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Editor's Pick: How Economic Warfare Impacts Energy · Columbia Energy Exchange

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  Transcript CEE rerun 2025.07.29 - Eddie Fishman
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  Bill Loveless: Six months in, President Trump’s trade war has entered a new phase. Just this weekend, the European Union agreed to a trade deal that includes a promise to buy $750 billion worth of American energy products over the next three years. And this week, with the August 1 tariff deadline looming, the US and China have restarted negotiations.
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  Of course, Trump has been using tools of economic warfare since his first term. And the Biden administration embraced policies such as steep tariffs on electric vehicle imports from China, and levying sanctions against Russia aimed at stifling its energy sector.
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  These economic chokepoints are part of a broader shift of the global economy. Countries are weaponizing economic power through sanctions, tariffs, and export controls — tools that were designed before the complex geopolitical competition we see today.
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  So how did we get here? What does this new age of economic warfare mean for global stability and the global economy? And how might these tools reshape everything from energy markets to global banking systems in the years ahead?
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  This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Bill Loveless.
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  Today on the show, we’re revisiting a conversation that Jason Bordoff had with Eddie Fishman back in February. Given ongoing developments, it remains as timely as ever.
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  Eddie is a senior research scholar at the Center on Global Energy Policy and an adjunct professor at Columbia University. His book, "Chokepoints: American Power in the Age of Economic Warfare," came out this winter and became an instant New York Times best seller. It traces the evolution of economic warfare from the War on Terror to today's great power competition.
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  Eddie previously served as a member of Secretary of State John Kerry's policy planning staff and played a central role in designing sanctions against Russia following its aggression in Ukraine. He also helped craft the economic strategy that led to the Iran nuclear deal.
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  Eddie joined Jason to discuss how the United States pioneered modern economic warfare, the rise of new tools like the oil price cap on Russia, growing technological competition with China, and what Trump's return to the White House means for the future of sanctions and tariffs. They also talked about what this may have in store for global energy markets and the energy transition.
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  I hope you enjoy the conversation.
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  Jason Bordoff: Eddie Fishman, welcome to Columbia Energy Exchange, and great to have you here, and congratulations on the book, which, this is audio, not video, but I'm holding in my hands one of the early copies, and it's very exciting tremendous achievement, and we're really proud that you're a scholar here, and proud of this book, so congratulations.
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  Eddie Fishman: Thanks, Jason, and I couldn't have done it without your support and everyone else here at the Center.
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  Jason Bordoff: So really a tremendous achievement, fantastic book, a lot of work, and sometimes there's always a little bit of luck involved, and I'm just struck looking at the book the subtitle of which is American Power in the Age of Economic Warfare, and the headlines in the news yesterday were things like declaration of economic war. Canada and Mexico vow response to Trump's tariffs, and in the Washington Post, Trump threatens country after country with U.S. economic weapons. So it's just, it was timely already, but, you know, we are in an age, we've been using tools of economic warfare, which you'll explain to us what those are, I think, in increasing ways for quite a while.
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  But it does seem like they're being unleashed now in some unprecedented ways and
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  I was just wondering if you could talk about the moment we're in. Help people understand when we talk about economic warfare. What does that mean? What does that arsenal exactly consist of? And let's talk for a little bit about what's happening in in the country today and then kind of step to talk through how we got here.
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  Eddie Fishman: Sure, no problem. So look, clearly Donald Trump loves using the tools of economic warfare. He's said that tariff is the most beautiful word in the dictionary. During his first term, he famously brandished a poster inspired by Game of Thrones that said, sanctions are coming. That actually, I think he put on display in a Cabinet meeting.
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  He coined the term maximum pressure strategies to use against Iran, Venezuela, and North Korea. So, this is clearly a toolkit that Donald Trump is very comfortable using. Sanctions, tariffs, export controls. I would also mention that he pioneered the use of export controls against Huawei. Which, you know, has kicked off a much broader technology competition between the U.S. and China. But I think a key premise of the book, and something that I think is very important for listeners to understand, is that this age of economic warfare predated Trump. And we'll continue long beyond Trump's time as president. And that's really because we're still living in a global economy that's designed for the benign geopolitical environment of the 1990s, but we have intensifying geopolitical competition.
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  So basically when we designed the global economy, we thought that there wouldn't be geopolitical competition. It's sort of a product of the end of the Cold War and the idea that, you know, economic relations with China and the U.S. would be win-win, and Russia and the U.S. would be win-win. That has not been the case now for quite a while, right?
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  I think you could go back to Russia's invasion of Georgia in 2008 when you realized, Oh, well, is it really worthwhile for us to be helping Putin modernize Russia's military? And then when you ask that question, you have to ask, Well, is it worth it for us to be investing in Russia's energy sector? Because that's ultimately where Russia gets money to funnel into its military industrial complex.
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  So there's been sort of–
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  Jason Bordoff: Sanctions have been used even for decades before the 1990s, but you're saying it was a more limited, a more targeted tool. There might be Cuba or apartheid, but, but there was an assumption that the world was going to integrate economically and that was a good thing to be encouraged.
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  Eddie Fishman: That's right. I think what I'm, I'm happy to talk about what makes sanctions today different. I think what I'm trying to explain is why we've seen this secular trend of more and more sanctions and tariffs being used over the last 20 years. And that, by the way, spans presidencies, right? You had Barack Obama break records for the amount of times that we'd use sanctions and then Trump in four years Doubled the number of sanctions that Obama had imposed and then Biden doubled the amount of sanctions that Trump imposed So at some point you ask yourself, is this something that is unique to the individuals in the White House?
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  Or is there something more structural going on? So my thesis is that there's something structural that explains this.
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  Jason Bordoff: And let's talk for just a moment about… we were talking about a week before people will hear this conversation.
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  So the news may change, but, but obviously what people are talking about this week is Trump's use of tariffs against Mexico and Canada. Just give me your reaction to what … how does this play into the story? Is this an unprecedented kind of thing that, you know, escalates beyond what anyone can imagine or this is kind of consistent with the story that you're talking about, just the next level of it.
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  Eddie Fishman: Yeah, I think, I think that this is a significant escalation. And it's part of the same story. I think the big difference right now is that Trump is threatening extremely aggressive penalties against America's friends and allies.
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  That's the thing that's different. It's not the use of, you know, tariffs and sanctions. It's, I think right now, the idea that he is going to go ahead and impose sweeping tariffs on Canada and Mexico. Frankly, for a national security reason, that doesn't really pass the smell test. When you talk about 19 kilograms of fentanyl seized at the U.S. kind of the border last year, it doesn't strike me as a–
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  Jason Bordoff: Very small compared to the total opioid crisis.
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  Eddie Fishman: Right, it doesn't strike me as a national security concern of the first order. I think that that's the thing that's different about what we've seen so far from the Trump administration.
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  Jason Bordoff: Yeah, and, and our, our colleague and friend Richard Nephew sort of pointed out too that these, I mean talk about how these tools are typically used. Usually it's, it's kind of clear what, what changes we're looking for from the target. And that seems maybe less true this time?
