Economic sanctions

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Economic sanctions or embargoes are commercial and financial penalties applied by states or institutions against states, groups, or individuals. [1] [2] Economic sanctions are a form of coercion that attempts to get an actor to change its behavior through disruption in economic exchange. Sanctions can be intended to compel (an attempt to change an actor's behavior) or deterrence (an attempt to stop an actor from certain actions). [3] [4] [5]

Contents

Sanctions can target an entire country or they can be more narrowly targeted at individuals or groups; this latter form of sanctions are sometimes called "smart sanctions". [6] Prominent forms of economic sanctions include trade barriers, asset freezes, travel bans, arms embargoes, and restrictions on financial transactions.

The efficacy of sanctions in achieving intended goals is a subject of debate. [1] [2] [3] [4] [6] [7] Scholars have also considered the policy externalities of sanctions. [7] [8] The humanitarian consequences of country-wide sanctions have been a subject of controversy. [9] As a consequence, since the mid-1990s, United Nations Security Council (UNSC) sanctions have tended to target individuals and entities, in contrast to the country-wide sanctions of earlier decades. [10]

History of sanctions

One of the most comprehensive attempts at an embargo occurred during the Napoleonic Wars of 1803–1815. Aiming to cripple the United Kingdom economically, Emperor Napoleon I of France in 1806 promulgated the Continental System—which forbade European nations from trading with the UK. In practice the French Empire could not completely enforce the embargo, which proved as harmful (if not more so) to the continental nations involved as to the British. [11] By the time of the Hague Conventions of 1899 and 1907, diplomats and legal scholars regularly discussed using coordinated economic pressure to enforce international law. This idea was also included in reform proposals by Latin American and Chinese international lawyers in the years leading up to World War I. [12]

World War I and the Interwar period

Sanctions in the form of blockades were prominent during World War I. [13] Debates about implementing sanctions through international organizations, such as the League of Nations, became prominent after the end of World War I. [14] Leaders saw sanctions as a viable alternative to war. [15]

The League Covenant permitted the use of sanctions in five cases: [16]

  1. When Article 10 of the League Covenant is violated
  2. In case of war or threat of war (Article 11)
  3. When a League member does not pay an arbitration award (Article 12)
  4. When a League member goes to war without submitting the dispute to the League Council or League Assembly (Articles 12–15)
  5. When a non-member goes to war against a League member (Article 17)

The Abyssinia Crisis in 1935 resulted in League sanctions against Mussolini's Italy under Article 16 of the Covenant. Oil supplies, however, were not stopped, nor the Suez Canal closed to Italy, and the conquest proceeded. The sanctions were lifted in 1936 and Italy left the League in 1937. [17] [18] [19] [20]

In the lead-up to the Japanese attack on Pearl Harbor in 1941, the United States imposed severe trade restrictions on Japan to discourage further Japanese conquests in East Asia. [15]

From World War II onwards

After World War II, the League was replaced by the more expansive United Nations (UN) in 1945. Throughout the Cold War, the use of sanctions increased gradually. [15] After the end of the Cold War, there was a major increase in economic sanctions. [9]

According to the Global Sanctions Data Base, there have been 1,325 sanctions in the period 1950–2022. [15]

Politics of sanctions

Economic sanctions are used as a tool of foreign policy by many governments. Economic sanctions are usually imposed by a larger country upon a smaller country for one of two reasons: either the latter is a perceived threat to the security of the former nation or that country treats its citizens unfairly. They can be used as a coercive measure for achieving particular policy goals related to trade or for humanitarian violations. Economic sanctions are used as an alternative weapon instead of going to war to achieve desired outcomes.

The Global Sanctions Data Base categorizes nine objectives of sanctions: "changing policy, destabilizing regimes, resolving territorial conflicts, fighting terrorism, preventing war, ending war, restoring and promoting human rights, restoring and promoting democracy, and other objectives." [15]

Effectiveness of economic sanctions

According to a study by Neuenkirch and Neumeier, UN economic sanctions had a statistically significant impact on targeted states by reducing their GDP growth by an average of 2.3–3.5% per year—and more than 5% per year in the case of comprehensive UN embargoes—with the negative effects typically persisting for a period of ten years. By contrast, unilateral US sanctions had a considerably smaller impact on GDP growth, restricting it by 0.5–0.9% per year, with an average duration of seven years. [21]

Oryoie, A. R. demonstrates that economic sanctions result in welfare losses across all income groups in Iran, with wealthier groups suffering greater losses compared to poorer groups. [22]

