First mentions about economic sanctions come from the year 432 BCE,
when Pericles – athenian politician and reformer of athenian democracy – issued a Megarian decree,
which cut off Megarian merchants from harbors and markets in Athens and in the whole Maritime Union
area. The reasons for cutting of Megara from trade (mainly grain supply) are unclear. Some of the
sources say that Pericles wanted to punish Megara for supporting Corinth in a war against Athens,
other sources say that the main reason was the abduction of three women from the house
of Pericles’s wife – Aspasia – by the Megarians. Yet another source says that it was a punishment
for the Megarians holding refugee slaves. Sanctions that Pericles used, instead of
preventing the conflict, turned out to be a broad conflict tinderbox, and lead to the Peloponnesian
War. In the coming years, there were rulers, who acknowledged that closing domestic markets
or borders for foreign trade can be as effective as open warfare, but sanctions were used rarely.
And what is the use of sanctions in modern times?
At present time, economic sanctions are used for different goals by the United Nations Security
Council. If some country breaks international law, the UN Security Council can pass a resolution to
impose economic sanctions on this country. The European Union also imposes sanctions
that are carried out by the EU countries. In the US, sanctions are imposed by the Office of
Foreign Assets Control. Many other counties have their own sanctions systems. In the modern world,
international sanctions (political and economic) have become the only universally accepted form
of applying pressure on counties in order to force them to obey the international law.
Economic sanctions are when the state, group of countries, or organization
uses their economic potential against another state. This kind of action may be a reaction
to – as we can read on the EU Councils’ page – terrorism, nuclear proliferation activities,
human rights violations, annexation of foreign territory or deliberate destabilization of a
sovereign country. Sanctions are a form of punishment for breaking a particular rule or norm,
or a form of preventing a given state, in which the sanctions are aimed at,
from breaking the rules, achieving its goals or profiting from their actions.
2. Economic sanctions can have countrywide outreach and include a general ban
for any dealings with the sanctioned country government, citizens and organizational units
that are in the country’s territory. Sanctions can also be directed at particular subjects and
particular branches of state business activity. Economic sanctions can be further categorized to:
financial sanctions, trade sanctions and sectoral sanctions.
Financial sanctions include monetary restrictions (currency transport ban, funds or assets blockade,
prohibition on providing funds to the particular subject, and insurance activity restrictions).
Some examples are: insurance companies can’t pay insurance money to the member
of a terrorist group, Syrian central bank assets in EU countries are blocked,
Belarusian government agencies are banned from bank and investment guarantees,
Iran ties to the global financial system are restricted,
and lately some of Russia’s banks are banned from the SWIFT international payment systems.
Trade sanctions are usually used to hinder weapon, crude oil, high tech and strategic
commodities exports. Their goal is to deprive the sanctioned country of goods that have an
important role for the state to operate properly. Trade sanctions can take the form of tariffs
(fees for trading), embargos (ban on trade) or quotas (restrictions on trade).
Examples of trade sanctions use are the US and EU embargo on Iranian oil; the ban on exports and
imports of weapons and the ban on exports of dual use items that have the potential for military or
weapons applications for Russia; sanctions against Belarus affecting imports of oil-based goods,
artificial fertilizers into the EU, and the ban on the transit of these goods through EU territory.
Sectoral sanctions are imposed on particular economic sectors and groups of goods. We can
say that sectoral sanctions are more “surgical” than traditional sanctions.
As Tim White from AMLRightSource describesit:
“Sectoral sanctions were developed to respond (short of going to war) to Russia’s aggression
against Ukraine (Editor’s Note: in 2014). The dilemma of the Russian/Ukrainian situation
was that the traditional remedy of applying broad economic sanctions against an economy as large as
Russia’s (the 8th largest in the world) following the global financial crisis of 2008, could
have undone the previous six years of economic recovery and triggered another global recession.
The solution was to apply very limited sanctions that targeted certain Russian economic sectors:
energy, financial, defense and the Deepwater Artic Oil Project. These sectoral sanctions were not
all-inclusive; they only applied to transactions involving new or renewed debt or equity financing
(loans, issuance of stocks or bonds, etc.). This surgical application of financial sanctions
had three objectives: - Create rapid deflation
of the Ruble (the Russian currency) - Make Russia question their ability to
grow without access to new or renewed capital - Minimize any subsequent collateral economic
damage to the very fragile global economy.”
4. Sanctions are the most discussed strategy of international states’ interactions. They are
controversial because of premises of implementing them, exterritorial character and efficiency.
The advantage of economic sanctions is that they are an alternative for use of military force,
and it’s certainly a more humane way to achieve goals than war, although they do
take time to work. Sanctions harm the government they are directed at, but also harm companies and
entrepreneurs that profit from their connections with the regime, and from military actions.
However, many economic sanctions are inefficient – they don’t help to achieve assumed goals.
A very harsh sanctions policy leads to exhaustion of any options for further economic pressure.
We saw that in Iran and North Korea.
Sanctions against North Korea were the harshest sanctions the EU ever imposed,
and yet seemed inefficient. (Disclaimer: we don’t consider present sanctions against Russia,
because they are still in motion, and we don’t know neither the final scale, nor the effects
yet). It was similar in the case of Iran. Most of the assumed goals were not achieved by sanctions.
The economy managed to survive sanctions shock, and even began to grow. Also,
previous sanctions against Russia (after 2014), failed to prevent the war that we witness today.
The “collateral damage” of sanctions is that they often harm ordinary citizens,
including those who don’t agree with their government’s policies.
In the worst case, they lead to poverty and very bad living conditions, like in Syria and Iran,
and still don’t change the regime’s policies. Harsh sanctions against Cuba, led to shortages
in medical care and electrical power outages. Sanctions are a risk not only to subjects that
the sanctions are directly aimed at, but also for every subject that rely on cooperation with them.
For entrepreneurs, sanctions means that it is forbidden to trade with sanctioned subjects.
The main cause of sanction’s inefficiency (compared to assumed goals) is that states
don’t enforce them the way they should, as they are obliged by the UN Security Council.
Often sanctioned countries are ruled by dictators who don’t want to comply to international rules.
They (and their associates) use loopholes in sanctions systems
and use more and more innovative ways to bypass and evade sanctions, for example
by using passports from different countries to start a business or open an account abroad.
To sum up, sanctions signalize that a given countries policies are undesired and unacceptable
by the international community. These policies disturb peace and international order, so they
are punished. Sanctions influence the sanctioned economy in indirect ways, and take time to work.
Many examples show that sometimes sanctions work, but there are also examples of sanctions that
didn’t work like they should (i.e., didn’t achieve assumed goals). Despite limited efficiency,
it’s very hard to find other instruments of international politics (apart of military action),
that would be more effective as an answer to terrorism or annexation of another states’
territory as sanctions, so maybe that’s all we have if we don’t want to start or join a war.