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  Eddie Fishman: I think there's generally speaking a bit of a paradox at the heart of Trump's tariff strategy in particular, and I'm happy to dive into that. Because on the one hand, you hear Trump talk about things like, we want to use tariffs to fix the U.S. trade deficit and reduce that, or we want to use tariffs to raise government revenue.
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  Those imply that the tariffs will be permanent, right? That they're trying to fix a structural problem. But then on the other hand you hear Trump say, well, this is our negotiating
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  Jason Bordoff: a tool of coercion.
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  Right.
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  Eddie Fishman: We're trying to use them just like we use sanctions against Iran to try to get them to give up their nuclear program.
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  The problem there though is They can't be permanent if they're leveraged, right? The idea is to use the threat of the sanctions or tariffs or, perhaps the implementation for some period of time, then to negotiate away. But again, that then premises you on the fact that the global economy should be one where the default state of the world is open trade and finance, right?
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  And the same applies to China. If Trump actually is going to go ahead and use you know, relieve sanctions and tariffs on China in exchange for some sort of a trade deal, are we really comfortable going back to sort of the status quo with China that existed as of, you know, 2010 or something like that?
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  I think most people in government would say no, right? In that China is an adversary and we don't want to be selling China NVIDIA H100 chips. We don't want to be you know, aiding China's military modernization.
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  Jason Bordoff: What do you, I mean, we don't know exactly, but it sounds like you expect these threats of tariffs will be used to make a deal of some sort.
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  That's kind of where this is headed, or do you think there's, we're really going to have permanent, very high tariffs, and that's kind of what's going to happen in the United States. I guess there's no way to know for sure.
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  Eddie Fishman: Yeah, I don't think Trump knows fully what he wants. It sounds like there may be a deal to delay the tariffs with Mexico.
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  Whether that means they're delayed indefinitely or if it's just a temporary thing, we're not totally sure as of this recording. But I think that this still needs to be sorted out, and I'll also remind everyone here that Trump went ahead with these sweeping tariffs against Canada, Mexico, and China before either of the main officials responsible for tariffs the Commerce Secretary and the U.S. Trade Representative, are even confirmed by the Senate. So, I think there's still a lot to be worked out. in the Trump administration about how they're going to use tariffs. I'm not sure, so sure Trump himself knows what his priority is.
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  Jason Bordoff: Are [tariffs] like a legitimate tool to think of in the way one thinks about sanctions? Now you pointed out fentanyl may be like kind of an argument that, a criticism of Canadian policy that you view to be not, not very persuasive. But let's imagine there was a real concern we had, with, even with an ally, and we've used sanctions to coerce policy changes in lots of countries. Like Iran shouldn't have a nuclear weapon. Is, are, are, are tariffs a similar tool to use in that way, to seek policy changes in other countries?
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  Eddie Fishman: historically speaking, we've primarily used tariffs to try to get reciprocal trade agreements, at least since the, you know, the end of the Second World War.
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  You know, because I think many folks believe that part of the reason we went down the path of the Second World War was high tariffs, the Hawley-Smoot Tariff [Act] after the Great Depression and sort of the chaotic breakdown of the global economy that came about thereafter. So the way that tariffs have been used primarily in the last 70 years, by the U.S. at least, is to try to get other countries to lower their trade barriers. So they have been used for leverage, but really leverage in trade negotiations. In terms of using tariffs
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  Jason Bordoff: leverage to counteract what's seen to be unfair trade practices.
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  Eddie Fishman: Exactly.
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  in terms of using tariffs to try to coerce other countries to bend their policy to our will on matters of foreign policy and national security, there's not as much of a track record of that, and that's because we have been using sanctions and export controls more prominently.
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  What I'd note is, tariffs are, are a gradation of .of sanctions, right? They're, instead of fully blocking the import of a product, which would be an embargo, you're just imposing a tax on it, you know? So in some ways, I mean, tariff is a lighter, a significantly lighter version of a sanction or an embargo.
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  Jason Bordoff: And the National Security Authority that the President is using for tariffs, is one that, if I understand your view correctly, is questionable like whether this is actually justified by existing statute that the president has this authority even when declaring an emergency and I'm wondering if you could explain that a little bit and What does that mean for how things might unfold over the next few years?
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  Do you think that will be challenged? Will courts intervene? Is it in fact the case that Trump doesn't have this power and that's going to mean for all the talk of tariffs -- you know, at some point when courts get involved -- this tool won't be there?
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  Eddie Fishman: I think quite clearly, Trump does have the power to impose pretty significant tariffs on foreign countries.
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  What he tried to do on February 1st was to use, as you said, Jason, the International Emergency Economic Powers Act to impose tariffs on China, Canada, and Mexico. That is the statute that underpins American sanctions. The reason he did that is because that was the only way he could do those tariffs at the timeline that he had suggested.
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  That he could credibly claim that this is a national emergency. We need to do this instantly. I think it's to be determined whether that holds up in court because we've never seen a president try to use that specific law for tariffs. However,
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  Jason Bordoff: how would that be challenged? It would be some U.S. something who suffered some harm and,
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  Eddie Fishman: A trade association can come out and say, you know, there are other laws that are in place that are used for tariffs.
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  One of the most important ones, the Trade Act of 1974, which Section 301 is what Bob Lighthizer in the, in the first Trump administration used to erect the tariffs against China. That's also viable for –
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  Jason Bordoff: there's no question that authority
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  Eddie Fishman: No question that the authority exists. The only thing that, the only problem with that is, it takes longer, right? It would require, probably, about a six month investigative process. But, look, I think if, if these tariffs are enjoined, and Trump decides that he still wants to go ahead with tariffs on Canada and Mexico, he theoretically could initiate a 301 investigation, and probably within six to twelve months, we'd get to the same place, that we are right now.
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  Jason Bordoff: So, let's widen the aperture, kind of go back to the bigger story that is the topic of your book, which is kind of like how we got here. And this is, as you said, a significant escalation, but it, but it follows a story of both parties using tools of economic warfare to a greater degree. You mentioned sanctions, tariffs, export controls.
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  Just tell the story. I mean, your book is a wonderful, set of stories organized around interesting characters and just kind of walk us through where, where this started and how we got to where we are.
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  Eddie Fishman: Yeah, sure. So I think the best place to start probably is right after George W. Bush was re-elected in 2004. Just to take us back to that moment when John Kerry and George Bush were competing for the presidency, the main national security concern at the time was nuclear terrorism, the idea that a terrorist group like Al Qaeda could get hold of nuclear material and launch an attack on the United States that was a ma you know, an order of magnitude more devastating than 9/11 And at that time, the biggest concern about how this could come about was that Iran was developing a serious nuclear enrichment capability. And this posed a really challenging problem for the United States and honestly, an awkward political problem for the Bush administration.
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  Because the Bush administration, a year prior, had invaded Iraq and overthrown Saddam Hussein, because they thought he had a nuclear program that proved not to exist. And actually that the official report that said that Saddam had given up his nuclear weapons, came out, right before John Kerry and George W. Bush had their first presidential debate. But then this question is, well, if it was worth invading Iraq to try to get rid of a fake nuclear program. Was it worth then invading Iran and starting another war to try to get rid of a real nuclear program that could devastate the United States? And so this was a problem that sort of hung over the 2004 election.
