Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances--they may also be imposed for a variety of political, military, and social issues. Economic sanctions can be used for achieving domestic and international purposes.
Economic sanctions generally aim to create good relationships between the country enforcing the sanctions and the receiver of said sanctions. However, the efficacy of sanctions is debatable and sanctions can have unintended consequences.
An embargo (from the Spanishembargo, meaning hindrance, obstruction, etc. in a general sense, a trading ban in trade terminology and literally "distraint" in juridic parlance) is the partial or complete prohibition of commerce and trade with a particular country/state or a group of countries. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, to elicit a given national-interest result from the country on which it is imposed. Embargoes are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war. Embargoes can mean limiting or banning export or import, creating quotas for quantity, imposing special tolls, taxes, banning freight or transport vehicles, freezing or seizing freights, assets, bank accounts, limiting the transport of particular technologies or products (high-tech) for example CoCom during the cold-war. In response to embargoes, a closed economy or autarky often develops in an area subjected to heavy embargo. Effectiveness of embargoes is thus in proportion to the extent and degree of international participation. Embargoes can be an opportunity to some countries to develop faster a self-sufficiency. However, Embargo may be necessary in various economic situations of the State forced to impose it, not necessarily therefore in case of war.
Politics of sanctions
Economic sanctions are used as a tool of foreign policy by many governments. Economic sanctions are usually imposed by a larger country upon a smaller country for one of two reasons: either the latter is a perceived threat to the security of the former nation or that country treats its citizens unfairly. They can be used as a coercive measure for achieving particular policy goals related to trade or for humanitarian violations. Economic sanctions are used as an alternative weapon instead of going to war to achieve desired outcomes.
Effectiveness of economic sanctions
Hufbauer, Schott, and Elliot (2008) argue that regime change is the most frequent foreign-policy objective of economic sanctions, accounting for just over 39 percent of cases of their imposition. Hufbauer et al. claimed that in their studies that 34 percent of the cases were successful. When Robert A. Pape examined their study, he claimed that only five of their forty so-called "successes" stood up, reducing the success rate to 4%. Success of sanctions as a form of measuring effectiveness has also been widely debated by scholars of economic sanctions.[vague] Success of a single sanctions-resolution does not automatically lead to effectiveness, unless the stated objective of the sanctions regime is clearly identified and reached.
According to a study by Neuenkirc and Neumeier (2015) the US and UN economic sanctions had a statistically significant impact on the target country's economy by reducing GDP growth by more than 2 percent a year. The study also concluded that the negative effects typically last for a period of ten years amounting to an aggregate decline in the target country's GDP per-capita of 25.5 percent.
Imposing sanctions on an opponent also affects the economy of the imposing country to some degree. If import restrictions are promulgated, consumers in the imposing country may have restricted choices of goods. If export restrictions are imposed or if sanctions prohibit companies in the imposing country from trading with the target country, the imposing country may lose markets and investment opportunities to competing countries. Critics of sanctions like Belgian jurist Marc Bossuyt, however, argue that in nondemocratic regimes, the extent to which this affects political outcomes is contested, because by definition such regimes do not respond as strongly to the popular will.
British diplomat Jeremy Greenstock suggests sanctions are popular not because they are known to be effective, but because "there is nothing else [to do] between words and military action if you want to bring pressure upon a government".
A strong connection has been found between the effectiveness of sanctions and the size of veto players in a government. Veto players represent individual or collective actors whose agreement is required for a change of the status quo, for example - parties in a coalition, or the legislature's check on presidential powers. When sanctions are imposed on a country, it can try to mitigate them by adjusting its economic policy. The size of the veto players determines how many constraints the government will face when trying to change status quo policies, and the larger the size of the veto players, the more difficult it is to find support for new policies, thus making the sanctions more effective.
Sanctions have been criticized on humanitarian grounds, as they negatively impact a nation's economy and can also cause collateral damage on ordinary citizens. Peksen implies that sanctions can degenerate human rights in the target country. Some policy analysts believe imposing trade restrictions only serves to hurt ordinary people as opposed to government elites, and others have likened the practice to siege warfare.
History of sanctions
The use of economic sanctions became much more common in the 20th century, particularly with the formation of The League of Nations in 1919. The Abyssinia Crisis resulted in League sanctions against Mussolini's Italy in 1935 under Article 16 of the Covenant. Petroleum supplies, however, were not stopped, nor the Suez Canal closed to Italy, and the conquest proceeded. The sanctions were lifted in 1936 and Italy left the League in 1937. After World War Two, the League was replaced by the more expansive United Nations in 1945.
Sanctions have become a commonly used foreign policy tool in the 21st century in countless situations ranging from disputes to hostile confrontations.
Implications for businesses
There is an importance, especially with relation to financial loss, for companies to be aware of embargoes that apply to their intended export or import destinations. Properly preparing products for trade, sometimes referred to as an embargo check, is a difficult and timely process for both importers and exporters.
There are many steps that must be taken to ensure that a business entity does not accrue unwanted or fines, taxes, or other punitive measures. Common examples of embargo checks include referencing embargo lists, cancelling transactions, and ensuring the validity of a trade entity.
