Sanctions

Like most things in life, actions have consequences. If we disobey our parents, we get grounded. If we break the law, we go to jail. If we don’t pay our taxes, we get fined. But what happens when a country does not play by the rules? 

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Sanctions Sanctions

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Table of contents

    Sanctions are a form of punishment taken against countries to change their behavior. They can be imposed for a variety of reasons, and while they are often seen as a last resort, they have a significant impact on both the offending country and its citizens.

    Definition of Sanctions

    Sanctions are a vital element of contemporary international relationships. We will start by defining this critical concept:

    Sanctions are coercive measures applied against nation-states, private entities, or individuals that threaten global peace or affect the interests of the sanctioning nation-states. The objectives of sanctions are to modify the behavior of the sanctioned group, weaken its position and reduce its capabilities.

    Many governments use sanctions as an alternative to the use of military force and to address geopolitical challenges that affect their interests. Sanctions may include diplomatic, commercial, and financial measures against targeted governmental entities, corporations, and individuals.

    The US government typically issues two types of sanctions: primary and secondary sanctions.

    A primary sanction is a coercive measure applied directly against a specific entity or individual who is part of the OFAC or other blacklist. Any US person that does business with a sanctioned agent is subject to these sanctions.

    In contrast, secondary sanctions impose penalties on individuals and entities not directly subject to the sanctioning country's legal jurisdiction but who engage in activities prohibited under primary sanctions programs. The aim of these sanctions is non-US persons.

    The UN on Sanctions

    Sanctions The UN Security Council Chamber in New York OFAC sanctions list StudySmarterFig. 1 – The United Nations Security Council Chamber in New York. Wikimedia Commons

    The United Nations is one of the most prominent sanctioning players on the international stage, as its sanction regimes have a global reach. The UN Security Council is the body in charge of adopting and debating coercive measures against state and non-state groups.

    Before 1990, the United Nations had only imposed sanctions against two countries: Southern Rhodesia (now Zimbabwe) in 1966 and South Africa in 19771 .

    Sanction resolutions must have a majority vote from the fifteen members and not have a veto from any of the permanent members.

    The UN Security Council's permanent members are five sovereign states with a permanent chair on that body: China, France, Russia, the United Kingdom, and the United States2 . The rest of the chairs rotate among the other members of the United Nations.

    The United Nations most frequently impose sanction regimes aimed at the fight against terrorism and the non-proliferation of nuclear weapons. These sanctions include state (North Korea) and non-state groups (Al Qaida and the Taliban).

    Types of Sanctions

    International powers are capable of comprehensive sanctions against targeted agents when addressing geopolitical challenges. The following table will explain the sanctions commonly applied to states, corporations, and individuals.

    Types of Sanctions

    Definition

    Example

    Against States

    Sanctions against states may range from diplomatic to economic and financial actions, such as banning the participation of the targeted agent in a multilateral forum or imposing an economic embargo against critical exports.

    South Africa was subject to sanctions in the 1980s to end apartheid3 .

    Sanctions ranged from trade, finances, and investment restrictions in the country, to the expulsion of South Africa from the first two Rugby World Cups.

    Against private entities

    Governments often impose sanctions on private entities that help targeted states and individuals to evade sanctions. Measures may include asset freezing and the prohibition of using the country's financial system.

    In 2019, the United States imposed sanctions on the private TV channel Globovision to tackle corruption in Venezuela4.

    The sanctions forbade American individuals and companies from doing business with the Venezuelan channel.

    Against individuals

    Governments may also target officials, people in business, and other people to address geopolitical crises. It often includes asset freezing and prohibition of entering the national territory and using the financial system.

    In the aftermath of the 2022 Russian invasion of Ukraine, the United States issued sanctions against President Vladimir Putin and Foreign Minister Sergei Lavrov5.

    In a press release, the US Treasury argued their responsibility to Putin and Lavrov for the Russian aggression.

    Table 2 – Types of Sanctions.

    Secondary Sanctions

    An actor that helps agents included in the SDN list to violate US sanction programs can be subject to secondary sanctions. Penalties generally consist of conditions from accessing the US financial system, effectively banning the sanctioned agent from doing business with US customers and suppliers.

    Specially Designated Nationals (SDN) are individuals included on the OFAC blacklists.