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  When Bush was re-elected, he really set about trying to figure out what to do about this. There was no political support for another war in the Middle East, and no interest within the, you know, the most important people in the Bush administration. There's some people, some neocons who actually did want another war against Iran, but Bush himself didn't want one.
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  And so what, what wound up happening was a new group at the Treasury Department called the Office of Terrorism and Financial Intelligence led by the first undersecretary, Stuart Levey, who was a lawyer, came over for the Justice Department, basically set about trying to figure out, what can we do about this?
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  Is there a way to use sanctions, perhaps, to coerce Iran to give up its nuclear program? And at the time, there was a lot of skepticism about that, because we had tried sanctions against Iraq throughout
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  Jason Bordoff: But to be clear, there's like this significant security threat, which is Iran developing a nuclear weapon.
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  Normally, you would think the Defense Department, the National Security Council, there's a foreign policy community that would figure out how to deal with this. And then a new office is created at the Treasury Department.
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  Eddie Fishman: And, and I think what this reflects is, you know, the Pentagon's fighting two wars in Afghanistan and Iraq, and there's no political support, no will for a third one. And so, look, the Pentagon's considering things, but really you know, it falls to, to, to people like Stuart Levey at Treasury to try to figure out what to do about it. And there's skepticism that sanctions could work. They failed in the 90s against Iraq, and that was when you had the whole U. N. Security Council aligned, basically, behind the sanctions. And so, and you couldn't get U. N. Security Council support for overarching sanctions against Iran because Iran was a much bigger economy than Iraq, had more strong international relationships.
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  And so, what Levey's key insight, that kind of winds up, in my view, launching this age of economic warfare, was that He didn't actually have to get support from the Russias and Chinas of the world in order to isolate Iran from the global economy. What he really needed to do was to sever Iran's financial links to the global economy.
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  And he could do that by going straight to banks. And so Levey goes on this really remarkable roadshow in 2006 and 2007, where he meets with over a hundred of the top bankers in the world. brings with him dossiers of recently declassified intelligence that basically shows how the, how the Iranian government is using their banks and using basically the, the infrastructure set up by their banks to fund its nuclear program and fund terrorist proxies like Hezbollah and Hamas.
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  And what Levey's insight was, was these CEOs, the last thing they want is an article in the Wall Street Journal saying that, you know, your bank is being used to fund Iran's nuclear program. And so most of these CEOs wind up just cutting ties with Iran on their own volition. And so the core insight is that Levey has is, you can use chokepoints in the global economy, in this case, the financial sector and, and the power of the dollar in the financial sector to isolate an economy.
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  A lot of this work is done just through truly Levey's powers of persuasion and meeting these guys. But there is a backstop which is that the U.S. begins threatening secondary sanctions against anyone who's violating these
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  Jason Bordoff: Explain the difference.
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  Eddie Fishman: Sure. So, a primary sanction would be saying that, for instance Bank Melli, the largest bank in Iran, is sanctioned by the United States. That would mean that, U.S. banks cannot transact with Bank Melli. It also means that should Bank Melli want to do any sort of payment in dollars, that probably would not be able to happen because it would need to access correspondent accounts in a place like New York, the city that we're sitting in right now.
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  And it also means that Bank Melli, any of its assets in the U.S. jurisdiction are frozen. Chances are they didn't have many assets, although you never know because they're on selling oil, you know, so and they're accumulating at this time oil revenues in dollars. You know, the petrodollar is another sort of key, plays a very key role in the story of the book.
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  Jason Bordoff: We'll come to why an energy center has a scholar like you and a book, a book like this in the first place.
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  Eddie Fishman: Yeah,
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  and what a secondary sanction says is If you're a foreign bank that then transacts with Bank Melli, you yourself could be sanctioned by the U.S. So in this scenario, let's say you are Deutsche Bank, and you say, you know what, I'm going to just, you know, continue having a relationship with Bank Melli.
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  That then, that relationship could result in the U.S. sanctioning Deutsche Bank, and then Deutsche Bank being fully cut off from the U.S. financial system, which for a global bank like Deutsche Bank would probably mean bankruptcy. So it's not a real choice, you know, that a global bank has in terms of whether or not they can access the U.S. financial system. One, one point I make in the book, which I stand by, is you know, trying to do global business without access to the dollar is like trying to travel the world without access to a passport. It's just not possible. So the threat of secondary sanctions, which really kind of takes off a little bit later in 2010, and that's remarkably, Stuart Levey winds up being retained by the Obama administration.
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  He's one of two very senior officials, himself and Bob Gates, who are kept on into a democratic democratic administration. It's after 2010 that we really start seeing this aggressive use of secondary sanctions that pretty much fully isolates Iran from the international financial system.
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  Jason Bordoff: And, and, I mean, fascinating history. And you know, I was in government then. Our colleague, Richard Nephew, helped to put a lot of those sanctions together.
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  I do remember, The Obama administration also created a new bureau in the State Department for Energy Diplomacy. I remember significant diplomatic dialogue that, you know, other friends of ours like Carlos Pascual and others had. So what you're sort of describing is like, we don't need the world on board.
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  We control the financial system, the dollar is dominant. Everyone's going to capitulate to U.S. will because this threat of secondary sanctions is so large. Is it really, like, as simple as that? Or, in fact, like, you got to get other people on board because there's a lot of ways to work around this stuff, etc.?
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  Eddie Fishman: It's a hard question. I think, look, the Obama administration was very successful with the use of secondary sanctions, and they did it in the most diplomatic way possible. And I think it'd probably be helpful to talk about some of the oil sanctions that you mentioned, because they're, I think, they're probably the most successful use of economic warfare in modern history, in my view.
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  So just to bring us along the timeline, we had Stuart Levey you know, come into this new bureau at Treasury in 2004. We have the advent of secondary sanctions really aggressively in 2010. And by 2011, 2012 you know, Iran's fully isolated from the international financial system, but its economy is still sort of chugging along just enough that it's not enough pressure to get a, to, to
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  Jason Bordoff: And why is that? If, like you said, like it's catastrophic for Deutsche Bank, like why isn't that alone enough to cut a country off completely and you, and you can't travel without a passport, as you said?
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  Eddie Fishman: It's because there was one big exemption to the sanctions, which was oil. The one major bank in Iran's economy that was not sanctioned was the Central Bank of Iran.
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  And it wasn't because we were worried about freezing Iran's central bank reserves. It was because Iran was the repository for, or the Central Bank of Iran was the repository for all of Iran's oil revenues. And so the fear was that if the U.S. were to impose sanctions on the central bank of Iran, no one would be able to pay for Iranian oil.
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  And as a result, Iran would, you know, we'd have two and a half million barrels of oil come off the market overnight, and it would cause a, you know, giant spike in oil prices and set back the global economy, which was still sort of, you know, limping along from the great financial crisis.
• 1:31
  Jason Bordoff: Now we come to why an energy center thinks about sanctions.
• 1:32
  Eddie Fishman: Exactly. The thing, though, that is, that is really interesting about how The Obama administration eventually did successfully do oil sanctions.
