Can The Economy Grow When All Relationships Are Negotiating Chips?

Forbes

26-05-2025

Edward Fishman's timing is perfect. His book, Chokepoints: American Power in the Age of Economic Warfare, was released one month into a new administration that views every economic relationship as a potential negotiating lever.
Fishman's book tells the story of a gradual, and then sudden, awakening of government officials to the power associated with squeezing or cutting off key arteries of economic connection to achieve political goals.
Fishman is friends with Chris Miller, who introduced us to the idea of chokepoints in his book Chip War. Miller explained that every chip that goes into the world's most advanced computers are made by Taiwan Semiconductor Manufacturing Company. And TSMC cannot produce these chips without a machine that only one other company, ASML of the Netherlands, can make. Those companies, and their products, are 'chokepoints' - control access to them and you wield enormous power.
Fishman expands the story into a chronology of how the U.S. government learned to identify and use chokepoints. He knows many of the key actors, and was personally involved in some of the policy actions. This gives his book a 'fly on the wall feel' as the reader is placed in the room where decisions were made.
Many of the stories track the increasingly detailed use of financial chokepoints. This began in 2006 with the US government going on a road show through Europe, meeting with bank CEOs and explaining how their institutions were helping channel money to Iran. Many of the CEO's were unaware and, fortunately, this forensic accounting approach convinced most to tighten enforcement of sanctions.
But there was always going to a subset of banks that didn't care about maintaining good relationships with the US, and thus continued to work with Iran. This forced a pivot in the Americans' approach. Instead of trying to suffocate Iran's oil business, the US attempted to prevent Iran from bringing home the money it had earned.
Iran could sell oil and receive payments in U.S. dollars. But, as the revenue was held in escrow accounts at foreign banks, the U.S. was able to restrict access. That created a tantalizing economic lever the US could pull. Look at all the money you've got - do what we want and you can have it, keep behaving badly and you can't.
It feels like a pandora's box - once the lid was lifted and the US started to view the global economy from the lens of chokepoints, it got progressively more 'creative'. This creatively was unleashed in full force against Russia in 2022.
One of the most striking stories in the book takes place just after Ukraine was invaded. Russian oil tankers attempting to leave the Black Sea and take their product to market became lined up in a vast traffic jam at the Bosphorus strait.
Why? Because they weren't insured. And if they didn't have insurance Turkey was not going to let them pass through its territory. Why were they uninsured? Because 95% of shipping insurance is provided by firms in London who were complying with a services ban on Russian oil. London insurers were the TSMC of shipping - without their product an entire industry could not operate.
Economic warfare has expanded beyond the financial realm and an important part of Fishman's story is how detailed legal maneuvering has been used against Chinese companies. One very important legal tool is a 'denial order' - an export control that bans the target company from buying all US products. In an interdependent global supply chain, getting hit with a denial order can amount to a death sentence.
For example, China's second-largest telecom equipment maker ZTE was caught in a plot to buy US technology and resell it to Iran. In 2016, as part of a settlement, they were fined $1.2 billion. When they were later found to be violating those terms, the Commerce department issued a denial order against them. Because ZTE relied on American technology, the denial order was deadly and within three weeks the company issued this announcement:
As a result of the denial order, the major operating activities of the company have ceased.
President Xi eventually sweet talked Trump into rescinding the order, but as Fishman says, the lesson was learned - a leading foreign company could be dispatched, and then resurrected, with the stroke of a pen.
What's my view on all this?
It's clever to squeeze Russian oil by banning London-based insurers from dealing with them. That's a short-term win, and justifiable given the savage invasion of Ukraine. But surely that action at least partially undermines the basis of the industry in London. Why rely on insurance from a firm that can be squeezed to shut you off? The same logic applies almost everywhere pressure on a chokepoint is applied.
The usual answer to this dilemma is: just don't invade a democracy and murder tens of thousands of people and you'll be fine. Fishman presents a version of this argument:
That distinction has now been eviscerated by the Trump government. It doesn't matter if you are Canada - the country most aligned with the US on values, culture and economic prosperity. It doesn't matter if you are Germany - a country that used its economic leadership in Europe to shepherd democracy across the continent. Nope - the message is now clear. Your economic ties with us are just as liable to be used as chokepoints as those with China, Iran or Iraq.
Germany made the mistake of relying on Russian natural gas for about 50% of its supplies. A massive chokepoint. And Russia choked them, triggering an energy crisis that threatens Germany's formidable industrial base. The US meanwhile has experienced a boom in exports of liquefied natural gas, and had ambitions to replace Russia supply, at least in part. But why would Germany build a reliance on US imports when it's obvious that will eventually be seen as a chokepoint?
I've often thought of Putin as a tactical genius and a strategic incompetent. He knows how to use threats, manipulations and leverage to influence events in the short term. Meanwhile, all his maneuverings keep his focus on tactical wins, while in the long-term his country declines.
It declines because of the contradiction that underlies the 'chokepoints' view of the economy. A country accumulates strength by virtue of a vibrant, competitive and growing economy. That economy is a network of connections and relationships. If all those relationships are ultimately vulnerable to government manipulation, the connections will be kept weak and shallow, because they must be expected to snap at any time. If everything becomes a point to be choked, there is no oxygen for growth. In the end you become weaker.
Pre-Trump many of us imagined the world moving back into blocks based on political systems and shared values. Yes, chokepoints might exist inside a 'western' group of democracies, but that's ok because there was no need to fear they would be used as leverage.
That vision is now gone. The US is now transactional, all chokepoints are fair game.