The Politics of Economic Sanctions

Economic sanctions have become an increasingly common foreign policy tool, especially for the United States. What is the nature of the politics behind U.S. policy regarding economic sanctions? Recent events, especially the negotiations concerning the United States’ possible return to the Joint Comprehensive Plan of Action (JCPOA, often called the “Iran nuclear deal”), as well as a stint as a discussant at a political science conference featuring a paper on sanctions, prompted me to try to systematize some of my own thinking on the subject of sanctions and their role in U.S. policy and politics. Here is what I came up with.

First of all, economic sanctions are not a single thing but a category of related policy actions. Collectively, they are a foreign policy tool, an option among others such as military force, diplomacy, propaganda, or simply ignoring a problem. These tools can be used in isolation or in combination. Each category has certain costs and benefits, which will vary with the assigned task and target. Some may be better suited to achieve a specified objective in view of a particular set of tasks, targets, resources, risks, and opportunity costs. None of them will always be right for all situations. It may well be that none of them will get you all the way to the goal you seek, yet you still may feel compelled to do something. Objectives may range from convincing a target state to change its way of thinking, to compelling it to change a particular behavior, to imposing a change of regime, to simply demonstrating your dissatisfaction.

Changes over Time

In recent decades the U.S. government’s policy tool preference has shifted from a preference for military action under President George W. Bush, particularly in his first term, to a preference for sanctions under Barack Obama and especially under Donald J. Trump. The Obama administration sanctioned about three times the number of individuals and entities in its final year in office as it did in its first. The Trump administration, on average, imposed sanctions at twice the annual rate of the Obama administration. (The Trump administration, on the other hand, undertook fewer, and often smaller, enforcement actions after sanctions were imposed, and two-thirds of those resulted from companies self-reporting their own violations).

Also, the nature of economic sanctions has evolved. During the Cold War, for example, sanctions generally came in the form of full trade embargoes intended to undermine a country’s entire economy. These, however, often failed because of the political divisions rooted in the Cold War itself. The Soviet Union could not smother Yugoslavia as long as the United States was there to rescue it; the United States could not smother Cuba as long as the Soviet Union was there. That changed with the temporary unity of the immediate post–Cold War era. A trade embargo imposed on Iraq after the Persian Gulf War of 1990–91 had devastating effects on Iraqi society, devastating enough to discredit that form of sanction.

What followed were targeted, or “smart,” sanctions. These were designed to reduce a country’s capacity to threaten others or to target the policy makers responsible for a country’s unacceptable behavior without causing undue suffering to the entire civilian population. Examples include arms embargoes; targeted trade sanctions restricting certain commodities, such as “conflict diamonds”; travel sanctions against specific targeted individuals; and financial sanctions, such as asset freezes or the blocking of electronic transfers.

Advances in technology created further possibilities, sometimes referred to as “weaponized interdependence.” While the growth of widely distributed networks in the cyber age was originally expected to have a leveling effect, networks in certain fields, for reasons of efficiency, evolved in such a way as to create a few key nodes, or chokepoints. Control of those nodes is a tremendous advantage. A prime example is the global financial system. Not only do U.S. banks play a prominent role in global finance, but nearly all international transactions pass through a single chokepoint: the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system. Even though SWIFT is physically located in Belgium, the United States has considerable influence over it. Unlike the Cold War examples noted above, a country that controls key financial nodes can impose effective sanctions unilaterally. It can even impose sanctions on countries with which it has no transactions to cut off. The Trump administration was not only able to re-impose sanctions unilaterally on Iran, with which it had no trade or financial ties, but it could also credibly threaten sanctions against our own allies if they failed to go along.

Two Views of Sanctions

Within the United States, there are two different approaches to economic sanctions, two different understandings that are quite different from each other. The first we can call the professional view, that of the foreign policy elites, including those who fulfill relevant roles in the foreign policy bureaucracy. The second, the popular or existentialist view, is held by many people in the general public, but frankly it is also shared by a number of foreign policy elites, including members of Congress and presidents.

Sanctions as a Practical Tool

First, in the professional view, sanctions are a practical tool for achieving a specific, well-defined outcome. To be effective, the goal needs to be achievable and the sanctions have to be accompanied by a credible promise of relief in exchange for compliance.