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  Maybe one sort of adjunct part of the story that's really important is that Congress at the time led by people like Bob Menendez from New Jersey, and you know, and Mark Kirk, senator from Illinois, were really pushing very aggressive sanctions against Iran. And so they were, almost like a bad cop that the Obama administration had to deal with.
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  And they were trying to get the Obama administration to impose sanctions on the central bank of Iran. And so people like Richard Nephew, our colleague, who are in government, people like, you know, David Cohen, who is Stuart Levey's successor at the Treasury Department, had to think, well, what do we do, right?
• 1:35
  Because we can't stop Congress from passing these laws, which they would pass routinely 100 to 0 in the Senate. So they'd pass it.
• 1:36
  Jason Bordoff: To push the Obama administration to be tougher.
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  Eddie Fishman: Exactly. We can't stop Congress. So what do we do to make their plans viable? And what the Obama administration came up with is this idea of a significant reduction exception.
• 1:38
  And so what they did was they said that the Central Bank of Iran is sanctioned, but you have an exemption from it if your home country significantly reduces your imports of oil from Iran every six months. And so the way that this looked was, you know, if China as a whole agreed to reduce its total oil imports from Iran every six months.
• 1:39
  Chinese refineries and Chinese banks could pay the Central Bank of Iran for its oil. And so,
• 1:40
  Jason Bordoff: was, like a gradual glide path. It was don't cut it off overnight, but we'll give you a pathway. And the idea was to let, we'll say like the market can adjust to this. It just takes time. And if you want to avoid a dramatic oil price spike, like, like, let's give it that time.
• 1:41
  Eddie Fishman: That's right. And eventually, the Obama administration added on to that, that you could, Not only did you have to significantly reduce your purchases of Iranian oil every six months, but when you paid Iran for its oil, you could only pay into an escrow account that was located in your home country that then could only be used for bilateral non sanctioned trade.
• 1:42
  The thing that's remarkable about all this, Jason, because there's a lot of details, is that this was a unilateral U.S. sanction. No one else agreed to it. It was not blessed by the U.N. The E.U. did not bless this sanction. This was a unilateral U.S. sanction. So the only teeth were the threat of U. S.
• 1:43
  Secondary sanctions. And so while you're right, Jason, that there was diplomacy, people like Carlos going to places like India, and we've got a great chapter in the book with him talking to refineries in India and China and trying to get them to reduce their purchases. The only backstop for this was American sanctions.
• 1:44
  And the reason that this worked is because the dollar was this choke point that banks didn't want to lose access to
• 1:45
  Jason Bordoff: And I will say, just because I was working in government at the time, when people talk about the geopolitical implications of the shale revolution, what, why was this so consequential?
• 1:46
  And there are a number of factors about going from a massive oil importer to a small oil exporter on a net basis but they give the Iran as an example. Look at how much more, now, now we can really be tough on Iran. We couldn't have done that before. And the reason I think it's kind of sui generis is when we were asking India and China, like, okay, on a gradual glide path, stop buying so much Iranian oil.
• 1:47
  U. S. oil production was growing a million and a half barrels per day per year. I mean, so we were putting a ton of oil on the market. That can't continue forever. It's not continuing now. This year it'll be two or three hundred thousand barrels a day. There's some spare capacity in OPEC. But it is a different conversation when you go to people and you say like, please stop buying Iranian oil.
• 1:48
  And they're like, what do you want me to buy instead? And then you, the, the potential for a much bigger impact on oil prices as a result of sanctions, I think, I think today is higher because you don't have, it's not whether the U.S. produces 5 million or 13 or 14 million, it's the rate of annual change that provides that flexibility.
• 1:49
  And that was like a one off moment in time. I don't know when that will happen again. It's certainly not happening now.
• 1:50
  Yeah,
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  Eddie Fishman: no, I think it's a very important point, Jason. And one of the remarkable things about this story is, so these gradual oil reduction sanctions go into effect at the very beginning of 2012. And at that time the Obama administration is still petrified that they're going to lead to a spike in oil prices.
• 1:52
  And so you see, frantic diplomacy by people like Tom Donilon trying to get the Saudis to pump more oil.
• 1:53
  Jason Bordoff: The former national security advisor, my old boss.
• 1:54
  Eddie Fishman: Yes, and there was actually some hope in Washington that the Saudis would pump more oil. At the time you had the Saudi king who was saying you should cut off the head of the snake and bomb Iran's nuclear facilities.
• 1:55
  So the thought was, well, if they wanted to bomb Iran's nuclear facilities, surely they could pump an extra, you know, a million barrels of oil a day to help us, squeeze Iran's oil sector. Lo and behold, the Saudis didn't help very much, right? They didn't actually increase production. And so what comes to the rescue is actually shale.
• 1:56
  And as, as you say, Jasonum shale's adding a million, a million and a half barrels of oil to the market each year per day. And that is effectively the exact same amount of oil. from Iran that comes off the market. So, from the beginning of these sanctions in 2012 to the time when we get the Iran nuclear deal, Iran's oil sales go from about two and a half million barrels a day to one million barrels a day.
• 1:57
  So you take a million and a half barrels of Iran's oil off the market, you add a million and a half barrels of shale, and ultimately it's a wash when it comes to prices.
• 1:58
  Jason Bordoff: and then you had a deal, I mean, this comes to the point of like, why are you doing this in the first place? Do you have an ask? Not an ask, do you have a demand? Is there some policy change you're trying to force on another country? And that led to the nuclear deal. Um, which then the Trump administration scrapped and the Trump administration was pretty successful in taking Iranian oil off the market too, although shale wasn't growing quite as fast then.
• 1:59
  Is there, is that a pretty similar use of the tool or was there something different that happened in the ability of the Trump administration? The reason I'm curious about it is because everyone's wondering if it's going to happen again. Like, Trump wants to take a hard line on Iran. Does that, again, mean another million barrels a day, at least, of Iranian oil is coming off the market?
• 2:00
  Or is that a lot harder to achieve for today than it was a decade ago?
• 2:01
  Eddie Fishman: So Jason, this is why I hesitated when, when earlier when you said, well, wasn't it, you know, a lot of diplomacy that the Obama administration did? Um, my own view is that the diplomacy that the Obama administration did around these oil sanctions was really important. And at the time also it was a bit of a harder problem that Iran had 21 oil customers.
• 2:02
  It was much more, it was, its oil was being sold to Europe, you know, so it was, it was a, it was a harder problem than you know it ultimately became later, which we can get to. Um, the reason I hesitated though is that, Trump did unilaterally reimpose these sanctions against the express wishes
• 2:03
  Jason Bordoff: Without a lot of diplomacy. Zero diplomacy,
• 2:04
  Eddie Fishman: and frankly against the express wishes not only of China and Russia but also our key allies in the P5 plus one, so you know, Britain, France, and Germany who, mind you, also go ahead and try to create a new payment mechanism to facilitate European trade with Iran to circumvent American sanctions.
• 2:05
  And, you know, Trump's maximum pressure sanctions against Iran do really hurt the Iranian economy. Um, not quite as big of a hit to Iran's economy as they experienced in 2012, but at the same magnitude. Um, and so I think what we saw through Trump's maximum pressure sanctions is that even when acting alone and even with very little diplomacy, America can impose very significant economic pain on a target.
