Inter-state economic coercion is an ancient tradition among nations. Within the framework of economic statecraft, economic coercion manifests itself in three forms: Economic Warfare, Trade Wars, and Economic Sanctions. The empirical evidence on the efficacy of economic sanctions to accomplish foreign policy objectives is not very convincing - even some of the strongest academic proponents of economic sanctions conclude that they were historically effective only 34% of the time. However, financial sanctions (a subset of economic sanctions) appear to show more promise. This monograph seeks to examine the efficacy of United States (US) financial operations at the interagency level. The primary research question is: Does the United States have an effective doctrine for conducting financial operations against both state and non-state actors? Financial operations link the application of specific financial restrictions, in concert with other elements of national power, to the strategic goals of the coercive campaign. This monograph concludes that it is possible to achieve operational art with financial operations at the interagency level if the Executive Branch is willing to centrally focus and synergize the energy of many players. The US first exercised financial operations during World War I after Congress passed the Trading With the Enemy Act (TWEA) on October 6, 1917. During the post World War II era, the US employed financial operations to manage expropriation threats to US corporations from developing nations, notably in Latin America. The Hickenlooper and Gonzales Amendments gave the Executive Branch special powers and responsibilities in meeting threats of expropriation to US firms. US foreign policy with respect to Allende's Chile manifests such US concerns with expropriation, however, it also marks a transition point for US employment of financial operations to not just protect US assets, but to coerce other states as well. Congressional approval of the International Emergency Economic Powers Act (IEEPA) in 1977 broadly expanded Presidential authority to employ financial operations. President Carter invoked IEEPA against Khomeini's lran on November 14, 1977, seizing or blocking all Iranian assets in the US, as well as US banks overseas. The ensuing synergies of asset seizures, global litigation, and military pressure finally resulted in not only the release of the 52 American diplomatic hostages, but in Iranian payment of far more corporate financial claims against lran than were due under law. Subsequent to the US-Iran crisis, US Presidents have employed IEEPA eight more times, including most recently against Colombian drug cartels. US led multilateral financial operations against lraq and Kuwait during and after the Gulf crisis saved Kuwaiti assets from Iraqi expropriation and greatly hurt lraq economically. However, the results of the other uses of IEEPA are mixed, and in the cases of Panama and Haiti, clear failures. Analysis of these cases indicates that financial operations need to be integrated at the interagency level with the utmost attention by the Executive Branch. This monograph proposes three initiatives to increase the efficacy of financial operations. The three initiatives are: 1) Seek to develop and refine financial sanctioning techniques and procedures that focus on target state political and economic elites. 2) Research and wargame new approaches to financial operations that may overcome time inconsistency when dealing with adversary states or non-state actors. 3) Initiate an interagency discussion on financial operations to improve crisis action coordination. The twelve recommendations offered to implement these initiatives may require significant intellectual and cultural shifts in American economic statecraft, but these shifts will go far to leverage the potential of distributed financial operations. This monograph concludes that financial sanctions can be crafted to be more effective than traditional economic sanctions, and that financial operations, synergized with the potential for direct military action, can achieve national objectives that are beyond the reach of the other elements of national power.

ADA 370163 Approved for public release; Distribution is unlimited. The opinions and conclusions expressed herein are those of the student-authors and do not necessarily represent the views of the U.S. Army Command and General Staff College or any other governmental agency. (References to these studies should include the foregoing statement.)