Imposing sanctions on an opponent also affects the economy of the imposing country to a degree. If import restrictions are promulgated, consumers in the imposing country may have restricted choices of goods. If export restrictions are imposed or if sanctions prohibit companies in the imposing country from trading with the target country, the imposing country may lose markets and investment opportunities to competing countries. [23]

Hufbauer, Schott, and Elliot (2008) argue that regime change is the most frequent foreign-policy objective of economic sanctions, accounting for just over 39 percent of cases of their imposition. [24] Hufbauer et al. found that 34 percent of the cases studied were successful. [25] However, when Robert A. Pape examined their study, he found that only 5 of their reported 40 successes were actually effective, [26] reducing the success rate to 4%. In either case, the difficulty and unexpected nuances of measuring the actual success of sanctions in relation to their goals are both increasingly apparent and still under debate. In other words, it is difficult to determine why a regime or country changes (i.e., whether it was the sanction or inherent instability) and doubly so to measure the full political effect of a given action. [27]

Offering an explanation as to why sanctions are still imposed even when they may be marginally effective, British diplomat Jeremy Greenstock suggests sanctions are popular not because they are known to be effective, but because "there is nothing else [to do] between words and military action if you want to bring pressure upon a government". [28] Critics of sanctions like Belgian jurist Marc Bossuyt argue that in nondemocratic regimes, the extent to which this affects political outcomes is contested, because by definition such regimes do not respond as strongly to the popular will. [29]

A strong connection has been found between the effectiveness of sanctions and the size of veto players in a government. Veto players represent individual or collective actors whose agreement is required for a change of the status quo, for example, parties in a coalition, or the legislature's check on presidential powers. When sanctions are imposed on a country, it can try to mitigate them by adjusting its economic policy. The size of the veto players determines how many constraints the government will face when trying to change status quo policies, and the larger the size of the veto players, the more difficult it is to find support for new policies, thus making the sanctions more effective. [30]

Francesco Giumelli writes that the "set of sanctions ... that many observers would be likely to consider the most persuasive (and effective)", namely, UN sanctions against "central bank assets and sovereign wealth funds", are "of all the types of measures applied ... the one least frequently used". [10] Giumelli also distinguishes between sanctions against international terrorists, in which "the nature of the request is not as important as the constraining aspect", and sanctions imposed in connection with "post-conflict scenarios", which should "include flexible demands and the potential for adaptation if the situation changes". [10]

Economic sanctions can be used for achieving domestic and international purposes. [31]

Foreign aid suspensions are typically considered as a type of economic sanctions. Previously mentioned work by Hufbauer, Schott, Elliot, and Oegg is a prominent example. [32] Claas Mertens finds that "suspending aid is more effective than adopting economic sanctions because (1) aid suspensions are economically beneficial for the adopting state, while sanctions are costly, (2) aid suspensions directly affect the targeted government's budget, (3) market forces undermine sanctions but not aid suspensions, and (4) aid suspensions are less likely to spark adverse behavioral reactions. [...] The findings suggest that economic sanctions are less effective than previously thought and that large donor states have a higher chance of achieving political goals through economic coercion." [33]

Criticism

Sanctions have been criticized on humanitarian grounds, as they negatively impact a nation's economy and can also cause collateral damage on ordinary citizens. Peksen implies that sanctions can degenerate human rights in the target country. [34] Some policy analysts believe that imposing trade restrictions only serves to hurt ordinary people as opposed to government elites, [35] [36] [37] [38] and others have likened the practice to siege warfare. [39] [40] The United Nations Security Council (UNSC) has generally refrained from imposing comprehensive sanctions since the mid-1990s, in part due to the controversy over the efficacy and civilian harms attributed to the sanctions against Iraq. [10]

Sanctions can have unintended consequences. [41]

Smart Sanctions

One of the most popular suggestions to combat the humanitarian issues that arise from sanctions is the concept of "smart sanctions", and a lot of research has been done on this concept also known as targeted sanctions. [42] The term "smart sanctions" refers to measures like asset freezes, travel bans, and arms embargoes that aim to target responsible parties like political leaders and elites with the goal of avoiding causing widespread collateral damage to innocent civilians and neighboring nations. [42]

Though there has been enthusiasm about the concept, as of 2016, the Targeted Sanctions Consortium (TSC) found that targeted sanctions only result in policy goals being met 22% of the time. [43]