This process can become very complicated, especially for countries with changing embargoes. Before better tools became available, many companies relied on spreadsheets and manual processes to keep track of compliance issues. Today, there are software based solutions that automatically handle sanctions and other complications with trade.
An undersupplied U.S. gasoline station, closed during the oil embargo in 1973
United States Sanctions
US Embargo of 1807
The United States Embargo of 1807 involved a series of laws passed by the U.S. Congress (1806-1808) during the second term of President Thomas Jefferson. Britain and France were engaged in the War of the Fourth Coalition; the U.S. wanted to remain neutral and to trade with both sides, but both countries objected to American trade with the other. American policy aimed to use the new laws to avoid war and to force both France and Britain to respect American rights. The embargo failed to achieve its aims, and Jefferson repealed the legislation in March 1809.
US Embargo of Cuba
The United States embargo against Cuba began on March 14, 1958, during the rule of dictator Fulgencio Batista. At first, the embargo applied only to arms sales, however it later expanded to include other imports, eventually extending to almost all trade on February 7, 1962. Referred to by Cuba as "el bloqueo" (the blockade), the U.S. embargo on Cuba remains as of 2021[update] one of the longest-standing embargoes in modern history. Few of the United States' allies embraced the embargo, and many have argued it has been ineffective in changing Cuban government behavior. While taking some steps to allow limited economic exchanges with Cuba, American President Barack Obama nevertheless reaffirmed the policy in 2011, stating that without the granting of improved human rights and freedoms by Cuba's current government, the embargo remains "in the national interest of the United States".
Viktor Yushcenko, the third president of Ukraine who was elected in 2004, lobbied during his term to gain admission to NATO and the EU. Soon after Yushchenko entered office, Russia demanded Kyiv pay the same rate that it charged Western European states. This quadrupled Ukraine's energy bill overnight. Russia subsequently cut off the supply of natural gas in 2006, causing significant harm to the Ukrainian and Russian economies. As the Ukrainian economy began to struggle, Yushcenko's approval ratings dropped significantly; reaching the single digits by the 2010 election; Viktor Yanukovych, who was more supportive of Moscow won the election in 2010 to become the fourth president of Ukraine. After his election, gas prices were reduced substantially.
Russian sanctions on Georgia
The Rose Revolution in Georgia brought Mikheil Saakashvili to power as the third president of the country. Saakashvili wanted to bring Georgia into NATO and the EU and was a strong supporter of the U.S.-led war in Iraq and Afghanistan. Russia would soon implement a number of different sanctions on Georgia, including natural gas price raises through Gazprom and wider trade sanctions that impacted the Georgian economy, particularly Georgian exports of wine, citrus fruits, and mineral water. In 2006, Russia banned all imports from Georgia which was able to deal a significant blow to the Georgian economy. Russia also expelled nearly 2,300 Georgian who worked within its borders.
United Nations sanctions
The United Nations issues sanctions by consent of the Security Council and/or General Assembly in response to major international events, receiving authority to do so under Article 41 of Chapter VII of the United Nations Charter. The nature of these sanctions may vary, and include financial, trade, or weaponry restrictions. Motivations can also vary, ranging from humanitarian and environmental concerns to efforts to halt nuclear proliferation. Over two dozen sanctions measures have been implemented by the United Nations since its founding in 1945.
The United Nations Security Council passed Resolution 1718 in 2006 in response to a nuclear test that the Democratic People's Republic of Korea (DPRK) conducted in violation of the Treaty on Non-Proliferation of Nuclear Weapons. The resolution banned the sale of military and luxury goods and froze government assets. Since then, the United Nations has passed multiple resolutions subsequently expanding sanctions on North Korea. Resolution 2270 from 2016 placed restrictions on transport personnel and vehicles employed by North Korea while also restricting the sale of natural resources and fuel for aircraft.
The efficacy of such sanctions has been questioned in light of continued nuclear tests by North Korea in the decade following the 2006 resolution. Professor William Brown of Georgetown University argued that "sanctions don't have much of an impact on an economy that has been essentially bankrupt for a generation".
Sanctions on Libya
On February 26, 2011, the Security Council of the United Nations issued an arms embargo against the Libya through Security Council Resolution 1970 in response to humanitarian abuses occurring in the First Libyan Civil War. The embargo was later extended to mid-2018. Under the embargo, Libya has suffered serve inflation because of increased dependence on the private sector to import goods. The sanctions caused large cuts to health and education, which caused social conditions to decrease. Even though the sanctions were in response to human rights, their effects were limited.
One of the most comprehensive attempts at an embargo occurred during the Napoleonic Wars of 1803-1815. Aiming to cripple the United Kingdom economically, Emperor Napoleon I of France in 1806 promulgated the Continental System - which forbade European nations from trading with the UK. In practice the French Empire could not completely enforce the embargo, which proved as harmful (if not more so) to the continental nations involved as to the British.
EU, US, Australia, Canada and Norway (by Russia) since August 2014, beef, pork, fruit and vegetable produce, poultry, fish, cheese, milk and dairy. On August 13, 2015, the embargo was expanded to Albania, Montenegro, Iceland, and Liechtenstein.
