Union allowing the Soviets to resell the same Commodities to Germany this included shipping products Direct from the US to Germany via the tri transiberian Railway and here we go on British estimates which aren't perfect but do Capt capture a sense of the incentives that existed I think between January and may 1941 before Hitler invaded Russia the British estimated that 109,000 tons of soybeans 12,800 tons of raw rubber 2,800 tons of copper and 200 tons of tungsten or as well as nickel wool and goods a bunch of other Commodities which trans shipped across Russia to Germany via the transiberian railway and these figures were in addition to Britain's own raw material exports to Germany throughout the war neutrals such as Sweden were prepared to resell to the Reich at marked up prices and Germany's mistake once again was to declare war on the handful of Imperial economies that controlled the bulk of the global supply of key Commodities these Empires would have been happy to keep exporting to Germany had they remained neutral if they could have done but when Germany attacked them they imposed embargos when Germany attacked the Soviet Union it lost a key supplier of grain oil and many Industrial Metals it now had to rely on the small number of European and South American neutrals for essential resources such as iron or which it acquired from Swedish lap Land by Norway and on Romania for oil with so many of the world's resources under the control of a handful of states of and Empires embargos could be extraordinarily effective in the first half of the 20th century as in fact they had been in the interwar period when as Nicholas molder has argued League of nation sanctions drove authoritarian States towards military expansionism aimed at gaining self-sufficiency as Brendan Sims has shown the need to control resources comparable to the great European and American Empires was Central to Hitler's plans for global conflict and his decisions to declare war on both the USSR and the United States even under embargo the German war machine adapted Germany fought on for four more years using new chemical processes to turn RAR coal into fuel oil and synthesize artificial rubber again the the emphasis in Germany's defeat must be placed not primarily on the blockade in in our view but on a combination of Imperial power and German strategists who had declared war on key allies and pushed neutrals into the arms of their enemies in short the the early 20th century was a uniquely supportive environment for great power economic Warfare in one sense there were relatively few neutrals and they were relatively weak in this sense there's a benefit in going back to the earlier periods of the 18th and early 19th centuries before the era of widespread Imperial resource control to understand our current moment and the cases from this imp period are even more even less encouraging I should say for a potential Mala operation Britain's Naval power was relatively speaking far stronger yet its blockades were often less effective and let's begin with the American Revolutionary War the Royal Navy first attempted a far blockade here aimed in the case that's most relevant to ask not primarily on the American colonies but on France and Spain Britain's blockade targeted Naval stores the essential supplies on which all navies depended in the age of sale think Mast hemp Timber that kind of thing at the time Russia was Europe's leading exporter of Naval stores followed by Prussia Sweden and Denmark Norway unfortunately for Britain these neutral states were powerful enough to organize and push back decisively when British vessels stopped and seized Naval stores on several Russian ships Empress Katherine the Great instituted the Declaration regarding the principles of neutrality in February 1780 which is the first ever attempt to define the concepts of neutrality in international law as it relates to Nations rather than individual or ships its first two principles were that all neutral vessels May freely navigate from port to port on the coasts of Nations at War and that Goods belonging to the subject Powers shall be free in neutral vessels except in Contraband articles in practice FR Katherine's position benefited France and Spain the main targets of the blockade which welcomed Russia's declaration as quote founded in Justice equity and moderation Denmark Sweden and the Dutch Republic then joined with Russia to form a league of armed neutrality to enforce Katherine's principles Britain ended up declaring war on the Dutch who had profited as the key medlen for the sale of Naval stores defeating their Navy at the Battle of dogger Bank the first of a number of pictures of battles you'll see on the screen however Britain was not capable of fighting all neutrals at once and indeed itself needed Russian naval stores so it was forced to temper the blockade by allowing them through and of course lost the war itself if we look at the Revolutionary Napoleonic Wars Britain attempts a similar operation balancing a close blockade against um the French Fleet that's the most famous part of it with constant searches and seizures of vessels taking part in the international trading system it faced the same problem neutral parties had strong incentives to sell Goods to France precisely because it was under blockade and prepared to pay more for those goods French trade with individual neutral countries fluctuated during the war but trade with Denmark for example reached levels seven times above its pre-war and post-war baselines Britain's attempt to enforce the blockade also forced it to violently stop offending neutral vessels the neutrals then used diplomatic and legal tactics to play for time while their convoys continued to run the blockade however once again Britain's blockade could not hold up against an organized Coalition of neutrals zarul was angry about Britain's repeated violation of its rights and condemned Britain treatment of Danish vessels as a quote self-evident violation of the law of Nations and the principles of neutrality and in December 1800 Russia and other neutrals proclaimed a second league of armed neutrality determined to make the blockade work London launched a military Expedition against the entire league and the British Fleet ends up sinking much of the Danish Navy in the first battle of Copenhagen a war between Britain and Russia was bored only by news that Zar Paul had been assassinated and his success a negotiates a compromise Britain agreed a joint declaration that Naval stores once again were not Contraband and a passport system for all future trade was created in which Merchant vessels had to specify what goods they were carrying where but Britain accepted it could not stop and search and seiz neutral vessels without prior evidence they had violated the terms of the passport simply put the price of neutral compliance was a weak blockade Britain concedes the piece of Amo but when War breaks out again again Britain briefly reimposed a blockade on neutral ports but was forced to Black down meanwhile its blockading tactics antagonized the United States the fledgling United States which had been profiting hugely from their neutral status with the US Merchant Marine quintupling in size when Britain mandated that all Americans trade with Europe stopped for inspection at British ports America responded with a full economic embargo against Britain and this eventually escalates to to cause part of the reason for the War of 1812 with two of the four CS B given directly relating to the blockade again we see that escalation with the blockade but we also see it struggling to have an econom effect the last case I'll mention is the Crimean War where Britain opposed imposed yet another far blockade this time on Russia through the Turkish Straits that was arguably more successful and it's worth talking about why the blockade focused on two things War material and Russian exports particularly grain Having learned from the blockades of France London pledged to quote preserved the Commerce of neutrals from all unnecessary hardship economic Warfare in the Crimean War struggled to Halt War material that was just moved through Prussia and into Russia but was more effective because it targeted Russia's Financial systems through a trade embargo and exports F in in this case Russia's grain exports the two largest markets for Russian grain were the belligerant themselves Britain and France the belligerant could therefore not only severely limit Russia's exports through embargo by doing so they were raising the price of price of grain and creating incentives for neutral grain exporters to work with the pl with the blockade there's dispute about how much of Russia's defeat in the Crimean War can be attributed to blockade economic exhaustion definitely contributed to Russia's collapse as Andrew Lambert has argued but it's well documented that the Russ that the blockade was struggling to stop Russia from acquiring and deploying material Russia's weakness rather was the collapse of its EXP sport Market caused by an economic crisis so here we can see these major themes coming through the historical case studies one is the danger of 20th century analogies in an imperial context that makes that makes economic Warfare very different and the other is the extraordinary autonomy and agency of neutrals in times of Greater geopolitical diversity in confronting working round and dodging blockades I'll hand back