Trading with the Enemy: Why Warring States Still Trade?
Dr. Mariya Grinberg, a political science professor at MIT, recently spoke at Tufts University’s Fletcher School about a surprising wartime phenomenon: countries at war often continue trading with each other. Drawing on her book Trade in War: Economic Cooperation Across Enemy Lines and fresh data from the ongoing Russia-Ukraine conflict, Grinberg explained why enemies engage in commerce even during hostilities. Grinberg is an expert on wartime commercial policy and political economy, with research interests in how time horizons and uncertainty shape state strategies (from military planning to questions of sovereignty). Her lecture delved into the history of wartime trade and presented a framework for understanding the strategic logic behind “trading with the enemy.”
Wartime Trade Throughout History
To set the stage, Grinberg first reviewed how belligerents have traded in past wars. History offers many examples of foes doing business despite being locked in conflict. During the Crimean War (1853-1856), for instance, Great Britain permitted trade in wheat with its adversary Russia. In World War I, Britain managed to import chemical dyes from Germany, even though those dyes were a key resource monopolized by the German industry. And even in World War II – an existential struggle – Britain continued buying certain products (such as dyes) from Nazi Germany despite the all-out conflict. These cases illustrate that wartime trade is nothing new. Even when nations are fighting fiercely, some economic exchange has often persisted across enemy lines.
Why Do Countries Trade During War?
This historical reality poses a puzzle. Conventional wisdom assumes that no trade should occur between enemies in wartime – after all, why would you help your opponent’s economy during a war? Moreover, according to “commercial peace” theory, nations deeply intertwined in trade should be less likely to go to war in the first place. If two countries are still trading after war breaks out, one might think they would never have gone to war at all due to the cost of losing that trade. It seems counterintuitive: if you’re fighting a war, why trade with the enemy at all? Grinberg’s analysis addresses this question head-on. Why do countries trade during wartime?
Indirect Trade via Neutral Parties
One key insight is that wartime trade is usually indirect. Direct bilateral trade between two warring states may collapse, but that doesn’t mean goods stop flowing between them – trade finds a way. Neutral third-party countries often step in as intermediaries to keep commerce alive. As Grinberg put it, “trade usually gets where it wants to go,” even when two sides are fighting. For example, a neutral country might buy a product from one belligerent and then quietly sell it to the other. Alternatively, neutrals can supply substitutes: if Country A can’t buy grain directly from enemy Country B, it might buy grain from Country C, who in turn increases purchases from Country B. In this way, the original goods still reach their destination through a circuitous route. Wartime trade often re-routes through third parties to circumvent restriction on direct trade.
Competing Incentives: Economic Gains vs. Security Risks
Grinberg emphasized that leaders face a balancing act when deciding on wartime trade policy. On one hand, they want to hobble the enemy’s economy and deny resources that could fuel the enemy war machine. On the other hand, they need to sustain their own economy and even generate revenue to fund their war effort. Severing all trade would maximize harm to the opponent but also inflict significant economic pain on oneself (and might allow neutral countries to capture long-term markets). Thus, governments weigh security risks against economic gains when choosing whether to permit trade with the enemy. Security considerations typically come first—no state wants to directly empower its foe’s military—but economic needs cannot be ignored, especially if cutting off trade would undermine one’s own financial stability or war-fighting capacity.
Conversion Trade-offs: What to Trade and What to Restrict
How do states manage this trade-off in practice? Grinberg argues they do so by carefully choosing which goods to trade and which to restrict, based on how easily each good can be turned into military power. The concept of “conversion” is critical here: it refers to how quickly a product can be converted into something that enhances military capabilities. The rule of thumb is straightforward – if selling a product could quickly bolster the enemy’s war effort, that product is off-limits. Conversely, if a good is not easily or immediately useful for war, a country might allow its export to the enemy, knowing it gains revenue while the enemy gains little short-term advantage.
For example, a nation would be reluctant to sell weapons or ammunition to its opponent in war, because those items can be used to harm it right away. Similarly, it is more likely to ban the export of advanced electronics or machinery that the enemy could swiftly turn into military equipment. However, that same nation might continue trading less-critical goods – say, certain raw materials, foodstuffs, or luxury items – that would take a long time to convert into weapons. By exporting those slower-to-convert products, the state earns money to finance its own war while minimizing the risk of immediately strengthening the enemy’s army. In short, policymakers examine each potential export and ask: Will this help the enemy now, or can we safely trade it to boost our own resources?