    Secondary sanctions also make international trade more difficult for the sanctioned agent, as it bars them from using the US dollar, a currency involved in 60% of global transactions and the primary currency for the trade of essential commodities, such as oil and gold6.

    The purpose of secondary sanctions is to restrain foreign companies and individuals from doing business with sanctioned agents in an attempt to overcome coercive measures.

    Embargos

    An economic embargo is the partial or total bar of trade typically adopted by a government to a targeted nation-state. The objective of an embargo is to punish and deter objectionable behavior to a particular agent, such as violations of human rights or its support to specific diplomatic action.

    From 1973-1974, the US faced an oil embargo from Arab countries because of American support for Israel in the Arab-Israeli War. The ban affected the US economy and caused oil prices to triple in a few months7 .

    Another aspect is that authoritarian regimes commonly subject to trade embargoes have successfully resisted sanction programs and other forms of economic pressure for decades, often at an immense humanitarian cost. Let's take the case of Cuba.

    Cuba has been subject to US full-scale embargo since 1962. The embargo had a massive effect on the Cuban economy, as the US was the principal commercial partner of the island. The United Nations estimates that Cuba has lost $130 billion since 1962 due to the US embargo8.

    An effectively applied embargo can be a reliable tool to isolate and put economic pressure on the targeted country. However, this is not commonly the case, as a full-scale economic embargo needs coordination between major global powers and strategic patience to achieve its objective.

    Economic Sanctions

    Economic sanctions include a specific range of coercive measures to isolate the targeted agent from the international community and reduce its financing sources.

    Economic sanctions are a withdrawal of customary trade and the cut of financial ties with a targeted agent for foreign and security policy purposes.

    Economic sanctions can be comprehensive or applied to an entire country, such as the US embargo on Cuba or specific entities. This type of sanction includes a comprehensive set of economic measures:

    • Embargo: A broad ban on trading with a particular country. An embargo may include humanitarian exceptions for supplying food and medicines to the sanctioned country.

    • Export controls: These often restricts sales of weapons, military equipment, oil drilling equipment, and critical technology by banning exports of specified products or services to the targeted States.

    • Capital controls: These aim at restricting foreign investment in targeted countries and access to the international capital market.

    • Asset freezes and seizures: Sanctioning countries commonly freeze or seize assets in their jurisdictions to prevent their sale or withdrawal, so the targeted agent can't use them for financing.

    Economic sanctions provide a reliable policy tool to pressure State and non-State actors that affect the interests of their sanctioning country.

    Iran has been subject to international sanctions imposed by the US, the EU, and the UN to limit the development of the Iranian Nuclear Program.

    Sanctions have ranged from restrictions on trade, the financial sector, asset freezes against top Iranian officials, and arms export prohibitions. Western powers lifted some of these measures after Iran signed the Non-Proliferation Treaty in 2015.

    In 2018, the US shifted to a full-pressure policy and walked away from the Non-Proliferation Treaty signed in 2015.

    Economic sanctions may also have non-expected adverse effects, such as a disproportionate humanitarian or economic cost to the people of the sanctioned country.

    Effectiveness of Sanctions

    We know what sanctions are and their types. How about the effectiveness of using sanctions in achieving desired objectives?

    The effectiveness of economic sanctions will depend on the time frame and the objectives' ambitions. If the goal is too ambitious (for example, regime change) or the time frame is too short, the sanctions policy will likely fail.

    Conventional trade and financial sanctions result in some meaningful behavior change on the targeted agent only 40% of the time10.

    The purpose of sanctions is to change the behavior of the targeted agent through actions that reduce their ties with the international system, such as:

    • Banning them from an international forum

    • Visa revocations of high officials

    • Restrictions on the use of global payment systems, etc.

    So on, the coordination between the international powers to impose these coercive measures is a crucial variable, as economic pressure will be higher if the most prominent financial players (US, China, European Union, etc.) coordinate actions against the targeted agent.

    OFAC Sanctions List

    Sanctions OFAC logo StudySmarterFig. 2 – OFAC Logo, US Department of Treasury. Wikimedia Commons

    The US is one of the most prominent sanctioning agents on the international stage. Its sanctions programs involve many executive power branches, such as the Treasury, State, and Commerce Secretaries.

    The Office of Foreign Assets Control (OFAC) is the entity that administers the US sanction programs with the OFAC blacklist, or OFAC sanctions list. The OFAC routinely adds or deletes entries to individuals, corporations, and governmental entities, depending on the current policy objectives.