to Ike to look a bit further at malaka thanks thank you Hugo so considering uh the China's situation in light of these historical cases I'm going to argue that the the case for a maloca blockade is particularly tenuous um China produces about four million barrels per day roughly a quarter of its total oil consumption but it's less vulnerable to a potential cut off of its Maritime oil supplies than is commonly assumed one reason is China's vast and growing strategic petroleum Reserve uh which now contains over 950 million barrels of oil about three months of current Imports um and another is the fact that domestic production could adapt if uh Prices rose which they inevitably would if China was placed under blockade because of its land borders China could over time through pipelines or even Trucking uh expand domestic Overland links uh to Russia and Central Asia and the pla itself would only require about 500,000 barrels per day day for the war effort which is about 12% of current domestic production uh China's food system similarly adaptable arguably even more so China has vast food stockpiles 70% of global maze reserves 60% of global rice reserves 50% of global wheat reserves according to USDA estimates uh today China derives most of its protein from imported soybeans and meat uh which which gives the impression superficially of food dependency on the United States and Brazil but that doesn't mean China would starve if trade were shut off is this chart shows China was almost entirely self-sufficient in protein until the early 2000s China just Imports protein today because the population is Rich enough to afford more protein and higher quality protein than it strictly needs to survive and the Chinese government has signaled that it's prepared to respond decisively if protein supplies are cut off in a 2021 speech season ping made an interesting comment he said that Foods China's food security is a top security top priority national security issue and furthermore he called for Research into alternative proteins that come from microorganisms as well as from plants and animals uh meanwhile as we have seen the question of whether the US Navy has enough ships to screen Maritime Transit through Mala is perhap the wrong question a better question is what new techniques the neutrals May devise as they seek to cheat and overtime erode the modern-day Navar system as we have seen the price pressures to cheat would be massive uh producers could Arbitrage price differentials created by blockade by finding alternative routs uh but it wouldn't necessarily be needed uh to redirect shipments across China's numerous land borders because ships can just go through the block and hack whatever electronic Navar system exists we've seen how quickly such a system can fail this year with the failure of the Russian oil price cap Merchant ships are in theory required to report their caros identities Origins destinations and so forth through the automated identification system AIS but Russian trolls have repeatedly shown that this can be hacked Chinese analysts have mentioned the same possibility uh ships that are supposedly Bound for Japan could simply resell their caros to China after they had passed through the blockade and divert course to Chinese ports uh electronic communications are an important difference between the current moment and N the 19th century and 18th century blockades that Hugo discussed earlier and then there's the question of whether if at all the threat of blockade serves as deterrent we argue in the paper citing some sources from analysts at kicker the China Institute of contemporary international relations which is the in-house think tank at the ministry of State security the main organization responsible for such analysis uh that the analysts there are not at all impressed by the threat of blockade as as jaia honu uh puts it in in one 2007 paper and his many of his colleagues have have referenced similar arguments blockades have quote historically often failed to achieve the goals of their enforcers and the US goal of containing China's economy through Oil Embargo is difficult to achieve in integrated Global energy Market because any disruption to oil supply anywhere will have an impact on the global market through the price channel so in conclusion uh far blockades tend to be ineffective because they aspire to defy the gravity of Market logic they create shortages in the Target country which then create incentives to adapt and opportunities for neutrals to profit through Arbitrage thus civilians suffer the effect effect of rationing but the impact on the blockaded States war fighting capacity is relatively small meanwhile the blockading state create uh suffers serious and often escalating diplomatic challenges neutrals have Collective incentives to cheat and degrade the blockade over time through legal challenges uneven enforcement and eventually organized resistance and ultimately the blockader faces a choice broaden the conflict and potentially Drive the neutrals towards the blockaded power or accommodate the neutrals leading to a Swiss cheese blockade embargos tend to be more effective because they do not require participation from neutrals to work but they also affect neutrals now I'll hand it over to Hugo for a final thought thanks to Def to deter an adversary with a threat of punishment one needs to be able to show that the pain imposed by the punishment would be maintained and ideally increased over time and would and would not inevitably diminish because it's nearly impossible to show that a far blockade would strengthen rather than deteriorate over time the threat of a blockade is a bad deterrent Lord fiser one of the architects of Britain's blockade in the first world war knew better than anyone else the limits of this approach and he put it this way the promulgation of War at Sea tends to raise up fresh enemies for the dominant Naval power in a much higher degree than it does on the land owing to the exasperation of neutrals the lesson for Washington is that economic war against China as traditionally understood is a struggle it's helpful to flip the question around in a conflict scenario people should be thinking not how can the United States punish China but how can the United States incentivize neutrals and work with Market forces to curtail engagement how could it create the necessary momentum for such a system so that it could strengthen over time resulting in a stage decoupling these are the kind of conversations that might lead to a more effective economic deterrent and we're going to talk about some of that elsewhere in future work but we do suggest that the malaka blockade is not the the way forward thank you thank you very much uh Hugo and thank you Ike I am going to uh waste no time and hand straight over to Nick Lambert for his uh comments uh and Nick assures me that he will be able to dispatch these in 10 to 12 minutes Nick over to you thank you Neil um right economic Warfare is a very complicated and poorly understood and surprisingly understudied subject um to keep my remarks to round about 10 minutes will be a challenge not only because I have much to say on the subject but more especially because I suffer from what my wife diagnoses as chronic Zoom Aspergers and I'm afraid it's incurable um but I will do my best so um I take the thrust of your argument saying that 250 years of British investment and C power was largely a waste of time mainly because of what might be termed the neutral problem um I have to say that as a um hard carrying naist um that I am somewhat disturbed by your lack of faith and the power of the force um I will allow that the uh neutral problem is a very real one and I can see what you're driving at and substantially I mean the portions of your argument I agree with but I generally I think you exaggerate the scale of the neutral problem and perhaps misjudge its nature I would like to point out that although Britain was sometimes induced to make some adjustments to accommodate uh the interest of neutrals nevertheless in all instances the c campaign of economic coercion did continue and ultimately they won and indeed it is very difficult to explain this pattern of consistent British victories in any other way other than the successful application of CPA um but going down further down this path is I think impractical uh because of the time it would take and anyway is unlikely to Pro uh prove much of use for your contemporary purpose to query the malaka operation as I think you called it and by the way I substantially agree with what was saying there although for perhaps for different reasons so instead I'm going to limit myself to going over uh what I see as the three overarching problems with the historical side of your paper and these are follow under the category of definitions and terminology conceptualization and sources right first definitions um I'm afraid I found many of you the terms you employ impr precise and confusing uh you use non-standard terms without clearly defining them and you use standard terms in perhaps non-standard ways um I especially dislike your phrase far blockade uh conventional term is distant blockade although frankly neither of them are really ideal um without taking a deep dive into the thicket that is international maritime law I would put the question in this way what does the blockade actually mean this isn't semantics historically speaking until the