• 2:06
  However, the flip side of that is what did Trump get out of that? Um, he got, No more nuclear deal he, he ostensibly tried to create a new deal with Iran that never came about and Iran became on basically a threshold nuclear power, right, within a few weeks of being able to get a nuclear bomb. So I think what the lesson of the maximum pressure strategy is, it's not so much that the U.S. can't impose economic pressure alone, it's that economic pressure devoid of any diplomatic and feasible political goal is useless and frankly can be counterproductive.
• 2:07
  Jason Bordoff: and, again, what that means for Trump's ability to replicate that now, because I know there are some, and maybe our colleague Richard is one of these, I'm not sure, who kind of, you know, more of the Iranian oil is being sold to China, we have a great colleague, Erica Downs, who writes about China's teapot refineries and whether, whether sanctions can even reach those sorts of institutions the organizations.
• 2:08
  Um, if you want to just be unilateral, no diplomacy, we have a big stick and we're gonna hit you with it. Can Trump be as successful taking Iranian oil off the market this time?
• 2:09
  Eddie Fishman: All depends on level of prioritization. If, if Trump said, my number one goal is taking Iranian oil off the market, and I don't care about, you know, consequences be damned, I think he could do it.
• 2:10
  Um, and
• 2:11
  Jason Bordoff: would it take to bring that effect about in the oil market? Is that something that happens
• 2:12
  Eddie Fishman: relatively quickly, honestly, because I think, I think what that would look like if you truly want to do this, and I don't anticipate he would,
• 2:13
  Jason Bordoff: Why not? He's said he wants to take a really hard line on Iran,
• 2:14
  Eddie Fishman: because ultimately what this would look like would be aggressive sanctions against Chinese refineries and banks. And so the question is, how high of a priority is this for Trump in his China policy?
• 2:15
  That's really what it comes down to. So just to maybe level set with listeners right now. Iran sells around a million to a million and a half barrels of oil a day, and effectively all of it goes to China. Um, and what you've asked about primary sanctions earlier, everything in Iran is under primary sanctions.
• 2:16
  So the question is really secondary sanctions. And the only real good targets for secondary sanctions are Chinese refineries and anyone who's doing business with those Chinese refineries. Um, you raised teapot refineries, so some of these most of the buyers of Iranian oil in China. are relatively small refineries in places, in a place called Shandong province.
• 2:17
  And so there's a question that some people ask, are these refineries even susceptible to American sanctions? Um, I think the evidence so far is that they are, and that we actually saw the Shandong sanctions against the Shandong oil terminal happen a couple weeks ago at the end of the Biden administration, and the Shandong Port Authority banned sanctioned vessels from coming to the ports.
• 2:18
  Um, and I think the reason is that maybe an individual oil refinery doesn't care so much if they lose access to the dollar, but then all of their business partners in China are going to care, because then they're going to be afraid of secondary sanctions. So maybe their bank. That isn't going to be willing to bank with him anymore.
• 2:19
  Their Chinese bank won't be willing to bank with him anymore. So there are ways, I think, Trump truly, if he wanted to, could take almost all of Iran's oil off the market. Um, probably lead to some level of a pretty significant price spike. Um, do I think he'll go there? No, because I think that he probably has bigger fish to fry when it comes to China.
• 2:20
  Jason Bordoff: Okay, let's come to China in a minute, but first I want to ask you about Russia, because we, you put out a great piece of work a couple weeks ago, I think, when Biden's departing gift to the new administration was very aggressive sanctions on Russian oil, which had been kind of excluded in part because, well, not excluded, there was a mechanism we'll talk about in a minute, but, but, but not Not directly targeted because of concerns about what it would mean for oil prices.
• 2:21
  Um, Scott Bessent, the incoming Treasury Secretary, said he might be even tougher. And, and I think your view at the time, I'm curious if you still have it or maybe something's changed, is this a big deal and this would mean like potentially a lot of Russian oil off the market immediately, although it might dissipate quickly over time. Yeah,
• 2:22
  Eddie Fishman: Look, I think The and even by the time this podcast is published, the final story won't be written on this because there's a grace period for a lot of these oil sanctions that Biden put in place until February or until March 12th.
• 2:23
  And so I think we've already seen probably something in the order of 200, 300, 000 barrels of Russian oil a day come off the market is the best estimate. Whether that goes up to a million barrels a day, a million and a half, or even as some people have speculated, two million barrels a day. I don't think we'll really know until mid March whether any of that's going to come to fruition.
• 2:24
  Um, I think the key question, and the one that I think a lot of people are asking right now, is will Trump build upon that foundation of oil sanctions that Biden came out with on January 10th? Um, I think there's reason to think he might. Um, the one big thing Trump has said on Russia so far is that if Putin doesn't come to a deal, he's going to impose really aggressive sanctions and tariffs on on Russia.
• 2:25
  I think this also is a tell that for Trump, sanctions and tariffs are the same thing because we only import two million two billion dollars worth of goods from Russia each year, so there's not much to tariff. Um, so it's really about sanctions. And so, I think a key question that the Trump administration will have to answer, and I think it's something they probably haven't worked out yet, is: Are they willing to do aggressive oil sanctions on Russia if that means a spike in prices?
• 2:26
  And so far, I think the evidence is that they may be willing to have a spike in oil prices if it means that they get more shale production in the U.S., if it means that maybe they can coax the Saudis to pump a little bit more. I don't know. There was I think a lot of people think that Trump, big reason he won the election was because of the concern about inflation and the cost of, cost of living.
• 2:27
  But we haven't seen that much concern about these issues, frankly, since he actually took the oath of office on January 20th.
• 2:28
  Jason Bordoff: And that's always been the challenge, how do you use sanctions as a tool, particularly in countries that depend heavily on energy export revenue, impose pain on the target country but not impose pain on yourself by pushing up oil prices in a global market.
• 2:29
  And that was what we were just talking about with Iran and the gradual reductions. So I'm just wondering, and then there was this innovative idea. Which was, let's take the oil off the market, or let's keep the oil on the market, but deprive the country of revenue. Like, force them to sell the oil cheaper.
• 2:30
  And the price, so-called price cap on Russian oil. And I'm wondering two things. One is like, you told the story of Stuart Levey sitting in Treasury, thinking creatively about new tools. Are we still in that process? Are we still thinking creatively and trying new things and experimenting and is this an example of that?
• 2:31
  And then I think you were optimistic that tool could be effective and I was not so tell me why I was right
• 2:32
  Eddie Fishman: Don't rub it in, Jason.
• 2:33
  So look, you know, the book is called Chokepoints, so maybe it's worth defining what that means, because I think it'll help me answer this question. Um, a choke point is a part of the global economy where one country really dominates, and there's very little redundancy. So, you know, for instance, you may have Bangladesh that dominates t-shirt sales to the U.S. That's not a choke point because if they were to cut off t-shirt sales to the U.S., you know, someone else would make t-shirts, right? With the dollar, that's not the case, right? You lose access to the dollar. There's not a readily available substitute. Um, for advanced semiconductor manufacturing equipment, there's not a readily available substitute for EUV machines.
