Quora Answer: When Should a Country Trade with Countries It Considers to be a Military Threat?

The following is my answer to a Quora question: “When should a country trade with countries it considers to be a military threat?” 

Trade does not cease simply because another country is considered a potential belligerent, unless there is sanctions in place.  The problem is that sanctions rarely benefit the country imposing and is not an effective policy tool.  For example, US sanctions against Iran cannot stop Iran selling oil.  It is based on an old pique because the Iranians overthrew the Shah, an American tool.  The US is a superpower; Iran is barely a regional power.  Iran is not even in a position to realistically threaten Israel, with its much stronger military.  What the sanctions have done is push Iran into selling its energy through Russia, further strengthening their position as a major energy provider, and increasing the influence of a greater, global rival. 

When a country considers another country a potential belligerent, it limits its trade of materiel and technology that would strengthen them militarily relative to their own military.  This can be seen in the US resisting Huawei’s expansion into their, and their allies’ telecommunications market.  Another example would be seen in Indonesia contesting Singtel’s takeover of Indosat.  What is almost never done is the outright ban on trade.  Trade is a powerful policy tool to shape perception in another country.  Countries that have developed strong trade links do not go to war since they have a lot to lose.  Japan used trade and soft loans to heal the rift of the Japanese Occupation with much of East, and Southeast Asia.