beginning of the 20th century it is meant deploying warships off an enemy port to physically bar entrance and ESS but like many writers you employ the word in your paper generically as a catch all for economic attack and this is a bad habit or this bad habit began round about the time of the second 197 hey peace conference but if you look at the primary sources you will find that those who did so usually inserted some sort of qualifier to the effect that well yes yes I know this is the wrong wrong word for what I am describing but really I can't think of a better one over time this qualifier or these qualifi have been come seen as redundant and dropped the problem is as more time has passed the qualifier has been forgotten so basically what I'm saying here is the meaning of blockade has varied in time and space and it is highly context specific thus making it really quite problematic to employ AC Frost time in space as you've done in this p now I'm accepting that in employing such imp precise uh technology you are following counselors previous writers and therefore in a sense you are accurately reproducing the state of the literature problem is that the secondary literature is a gigantic hot mess many who have written on this subject have come to it indirectly and the real focus of their work being elsewhere and this has encouraged the tendency to skate over an awful lot of complexities others have come with a particular agenda meaning that their work is highly politicized and thus really can't be taken at face value and I'll return to this point later my second Point concerns your conceptualization of your paper um forgive my blunt list but I think far too much has been smooshed together in this uh what 44 Pages uh you discuss measures of economic coercion that presume state of war and in the same breath you discuss measures that presume peace War and Peace are very different and in your analysis I think it's important you keep them separate and I just hasten to add again I acknowledge you're not supposed to do this but it's problematic when you do um in making your case you also don't take adequate account of the changes in the uh the international economic landscape in your analysis you have the pre globalized econom IC era mixed in with the pre first war globalization 1 the semi- aut aaric trading blocks of the 30s and the post 1980 globalization 2 uh similarly you sometimes presume highly optimized market system and sometimes essentially plan economy and these sorts of differences just can't be elided great Precision is required all this is to say that to my mind you can't incredibly mix and match the economic coercion campaigns from different eras in the way you've done it the concept and practice of true Naval blockade originated and acquired legal status during the early modern era between say 1648 and should we say 1898 um the object of tact was the enemy State the aim was quite literally to bankrupt the enemy State the mechanism of coercion they employed mechanism coer so to speak aimed at depriving the enemy state of excise revenues it really wasn't to interdict enemy trade per say indeed the well um to a considerable degree the British welcome trade with the French as long as it was B neutrals and so long as it was British merchants taking the Lion Share of the profits and the British exer collecting the taxes now at the end of the 19th century marked the beginning of a new era this was the time time of the first globalization and the Second Industrial Revolution the economic landscape changed fundamentally and so did the Strategic environment in which navies operated from the late 1890s or so you see a transition from simple blocket to sophisticated economic Warfare as I turn it certain naval officers beginning with C Captain Alfred there Mahan in the United States and Jackie Fisher in Britain saw that this new economic system was highly optimized and therefore susceptible to derangement they're going for the system they're not looking at stocks uh they're not they're aiming at the flows to disrupt the Flows In order to basically topple the system in studying this subject um the Navy uh particularly the British Navy they factored into they factored in new understandings of business Cycles as well as the psychology of economic shocks they also had new tools that there dispersal the most important of which was information transmitted to the admiralty via cable and they also devised ways to exploit the aggregation of information again wholly different in any case as a result of all this the object of Naval economic attack shifts from the enemy state to the enemy Society in effect the Royal Navy sought to cause maximum discomfort the enemy Society by deranging the systems that underpin their economy with the intent of provoking in Social upheaval and political unrest you can see this is quite different the mechanism of coercion also changes in 1914 Britain plans to isolate Germany from the outside economic World by denying access to the mainly British owned and controlled infrastructure of the global training system which is the communications grid Oceanic Merchant shipping and Global Financial Services think of this as a kind a sort of giant denial of service attack most importantly this new economic Warfare strategy relied not upon the physical interdiction of ships and caros as previously but rather upon the control and manipulation of data it is almost a virtual attack real ships physical ships are almost ancillary to the whole process and that's going to be very much the much closer to that today than any other of the examples I think I should also clarify in 19 that in 1914 this strategy is Central to British Naval strategy and to the government's plan for winning the war it was not as you say on the top of uh page 24 an auxiliary or fallback measure um consider this When The War Began in August 1914 the expectation was it would all be over by Christmas right what lay behind this conviction it was not that the machine guns would kill all the soldiers in a couple of half an hour or more it was the widespread fear that the global economic system would collapse thus raising the Spectre of 1848 now in choosing economic Warfare the British leadership understood that they were playing with very powerful forces and in many ways their strategy was a weapon of mass destruction and that W this would produce significant collateral damage both to neutrals and to themselves by the way they were quite right the problem was that they underestimated the magnitude of this collateral damage which was the main reason why after a couple of weeks they called it all off and improvised a much watered down form of economic coercion against Germany which really didn't begin to work until maybe late 1916 or early 1917 in effect they glimpsed the abyss and shrank back the pity was that they then plunged into an even deeper Abyss four grinding years of attritional warfare that destroyed British society and irredeemably mortgaged British power and I'm nearly done my third and last Point concerns your use of sources basically in producing this paper you have engaged in what I call averaging especially in Your World War I section in effect you have averaged the interpretations of different Scholars without paying sufficient attention to the quality of the scholarship underpinning their interpretations you have taken everything at face value without sufficient um grasp is a strong word but grasp of the or appreciation of the archival and conceptual rigor of the underlying research so first world war section uh besides Arch ball ball so-called official history which by the way was nothing of the sort um in your footnotes you cite um Alan Kramer John Mau Morgan Owen Nicholas muler and Abner offer here's the problem except for Bell who I've said is deeply problematic none of these people have done any research in the key archives in economic Warfare and I mean none and if you doubt me on this go and look at their footnotes and all their various Publications and you'll see it's quite true in tackling this subject The Point of Departure must be the records of what was called or became known as the ministry of blockade this was the body that actually implemented policy it coordinated all departmental action and ran the entire administrative apparatus to develop a sense of the subject and to understand how the blockade functioned on a day-to-day level how it really functioned you must plow through at least several hundred feet of files which by the way are uncataloged and this is just a necessary first step now since these Ministry of block blockade files were released in 1968 just four historians have done serious research and the other people you ought to be reading there are Keith neelson Greg Kennedy and alen maren two others have done enough to be regarded as having informed opinions and they are Bruce Kent and George pedon um all the others have basically dipped their toes into these murky Waters and promptly run away shrieking which is probably what I should have done but uh I didn't um now um You may be surprised by my including Abner offer in this list um certainly he has done a considerable research on the economics of the first world war but his work was driven by a very different set of questions and anyway he was much more interested in the German side in his treatment of British blockade policy he skimmed the British archives and therefore offers the