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Do Sanctions Work? Financial Alternatives to War Explained

Do Sanctions Work? Financial Alternatives to War Explained

Nations are increasingly turning to financial measures as a way to avoid military conflict. The impact of these weapons, generally called sanctions, can be hard to predict, and they can inflict collateral damage. They tend to be more effective when a group of countries comes together to target an offending state, as the U.S., European Union and others have following Russia’s all-out invasion of Ukraine. The sanctions against Russia — ratcheted up since it annexed Ukraine’s Crimean peninsula in 2014 — are the most far-reaching imposed on a major power since World War II. At the same time, because Russia is a major commodities exporter, hitting it hard also means pain for the global economy.

1. What forms can sanctions take?

Sanctions are economic penalties designed to hurt a target — a person, a company, a group or an entire country — through restrictions on trade, access to financial assets or the ability to process transactions in U.S. dollars or euros. Sanctioned individuals may face travel bans and the seizure of property, such as the yachts owned by Russian billionaires that have been impounded since the war in Ukraine. Companies or industries may be blocked from certain exports or imports. Governments can find themselves unable to tap capital markets. In what are known as secondary sanctions, third parties can face penalties for doing business with sanctioned people or entities.

2. What’s the history of their use?

The use of sanctions as a form of warfare goes back thousands of years to when the city-state of Megara banned trade with Athens in 432 B.C. They typically preceded or attended armed conflict until the aftermath of World War I, when U.S. President Woodrow Wilson led a movement to use them as an alternative to combat. Drexel University’s Global Sanctions Database documents a steady rise in the number of sets of sanctions in place in any given year from two in 1949 to 230 in 2019. The U.S. accounts for 42% of the total 1,100 imposed in that time, with the EU coming next with 12%, followed by the United Nations with 7%. According to a 2021 Treasury Department report, the use of sanctions by the U.S. rose 10-fold in the two decades following the September 11 attacks as officials increasingly targeted suspected terrorist activity. 

Do Sanctions Work? Financial Alternatives to War Explained

3. How well do sanctions work?

There’s a vigorous debate about that. Scholars note that while punishing parties typically say that sanctions are applied to change the behavior of leaders like Russian President Vladimir Putin, they are sometimes simply intended to signal disapproval and to satisfy domestic constituencies. The Drexel researchers found that overall about 35% of the stated aims for sanctions were completely achieved, 14% were partially achieved, 6% resulted in a negotiated settlement, 22% failed and for the rest, there was no outcome yet. But success varied depending on the specific aim of the measure, with the goals of promoting democracy and human rights most commonly achieved and the objectives of combating terrorism, destabilizing a regime, and settling a territorial conflict most elusive.

4. What other factors contribute to success?

Sanctions that occur between countries that are normally friendly tend to work better than those between countries that have a history of hostilities. An example of the latter are the threatened sanctions that the U.S., fearing a superpower clash, used in the 1950s to get Israel and the U.K. to give up a campaign to wrest the Suez Canal from Soviet-backed Egypt, which had nationalized it. Democratic or quasi-democratic states that care about international opinion and rely on global trade and finance are likeliest to respond to sanctions, while isolated authoritarian regimes, such as those in North Korea and Syria, often don’t. The most effective sanctions are crippling ones imposed by multiple countries. The global boycott of South Africa in the 1980s contributed to the dismantlement of its racist apartheid policy. Global measures against Iran squeezed its economy and propelled its leaders to return to talks that produced an agreement that limited the country’s nuclear program until the U.S. undermined the deal in 2018.

5. What are the downsides of sanctions?

While designed to put pressure on the leaders of a country, sanctions often inflict collateral damage on ordinary citizens by fueling inflation and creating shortages of essential goods. That’s one reason governments in recent years have moved more toward “targeted sanctions” aimed at a narrow mark or set of marks rather than an entire country or industry. There can also be negative consequences for sanctioning countries, a huge concern in the case of measures ostracizing Russia, the world’s second-biggest crude exporter and a significant source of fertilizer, wheat and metals including nickel, platinum and aluminum. A surge in energy and food prices triggered by the tighter sanctions on Russia has fueled a sustained shock of inflation that threatened to slow global economic growth. 

The Reference Shelf

  • Related QuickTakes on secondary sanctions, past U.S. sanctions against Russia, and how war and sanctions have sparked ruble volatility.
  • The U.S. Treasury’s 2021 sanctions review.
  • Foreign Policy magazine explains how “a blunt diplomatic tool” morphed into a “precision-guided” weapon.
  • Three economists assessed the effectiveness of sanctions in a 2009 book, “Economic Sanctions Reconsidered.” A table looks at cases since 1914; another covers post-2000 episodes.
  • Juan Zarate, a former Treasury official, describes how the U.S. used post-9/11 financial weapons against terrorists, criminals and rogue regimes in his book, “Treasury’s War.”

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