The issue of achievability leads to two further questions:

1. How important is the targeted behavior to the country being sanctioned?

To the extent that the leaders of the targeted country view the sanctioned behavior as vital, bringing the targeted country into compliance with the sanctioning country’s demands will become more difficult.

The difference may be seen in the contrasting results of nuclear negotiations with North Korea and Iran. North Korea evidently sees nuclear weapons as essential to its security, which has made it difficult to reach a lasting settlement, or even a short-term settlement. On the other hand it is not entirely clear that Iran even wants nuclear weapons. It was reportedly a few months away from a bomb’s worth of nuclear material for years and never went there. At the very least, Iranian elites have been divided on the issue. That’s part of why JCPOA succeeded. In recent years, with President Trump’s policy of maximum pressure, we may have been on the verge of pushing Iran into a nuclear weapons program intended just to show us that they won’t be pushed around.

2. How many countries has the targeted country offended; or, what is the magnitude of the risk inherent in the situation?

The targeted country will try to avoid the impact of embargoes by cultivating alternative sources. If sanctions are to be effective, then it will be necessary to include as many potential alternative trading partners as possible in the sanctions regime. The number of countries willing to join will depend on what the targeted country has done. Offending American sensibilities will not be enough.

Cuba, for example, survived generations of U.S. sanctions. Initially, as noted above, the United States organized a sanctions regime among its allies, but the Soviet Union came to Cuba’s rescue. With time, even that sanctions regime started coming apart. As Cuba stopped trying to promote revolution in Latin America, fewer and fewer countries saw the trade embargo as necessary. Eventually, the United States was the only country left, allowing Cuba to blame its economic problems on U.S. sanctions while trading freely with much of the rest of the world.

The United States was successful in organizing multilateral sanction against North Korea in the 2000s and 2010s, on the other hand, because many countries saw North Korea’s behavior as threatening. In an odd twist, Trump—perhaps in a witting or unwitting application of Nixon’s “madman theory” of bargaining—raised the general threat level with his “fire and fury” rhetoric in 2017. Soon, South Korea was reaching out to North Korea to calm the situation, and China was pressing North Korea to respond. But then Trump not only backed away from his rhetoric and engaged in talks, which was a positive thing, but announced that the problem had been resolved when in fact nothing had changed. The result was to undermine his own sanctions regime.

The other condition—relief for compliance—should be self-explanatory but is too often forgotten. If the targeted country does not believe that compliance with the sanctioning country’s demands will lead to the end of sanctions, then it will have little incentive to comply. Certain of the sanctions faced by Iran, for example, were imposed by the United Nations, the United States, and other countries expressly to compel Iran to negotiate about its nuclear program. When Iran reached an agreement with the United States, Britain, China, France, Germany, and Russia, which was then endorsed by the UN Security Council, those sanctions were lifted. (Sanctions imposed for other reasons were not lifted, much to Iran’s annoyance.) The Trump administration’s decision to re-impose sanctions unilaterally undermined any confidence Iran (or, for that matter, North Korea) might have had that the Trump administration would abide by any agreement that it made. Thus the administration could not even get Iran to discuss the “better deal” that it had insisted it could achieve.

Sanctions as Moral Imperative

The second understanding of sanctions, the popular view, is existential and moralistic. To oversimplify just a bit, this approach holds that some regimes are good and other regimes are evil. Evil regimes are targeted at least as much for what they are as for what they do. Thus sanctions are the punishment for being evil. In this conception, sanctions may not be aimed at curtailing a specific activity. The only worthy objective is to bring down the evil regime—or at the very least to demonstrate one’s disapproval of the regime and thus assert one’s own moral superiority.

In this conception, mere compliance by the targeted state is a trick, an attempt to escape sanctions while remaining evil. The only valid way to escape sanctions is through regime collapse. Here regime collapse is always seen as a solution to problems and never seen as likely to cause further problems—despite, say, the still continuing years of chaos and turmoil following the collapse of the Taliban regime in Afghanistan in 2001, the Saddam Hussein regime in Iraq in 2003, and the Muammar Qadhafi regime in Libya in 2011.