best a 30,000 foot view his understandings of British aims and intent which are all important was based upon Bell you should also be aware that when office book came out a number of historians felt he had overdetermined his evidence when he spoke at Oxford at All Souls I was there and saw the push back he encountered which is sadly not recorded but may I suggest you look at the carefully constructed and rather guarded review essay on Auer book that appeared in 20th century British history written by some chat called Neil Ferguson of Cambridge H very guarded very good I anyway um the reason last point the reason I dwell on this point about sources is that the outputs of Applied history are only as good as the inputs unless there's quality control on the inputs there's going to be a problem with the output now of course you aren't to blame for The Superficial quality of so much previous writing on this subject but you do need to be aware of it and take steps to control for it you need to know the history of the history and if I may say you need to employ the methods used to write this book you may recognize it the methodology described in chapter one The delightfully cynical skepticism displayed in chapter 3 you basically I'm saying is double check that the emperor really is wearing new clothes I like that line sometimes historians can be as Artful as politicians I'll stop thank you very much indeed uh Nick um for uh uh a a very uh uh oxonian critique uh that's perhaps the best way of putting it um and it brought back happy memories of reading AV offer and thinking something about this doesn't quite add up uh I wonder if uh the best way to proceed uh is rather than saying to ion and Hugo respond uh rather than do doing that let let's maybe take some questions from the audience uh and come back to IE and Hugo at the at the end um I think that that might make more sense um I want to ask a question that really follows on uh from what Nick just said uh and it's really a question about the the malaka case I mean the object of Applied history is obviously uh to use somewhat coar grained analogies just to think about a contemporary problem and it by by the very nature of the lives we lead it's impossible to do as much research on every single case as one ideally would would like to so if one thinks about uh the the Jackie Fisher point with which Hugo ended that you're you're going to have trouble with the neutrals and that'll be the hard part can we just think about what that implies for the Mala scenario uh I don't know which of you would like to take that but I'm guessing Ike will have a go if we just think about uh the the the the case I'm reminded here of Edward lwac telling me with absolute confidence that China would be very quickly defeated by the the Mala blockade what what are the kind of uh other players going to do I mean what I can we learn from the trouble of the the Russian uh sanctions about how a malaka blockade would play out with the CA in the case of the neutrals to be very specific well let me just quote from D janger who's another research analyst at kicker of the state Ministry of State security uh this is him joh writing writing in 2005 quote the US cannot operate in Mala without the permission and support of the loral states and while Malaysia and Indonesia are certainly suspicious of a growing China they are also distrustful of the US they believe it is in their interest to keep the Straits open to maintain a delicate balance between superpowers and Powerful neighbors I think Jang is Right Hugo yeah I I agree with all of that I I would only add that what we've seen in the Russian case is those countries with land borders to Russia massively profiting from transit trade I think there was there there have been Kyan statistics that been doing the rounds a lot and I think that's worth considering as well I would also say that it's not just neutrals on this score the UK us and Australia have very different interpretations of international law and they see these things in very different ways the specifics of well when can you bord ship when can you stop it are as r as next says fiercely complicated and different states interpret it differently of course the US is not a signatory of the UN Convention of the law of the sea but others are and that goes that goes for us allies as well so there's a there's a neutral point that I emphasize is we emphasiz in the paper but these things are really difficult to line up do you want me do you want us to talk about the the Nick side of things now or just do it in the context of other questions well I was going to take advantage of the fact that we have some uh distinguished uh Naval expertise on the line uh by just seeing if I could uh uh go Jim Ellis into intervening um Jim you may not not want to but uh it would be a shame not to hear from you and I I'll just take this opportunity to remind everybody that if you want to intervene uh the best way of attracting my attention is to uh use uh the dreaded hand gestures on Zoom you can also use the chat uh uh function to to get my my uh attention but Jim let's hear from from you as somebody who probably has a slightly more uh firsthand understanding of the malaka strategy than most of us well as uh as Ike knows from our shared experiences of a couple of weeks ago I mentioned I had a a preview of his U of of this briefing at an energy conference we were both attending in in Dallas and uh very much enjoyed the conversation uh and so again I I think there's a there's a great to think a great deal to think about here but you know Nick has has pointed out the you know some of the significant elements that need to be considered but you know I'm I'm also mindful of the of the practicalities and realities of of Naval blockades and uh and quarantines or court on sanitary or or as we run through the Litany of uh of of real options in in this but uh you know we we tend to do a correlation of forces and a correlation of capabilities we tend to to view as as Hugo mentioned earlier the the role of or maybe it was Ike in his in his quote the the role of the loral countries and and the like but in in practicality a lot of these things are driven by uh by perceptions and not by necessarily reality there doesn't have to be a a one-on-one I mean you know Ike will remember that I somewhat humorously said uh that in terms of the uh of the quarantine or blockade scenario that um uh you know Islamic terrorists there's old saying Islamic terrorists are like coo salmon life is good until the seals show up and uh and and so in terms of Economic blockades and things that uh that might be applied you you you have the threat of that uh we've seen in in conflicts I'm old enough to have been a part of I'm now into six Wars if you count the cold one and uh but beginning in Vietnam it wasn't the mines in Hong Harbor that did anything it was the threat of the mines and the perception that there were mines that change the uh the outcome and so there are there are tools that can be had and can be employed that don't have to be a one to one correlation of forces that could uh could dramatically shape the uh the willingness of uh of insurance companies and and the like and and even commercial Mariners to U uh to test the waters pun intended so again I think there's much to think about here we're we're far too glib and I do agree with with Hugo and Ike and and kind of way our hands about this but I think the uh the analysis and the realities are going to be different at the next time than they were in some of the historical analogies that they've very carefully and and and excellently crafted for for our review um and and I think that's something that's going to have to have to be considered but nonetheless I mean the the realities are that you know from a a US perspective and uh you know the the pivot to the Pacific has been spelled with a very small p and the uh the for structure to uh uh to to affect some of the things that we uh we think may be possible in in the Mala scenario are not likely in place and uh and their mobilization and motivation toh to do so would would have to be attended to in in much larger numbers than it is now uh you know I too Nick I'm a naval IST as you might imagine after 39 years in the uniform and so uh I do think that uh you know chiseled on the front of that uh uh that de that I used to stare at when doing Congressional testimony it says uh you know it's the obligation of Congress to uh to raise an army and to maintain a navy and uh and one could argue that we failed in both directions so thank you thank thanks very much and d i I want to before going to Kevin and Erin uh take one part of of Nick's a critique uh that I want both ion and Hugo to respond to and that that's the critique that says that there're really different kinds of blockade there's the 18th 19th century blockade that looks to impose pain Financial pain on the enemy Sovereign and then there's the 20th century version that looks to destabilize uh the enemy Society uh and I guess my question is which of these is the US envisioning with the malaka strategy I'll take that one um I I should begin by saying we are not criticizing sea power in general there are too many very important Admirals and and Naval historians on this call to say it's useless that's far from the case we're making the case we're making is is is narrow and specific to this the interdiction of trade and the kinds of