Smart Sanctions have also not been totally successful in avoiding civilian harm or unintended consequences. [42] For example, arms embargoes can impact the self-defense efforts of those under attack, aviation bans can affect a nation's transportation sector and the jobs of civilians associated with them, and financial sanctions targeting individuals raise due process issues. [42]  One example of smart sanctions in practice can be seen with sanctions imposed by the United States on the Russian Federation following the latter's 2014 annexation of Crimea, which were intended to exert pressure on Russia's financial sector. [44] The sanctions resulted in American credit card companies Visa and MasterCard suspending all transactions of sanctioned Russian banks, effectively canceling the credit cards of ordinary Russian consumers. [44]

Implications for businesses

There is an importance, especially with relation to financial loss, for companies to be aware of embargoes that apply to their intended export or import destinations. [45] Properly preparing products for trade, sometimes referred to as an embargo check, is a difficult and timely process for both importers and exporters. [46]

There are many steps that must be taken to ensure that a business entity does not accrue unwanted fines, taxes, or other punitive measures. [47] Common examples of embargo checks include referencing embargo lists, [48] [49] [50] cancelling transactions, and ensuring the validity of a trade entity. [51]

This process can become very complicated, especially for countries with changing embargoes. Before better tools became available, many companies relied on spreadsheets and manual processes to keep track of compliance issues. Today, there are software based solutions that automatically handle sanctions and other complications with trade. [52] [53] [54]

Examples

An undersupplied US gasoline station, closed during the oil embargo in 1973 GASOLINE SHORTAGE HIT THE STATE OF OREGON IN THE FALL OF 1973 BY MIDDAY GASOLINE WAS BECOMING UNAVAILABLE ALONG... - NARA - 555405.jpg
An undersupplied US gasoline station, closed during the oil embargo in 1973

United States sanctions

US Embargo Act of 1807

The United States Embargo of 1807 involved a series of laws passed by the US Congress (1806–1808) during the second term of President Thomas Jefferson. [55] Britain and France were engaged in the War of the Fourth Coalition; the US wanted to remain neutral and to trade with both sides, but both countries objected to American trade with the other. [56] American policy aimed to use the new laws to avoid war and to force both France and Britain to respect American rights. [57] The embargo failed to achieve its aims, and Jefferson repealed the legislation in March 1809.

US embargo of Cuba

The United States embargo against Cuba began on March 14, 1958, during the overthrow of dictator Fulgencio Batista by Fidel Castro during the Cuban Revolution. At first, the embargo applied only to arms sales; however, it later expanded to include other imports, eventually extending to almost all trade on February 7, 1962. [58] Referred to by Cuba as "el bloqueo" (the blockade), [59] the US embargo on Cuba remains as of 2022 one of the longest-standing embargoes in modern history. [60] Few of the United States' allies embraced the embargo, and many have argued it has been ineffective in changing Cuban government behavior. [61] While taking some steps to allow limited economic exchanges with Cuba, American President Barack Obama nevertheless reaffirmed the policy in 2011, stating that without the granting of improved human rights and freedoms by Cuba's current government, the embargo remains "in the national interest of the United States". [62]

Other countries

Russian sanctions

Russia has been known to utilize economic sanctions to achieve its political goals. Russia's focus has been primarily on implementing sanctions against the pro-Western governments of former Soviet Union states. The Kremlin's aim is particularly on states that aspire to join the European Union and NATO, such as Ukraine, Moldova, and Georgia. [63] Russia has enacted a law, the Dima Yakovlev Law, that defines sanctions against US citizens involved in "violations of the human rights and freedoms of Russian citizens". It lists US citizens who are banned from entering Russia. [64]

Russia sanctions on Ukraine

Viktor Yushchenko, the third president of Ukraine who was elected in 2003, lobbied during his term to gain admission to NATO and the EU. [65] Soon after Yushchenko entered office, Russia demanded Kyiv pay the same rate that it charged Western European states. This quadrupled Ukraine's energy bill overnight. [65] Russia subsequently cut off the supply of natural gas in 2006, causing significant harm to the Ukrainian and Russian economies. [66] As the Ukrainian economy began to struggle, Yushchenko's approval ratings dropped significantly; reaching the single digits by the 2010 election; Viktor Yanukovych, who was more supportive of Moscow won the election in 2010 to become the fourth president of Ukraine. After his election, gas prices were reduced substantially. [65]