    OFAC calls the members of its blacklists Specially Designated Nationals (SDN)11.

    Agents added to the OFAC blacklist have their assets on US soil blocked and can't use the US financial system or enter the country.

    Over six thousand individuals, businesses, and groups are currently part of the OFAC blacklist12. Under Trump's administration, OFAC added to its blacklist high-ranking officials from Cuba, Myanmar, Nicaragua, and Venezuela.

    OFAC lists non-state groups on its blacklist, designated under no-country-specific programs, such as drug traffickers and terrorists.

    Key takeaways

    • Sanctions are coercive measures applied against States, private entities, or individuals that threaten global peace or affect the interests of the sanctioning States.
    • International powers have comprehensive sanctions against targeted agents when addressing geopolitical challenges. Sanctions are commonly applied to states, corporations, and individuals.
    • Economic sanctions are a withdrawal of customary trade and the cut of financial ties with a targeted agent for foreign and security policy purposes.
    • The Office of Foreign Assets Control (OFAC) is the entity that administers the US sanction programs with the OFAC blacklist, or OFAC sanctions list.

    References

    1. Masters, Jonathan, “What are economic sanctions?” Council of Foreign Relations (2019).
    2. Masters, Jonathan, “What are economic sanctions?” Council of Foreign Relations (2019).
    3. Levy, “Sanctions on South Africa: What did they do?” (1999).
    4. Reuters, “US issues fresh Venezuela sanctions including Globovision” (2019).
    5. BBC - “West imposes sanctions on Russia's Putin and Lavrov” (2022).
    6. Dow Jones Glossary, “What is a secondary sanction?” (2022).
    7. The Office of the Historian, “1973-1974 Oil embargo."
    8. Reuters, “US trade embargo has cost Cuba $130 billion, UN says” (2018).
    9. Atlantic Council, “the humanitarian effect of the Iranian sanctions” (2019).
    10. Wright, “Why sanctions too often fail?” (2022).
    11. OFAC Lawer, “OFAC economic sanction programs” (2019).
    12. Masters, Jonathan, “What are economic sanctions?” Council of Foreign Relations (2019).
    13. Fig. 1 – United Nations Security Council (https://upload.wikimedia.org/wikipedia/commons/3/35/United_Nations_Security_Council.jpg) by Patrick Gruban (https://www.flickr.com/photos/19473388@N00) licensed by CC-BY-SA-2.0 (https://creativecommons.org/licenses/by-sa/2.0/deed.en).
    14. Table 1 – Types of Sanctions.
    15. Fig. 2 – Logo of the U.S. Office of Foreign Assets Control (OFAC) (https://upload.wikimedia.org/wikipedia/commons/e/e4/Logo_of_the_U.S._Office_of_Foreign_Assets_Control_%28OFAC%29.jpg) by U.S. Department of the Treasury (https://web.archive.org/web/20170730212223/https://www.childfoundation.org/newcontent/august2014/small-ofac-logo.jpg) licensed by PD-USGov (https://commons.wikimedia.org/wiki/Template:PD-USGov).
    Frequently Asked Questions about Sanctions

    What is a sanction?

    Sanctions are coercive measures applied against States, private entities, or individuals that violate international laws and threaten global peace. The objectives of sanctions are to modify the behavior of the sanctioned agent, weaken its position and reduce its capabilities.

    What are examples of sanctions?

    Many countries, such as North Korea, Iran, Cuba, Venezuela, and Russia, have been subject to sanction programs.

    What does enforcing sanctions mean?

    Sanctions enforcement means the improvement of civil or criminal penalties for violating sanction programs.

    What does it mean if you are sanctioned?

    Any individual who has entered the OFAC blacklist will have their assets on US soil frozen and unable to use the US financial system or enter the United States.

    What are sanctions on a country?

    Sanctions on a country are coercive measures applied explicitly to certain countries that affect the interests or represent a national security challenge to the sanctioning country.

    Test your knowledge with multiple choice flashcards

    When did the United States impose the embargo on Cuba?

    Approximately how many Special Designated Nationals (SDN) are there on the OFAC blacklist?

    Select if the following statement is true or false: Sanctions provide governments with an effective tool to address geopolitical challenges.

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