• 2:34
  For instance, there's only one company, ASML, based in the Netherlands that makes them. Um, what the Biden administration tried to do was effectively lower the price of Russian oil by using chokepoints in energy supply chains. Um, And what those chokepoints that they tried to use were, were first and foremost maritime insurance where about 95 percent of all seaborne oil cargoes are insured by the London based P& I Club.
• 2:35
  To use tankers, where a big part of the global tanker fleetum comes from EU countries, primarily Greece. And also trade finance, which obviously the US and UK you know, sort of Western financial systems dominate. They thought that basically if you could condition the use of any of those services on only selling Russian oil for $60 a barrel or less, that you would get most Russian oil to comply.
• 2:36
  It did, I think, work for a little while, right? You had a few months where no Russian oil, or very, very little of it, was sold for above 60 a barrel. You saw massive discounts on Urals, which is the main seaborne grade of Russian crude that comes out of its ports on the Baltic Sea and in the Black Sea.
• 2:37
  But what happened? I think what the Biden administration got wrong was that those chokepoints weren't so durable. And that I think they assumed that they might last two, three years before Russia could circumvent them. They wound up lasting maybe six months. And the way that Russia did it was, on the insurance standpoint, they used sovereign guarantees and Russian insurance basically as a substitute for London based P& I insurance.
• 2:38
  And they successfully got buyers to treat that insurance as credible, even though I think it's yet to be tested. Right. There hasn't been a big oil spill where Russia has had to pay a claim. So we'll see if that lasts. They very famously accumulated a very large shadow fleet. So, Sovcomflot the state owned Russian shipping firm, bought well over a hundred tankers of their own and then they also wound up accessing sort of these other more sort of free agent tankers that are used to ship sanctioned crudes from places like Venezuela and Iran.
• 2:39
  Um, and so what they did was they basically worked around the maritime insurance and shipping chokepoints. That doesn't mean that there aren't other chokepoints that the U.S. could use if they wanted to make the price cap bind. Critically. So the same choke point that Stewart Levey used and the same choke point we talked about in terms of using to get the gradual reductions from Iranian oil were not included in the price cap.
• 2:40
  So, if you're a bank and you process a payment for Russian oil and that oil is sold for 70 bucks instead of 60, you're not on the hook, right? You're not doing a sanctions violation.
• 2:41
  Jason Bordoff: Are these chokepoints moving targets? So you said like the dollar, there's no alternative to the dollar and you hear all the time. Saudi wants to sell pet, you know, oil in a currency other than the dollar. And the more you use these tools, I presume, the more of the people susceptible to these tools try to figure out other systems that are insulated.
• 2:42
  So is it an inevitable feature that like what you see now or what policymakers see now as the, as the chokepoints? Someone's going to figure out 10 years from now, maybe sooner, like, they're not going to be a choke point anymore?
• 2:43
  Eddie Fishman: Definitely. Chokepoints come and go. Right. You're, you know, in the chokepoints that exist today may no longer be chokepoints ten years from now. And frankly, what we have is an effort really on both sides of sort of the U.S.-China divide to develop workarounds to the other side’s chokepoints.
• 2:44
  But what happens of course, Jason is these chokepoints aren't necessarily created because, you know, government policy makers are sitting in an office and say, Oh, we want to dominate this sector, right? They happen organically through business innovation. And so I think as we see new industries develop over the coming years, we'll also see new chokepoints develop.
• 2:45
  And I think that's you look at, for instance, one of the reasons I think the Biden administration imposed such steep tariffs on electric vehicle imports from China is there's a real concern that If China dominates the global auto industry and you can't buy a vehicle unless you buy a Chinese vehicle, that becomes a choke point.
• 2:46
  All of a sudden, China could turn off cars in the United States.
• 2:47
  Jason Bordoff: But I want to come to China in a second, but just very quickly on the dominance of the dollar. Is that a choke point that you think is durable, or do you think that that really can erode?
• 2:48
  I mean, the view that like, there's just no alternative. People can talk about it and talk about it, but it's impossible. Is that your view, or you think it's actually a choke point that is easier to, to wane over time?
• 2:49
  Eddie Fishman: Almost certainly, at some point and, and probably within this century, there will be a very clear alternative to the dollar.
• 2:50
  So the idea that the dollar as a choke point is immutable I think is, is patently false and sort of defies the laws of history. These things change over time. I think the way that you will see that develop though, and I think the reason that people have gotten confused about this, it's not so much that overnight the RMB will replace the dollar and everyone will say, you know what, the RMB is the reserve currency.
• 2:51
  What will happen is you'll see parallel systems develop. And that's already happening. So you have China that has built an alternative to Western clearing systems like SWIFT and CHIPS, which is the Clearinghouse Interbank Payment System. China launched one in 2014 called CIPS, the Clearinghouse, or sorry, the Cross Border Interbank Payment System.
• 2:52
  It's a, you know, very similar name to the one in the U.S. That now is processing a lot of money every day. And there are banks all around the world that are joining it. Um, I think critically China is honestly in the lead when it comes to digital currency innovation. So China has the most advanced and most used central bank digital currency, the digital renminbi.
• 2:53
  And they also have a clearing platform called Enbridge that they pioneered with the Bank of International Settlements, which has shown that it can actually clear cross border transactions much more quickly than correspondent banks can. So Um, we could be falling behind in some ways. I think the likely scenario in which you actually see the dollar lose its potency as a choke point is that some of these systems develop unchecked over the next five to ten years, and then maybe there's a pivotal moment, right, where maybe the U.
• 2:54
  S. is fighting a war with China, and the U.S. tries to impose blocking sanctions on all Chinese banks. And all of a sudden companies around the world have a choice. They say, do we want to, you know, Join these Chinese systems? Do we want to double down on them? Or are we going to go with the U. S.? And I think, frankly, when you have an economy like China, where they're the leading trading partner of 120 of the world's countries, so two thirds of the world counts China as its leading trading partner, I do believe that Chinese systems will be very appealing and almost impossible to, to stop from, from growing.
• 2:55
  Jason Bordoff: You mentioned China a moment ago and electric vehicles, and I'm just wondering, so we talked about chokepoints like export controls and sanctions and tariffs, and I'm wondering if EVs, we have tools we can use to target EVs like tariffs. But I think what I hear you saying is dominance in a supply chain in strategic sectors is itself a chokepoint, and that could be OPEC countries, you know, that could cut off oil exports in the early 1970s, or China's dominance today in many parts of the technology and clean energy supply chain, that's not our weapon to use, that's theirs, is that what you're saying?
• 2:56
  Eddie Fishman: That's right. Yeah. I mean there, there's no, there's no clear way. I see at least in the next decade, the US using clean energy supply chains as a weapon. It's much more plausible than China would, right? China is dominant in a lot of these spaces, whether it's the production of finished electric vehicles or a lot of the key materials that go into them, be it lithium, cobalt graphite.
• 2:57
  Um, so this is a weapon that China possesses. And so industrial policy in the U.S. and things like the Inflation Reduction Act in many ways I think are, are an attempt to mitigate some of the vulnerability that the US has. I think the US, frankly, is so far behind in a lot of these spaces that there's no way that we would necessarily use that as an aggressive weapon.