Gaza Strip by Israel since 2001, under arms blockade since 2007 due to the large number of illicit arms traffic used to wage war, (occupied officially from 1967 to 2005).
Iran: by US and its allies, notably bar nuclear, missile and many military exports to Iran and target investments in: oil, gas and petrochemicals, exports of refined petroleum products, banks, insurance, financial institutions, and shipping. Enacted 1979, increased through the following years and reached its tightest point in 2010. In April 2019 the U.S. threatened to sanction countries continuing to buy oil from Iran after an initial six-month waiver announced in November 2018 expired. According to the BBC, U.S. sanctions against Iran "have led to a sharp downturn in Iran's economy, pushing the value of its currency to record lows, quadrupling its annual inflation rate, driving away foreign investors, and triggering protests."
There is a United Nations sanction imposed by UN Security Council Resolution 1267 in 1999 against all Al-Qaida- and Taliban-associated individuals. The cornerstone of the sanction is a consolidated list of persons maintained by the Security Council. All nations are obliged to freeze bank accounts and other financial instruments controlled by or used for the benefit of anyone on the list.
In response to cyber-attacks on April 1, 2015, President Obama issued an Executive Order establishing the first-ever economic sanctions. The Executive Order was intended to impact individuals and entities ("designees") responsible for cyber-attacks that threaten the national security, foreign policy, economic health, or financial stability of the US. Specifically, the Executive Order authorized the Treasury Department to freeze designees' assets. The European Union implemented their first targeted financial sanctions regarding cyber activity in 2020.
In response to intelligence analysis alleging Russian hacking and interference with the 2016 U.S. elections, President Obama expanded presidential authority to sanction in response to cyber activity that threatens democratic elections. Given that the original order was intended to protect critical infrastructure, it can be argued that the election process should have been included in the original order.
Bilateral trade disputes
Vietnam as a result of capitalist influences over the 1990s and having imposed sanctions against Cambodia, is accepting of sanctions disposed with accountability.[clarification needed]
In March 2010, Brazil introduced sanctions against the US. These sanctions were placed because the US government was paying cotton farmers for their products against World Trade Organization rules. The sanctions cover cotton, as well as cars, chewing gum, fruit, and vegetable products. The WTO is currently supervising talks between the states to remove the sanctions.
In March 2021, Reuters reported that the EU has put immediate sanctions on both Chechnya and Russia - due to ongoing government sponsored and backed violence against LGBTIQ+ individuals.
Hufbauer, Gary Clyde; Schott, Jeffrey J.; Elliott, Kimberly Ann; Oegg, Barbara (2008). Economic Sanctions Reconsidered (3 ed.). Washington, DC: Columbia University Press. p. 67. ISBN9780881324822. Retrieved . By far, regime change is the most frequent foreign policy objective of economic sanctions, accounting for 80 out of the 204 observations.
^Economic Sanctions Reconsidered, 3rd Edition, Hufbauer et al. p. 159
Pape, Robert A (Summer 1998). "Why Economic Sanctions Still Do Not Work". International Security. 23 (1): 66-77. doi:10.1162/isec.23.1.66. JSTOR2539263. S2CID57565095. I examined the 40 claimed successes and found that only 5 stand up. Eighteen were actually settled by either direct or indirect use of force; in 8 cases there is no evidence that the target state made the demanded concessions; 6 do not qualify as instances of economic sanctions, and 3 are indeterminate. If I am right, then sanctions have succeeded in only 5 of 115 attempts, and thus there is no sound basis for even qualified optimism about the effects of sanctions.
^A Strategic Understanding of UN Economic Sanctions: International Relations, Law, and Development, Golnoosh Hakimdavar, p. 105
^Peksen, Dursun; Jeong, Jin Mun (30 August 2017). "Domestic Institutional Constraints, Veto Players, and Sanction Effectiveness". Journal of Conflict Resolution. doi:10.1177/0022002717728105 – via Sage Journals.
^A., Conley, Heather (2016). The Kremlin Playbook: Understanding Russian influence in Central and Eastern Europe : a report of the CSIS Europe Program and the CSD Economics Program. Mina, James, Stefanov, Ruslan, Vladimirov, Martin, Center for Strategic and International Studies (Washington, D.C.), Center for the Study of Democracy (Bulgaria). Washington, DC. ISBN9781442279582. OCLC969727837.
^"Pearl Harbor Raid, 7 December 1941". Washington: Department of the Navy -- Naval Historical Center. 3 December 2000. Archived from the original on 6 December 2000. Retrieved 2019. The 7 December 1941 Japanese raid on Pearl Harbor was one of the great defining moments in history. A single carefully-planned and well-executed stroke removed the United States Navy's battleship force as a possible threat to the Japanese Empire's southward expansion. [...] The Japanese military, deeply engaged in the seemingly endless war it had started against China in mid-1937, badly needed oil and other raw materials. Commercial access to these was gradually curtailed as the conquests continued. In July 1941 the Western powers effectively halted trade with Japan. From then on, as the desperate Japanese schemed to seize the oil and mineral-rich East Indies and Southeast Asia, a Pacific war was virtually inevitable.