Capital Wars from 1600 to the Present
As I studied past cases of conflict between major powers, I observed that in most cases, before there is ashooting war, there is a mix of escalating economic, technological, geopolitical, and capital wars. For instance,
while 1939 and 1941 are known as the official starts of World War II in Europe and the Pacific, the conflicts reallybegan about 10 years before that, with a series of escalating economic and capital conflicts before the “hot war”
began.
To better understand what these economic and capital conflicts could look like in the future, I looked at all themajor cases of capital wars from 1600 to the present. In this study, I lay out the typical nature of these conflicts
and share details on the major cases we looked at.
As we started digging into the different measures that countries have taken, we found that they generally fall into
three categories:
Asset Freezes/Seizures: Preventing an enemy/rival from using or selling foreign assets they own. These
measures can range from asset freezes for targeted groups in a country (such as current US sanctions on
the Iranian Revolutionary Guard) up to more extreme measures like unilateral debt repudiation or outrightseizures of a country’s assets.
2) Blocking Capital Market Access: Preventing a country from accessing your country’s capital markets,
either for accessing capital (such as by blocking debt or equity issuance in your country), or for investingin your country (such as policies to block inbound investment from rival countries). This can also take theform of either withholding ongoing lending or coordinating sales of a country’s assets, with the noneconomic purpose of weakening them or coercing particular behaviors.
3) Embargoes/Blockades: Blocking trade in goods or services, either with your own country or in some caseswith neutral third parties, for the purpose of weakening the targeted country. This can involve blocking
imports of key supplies (such as occurred with the US embargo of oil to Japan in the lead-up to WWII) orblocking exports from the targeted country that represent significant income to that country (such asoccurred in France’s blockade of the UK in the Napoleonic Wars). 11)

All three of these levers can take more and less severe forms, as we show in the following diagram. When looking
at past cases, particularly recent ones, we generally see a range of levers employed at once (such as
simultaneously restricting some trade and engaging in highly targeted asset freezes). And the most severe
levers—such as completely cutting a country off from your financial system or freezing all its assets abroad—typically comes after a longer period of tit-for-tat escalation (as occurred with the US and Japan in the lead-upto WWII) or comes in response to a major crisis/provocation from the targeted country (such as the Russianannexation of Crimea).
The most extreme measures often come when a hot war is imminent or already underway (e.g., the most extreme
measures across the types of levers were all employed in WWII, with a number of measures starting in the leadup period). By contrast, US sanctions against Russia over the past decade have involved a range of moderatemeasures (broad blockages from the US financial system for key Russian businesses, targeted asset freezes of
specific individuals, and trade restrictions, including ones applied to third-party countries).

We recognize that embargos may be considered part of trade wars rather than capital wars. However, we learned that embargoes were themain tool to cut countries off from government/war financing through at least the 19th century (and maybe beyond). The income from naval
trade (and tariffs on that trade) was a big deal for many countries—often easily the single biggest government revenue source. And the big
trading companies had armies bigger than the government’s.
1SevereModerate

Mild/
Targeted

Asset Freezes/SeizuresBlocking CapitalMarket AccessFreezing all assets and/orpressuring third parties todo so; outright asset
seizures; debt repudiation
Ex: US’s measures against
Germany during both worldwars

Total block from capital
markets; sanctions imposedon all entities, including thirdparty countries that transact
in enemy’s assets
Ex: US sanctions against
North Korea

Cutting off supply of key
resource (e.g., oil embargos);
directly blocking trade withthird-party neutrals (such as
full naval blockades)
Ex: US embargo of Japan inlead-up to WWII

More indiscriminate assetfreezes (such as all
government assets)
Ex: Current US sanctions
against North Korea

Blocking large portions ofcountry or government;banning your citizens fromholding target’s assets
Ex: Current US sanctions
against Russia

Broader restrictions on trade,and/or pressure on thirdparty neutrals to stop tradingwith targeted country
Ex: US sanctions on Axissupporting neutrals in WWII

Targeted asset freeze for
specific individuals orcompanies
Ex: 2014 asset freeze for
specific Russian officials

Targeted blocking of specificindividuals or companies
Ex: Potential pressure toforce Chinese companies tode-list from US exchanges

Blocking trade withstrategically important
entities and/or products, orin luxury products
Ex: Limiting some high-tech
exports to China, Huawei

Embargoes/Blockades

The following table summarizes which of these levers were employed across the historical cases we examined. At
a high level, we see capital wars being used as an instrument of warfare throughout history—there’s evidence ofblockading trade-dependent cities to weaken them as far back as ancient Greece. At the same time, thecomposition of levers used has broadly shifted. In earlier conflicts, it generally took the form ofdisrupting/blockading trade of an enemy (such as occurred in the Napoleonic Wars or the War of 1812), and sonaval power influenced who could and couldn’t effectively use these weapons. More recently, we’ve seen a wider
array of financial and trade measures used. In particular, over the past half century we’ve seen the US weaponize
its reserve currency status to block its adversaries from the dollar financial system, as well as to threaten neutral
parties that might consider transacting with the US’s adversaries (through what are known as secondarysanctions). One notable case is the series of financial sanctions against Russia over the past decade, though similar
measures have been employed against Iraq, Iran, Venezuela, and other countries over the past few decades.

