Global Trade Blockades: A Rising Cost of Living, Conflict, and Practical Solutions

Original article: Bloqueo del libre tránsito de mercancías: Un costo global que encarece la vida, trae guerra y una solución concreta

Restrictions on the flow of goods and information impact not only the sanctioned nations but resonate throughout global economies, driving up prices and contradicting the principles of free market that proponents claim to defend.

By Bruno Sommer

In an increasingly interconnected world, where supply chains are global and information travels in milliseconds, imposing barriers to the free movement of raw materials and data serves as a formidable geopolitical weapon with devastating collateral effects. Countries such as Venezuela, Cuba, Iran, North Korea, and more recently, Russia following its invasion of Ukraine, experience firsthand how blockades and sanctions choke their economies. However, the impact of these measures doesn’t remain contained within their borders; it spreads like a shockwave, distorting markets, interrupting production chains, and ultimately driving up the cost of living for citizens around the globe.

The Domino Effect: From Raw Materials to Supermarkets

When a key resource-producing country—a critical supplier of oil, gas, rare minerals, fertilizers, or grains—is subjected to sanctions restricting or prohibiting its exports, a global supply crisis ensues. The basic law of economics is at play: less supply with constant or increasing demand leads to higher prices.

The case of fertilizers is particularly illustrative. Russia and Belarus are major exporters of potassium and nitrogen. Sanctions imposed after the conflict in Ukraine severely limited their flow. The result was a global increase in fertilizer costs, which were directly passed on to farmers worldwide. In turn, these farmers transferred costs to staple foods—wheat, corn, rice—raising the global cost of living and exacerbating food crises in vulnerable regions.

In this sense, sanctions act like a boomerang that strikes the target but always returns to hit the sender, often manifesting as inflation. We must recognize that the global market is an interconnected ecosystem. Damaging one of its significant players inevitably impacts the health of the entire system.

The Neoliberal Contradiction: Free Markets Only When Convenient

This landscape creates a profound contradiction with the principles of neoliberal economists and politicians who preach the omnipotence of free markets, minimal state intervention, and globalization as a vehicle for prosperity.

Blockades, at their core, exemplify maximum state intervention in the market. They represent a coercive use of political power to dictate who may trade with whom, directly violating the principle of the «invisible hand» that Adam Smith suggested should guide transactions based on efficiency and mutual benefit.

This is structural hypocrisy; on one hand, advocates preach deregulation and absolute economic freedom for corporations within their borders or in relations with allies. On the other hand, they utilize state machinery to impose extremely aggressive and restrictive regulations against their geopolitical adversaries. The ‘free market,’ in their rhetoric, seems to apply only to flows that consolidate their hegemony.

Underlying Reasons

So why do nations that proclaim to champion free markets resort to these practices? The reasons are manifold and intertwined:

Geopolitical Power and Coercion: Blockades represent the war of the 21st century. They allow maximum pressure to be exerted without direct military conflict, aimed at forcing behavioral or regime changes in the targeted country.

Strategic Competition: Limiting access to cutting-edge technologies (like semiconductors) or critical resources hinders the development of strategic competitors, maintaining technological and military advantages.

Protected Economic Interests: Occasionally, sanctioning an efficient producer (e.g., steel or aluminum from a country) can be a covert form of protectionism to favor less competitive domestic industries.

Domestic Narrative and Identity Politics: Sanctions are a tool of domestic policy, allowing governments to project strength and defend “values” to their electorate, constructing a narrative of “us against them.”

The recent decision by the United States to intervene militarily in Venezuela and seize control of revenues from over 50 million barrels of oil, while holding President Nicolás Maduro and his wife captive, represents an unprecedented escalation in practices of blocking free trade, taking the concept of “economic interference” to a new level of geopolitical assertiveness.

This intervention epitomizes the extreme culmination of the previously discussed neoliberal contradiction, that is, hyper-intervention disguised as market defense, democracy promotion, fighting terrorism, or combating drug trafficking.

While they preach non-state intervention, they practice the most aggressive interventionism. It is justified as “market protection” when in reality it deeply distorts it.

This leads us to an institutionalized double standard, where the free flow of capital is defended for certain actors but blocked for others, and principles of trade sovereignty are selectively applied.

Thus, economic issues ultimately become treated as national security threats, militarizing trade relations with significant risks for the peoples inhabiting the territories housing natural resources, as well as for the attacking power.

Proposed Solutions

In light of this global high-stakes environment among world powers, the most feasible solution is the creation of non-discriminatory, multinational economic participation spaces in each country where these powers have interests in key raw materials for their productive chains. Such arrangements would ensure that the state possessing the natural resource retains a minimum of 51% ownership in production processes to prevent a neocolonization reminiscent of early global trade.

Various stakeholders could participate through transparent, international public bidding processes, where the best conditions can gain access to the real economy.

To address potential disputes, an International Commercial Disputes Tribunal is proposed to resolve conflicts when investors challenge bids.

Mechanisms based on blockchain for transparency in resource flows are also recommended, particularly to ensure that these resources do not end up being used to fuel armed conflicts.

The outlined solution is suggested to be implemented in three phases:

Pilot Phase: Volunteer countries implement the model in a specific sector.

Regional Phase: Regional blocs adopt the principle as common practice.

Global Phase: Negotiate an international treaty once viability has been demonstrated.