Russian sanctions on Georgia

The Rose Revolution in Georgia brought Mikheil Saakashvili to power as the third president of the country. Saakashvili wanted to bring Georgia into NATO and the EU and was a strong supporter of the US-led war in Iraq and Afghanistan. [67] Russia would soon implement a number of different sanctions on Georgia, including natural gas price raises through Gazprom and wider trade sanctions that impacted the Georgian economy, particularly Georgian exports of wine, citrus fruits, and mineral water. In 2006, Russia banned all imports from Georgia which was able to deal a significant blow to the Georgian economy. [67] Russia also expelled nearly 2,300 Georgians who worked within its borders. [67]

United Nations sanctions

The United Nations issues sanctions by consent of the United Nations Security Council (UNSC) and/or General Assembly in response to major international events, receiving authority to do so under Article 41 of Chapter VII of the United Nations Charter. [68] The nature of these sanctions may vary, and include financial, trade, or weaponry restrictions. Motivations can also vary, ranging from humanitarian and environmental concerns [69] to efforts to halt nuclear proliferation. Over two dozen sanctions measures have been implemented by the United Nations since its founding in 1945. [68]

Most UNSC sanctions since the mid-1990s have targeted individuals and entities rather than entire governments, a change from the comprehensive trade sanctions of earlier decades. For example, the UNSC maintains lists of individuals indicted for crimes or linked to international terrorism, which raises novel legal questions regarding due process. According to a dataset covering the years 1991 to 2013, 95% of UNSC sanction regimes included "sectoral bans" on aviation and/or the import (or export) of arms or raw materials, 75% included "individual/group" sanctions such as asset freezes or restrictions on travel, and just 10% targeted national finances or included measures against central banks, sovereign wealth funds, or foreign investment. The most frequently used UNSC sanction documented in the dataset is an embargo against imported weapons, which applied in 87% of all cases and was directed against non-state actors more often than against governments. Targeted sanctions regimes may contain hundreds of names, a handful, or none at all. [10]

Sanctions on Somalia, 1992

The UN implemented sanctions against Somalia beginning in April 1992, after the overthrow of the Siad Barre regime in 1991 during the Somali Civil War. UNSC Resolution 751 forbade members to sell, finance, or transfer any military equipment to Somalia. [70]

Sanctions on North Korea, 2006

The UNSC passed Resolution 1718 in 2006 in response to a nuclear test that the Democratic People's Republic of Korea (DPRK) conducted in violation of the Treaty on Non-Proliferation of Nuclear Weapons. The resolution banned the sale of military and luxury goods and froze government assets. [71] Since then, the UN has passed multiple resolutions subsequently expanding sanctions on North Korea. Resolution 2270 from 2016 placed restrictions on transport personnel and vehicles employed by North Korea while also restricting the sale of natural resources and fuel for aircraft. [72]

The efficacy of such sanctions has been questioned in light of continued nuclear tests by North Korea in the decade following the 2006 resolution. Professor William Brown of Georgetown University argued that "sanctions don't have much of an impact on an economy that has been essentially bankrupt for a generation". [73]

Sanctions on Libya

On February 26, 2011, the UNSC issued an arms embargo against the Libya through Security Council Resolution 1970 in response to humanitarian abuses occurring in the First Libyan Civil War. [74] The embargo was later extended to mid-2018. Under the embargo, Libya has suffered severe inflation because of increased dependence on the private sector to import goods. [75] The sanctions caused large cuts to health and education, which caused social conditions to decrease. Even though the sanctions were in response to human rights, their effects were limited. [76]

Sanction on the Central African Republic

In 2013 the UN decreed an arms embargo against the CAR. The arms embargo was established in the context of an intercommunity conflict between the Séléka rebels, with a Muslim majority, and the predominantly Christian militias. to fight back. Raised UN Security Council lifts arms embargo on CAR on August 1, 2024. [77]

Sanctions on apartheid South Africa

In effort to punish South Africa for its policies of apartheid, the United Nations General Assembly adopted a voluntary international oil-embargo against South Africa on November 20, 1987; that embargo had the support of 130 countries. [78] South Africa, in response, expanded its Sasol production of synthetic crude. [79]

All United Nations sanctions on South Africa ended over the Negotiations to end Apartheid, Resolution 919 and the 1994 South African elections, in which Nelson Mandela was elected as the first post-Apartheid president. When asked in 1993 if economic sanctions had helped end apartheid, Mandela replied "Oh, there is no doubt." [80]