blockades we're talking about the the point you make is a good one in that what it meant to destabilize an economy meant different things in different time periods and there was a greater focus on Financial Resources as well as physical stuff right Naval stores War material that was essential to so many of the of the early modern examples descriptions of the Mala very system kind of vary between the two I think there's there's an implicit suggestion in many that there could there could be an oil shortage I think Ike has has demonstrated the dangers of thinking that way social destabilization I'm never quite certain what that looks like in practice um I think the I think the capacity to endure hardships is much greater I'm going to defer to that defer that conversation to Ike to take further the one thing I'd say as as we move forward is that when we think about the neutral case which is so Central to the argument we're making the reason we look back further in time is to try and account for a world in of considerable geopolitical diversity in which there are so many states that will wish to remain either non-aligned or to take advantage of both sides there's huge problems with looking back further in time towards those 18th and 19th century examples but the benefit is because the economy was so much smaller for the very reasons you outline we can get a sense of the scale and significance of neutral action that's harder to do in the first and second world wars simply because the number of neutrals is so much smaller relatively and the great empires have such huge resource control and this is Alan Kramer's Point who I agree is not a historian of blockade but that's that's the point that many others are trying to make you look at it more broadly um I should end just by thanking Nick so much for his comments um that's really helpful and I hope we can take that forward subsequently to this call I I'll hand over to ion the kind of malaker intent point to take further thanks I don't think that the Strategic goals of a potential malaka operation have been carefully thought out and whether the the goal is to deprive China's hypothetical War Machine of the the fuel to that it would need to keep operating or whether it's to propose shortages inflation other sorts of social pressure uh in China to bring about a systems collapse of the kind that uh that Nick was describing I think it's important to remember this would not be taken in isolation as we said at the beginning of the of the talk this is not an operation you would contemplate outside the context of war and therefore if it were to be implemented it would be part of a much broader uh Suite of economic Warfare policies which would try to destabilize uh China at home uh to the point that it was willing to sue for Peace So I think it's worth considering what those policies might be uh will they include uh Financial sanctions uh how strict would those financial sanctions be uh would the US uh inevitably uh halt all trading with the Enemy as you know Philips ELO and Bob Blackwell have have suggested uh what other measures would be taken alongside alongside this I think there is a set of measures that you can imagine the United States inflicting on China which would cause so much damage to China that the the regime would collapse very quickly but if what we're trying to imagine is whether this contest to Bear pain uh could be credibly threatened in advance uh I think China being able to tell itself a story whereby Market forces and all of its trading partners would work together to resupply its key needs uh is a very important consideration because it means that China is not deterred by the threat and I think we should not underestimate the Chinese system's ability to ration supplies and adapt so I I don't yet see a way around the problem of stock piles plus cooperation with neutral States and I this is just a feature of of blockaded Continental powers in general it's a feature of how China survived blockade of Japan in World War II um when when a when a a military needs to be resupplied it can be it can be resupplied through pretty outrageous uh circumstances and tenuous supply lines and China has a whole Continental hinderland especially an buring partnership with Russia which would probably be willing to to support it so unless and this is something Admiral Ellis and I have discussed briefly in Dallas unless the United States were actually willing to contemplate targeting China's supply lines on its land borders something that could potentially expand the war in a very Rapid Way uh I think it's it's naive to assume that simply cutting off its physical Supply Roots by sea uh would have an immediate impact in in haling its it its War fighting ability thanks I what I'm going to do now given that we don't have Limitless time is is take Kevin uh Harrington eron Carter and Kate Epstein's questions one after the other and then we'll go back uh to the presenters well maybe to Nick and the presenters for final thoughts Kevin you're first hi Neil um so uh a couple of thoughts here have you um looked at the differences now in in the cases where neutral shipping needs to have Insurance pretty much and that that insurance would Skyrocket if they have to sail into a war zone where merely creating a sufficient military friction uh would deter a lot of neutral shipping and so China would thus be dependent on its own shipping and in effect have to militarize it uh so that even if uh Chinese ships could could run the blockade under some military scenarios where the United States failed to enforce the blockade for some reason uh you would shut down most of the the neutral shipping just because the the insurance cost would be prohibitive uh and the second uh question is uh how much does a modern blockade depend on control of space where if there is a space War accompanying this where either the United States or China or both loses their ability to surveil the open ocean uh or has that severely impaired that uh you that the blockade fails for that reason uh rather than it primarily be focused on what uh what the neutral States sitting on those Straits uh to the South trying to see think about things uh and third uh is there some usefulness for partial blockades as a form of escalated pressure similar to what the Kennedy administration did in its quarantine of Cuba which didn't seem to come up in your paper uh where it was not a full blockade and they were using a minimum of force uh but it was enough to signal to the Soviet Union that uh there was more to come if they didn't negotiate an end to the situation thank you Kevin uh Aaron Carter uh thank you I found this paper very interesting and informative and persuasive um so I have two quick reactions uh and comments so first so Global public opinion about China has been trending negative for quite a long time um and of course China has been nibbling at its neighbors territory for also for quite a long time now so I can imagine a scenario in which neighboring countries are actually quite eager to be part of a multilateral effort to impose a blockade on China those policies you might be appealing for domestic electoral reasons um so so I'm curious how how you might react to that so as you know I I find this idea of a neutral problem very interesting and persuasive but I I'm curious how the domestic politics of China's neighbors might influence their willingness to you know actually possi be be part of a um concerted multilateral effort to counteract China um through through a blockade so so second so I I would love so this wasn't really part of the paper um so much you mentioned it really briefly I'm curious for your estimate of what share of the Malica problem being not so much of a problem for China it can be attributed to this neutral problem right so you have of course the northern route in the summer you have these Overland routes that were briefly mentioned in the paper um I'm curi curious about how much you think those alternative strategies solve the Malik problem um and if that that's really the solution to the problem that Chinese Scholars have discussed already um what what share of it is really this neutal problems I'm thinking you know if you might want to go down the game TR a little bit and thinking about if the conflict were to widen or become more severe you know how vulnerable all these are these alternate routes to US military action um I'm just curious how you think about them in China's broader strategic solution to this problem thank you thank you eron and uh K epsteam thank you very much um so this is really a question for Ike um because I know you know the um the the kind of Chinese side um so well um and it's a question about prices so you know you talked about one of the things that I liked in your paper um was kind of the when you talked about the oil issue it was you you were saying it's really not the physical supplies it's the way that everything would react um on the Go Global price of oil and so my question is like how does that apply to other Commodities um you you've talked about food you've talked about um I mean all the other things that China would need um in a war and you know one of the things like that Nick talked about in Warlords was that it's really it's like stocks you know for a modern economy don't last for very long you you kind of have to keep the flow going and then question becomes at what price can you do it and then