• 2:58
  Our goal really is to patch up our vulnerability so that in a scenario of a real serious conflict scenario with China, they're not imposing sanctions on us that are really devastating to Americans.
• 2:59
  Jason Bordoff: And so how do you, I mean, yes, that is obviously right and the question then is like how do we think about that?
• 3:00
  Jake Sullivan's small yard, high fence. There's a small, we want global trade. It's great. There's a small number of highly sensitive, you know, advanced semiconductors with military applications. We need to have domestic capacity and you don't want to be too dominant on China. You want diversified supply chains.
• 3:01
  In reality, it seems like that, that motivation along with. Jobs in Michigan and economic competitiveness and we kind of conflate a lot of goals together And then the yards not so small anymore And I'm wondering if that strikes you as right and like when you think about the use of a choke point the use of a weapon Like what is it and what's it not like, you know China makes most of the world's solar panels and if they decided to stop exporting solar panels There'd be a price spike in solar power.
• 3:02
  It wouldn't cut off the electricity today. It would mean you can't install new solar panels. Is that a weapon? Is our EVs a weapon? Are semiconductors a weapon? How should we think about it?
• 3:03
  Eddie Fishman: Yeah that's why I brought up this idea of redundancy, right? And how hard, how hard it is to build a redundancy if you need it.
• 3:04
  So for t-shirts in Bangladesh, it's not so hard, right? For the dollar, it's pretty hard, you know? Um, forum for parts of the semiconductor supply chain, be it, you know, ASML’s, EUV machines, or some of the semiconductor manufacturing equipment coming out of companies like Applied Materials in the U.S., very, very hard. There's not an alternative, and China's been pouring tens of billions of dollars, probably hundreds of billions of dollars, and they still can't really figure out how to do it. But then there are other chokepoints like we mentioned, be it maritime insurance or oil tanker fleets, which aren't really that durable and in fact can be supplanted within a few months.
• 3:05
  When it comes to clean energy technologies, I do think electric vehicles is one that's really tough, right? Because being able to set up that whole, sort of end to end supply chain that China has built now over the last two decades is really challenging and will take some time. It doesn't mean we couldn't do it, but I think it will take years,
• 3:06
  Jason Bordoff: And, is that even the right way to think about the alternative like with t shirts or you know It turns out there would be a setback in sales of EVs and everybody would buy like the you know, traditional yeah, combustion engine cars that are well made in Michigan and elsewhere So, how should we think about why is it if we buy a lot of Chinese EVs here?
• 3:07
  I get why it might be a political problem in Michigan or an economic problem or jobs, but do you think it's a security problem
• 3:08
  Eddie Fishman: I personally do. I think because over time, I mean, it is a security problem if you believe that we need to ultimately transition to a clean energy transportation fleet, which I believe, right? If you don't believe that, then no, you're right. It's not a security problem because you could just have internal combustion engines forever.
• 3:09
  I think Chinese connected vehicles are a different story. That's another thing that the Biden administration band. Um, these are, you know, vehicles that are, you know basically talking to each other. They're connected to a network. That I think is a real serious security concern because overnight you could basically have the Chinese turn off the cars in the U.S. And this, by the way, is the fear that underpinned the Trump, first Trump administration's war, I would call it, against Huawei. Because there was a real fear that if Huawei, you know, the leading private Chinese tech company, were to dominate global 5G networks, that you would have global telecom completely dependent on China, and you could have, effectively, Beijing flip a switch and turn off key telecom communications networks all around the world.
• 3:10
  And this was, I think Bill Barr, you remember, the former head of DOJ had this comment where he said that if we allow Huawe to dominate global 5G networks, you know, China would have a geostrategic weapon that eclipses the dollar. Basically, this would be a choke point that's even more important
• 3:11
  Jason Bordoff: Now is that, we're sitting in a room with microphones and iPads and iPhones and Caroline Pittman's laptop and, like. Right? Isn't that true for everything we're, everything we depend on every day? Isn't that true for all of it?
• 3:12
  Eddie Fishman: Oh, totally. I mean, look, and I think this, you know, comes back to what we, our start of our conversation, which is, you know, the global economy is built on this premise that we live in a benign geopolitical environment, that we don't have to fear you know, the telecom network that we're placing a call on, that we don't have to fear the bank that we're making a payment with, right?
• 3:13
  Certainly the reason that Russia, you know, was able to, or decided that they were to accumulate foreign exchange reserves and currencies like dollars and euros was because they thought that. It wouldn't, you know, be frozen, right?
• 3:14
  Jason Bordoff: What I hear you saying then is there's an evolution in your book to the use of these tools of economic war that Stuart Levey and, you know, you started and, and you're telling of it and they evolve over time and then, and then, and, and they're motivated by this geo-economic fragmentation and competition and a new way to think about.
• 3:15
  Our place in the world and what security means, economically and strategically, militarily. But then there's also defensive tools where we need to diversify supply chains, friends who are build domestic manufacturing. That's like industrial strategy.
• 3:16
  Eddie Fishman: I think the real question that the U.S. has to answer is, are we going toward an economy, a global economy of blocks where, you know, we have a block of alliesum be it in North America, Europe East Asiaum this was the concept of friendshoring. Or are we going towards something that looks a lot more like autarky? And frankly, that does seem like what President Trump wants from time to time when he talks about, you know, you can't do business with the U.S. unless you, you know, start, open up a factory here and produce all of your product in the United States. Um, I think most economists would say that autarky is impossible and it's incredibly costly and incredibly
• 3:17
  Jason Bordoff: I was going to say, this all sounds very inflationary.
• 3:18
  Eddie Fishman: Yeah, I don't think this is a good future for us, Jason, to be very clear. But I think that's honestly like if you're looking at the direction of travel, you know.
• 3:19
  So, if there are three futures for the global economy, one is we go back to the globalization of the 90s, another is we have fringe shoring and block based, trade with allies, and a third is autarky. Unfortunately, I think the first option, going back to the 90s, is probably the least likely in the next decade or two, and I think that's scary, but it's a reality.
• 3:20
  Jason Bordoff: And that means you think the world, kind of, is gonna break into these economic blocks. Of friends and allies. Although we started the conversation talking about tariffs on Canada and Mexico.
• 3:21
  Eddie Fishman: during the Biden administration, that was sort of the direction of travel. It seemed like the U.S. was well on its way, frankly, to building economic security relationships with Europe, with Japan.
• 3:22
  The USMCA, by the way, was negotiated during the Trump administration. That was seen to be extremely successful. I think you look at someone like Robert Lighthizer again, who's incredibly proud of that deal. You know, the Trump trade representative who negotiated it. I think if we see the Trump administration over the next several years continue to use coercive economic measures, sanctions, tariffs, etc., against the likes of Canada, Mexico, the European Union, Colombia, You're much more likely to see America isolated. So it could be autarky by default, right? Whether or not he's trying I think it's going to be very hard to get countries to sign economic security agreements with the U.S. if they fear that Trump could, the next day, impose 25 percent tariffs them.
• 3:23
  Jason Bordoff: We talked about the defensive side of these tools like Diversify Supply Chains, Inflation Reduction Act, the CHIPS Act. There's an offensive side with China too, like leadership and AI and export controls on the most advanced chips. Just talk about how you view that today. Is that effective? How should the U.S. government be approaching that?
