Restricting trade as a form of statecraft, a
Although used sparingly until World War I, the case for using economic sanctions as a coercive tool gained popularity following Rhodesia’s—now Zimbabwe—struggle for an internationally recognized independence in 1980. During the Cold War, sanctions were issued against the Soviet Union to prevent the bloc from amassing technological weaponry that could be used against the United States, and during the Yugoslav War, sanctions were used as a means to help end gross human rights violations, including genocide, in the Balkans.
“The Cold War sanctions were a quite elaborate effort organized by NATO to impede Soviet access to technology, and it was the first example of a really systematic long-term multilateral effort to impede the progress of a hostile regime and do them harm,” says Michael Oppenheimer, professor at New York University’s School of Professional Studies Center for Global Affairs. “And with some success. The Soviets had a powerful military, they were very good at finding workarounds, but the workarounds were not nearly as good at producing systems as ours.”
More recently, sanctions have been imposed against Venezuela, North Korea, Iran, and Russia, among others. Perhaps ironically, as Russia has been sanctioned for its invasion of Ukraine and other offenses, it has also been an ally in imposing sanctions against North Korea and Iran.
“When we brought Iran to the table to negotiate, getting Russia on board was key. You have to have all of the large countries coordinating,” says John Zindar, partner of transatlantic business development at the European–American Business Organization. “Even if you have effective sanctions, one country could still screw it up.”
That coordination becomes increasingly important as globalization minimizes the impact any one country—even a superpower—can have on its own. During the Cold War, a mostly bipolar system provided leverage
“The political entities that are imposing sanctions now are more like coalitions of the willing, and less like formal alliances,” says Oppenheimer. “And they come together depending on whether their interests happen to coincide.”
But what happens when the U.S. itself is a rogue player? Such is the case with Cuba, where U.S. sanctions have lingered for decades, despite many other countries maintaining regular trade relations with the island nation. The thawing of relations under the Obama administration and optimism that trade might become normalized is once again in question after the two nations expelled each other’s diplomats amid a mysterious sonic attack in Havana, after which Congress launched an investigation into Cuban airport security.
“One of the criticisms against the use of sanctions is that it can provide an excuse for an authoritarian regime to stay in power, and it demonizes the country on the global stage,” Zindar says. “This was evidenced in Cuba. The embargo program has clearly bolstered the Castro regime, and in the
While some might call to simply end the sanctions against Cuba, abruptly exiting any sanctions program without considering the long-term ramifications and all of the players involved can be catastrophic. The issue is topical now with the U.S.
“We’re walking away from the Iran deal, which I think is just disastrous. To me, the Iran deal was brilliantly conceived and executed,” Oppenheimer says. “And of course the immediate negative impact is on North Korea
That not only has consequences with targets of potential sanctions, if the threat of sanctions loses heft
“You’re not going to get your allies to go along with you next time. You’re going to walk away from Iran and then you’re going to go back to the Europeans and the Russians and the Chinese in two more years and try to get multilateral sanctions on, you know, name your country,” Oppenheimer adds. “They’re going to look back at the Iran experience and say, ‘Why should I even pretend to sit down and talk about this when, in the end, if you don’t like the result, the United States is just going to walk away?’”
One of the largest criticisms of sanctions is that while they aim to rein in the ruling class of an offending nation, they instead disproportionately affect civilians.
Whether such consequences are detrimental or beneficial to a sanctions scheme is widely debated.
“The problem is, sanctions don’t affect the standard of living of the elites,” Zindar says. “They will always be able to get their luxury items, sanctions or no. But the people who are usually hurt the most are the common men and women who really have little to do with their country’s policies.”
“In terms of whether you should hold back on sanctions because you fear you’ll hurt innocent people, in a sense you want to hurt innocent people because you want to create political backlash within that country,” Oppenheimer says. “So it’s not that you relish hurting innocent people, but you’re running the trade-off, and you’re asking, ‘Is it worth hurting some innocent people in order to generate the pressure on the regime to come to the bargaining table?’
“And the answer is yes. And I think that’s the right answer.”
In the U. S., the Office of Foreign Assets Control (OFAC), housed in the Treasury, oversees enforcement of sanctions against individuals or groups listed on the Specially Designated Nationals list for terrorism-related activities. The State Department’s Office of Economic Sanctions Policy and Implementation oversees foreign policy-related sanctions adopted to counter threats to national security posed by particular activities and countries. The Department of Commerce’s Bureau of Industry and Security sets the export controls and issues export licenses. It was the Department of Commerce that issued a $1.19 billion penalty against a Chinese telecommunications company in May for willingly and knowingly circumventing sanctions against North Korea and Iran.
“There’s broad discretion in the agency to enforce the law in the way it sees fit, and there’s a strong incentive to those who are subject to it, to report a violation,” says David Brummond, a sanctions lawyer at Jacobson Burton Kelley in Washington. “The combination of those two things make it a very effective enforcement regime.”
Brummond has firsthand experience of the effectiveness of sanction enforcement; before joining his current law firm, he spent eight years in OFAC, where he developed the incentive matrix for violation reporting. Not only is the enforcement effective, he says, but so too are the deterrents in place to prevent entities from conducting transactions with sanctioned countries.
“The problem is, it’s gone too far. It has essentially created a fear that keeps banks and others from doing legitimate business transactions that are no longer prohibited,” Brummond says. “You can do the trade, but you can’t get the financing for it
Equally problematic are the unintended consequences of sanctions imposed to advance foreign policy and national security interests without consideration of existing treaties. One such conflict arose when limiting Iran’s access to refined petroleum added restrictions to transport vessels that were already heavily restricted due to international agreements on a shared pollution liability scheme. Traditionally, insured vessels refused to assume the additional liability and deliver to Iran. Consequently,
“Just because you have a very valid strong policy interest in what you’re trying to do from a sanctions standpoint, doesn’t mean it should be the only exclusive consideration,” Brummond says. “Where possible, there should be