it helps not to have a massive debt problem um because it helps to be able to borrow on an emergency basis um to basically buy things at higher prices so I was just kind of I was just curious how you envision you know the you talk about in the context of oil but like what does that price Ricochet effect look like for other Commodities and then like how does it affect China's ability to um kind of sustain a war effort thanks Kate well we have uh I think uh six State questions there um we we've got uh only a finite amount of time uh well 10 minutes technically to deal with them all uh and so it probably will be best if uh IU and Hugo divide them up in some way um would you like to go first sure you which ones to ask I'm sure your have thoughts on the insurance question yeah the insurance question might be a good place to start you okay I'll start with the insurance and then I'll look at one or two others and then I'll I'll move across um so insurance and shipping yes you're absolutely right it would be a massive issue that happens anyway regardless of the blockade um many of these con of these scenarios relate to a t a fiscal confrontation over Taiwan obviously that would have an impact on insurance things I would say that impact affects other countries in the region too so that has its own wider KnockOn effect that is very unhelpful to us positioning because it makes those countries struggle to trade so the insurance point is true for all states in the region I really would emphasize though the price incentive point no one's doubting that in many of these scenarios the Chinese economy and the Chinese people would be suffering hugely but the difficulty you have is that the Chinese state would have a massive incentive to pay a premium to run Goods through and that includes potentially insuring there's no reason they couldn't do that so I'd emphasize the price point and again it goes back to Neil's original point which is what is the objective of this blockade if the objective is to really slowly inflict hardship on the civilian population over time okay if the objective is to limit or restrict China's actual capacity to fight the conflict that I don't think is is really engaged with in the Insurance case neighboring countries and domestic politics um I'll largely defer to Ike I would only say that the domestic economic pressure would be catastrophic in those very same neighboring countries um I would also say that some of those countries notably Singapore have long standing ideological and very important commitments to free trade and free shipping um so that's that's also a separate point to consider um shares of the Malika problem attributed to new Roots relative to the neutral trade that is a very difficult thing to work out I would say that quite often the neutral com the the Overland Roots conversation focuses on oil and potential oil pipelines um I know Gabe Collins has done some work on this and and the potential construction of new pipelines to increase Supply um what I would what I would mostly say on that is that that would very much depend on how the actual conflict was going obviously and that relates back to the insurance question right a lot of this is is peering into the dark what I do think is clear is that the Russian case will have reinforced to China the neutral issue and the potential in the massive incentives that exist for neutrals to work round sanctions and blockades so I think as as a deterrent strategy that's a really important thing to emphasize the balance between the two would depend on the actual conflict itself I I'll move to ik now okay let me hit these quickly Insurance well in addition to to China having you know by far the world's largest Merchant Marine uh China could just offer its own insurance to neutral neutral shippers um in terms of space space combat I think the difficulty of tracking country tracking uh vessels is less significant uh than than the the system AIS that we use uh which relies on vessels reporting accurate information and we showed you that that image of Russian ships that made a made a z pattern uh uh in the azov sea the point being that it's relatively easy for ships to turn their own transponders off if they don't want to participate in this system and especially if it was a collective interest in the neutrals to erode the efficacy of the a AIS system over time uh based on the satellite capabilities we have we just cannot keep track of every merchant ship that's moving through uh the East and South China Sea all at the same time is too big a task and in any case uh that wouldn't be the focus of of us and Allied intelligence if they were simultaneously fighting a naval war with China their their focus would be on shot spotting Chinese ships um with respect to a partial blockade or quarantine um I just think it's it's an interesting question but it's a very diff different analogy uh Cuba is right off of the US Coast and it's it's a very it is an island rather than a continental Continental power so I I think the analogy although interesting and and potentially very relevant in terms of a Chinese quarantine on Taiwan isn't so instructive in the other direction um vulnerabilities of Overland routs I mean yes as some have noted you know pipelines are vulnerable infrastructure and they too could be uh could be hit with conventional strikes but there's any number of ways that if the price pressure is kicked in China could acquire for example the oil it needed we talked about Fisher tropes which is the process for chemically converting coal into fuel oil um the estimates vary but the break even is something like a $100 a barrel China has abundant domestic coal resources so if they needed they could produce you know an insu not a perfect substitute but some sort of fuel oil uh and they could build it relatively quickly given their state capacity for doing that um um the the global public uh opinion reaction in Central Asia I mean I think countries that were willing to trans ship uh weapon systems to to Russia or DJI drones to Russia during the uh the war on Ukraine which include many of the Central Asian republics would presumably be willing to do to do the same for the right price in a conflict with China uh we can maybe pick off some of them but that's not the difficulty the difficulty is picking off all of them being that the fewer the fewer neutrals are actually participating in Breaking the blockade the more the cheaters can profit so I would I would suggest the analogy of the War on Drugs one of the uh papers that we cite is reuter and Kim's famous 1986 piece RIS risks and prices and economic analysis of drug enforcement where they make the point that if demand is inelastic and you crack down on Supply you simply make it more profitable uh or you increase the compensation for drug trafficking to take on the the human risk involved in trafficking and so there would be some equilibrium dynamic equilibrium uh about price pressures incentivizing neutrals which may be State actors or maybe nonstate actors to participate in China's resupply effort and then in terms of the the impact on uh Global prices of Commodities that that Kate mentioned I think it's it's hard uh it's it's hard to grasp unless you you remember that China has accounted for most or all of the demand for key Commodities and basically every year since the the Great Recession and they account for more than 50% of Global Imports of Seaborn iron ore of copper tungsten of essentially any other element you can think of so without the Chinese market uh prices of these Commodities would plummet and the finances of many of the producer countries would would not work and so this would give China a lot of Leverage um I think I may have missed it uh but I I don't recall anyone answering Kevin's question about space yeah that's the I said the difficulty of spotting ships I think it we wouldn't be able to it's not a question of spotting ships it's a question of dealing with them one at a time as they come through the straight so I I think that's where it could be relevant is if the the communications of the ships are and this is an important point maybe this is Kevin what you meant if the communications of the ships are shut down because no one has access to GPS no one has access to satellite Communications it may be harder for them to resell their cargos or change their destination while in route um we're really running short of time but I think it would be uh wrong not to allow Nick a last word and then uh Hugo and Ike a last word but these will need to be almost uh Twitter length uh concluding our Reflections Nick can you go first witer length that's tough I I still in a lot of what I'm hearing there's great deal of confusion of whether we're talking about a state of war or a state of peace or aggravated peace whether we're trying to deter whether we're trying to punish coer whatever um and it's if we're talking state of War I mean you can shut those Straits quite easily just by dropping um a couple hundred mines in it stop traffic dead um if you're talking about a state War the space Dimension yes extremely important when satellites start falling down from the sky in large numbers which both sides have incentive to do you're going to have much bigger economic problems to worry about um and I also think that the question of insurance is inter terribly important as well um it's if you're going to have have a state or anything