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I’m taking a break from the tariff wars this week to talk about sanctions, but don’t worry—tariffs will be back on my screen soon enough. Sanctions have become an increasingly popular tool of statecraft because they are the main alternative between diplomacy and war. When the former doesn’t work, and nations don’t want to start the latter, they end up in the middle with sanctions. Those can take many forms, some of them not strictly economic. Embargoes, either general or specific, export controls, investment controls, restrictions on capital, confiscation of assets, restrictions on the movement of people, visa denials, and deportations targeted to specific nations have all been employed at various times by various countries.
The big innovations of the twenty-first century were secondary sanctions and the application of sanctions to individuals. Primary sanctions attack the target directly—no trade with Cuba or Russia, for example. Secondary sanctions are bank shots. They affect entities in third countries that do business with targeted countries. The idea is that if you do business with Iran, for example, you cannot do business with the United States, even if doing business with Iran is legal in your country.
Individual sanctions followed a similar path as governments realized that instead of a sledgehammer approach—targeting entire economies or whole sectors—they could use a scalpel and attack individual miscreants that they deemed responsible for the bad behavior they wanted to stop. The use of such sanctions peaked recently in the financial ostracizing of numerous Russians for contributing to the invasion of Ukraine.
Initially, the U.S. business community welcomed individual sanctions because they focused the government’s ire on people directly responsible rather than more sweeping sanctions, which inevitably affected large numbers of innocent people. However, that attitude began to change as the U.S. government improved the efficiency and enthusiasm of its sanctions enforcement. The main consequences were financial sanctions, which generally sought to block transactions that would enhance the target country’s military or technological capabilities. The zealous work of Department of the Treasury officials in the George W. Bush and Obama administrations in approaching foreign financial institutions individually and persuading them to stop financing questionable transactions led to those institutions often deciding not to finance any transactions with the target country, including those approved by the U.S. government and intended for humanitarian purposes. It was simply too complicated and too risky to try to parse the “good” transactions from the “bad,” so the decision was made to deny them all. Over time, the volume of individual sanctions increased geometrically as the government began to employ numerous lists of sanctioned parties, currently totaling more than 18,000 individuals and entities, and sanctions programs have ended up much more far-reaching than expected.
The larger question is whether any of this actually works. That question has been extensively researched. (Peterson Institute, “Evidence on the Costs and Benefits of Economic Sanctions”; U.S. International Trade Commission, The Economic Impact of U.S. Sanctions with Respect to Cuba; World Trade Organization, Can economic sanctions be effective?; Johns Hopkins School of Advanced International Studies, How Sanctions Work: Iran and the Impact of Economic Warfare.) The two main conclusions have been that multilateral sanctions work better than unilateral sanctions, and sanctions by big countries against small ones work better than the reverse. Neither of those is surprising. The most conspicuous example of a failed unilateral sanction is the United States embargo of Cuba. Dating back more than 60 years, it is fair to say it has not achieved any of its political goals and has served primarily to impoverish the Cuban people, who probably don’t like their government much more than we do. As the world economy becomes more integrated, prospects for the success of unilateral sanctions will decline further as most targeted countries can find substitutes for what is being denied them. China has probably discovered the same thing in its actions against Lithuania, Australia, Norway, and others.
Multilateral sanctions have arguably been more successful, although “success” depends on how the term is defined. For example, the Biden administration deserves credit for an extraordinary effort to organize multilateral sanctions in the wake of Russia’s invasion of Ukraine. The sanctions have clearly had an impact in reducing Russia’s trade and the revenue derived from it and in limiting its access to critical technology, yet the war continues. If the goal was to change Russian behavior with respect to Ukraine, the sanctions, so far, have failed. If their goal was to complicate the war effort and weaken the Russian economy, they have succeeded. Iran illustrates a similar dichotomy. If the sanctions’ goal was regime change (which many sanctioning governments have denied), they have failed. If they were intended to prevent Iran from obtaining a nuclear weapons capability, the jury is still out, though the sanctions do not seem to have altered their plans. If the goal was to complicate the latter effort, then perhaps they are succeeding. The lesson here is that sanctions are unlikely to achieve big goals, but they can have an impact on modest ones.
The main limiting factor in most cases is “leakage”—the ability of targets to find a path around the sanctions. This is due to criminal elements building illegal networks involving multiple third-party intermediaries and customs fraud, nonparticipating countries not cooperating in enforcement efforts and allowing or facilitating sanctions evasion, and weak enforcement and compliance among participating countries. That means it is best to view sanctions as a management problem. Complete compliance is unrealistic; leakage is inevitable. If the goal is regime change or a major policy reversal, the sanctions are not likely to succeed. If the goal is more limited, there is a shot at achieving some success, though the impact usually diminishes over time as the targets find paths of evasion, each of which has to be closed off in a never-ending cat-and-mouse game.
William A. Reinsch is senior adviser and Scholl Chair emeritus with the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