War Duration and Intensity: A Two-Factor Model
To describe this decision-making process, Dr. Grinberg uses two key factors: how long the war is expected to last and how intense (or total) the war is. These two factors together determine the strictness of wartime trade policy:
Expected War Length: If leaders believe the conflict will be short, they tend to be more lenient about trade. The reasoning is that if a product takes a long time to be converted into military power, it likely won’t impact the outcome of a short war. In a short-war scenario, a state can safely trade certain goods and reap immediate financial benefits, assuming the enemy won’t have time to turn those goods into weapons before the war is over. On the other hand, if a war is expected to drag on for many years, almost any traded item could eventually be converted into something militarily useful. In such long wars, countries grow much more cautious and restrict a wider range of goods, denying the adversary even those resources that only have long-term military value. The longer a war is projected to last, the more potential an enemy has to eventually make use of anything you sell them – so the list of prohibited exports grows.
War Intensity: The severity of the war also shapes trade decisions. In a limited war or lower-intensity conflict, a country might accept a bit more trade risk because it wants to preserve its economic strength for the future. If the war is not an all-out fight for survival, losing trade revenue could weaken the state’s long-term security posture, so leaders may allow some commerce to continue in order to keep the economy healthy. By contrast, in a total war – an existential struggle where the nation’s survival is at stake – leaders are far more willing to sacrifice economic benefits for military security. In a high-intensity, total war, states impose much stricter embargoes on the enemy because they cannot afford to give the adversary any help, even if that means significant economic pain for themselves. Essentially, the higher the stakes of the war, the more a state prioritizes starving the enemy of resources over its own trade gains.
Using these two dimensions (time and intensity), states decide which goods are “safe” to trade and which are too risky. For each product, officials ask: Will this item likely be converted to enemy military use within the timeframe of this war? If the answer is no (for example, it’s a raw material and the war is expected to be over before that material can become a weapon), they may tolerate the trade. If the answer is yes (the war will last long enough or the item could be used quickly), they ban it. Importantly, these decisions are not set in stone – if a conflict lasts longer than expected or escalates in intensity, countries often tighten their trade restrictions as conditions change. A war that was supposed to be quick may stretch out, prompting leaders to reconsider which exports might eventually arm the enemy. Likewise, if a limited war evolves into a desperate fight, economic considerations will increasingly take a backseat to security, and previously allowed trades might be cut off.
The Russia-Ukraine War: A Modern Case Study
The ongoing Russia-Ukraine War offers a real-world example of Grinberg’s theory in action. This conflict is unusual because it has elements of a proxy war between Russia and the Western alliance (the United States and NATO) supporting Ukraine. That dynamic has complicated wartime commerce. On the one hand, many European countries depended on Russian exports (especially energy) and did not sever all trade immediately when the war began. In fact, even as Russian and Ukrainian troops were fighting, Russian natural gas continued to flow through pipelines across Ukraine to supply European consumers. Ukraine’s government, despite being at war with Russia, allowed those gas transit pipelines to stay open for a period, partly because shutting them would have hurt European allies who rely on that gas. In short, the political and alliance context influenced which trade links remained intact: European demand and the indirect U.S./NATO involvement limited Ukraine’s ability to cut off certain trades outright.
Grinberg highlighted how initial expectations about the war’s length shaped early trade decisions. In February 2022, Russia and many Western observers expected a short conflict – some thought Kyiv might fall within days. Accordingly, the first rounds of sanctions and trade bans were relatively limited in scope. Both Ukraine and Europe hesitated to completely sever economic ties with Russia at first. However, as the war went on far longer than anticipated, Ukraine and its Western partners ramped up their economic restrictions. Western countries expanded their sanctions to cover more Russian banks, technology, and commodities.
Commerce between Russia and Ukraine did not vanish entirely – it simply re-routed through other channels. Grinberg presented new empirical research tracking specific goods that used to flow between the two countries before the war and showing how those goods continued to move via third countries after hostilities began. By examining trade statistics, Grinberg identified products that Russia and Ukraine are effectively still exchanging indirectly via such intermediaries. This ongoing indirect trade underscores her point that even heavy sanctions and the fury of war cannot completely choke off commerce – the goods often find another path.
Conclusion: Implications of Wartime Trade
Dr. Grinberg’s findings carry important implications for both scholars and policymakers. One takeaway is that economic sanctions and trade barriers have limits: while they can strain an adversary, they are unlikely to completely cripple a foe’s war effort because determined countries will find alternative markets and middlemen. In other words, it is extremely difficult to fully isolate a country economically, even when the world’s major powers try to do so during war. Trade tends to seep through the cracks. Another implication is a caution for the popular “commercial peace” theory. Grinberg’s research suggests that strong trade ties do not guarantee peace – nations can be economically interdependent and still end up at war, and even after war starts, they may continue trading. This means we should be skeptical of the idea that fostering trade alone will prevent conflict. Ultimately, her lecture highlighted a nuanced reality: states at war are constantly balancing short-term security needs against long-term economic health. Wartime trade is a product of that balance, and it shows the remarkable adaptability of economic networks even under the harshest political circumstances.