approaching a state of War um you you seriously consider the traffic in the South China Seas or indeed over much of the Western Pacific is going to continue and if it's not continuing what's going to be the impact and KnockOn effects uh for the economies well pretty much right the way around the world particularly Australia I could go on and on and on I mean I um as I said I I mean my view is is the historical analogy doesn't work too well because the the the similarities yes they exist but the differences so dwarf the um differences so dwarf the similarities that I think that makes any form of attempt analysis or conclusions from it extremely problematic um now if we're going to have a discussion on a war strategy against China well we would start again thanks Nick uh Ike and Hugo perhaps just just final Reflections what we're reaching for here is a strategy of deterrence by means of credible threats of economic punishment which means making China believe that if it attacks Taiwan that it will have a very high probability of getting hit by something that that poses severe pain and possibly existential risk and I think a threatened operation that has such a high propensity to backfire and which operationally would be so difficult to execute even in the best case scenario makes for a not compelling threat of punishment so I think it's a poor deterrent and we should be reaching for other approaches for thinking about economic deterrence that have to do with building coalitions of neutrals I'll I'll conclude on that point first of all thank you everyone for your for your feedback and questions and thank you Nick we are in a a geopolitical moment that is very unlike the geopolitical moments of the of the early 20th century because of its diversity and because of the number of states out there that want to have views and opinions and when we're thinking about economic Warfare and we're thinking about economic deterence any strategy that you are putting forward needs to recognize the incentives of of neutral and third party States and understand that in in these times they don't face binary choices and we've laid out our criticisms of the malaka IDE when we're thinking about strategies of economic denial of deterrence that has to be Central how you build those coalitions and incentivize support and I hope we can play a role in starting that conversation thank you again well thanks everybody for what's been a fascinating uh discussion uh it's certainly forced uh me to think much harder about this question than I had before and uh I will have some great uh comeback lines the next time I run into Edward lubach uh it's uh it's been an excellent discussion I think the innovation of having a designated commentator is a good one which we should keep uh and uh uh uh and and so I'm GNA wrap it there uh we always end uh with a virtual uh Round of Applause or you can do real Applause if you prefer so let me uh uh invite you to join me in thanking the speakers here here uh and uh Manny if you got any final uh reminders or announcements uh before we uh call it a day I do not um I'll just point out to Ike and Hugo there's some people really had a lot more questions in comments so you might want to screenshot the the chat right now so you don't lose them uh please mark your calendars as I said for January 25 and February 12 uh you'll be receiving an email with the the rest of the dates but uh you know mark your calendar FR Le those too happy holidays if that is the last uh uh history working group seminar of uh 2023 uh allow me to wish you a happy uh Christmas Hanukah holiday or anything else that you feel like having and we look forward to seeing you in 2024 thanks everybody thank you all thank you great work Nick hello I'm Neil Ferguson I'm the Milbank family senior fellow at the Hoover institution and I chair the h history working group we've just had a brilliant presentation of a new paper the malakam myth lessons on economic Warfare from the history of Naval blockades uh authored by Ike Fryman and Hugo Bromley Ike is a fellow here at the Hoover institution uh having joined us this Academic Year his co-author Hugo bromy is a post-doctoral re research associate at Cambridge University uh gentlemen thank you very much indeed uh for joining us let me begin with a very basic question uh you know what exactly is the malaka myth uh this is the myth if I understand it correctly that in the case of a war uh with China the United States can shut China's Imports down just by closing the Mala straight have I got that right yes that's right China is very dependent on imported oil they import over 8 million barrels of oil Day by SE and most of that comes through the Straits of Mala the narrow uh passageway uh that most ships used to Transit between the Pacific Ocean and the Indian Ocean so the idea is that because this Waterway is so narrow it can easily be cut off the US Naval forces could conduct an interception operation there uh either to uh to prevent Chinese oil shipments from reaching China or to to screen various of China's imports and exports for Contraband but the argument of the paper is drawing on lessons of history that that would be much harder to do than many strategists assume and would in fact be likely to backfire because neutrals would not be inclined to participate Hugo uh one of the fascinating things about this paper is that it is real applied history you take five historical examples of uh Naval blockades uh and you use them to help us understand the flaws that there might be in this uh Grand Design to shut down Chinese Imports through the straight of Mala uh walk us through the historical examples uh you're not saying any of these is a perfect fit but if you take the five together uh you begin to see some of the the downsides or disadvantages of this this kind of uh distant or far blockade I don't know where you want to start we go through them chronologically or maybe begin with the world wars up to you Le let's let's go with the world wars and work backwards thanks Neil So that what we're trying to do with the case studies is get a broad sense of how geopolitical systems how International systems react to blockades and try and learn from the ways they've been imposed by one great power on another throughout history and that's the key Point here we're not talking about actions against small states we're talking about a an action aimed by the United States against China and so to understand it we need to go back to those examples of great power blockades and really the key examples come from the Royal Navy and come from Britain's use of power in the early modern and modern periods and of course the first thing you go to is the world wars right you go to the the blockades the that the United Kingdom that the Royal Navy put against Germany in the first and second world wars the difficulty you have here and there's two points I'd make the first is that the neutral states that did exist in that period particularly initially the United States but also in the second world war case initially the Soviet Union as well as other European neutrals and South American neutrals all sought to avoid and work round the blockade and when those countries seek to avoid and work work around the blockade the blockading power has a choice they can either escalate and try and enforce the blockade as it is or they can accommodate those neutral concerns and those NE neutral concerns aren't trying to trade around the blockade because they love the blockaded country they're dealing with an economic situation and they're seeing an Economic Opportunity if you have a global war you have a global economic crisis you have states around the world really struggling particularly commodity producers but if you have a blockaded country in this case Germany for example they really want that stuff and they're prepared to pay money for it so the obvious thing that you want to do is you want to get around the blockade it's a basic question of economics what makes the world war cases difficult is they're taking place within an imperial system where so much of the world's land mass so much of the world's resources are under Imperial control so you're looking at the British Empire in India and Africa and Canada you're looking at the French in Africa you're looking at this whole system that is imperially run so the number of neutral countries actually quite small what we then say is that while there are huge problems with these analogies in terms of technology in terms of impact there's a real benefit to looking further back and when you look further back to those British blockades in the late 18th and early 19th century so in the American Revolutionary and Napoleonic and then later into the Crimean Wars what you see is in those contexts where neutrals are far more significant blockades are a diplomatic nightmare you're constantly having to balance against those incentives you're constantly facing that deescalate or escalate pressure we see that spiraling into Conflict for Britain several times particularly in with the Dutch in the in the American revolutionary war with Russia and Denmark in the in the Revolutionary War and Napoleonic Wars so there's this constant difficulty of managing the blockade and even still the economic incentives remain and remember it's hard to collapse a society there's two basic objectives of a blockade in all these cases you collapse the society or you collapse