The pitfalls of sanctions and financial warfare

Sanctions are all the rage in contemporary foreign policy circles. Following interventions in Iraq, Afghanistan and Libya, Western populations rightly are less and less supportive of direct military action, especially of any initiative involving “boots on the ground.” Sanctions provide a tempting policy solution to decision makers all too conscious of public opinion; a sort of “financial warfare,” where offending countries are punished economically rather than confronted on the battlefield.

In psychological terms, the goal of sanctions is to change undesired behavior in countries that deviate from the norm through negative reinforcement. Though widely used throughout the Clinton era (35 countries were targeted by U.S. sanctions between 1993–96), they fell out of fashion under successive George W. Bush administrations, which, under strong neoconservative influence, took a more combative approach to global issues. In 1998, Dick Cheney, then Chief Executive/lobbyist for the Halliburton oil services company, argued that “unilateral sanctions […] almost never work.”

Under President Obama, sanctions came back with a vengeance, starting with tightening the noose around Iran in an attempt to stem the country’s nuclear enrichment plans, and most recently, targeting Russia for its alleged role in the ongoing Ukraine conflict. The appeal of sanctions is evident. The last thing war-weary Americans have wanted is another war; however, many foreign developments demand that the White House is still expected to act in response to foreign developments and threats. As the United States Conference of Catholic Bishops puts it, “sanctions can offer a nonmilitary alternative to the terrible options of war or indifference when confronted with aggression or injustice.”

Richard Haass, a U.S. diplomat and the president of the Council on Foreign Relations, goes further, pointing out that sanctions can respond to the “CNN effect,” whereby heavy media coverage of a particular conflict leads the public to demand that their leaders take action. “Sanctions offer a popular and seemingly cost-free way of acting,” Haass wrote, before exposing their limits in a 1997 essay.

Obama’s proclivity towards sanctions can be compared to his apparent fondness for drones. Both methods promise a neat and surgical solution to perceived threats without endangering American lives. As with drones, however, the effectiveness of sanctions should be hotly contested.

Do sanctions really work?

As the United States continues to push for additional sanctions against Russia, the effectiveness of such measures is of key importance. By now, the myriad problems with sanctions should be well known. In Iraq and Iran, sanctions seemed to hurt innocent civilians much more than the countries’ political leaders. When confronted with claims that half a million Iraqi children had died from the consequences of U.S. sanctions, Secretary of State Madeleine Albright infamously stated, “the price is worth it.”

What is “it,” though? Tufts University professor Daniel Drezner points out that whether sanctions are effective depends on what their intended goals are. If the goals of sanctions are territorial concessions or regime change, the probability of success is slim indeed. “In world politics, there is no greater demand to ask of a government than to make de facto or de jure territorial concessions,” Drezner wrote in Foreign Policy.

With regard to Russia, U.S. sanctions have been enacted in response to “the deployment of Russian military forces in the Crimea region of Ukraine,” while EU measures seek to address Russia’s “illegal annexation of territory.” If the goal of Western sanctions is to pressure Russia into surrendering Crimea, they are doomed to fail. Putin’s actions in Crimea have been remarkably well received by his constituents — his popularity has skyrocketed to around 80 percent approval. These are figures that most Western leaders could only dream of and mean that Putin has strong grounds for not giving up the recently-acceded territory. Also, Crimeans themselves feel closer to Russia, despite what much of the Western media seems to claim.

Finally,while Russia de jure ownership of Crimea remains contested internationally, there is no denying the Kremlin’s de facto control over the region. Since the last (and only) case of sanctions resulting in territorial concessions was the 1956 Suez crisis — which, as Drezner notes, took place in completely different circumstances — there is little hope that Western sanctions against Russia will actually be effective in their stated goals.

The toll of financial warfare

In the end, what sanctions will most likely succeed in doing is undermining the U.S. financial order. The United States has increasingly used its economic heft, mainly owing to the dominance of the dollar, for national political ends, from the $9 billion fine levied against BNP Paribas for doing business with Iran to cajoling Western business leaders into boycotting Putin’s international economic forum in Saint Petersburg (SPIEF). Europe has too often been coerced into complicity in this dangerous game of financial warfare.

It logically follows that, the more the West politicizes their economic model, the less the rest of the world will want to be a part of it. At the 2014 BRICS Summit last month, leaders of the biggest emerging economies were quick to condemn Western sanctions on Russia and hastened the creation of a “BRICS Bank,” which, by granting loans in currencies other than the dollar, “could help speed the dollar’s decline as a reserve currency.”

The irony is that sanctions, while popular for their image of a risk-free foreign policy tool, might just prove to be hazardous to the West’s long-term interests.