• 3:24
  Eddie Fishman: So we started off by talking about sanctions and export controls and tariffs, coercive economic measures as a tool of leverage for negotiations, and classically that's what they are, right?
• 3:25
  You go back to the Iran sanctions. The goal wasn't just to bludgeon Iran with sanctions, it was to use economic pressure to get a deal in which Iran gave up its nuclear program. The China semiconductor export controls, which originated almost by accident during the Trump administration where they kind of realized that the semiconductor supply chain could be used as a chokepoint but then were expanded upon significantly by Biden because Biden imposed really, really aggressive curbs on the export of semi and really any se semiconductor using something very similar to the, to secondary sanctions to China.
• 3:26
  Those restrictions are not aimed a changing China's behavior, right? There's no idea of negotiating those away in exchange for something. They're really a tool of attrition. The idea is to degrade China's technological advance and degrade China's military capability. Will that work? I do think that China's development of frontier AI will be slowed down by the fact that they don't have access to the most cutting edge semiconductors.
• 3:27
  But what we've seen very recently with DeepSeek is that there are other ways to innovate and to create really advanced AI models that don't need quite as many H-100s. They maybe don't need as many of these sort of critical hardware that the U.S. and its allies dominate. I think over time though that hardware advantage should mean that the U.S. retains a lead does, doesn't guarantee it, but… And I think, I think one maybe point here, and this it can be frustrating for, for, for people, but if you've served in policy roles like Jason has, and I have, you, you realize is, well, you have to ask about any policy is, what's the alternative, right?
• 3:28
  So would we be better off if China had unfettered access to NVIDIA chips? Would DeepSeek's AI algorithm be worse if they had access to NVIDIA chips? The answer is almost certainly no, right? And you even saw the CEO of Anthropic come out and say that DeepSeek shows why export controls are so important and that we actually need to strengthen export control.
• 3:29
  Jason Bordoff: Our colleague Richard who we mentioned and another colleague, Jack Lew, who's about to return to SEPA wrote about the risk of overusing sanctions. And I was just wondering, you, you, how do you think about that risk? Like we, this is a powerful tool. We talked about how the chokepoints can erode over time.
• 3:30
  How do you think about the use versus risk of overuse? What is the, what is the risk of overuse?
• 3:31
  Eddie Fishman: I have tremendous respect for Jack Lew and, and Richard. I have a slightly different take than they do. I don't think overuse is necessarily the problem. And frankly, if it was a problem, there's nothing we could really do about it. And just to go back to one of my original points, we have seen a secular rise in the use of sanctions.
• 3:32
  And so I think there's a reason for this. that is structural, and there's not really much that any president could do to rein this in. I mean, I think Biden's a great example. He started this administration by basically endorsing this view of overuse of sanctions by coming out with a top to bottom sanctions review, which said that we should use sanctions judiciously, and then he broke every single record in terms of sanctions imposed way, way more sanctions than anyone has in the past, and more aggressive sanctions in terms of, sanctioning the Central Bank of Russia, which is probably the largest sanctions target in modern history.
• 3:33
  My own view is that the real risk is misuse of sanctions and tariffs. It's not, I don't think there's much we can do to reign in their use because of, sort of the structural reasons I said, but I think. If you're using them capriciously or arbitrarily, if you're using them against allies in addition to adversaries, I think that there's a huge risk, not just to American national security, but also our economic livelihood.
• 3:34
  And that's, I think, my biggest concern when it comes to Trump. It's not so much that he's going to use tariffs and sanctions too much – that would be a bit hypocritical given that Biden used tariffs and sanctions much more than Trump did the first time around – I think it's that he'll use them unwisely and capriciously.
• 3:35
  Jason Bordoff: So you'll write an epilogue or a new, a new version, a revised version of this in say, I don't know, 2040, let's say maybe sooner. Anticipate what it will say. What's the next frontier of sanctions, microtargeting crypto currency?
• 3:36
  Eddie Fishman: So, I think we're going to get more and more sophisticated use of sanctions and tariffs and export controls. And you already even saw some of this in Trump's executive orders against Canada, Mexico and China, where he got rid of the de minimis rule, which historically you've been able to import. Goods from these countries tariff free if they come in under a certain dollar value and he basically eliminated that.
• 3:37
  So I think that you're going to continue to see more and more creative uses of these tool so similar to the price cap or the foreign direct product rule, which are sort of the secondary sanctions that were used against Huawei and the Chinese, the Chinese tech sector. But I think the real question, the one that I will, I hope I'm writing in a positive light in 2040 is where is this all headed?
• 3:38
  I mean, I basically see there's two potential futures. I already ruled out the 1990s style return to, you know, the halcyon days of globalization. I don't see that on the table. I think the real question is where, where is the age of economic warfare headed? Are we going to be in a place where we have supply chains that are closer to home, where we have more and more trade with our allies, Canada, Mexico, Europe. Probably significantly less trade with places like China. But that we actually live in peace because maybe this means that we're not, we don't feel so threatened because we're not so worried that, you know, China's gonna shut off the power in the US every day. Or are we gonna go to an era in which, you know, we have supply chains that are really only at home, we have very little access to foreign markets. And really, the only way to access foreign markets and resources is through territorial conquest and imperialism. And people laugh, some, about Trump's threats against Greenland and, you know, the idea of conquering a foreign country for their mineral resources.
• 3:39
  But I think, you know, history shows that when countries feel like they can't access resources and markets that they want through open trade, the temptation for military conquest rises. And so, I do worry, Jason, that if we do actually go to a chaotic breakdown of the global economy, where everyone only feels that they're safe through getting things that are under their juridical control, that you could have a return of great power war.
• 3:40
  And that's my biggest fear.
• 3:41
  Jason Bordoff: Well, that's an optimistic note to end on.
• 3:42
  The book is Chokepoints and there's a little quote on the cover here from the great Paul Kennedy, the author of The Rise and Fall of the Great Powers: “Remarkable, one of the most important books on economic warfare ever written.” That's pretty high praise. And it's fascinating to talk to you about it, but it's also fascinating to read, not just because the topic is, in my view, fascinating, but it's also really well written, which is hard to do with a topic that. It seems, maybe dry and technical, like sanctions and tariffs, but it's really, really well written.
• 3:43
  So congratulations on a tremendous achievement and thanks for talking about it with us, Eddie Fishman.
• 3:44
  Eddie Fishman: Thanks so much, Jason. Really appreciate it.
• 3:45
  Bill Loveless: Our thanks to Eddie Fishman, and to you, for listening to this week’s episode of Columbia Energy Exchange.
• 3:46
  The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.
• 3:47
  The show is hosted by Jason Bordoff, and me, Bill Loveless.
• 3:48
  The show is produced by Mary Catherine O’Connor.
• 3:49
  Additional support from Caroline Pitman, Martina Chow, Kyu Lee, and Richard Nephew.
• 3:50
  Sean Marquand and Greg Vilfrank engineered the show.
• 3:51
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• 3:52
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• 3:53
  Thanks again for listening, we’ll see you next week.