It is this existential understanding of sanctions that prompted the Trump administration to shift the goal posts and sanction Iran even after that country had fully complied with the JCPOA. Lifting sanctions on Iran was “siding with the terrorists.” Damage to the Iranian economy was proof of success. It did not matter that Trump’s abandonment of the JCPOA and re-imposition of sanctions were counterproductive in terms of the administration’s own stated goals.

Sanctions as a Wasting Asset

Logically speaking, the use of economic sanctions to achieve a foreign policy goal assumes that the targeted country has economic ties to the outside world, the disruption of which would be damaging to the targeted country. Otherwise, there is little point. The extended use of sanctions, however, reduces those very ties. The ability of the United States to impose unilateral sanctions on North Korea is reduced by the fact that the United States has sanctioned North Korea since 1950 and has virtually no economic ties to it at all. The Trump administration’s trade war with China has induced China to reduce its dependence by striving to produce more of its necessary goods domestically and diversifying its sources of those it cannot produce.

In cases of weaponized interdependence, where the sanctioning state controls key chokepoints, reducing outside dependence will be harder and certainly time consuming but not impossible. Avoiding the impact of sanctions might require establishing alternative institutions, which one country working alone would not be able to do. Extensive use of sanctions by a single country for its own purposes, however, could prompt others to do so eventually. In the case of Trump’s maximum pressure campaign against Iran, U.S. allies Britain, France, and Germany undertook efforts to establish an alternative system, the Instrument in Support of Trade Exchanges (INSTEX), to enable transactions with Iran without going through SWIFT. In that particular case, Western corporations, fearing U.S. sanctions against themselves, avoided using the alternative system. But the possibility still stands if the incentives grow strong enough. Weaponized interdependence is resilient, but sanctions may still be a wasting asset. The more you use them, the less you may be able to rely on them in the future.

The Domestic Politics of Sanctions

Sanctions may be imposed for a variety of reasons, either professional or popular, either for purely foreign policy purposes or in response to domestic political dynamics. Once imposed, however, they often prove difficult to remove.

In part, the difficulty is rooted in technical/legal obstacles or interactive connections to other issues. For example, the Bush administration’s sanctions on a Macao bank, Banco Delta Asia, imposed for its role in money laundering, interfered with the Bush administration’s later efforts to lift sanctions on North Korea and resume negotiations on its nuclear program because North Korean assets were frozen in that bank and the legal process of unfreezing them was convoluted. With regard to Iran, the Iran Nuclear Agreement Review Act (INARA) of 2015 requires the president to certify every 90 days that Iran is “transparently, verifiably, and fully implementing” the agreement. Iran, which continued to adhere fully to the agreement for one year after the Trump administration renounced it, then began a program of planned escalating violations at preset intervals in an attempt to coerce the United States back into compliance. Iran now says it will not comply with the JCPOA until the United States does, but INARA implies that Iran must in compliance first. Depending on one’s interpretation of INARA, returning to the agreement may also trigger a host of political/legislative hurdles that the agreement originally had to overcome in 2015. INARA thus complicates efforts to restore the deal even though it was the United States that initially—and more fundamentally—violated it.

On the other hand, the difficulty can be political rather than technical/legal, owing to the likelihood of existentialist arguments to attach themselves to the issue. Sanctions on Cuba persist decades after the original foreign policy justifications (support for guerrilla movements, alliance with the Soviet Union) have passed from the scene. Even the hurdles created under INARA were put there by arms-control skeptics taking an existentialist perspective. While foreign policy professionals may not share the existentialist understanding of sanctions, they will have to take it into consideration for domestic political reasons.

Advocates of economic sanctions often argue that they represent a reasonable middle ground in foreign policy between doing nothing and resorting to military force. They are only reasonable, however, if they are attached to realistic goals and adjusted for changed circumstances. Too often sanctions are employed to demonstrate disapproval or outrage, while the underlying issues are allowed to fester. In that respect, they are really a self-oriented activity. They create the impression of doing something, tar the adversary as morally inferior, and allow one to feel better about oneself. If demonstrating outrage is your purpose, you can do it, but it is unlikely to go far toward resolving international issues.