Other multilateral sanctions

The United States, Britain, the Republic of China and the Netherlands imposed sanctions against Japan in 1940–1941 in response to its expansionism. Deprived of access to vital oil, iron-ore and steel supplies, Japan started planning for military action to seize the resource-rich Dutch East Indies, which required a preemptive attack on Pearl Harbor, triggering the American entry into the Pacific War. [81]

In 1973–1974, OAPEC instigated the 1973 oil crisis through its oil embargo against the United States and other industrialized nations that supported Israel in the Yom Kippur War. The results included a sharp rise in oil prices and in OPEC revenues, an emergency period of energy rationing, a global economic recession, large-scale conservation efforts, and long-lasting shifts toward natural gas, ethanol, nuclear and other alternative energy sources. [82] [83] Israel continued to receive Western support, however.

In 2010, the European Union made the decision to sanction Iran due to their involvement in their nuclear program. [84] Theresa Papademetriou states the exact restrictions the EU posed on Iran, "prohibition on the provision of insurance, increased restrictions on and notifications needed for transfers of funds to and from Iran, restrictions on the supply of or traffic in technology and equipment to be used in certain oil and gas fields and prohibition of investment in such fields, expansion of the list of goods and technology whose supply to Iran is either subject to prior authorization or is completely banned and new visa restrictions.” [84] Also in 2010, the UN Council imposed sanctions on Iran due to their involvement in their nuclear program. [85] These sanctions banned Iran from carrying out tests on their nuclear weapons and imposed an embargo on the transfer of weapons into the country. [85] These sanctions resulted in drastic macroeconomic downturns for the Iranian economy including volatility in GDP, increase in unemployment, and increase in inflation. [86]

Current sanctions

By targeted country

List of sanctioned countries (the below is not an exhaustive list): [87]

By targeted individuals

By sanctioning country or organization

By targeted activity

Bilateral trade disputes

Former sanctions

See also

Related Research Articles

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<span class="mw-page-title-main">Iran–European Union relations</span> Bilateral relations

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Seven resolutions have been approved by the United Nations Security Council (UNSC) relating to the nuclear program of Iran, although the only one currently in force is Resolution 2231, passed on 20 July 2015 endorsing the Joint Comprehensive Plan of Action on the Iranian nuclear program. It sets out an inspection process and schedule while also preparing for the removal of United Nations arms sanctions against Iran. In August 2020, the U.S. released a proposal to extend the UN arms embargo on Iran in the UN.

Cyber sanctions are defined as the economic and financial measures intended to change the behaviors of targets using malicious cyber activities and/or intrusions. Since cyber sanctions regimes are used by countries, these instruments are used predominantly by countries. Thus, the units of analysis are the countries in the international system. In other words, countries, rather than the non-state actors including companies, are the main actors and decision-makers when it comes to the threat and/or use of cyber sanctions at the international level. The concept of cyber sanctions is relatively new area in the world politics. Today, we have few countries took measures and enacted legislation by involving cyber-related regulation to secure their information technology. On the other hand, there are many countries, including developed countries, have not updated their legislation according to this new security area, i.e., cyber-crimes.

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PD-icon.svg This article incorporates public domain material from European Union: Renewed Sanctions Against Iran. Library of Congress . Retrieved 2023-12-14.

Further reading

  1. ↑ "Global Sanctions Database - GSDB". globalsanctionsdatabase.com. Retrieved 2021-05-18.
  2. ↑ Felbermayr, Gabriel; Kirilakha, Aleksandra; Syropoulos, Constantinos; Yalcin, Erdal; Yotov, Yoto (2021-05-18). "The 'Global Sanctions Data Base': Mapping international sanction policies from 1950-2019". VoxEU.org. Retrieved 2021-05-18.
  3. ↑ Kirikakha, Aleksandra; Felbermayr, Gabriel J.; Syropoulos, Constantinos; Yalcin, Erdal; Yotov, Yoto V. (2021-12-10). "The Global Sanctions Data Base (GSDB): an update that includes the years of the Trump presidency". Research Handbook on Economic Sanctions: 62–106. doi:10.4337/9781839102721.00010. ISBN   9781839102721. S2CID   245356746.
  4. ↑ Morgan, T. Clifton; Bapat, Navin A.; Kobayashi, Yoshiharu (2021-12-10). "The Threat and Imposition of Economic Sanctions data project: a retrospective". Research Handbook on Economic Sanctions: 44–61. doi:10.4337/9781839102721.00009. ISBN   9781839102721. S2CID   245374708.
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