the war making machine societies are really hard to collapse War making machines have a massive incentive to get stuff and don't need as much stuff as a society and those are the key lessons we take away from those broad historical case studies uh in his commentary on on your paper Nick Lambert made the argument that if if this kind of thing was such a bad idea it was strange that Britain kept doing it and winning wars how do you respond to that Ike I mean it seems to me as if it would be odd if the United States with its Global Naval maybe not Imperial but you know quite Imperial is didn't uh threaten this kind uh of action isn't it a necessary part of being a great anglophone power that you do have the option to impose blockades sure they're never going to be perfect in fact I think Nick Lambert's point is when it was perfect it was way too destabilizing but it's something you've got to have as as an option if you want to deter another Empire which let's face it China of is these days well this is this is the right question Neil because any strategy of economic Warfare doesn't have to work perfectly in order to have some effect so the question that rather the argument that Advocates of the blockade would make is why not well there's two reasons to for why not the first is the opportunity cost of what you would be doing with all the resources that you need to enforce the blockade and that means the ships but also the the massive administrative capacity the bureaucrats who are involved in tracing and cataloging all of the movement of tens of thousands of vessels around the world simultaneously especially if they're incentivized to lie to you about their caros uh and in the context of a us China naval war the US Navy would be numerically outmatched so any ships that it was dispatching to the South China Sea or Indian Ocean to police neutral shipping would be ships that could would not be participating in an actual conflict against China but then the other reason is more subtle and that has to do with what Hugo's describing and the push back and price incentives of neutrals I think that the point that Hugo made about the American Revolutionary and Napoleonic War is really key it's not just that neutrals don't like it it's that they actively resist and they end up taking steps that tempts the blockading power to expand the war by going to war with the neutrals and themselves that was the lesson of the Napoleonic Wars and that was one of the key reasons why Britain failed for the better part of a decade the first decade of the 19th century uh to make its blockade on Napoleon work it it it by means of its blockade it disrupted the potential coalitions that would have been so helpful otherwise so the argument that we're making is you have to reconceptualize the whole idea of economic War uh if you make it all about punishing your enemy you're going to isolate every neutral country that you are making collateral damage the better way to think about it is building a coalition that can collectively benefit from taking economic action against your target but a blockade is not the way to do that you quote Admiral Jackie fiser uh one of the architects of British Naval power in the early uh 20th century as saying the prolongation of War at Sea tends to raise up fresh enemies o to the exasperation of neutrals uh and it seems to me that your paper takes this very much to heart uh I I guess the the the the question I I was left with was well how do you go about building that kind of Coalition of non-ex asper neutrals uh if you take the blockade threat off the table what's what's the alternative which is another one of the brilliant questions we hope to provoke I mean it's important to stress as a side note we're not saying that Naval power is useful there are lots of things that ships do that don't involve blockades that have huge benefits to any power and in Britain's case of course it's essential to domestic security we in Ireland in the case of what might work well maybe one place to start is two anecdotes from history one is Napoleon who actually actively wanted to export grain into Britain at one point because Britain was suffering from bad harvests and he wanted the profit the other is the Crimean War where neutrals had massive incentives to to comply with Britain's blockade because Russia was the main grain exporter Russia couldn't export grain so the price went up when we think about what deterrence might look like it needs to have two key arms one is it needs to prevent China building a global trading system it needs to say if there's a conflict you're not going to get the chance to remake the international trading system in a way you'd like but the second is to find some way of incentivizing neutrals to play the role that China plays in the global trading system and this is something Ike and I have been thinking about a lot hopefully there'll be more stuff coming out actually with Hoover on this point in the coming months now that's kind of already happening we call it decoupling and the benefit of decoupling is you get to make the stuff and you get to sell the stuff that China is currently making and selling so there's a there's a whole world of economic leadership ideas that aren't explored enough and our goal is to start that conversation because the threats of punishment aren't viable in so many ways they do something but there are such huge problems and why not is not the good origin of a strategy like let me end with a question about the lessons of very recent history now obviously uh there's not been a blockade imposed on Russia since its invasion of Ukraine but all kinds of uh forms of economic Warfare have been adopted I've been very strucked by the fact that for example attempts to restrict uh Russia's uh revenues from uh oil exports have not been very successful partly because one senses that the United States doesn't want to pay the price of successful economic War Warfare uh against Russia and I wonder if that would be even more true in the case of a conflict between uh uh the United States and China I've talked about mutually assured Financial destruction one consequence of a conflict would just be Financial chaos is that the right conclusion to draw here that in a sense economic Warfare sounds good but it's not clear that the United States can afford it domestically even if it were to work against China well let's compare the Russian and Chinese economies Russia represents 133% of global oil production and less than 1% of global demand or about 1% of global demand China represents over 90% of production for a number of critical minerals as well as 30 to 50% of production for a whole range of things that we take for granted in our daily lives including active pharmaceutical ingredients uh so if we if we did not dare uh cut off Russia's exports of oil for fear of the shortages that would result uh how would we think things would play out differently if we cut off China's exports of things like active pharmaceutical ingredients so people around the world couldn't access life-saving medication uh but I think the point we're making in this paper is it's not just about the world's Reliance on Russia's or China's exports it's also about the the magnetic power of their demand and the fact that Russia that China is such a Monumental share of global demand for all these Commodities means that the countries that produce these Commodities are completely dependent on China's demand keeping the price up so if you cut China out of the system their finances don't work they'll face social collapse uh what we have been thinking about and this will as Hugo mentioned be coming out in a separate report is if you are decoupling from China realistically you're going to want to do it over time you're going to want as Hugo indicated to bring back the productive capacity that currently exists in China that has moved to China in the past 20 years since China to joined the WTO into the United States and Britain or really any other Allied or neutral countries around the world it's not just friend Shoring it's anybody else Shoring and in the process you'll be bringing back the demand for all those Commodities to the rest of the world so this is essentially the pitch that the United States and its core allies would make to the neutrals in the event of a war with China not we're going to ban you from Trading with China but China exported $3.7 trillion dollar worth of stuff last year we're gonna take it back would you like a cut of making some of it well uh it sounds to me as if you're wetting our appetites for another paper and uh I look forward very much to uh having you come and present that uh at the Hoover history working group uh whenever we can schedule it in 2024 this has been the last of our seminar series for 2023 and it's uh We've uh Ended as a result on a a very high note the paper once again is the Mala myth lessons on economic Warfare from the history of Naval blockades the authors Ike Fryman and Hugo Bromley Ike Hugo thanks so much for leading a very stimulating discussion and uh we look forward to seeing this uh in print in due course and shaping debate on US Naval strategy uh in the years to come thank you both thank you

Channel: Hoover Institution

Views: 26,999

Keywords: Eyck Freymann, Taiwan Strait, Shipping, Blockade, Malacca Myth, History of Naval Blockades

Id: 9mkF2tIm6wQ

Length: 101min 34sec (6094 seconds)

Published: Sat Dec 16 2023