Historical Capital Wars Summary Table
CaseCountry
Imposing
Capital War

Country Targeted

Hot War?

Capital War
Preceded HotWar?

Asset
Freezing/
SeizureBlocking
Financial
AccessBlockades/
Embargoes ofKey Trade

2014-Present

Venezuela

USAVenezuela

No-

Moderate

Moderate

Moderate

2014-PresentRussia

USA

RUS

Not Directly-

Targeted

Moderate

Moderate

1979-Present

Syria

USA

Syria

Yes

No

Moderate

SevereSevere1990-2003

Iraq Wars

USA, UN

Iraq

Yes

Yes

Moderate

SevereSevere1979-Present

Iran

USA

Iran

No

-

Moderate

SevereSevere1973-74

OAPEC Oil Embargo

OAPEC

USA, NLD, PRT, SAF

No

-

No

No

SevereSevere1960-Present

Cuba

USA

Cuba

No

-

SevereSevere1956

Suez Crisis

USA

GBR

Not Directly

No

No

SevereNo

1950-Present

North Korea

USA

North Korea

Yes

No

Moderate

SevereSevere1948-91

Cold WarUSA

USSR

No-No

SevereSevere1940-45

WWII

USA, GBR

NeutralsNo-

Moderate

No

Moderate

1940-45WWII

USA

DEU, JPN

Yes

Yes

SevereSevereSevere

1939

WWII

USA

USSR

No-

No

No

Moderate

1939-45WWII

DEU

GBR, USA

Yes

Yes

Severe-*Severe

1939-45WWII

GBR

DEU, JPN, ITA

Yes

Yes

SevereSevereSevereModerate

1937, 40-44

WWII

USA

ESP

No-

ModerateNo

1935, 41-44

WWII

USA

ITA

Yes

Yes

SevereSevereSevere1914-18WWI

DEU

GBR, FRA, USA

Yes

No

Severe-*Severe1914-18

WWI

USA

DEU

Yes

No

Severe-*Severe1914-18

WWI

FRA

DEU

Yes

No

Severe-*Severe

1914-18

WWI

GBR

DEU

Yes

No

SevereSevere

Severe1861-65

US Civil War

USA (South)

USA (North), GBR, FRA

Yes

NoIneffective-**

Moderate

1861-65

US Civil War

USA (North)

USA (South)

Yes

NoSevere-**

Severe1807-15

War of 1812

GBR

USA, FRA

Yes

Yes

-**

-**

Severe1807-15

War of 1812

USA

GBR, FRA

Yes

Yes

-**

-**

Moderate

1806-14

War of 1812

FRA

USA, GBR

No--**-**

Severe1806-14

Napoleonic Wars

FRA

GBR

Yes

No-**-**

Severe1803-14

Napoleonic Wars

GBR

FRA

Yes

No

-**-**

Severe1781-84

Fourth Anglo-Dutch War

GBR

NLD

Yes

No-**-**

Severe1775-83

Revolutionary War

GBR

USA

Yes

No-**-**Severe

1756-63

Seven Years' War

GBR

FRA

Yes

Yes

-**-**

Severe1672-74

Third Anglo-Dutch War

FRA, GBR

NLD

Yes

No-**-**

Ineffective

1672-78

Franco-Dutch War

FRA, GBR

NLD

Yes

No

-**-**

Ineffective

1665-67

Second Anglo-Dutch War

NLD

GBR

Yes

Yes

-**-**

Moderate

1655-60

Second Northern War

SWE

DNK, NLD

Yes

Yes-**-**

Moderate

1651-54First Anglo-Dutch War

GBR

NLD

Yes

Yes

-**-**

Moderate

1618-48

Thirty Years' War

NLD

ESP

Yes

No-**-**

Moderate

1602-63Dutch-Portuguese WarNLD

PORYes

No-**-**Severe* Markets were broadly closed for significant periods of the war.
**Evidence for financial asset seizures and restrictions is limited for pre-20th century conflicts, though many of these conflicts focused upon controlling territories that werevaluable sources of revenue (e.g., colonies, trading posts).

Below, we briefly summarize the major cases.
Major 20th and 21st Century Cases: Portuguese•World War I (1914-18): WWI was preceded by a contest for resource-rich colonies, but given how sudden
the war was, there were only a couple examples of capital war—with the notable one being Germany
blocking financial access to Russia in the 1880s. During the war, combatants used an escalating series oftrade blockades and asset seizures to advance their agendas. All countries banned trading with enemies,
and naval powers like the UK and the US blockaded Germany, who retaliated by using submarines totarget merchant ships to the UK. As the war progressed, combatants who initially froze enemy assets
liquidated them to fund their own war efforts.

•World War II (Late 1930s-45): Prior to the war, there was an escalating spiral of capital war and hot war
conflicts, as Allied powers like the US and the UK placed punitive resource embargoes on Axis countries
in response to their territorial expansion, which spurred further invasions by Axis powers to support theneeds of their militaries (such as Japan’s need for oil). As the war began, Allied forces expanded embargoes
into full blockades, and assets from combatants and neutrals were frozen and then seized. Countries relied
less on blocking market access or selling assets because target countries were often more reliant on accessto resources than financial flows at the time.

•Cuba Embargo (1960s-Present): Throughout the Cold War, following Castro’s takeover of Cuba, the US
maintained steady capital war sanctions, including stopping trade with Cuba, freezing financial aid, andlimiting remittances. Cuba did respond with some seizing of US property in Cuba but lacked the capacity tofully retaliate.

•The Suez Crisis (1956): After Egypt seized and nationalized the Suez Canal, the UK invaded to regain
control. The US was opposed to any military intervention, and withheld IMF funds from the UK until British
forces completely withdrew from Egypt. The UK desperately needed capital as it was hemorrhaging
reserves and would not be able to maintain convertibility of the pound without US financial support, so theUK capitulated and withdrew.

•OAPEC Oil Embargo (1970s): From 1973 to 1974, the Arab members of OPEC maintained total oil export
embargoes against the US and other developed countries for their support of Israel, which Egypt and Syria
had just invaded. The embargo, as well as massive supply cuts, caused significant economic damage andfinancial asset losses across the world through higher oil prices and inflation. In the end, it did little to affectthe immediate Arab-Israeli political situation, but it did serve to enrich oil producers and change the US’s
stance on foreign energy dependence.

•US-Iraq Conflicts (1980-2003): The conflict between the US and Iraq lasted for decades and was centeredaround Iraq’s invasion of Kuwait and possible support of terrorism and weapons programs. The US heavily
enforced severe economic sanctions and the freezing of financial assets over this period to hold leverageover Iraq. Through the UN and the US’s allies, the US was also able to exert global pressure, with most of
the world signing onto the economic sanctions.

•Today: The United States currently imposes considerable sanctions on Iran, North Korea, and Russia, alongwith a few other countries. These include asset freezes, bans on US entities trading with or financing
blacklisted entities, blocking access to dollar-financing pipelines (notably, the SWIFT system), andsecondary sanctions on neutral entities that trade with blacklisted entities.

Major Cases of Capital War Pre-1900:•Capital War Tactics During the Dutch Empire (1600-1800): The main form of capital war in the wars foughtby the Dutch during their heyday were trade blockades, cutting off key income sources for their enemies
from trade and colonial revenues. Several wars broke out over trade barriers and commercial rivalries thatpreceded the war—the most notable examples of this are the First and Second Anglo-Dutch Wars. The
Fourth Anglo-Dutch war is a key example of the devastating power of capital warfare: by blocking traderoutes and controlling trading posts, the British managed to bankrupt the Dutch East India Company.

•Napoleonic Wars (1803-15): Capital wars were an important lever used by both France and the UK
throughout the conflict. Three years after the two powers went to war, Britain stepped up a severe blockadeof naval ports in France. The capital warfare escalated from there in a tit-for-tat manner with cascading
blockades and trade restrictions (the UK relied on its superior fleet, while France relied on its control ofmany European ports the UK used to trade).

•The War of 1812: During the Napoleonic Wars, the US faced capital war pressure from both the British andthe French as the two sides tried to restrict trade with each other. This along with Britain’s aggressive
impressment actions (i.e., capturing US citizens and forcing them into the British Navy) caused the US to
impose trade embargoes against both powers, which hurt the US more than Britain or France. Over 1810 to1811 the US ended up reengaging in trade with France while cutting off Britain, eventually leading to war in1812. During the war, the British used their superior navy to step up their blockade of US ports.

•The US Civil War (1861-65): Over the course of the war, the North blockaded the Confederate states, relying
on its superior navy, while the South informally cut off exports to Britain and France (“King CottonDiplomacy”) in an unsuccessful attempt to coerce them to join the war effort. Additionally, the North passedlaws over the course of the war allowing for the seizure of Confederate assets.