Statecraft and the Limitations of Economic Sanctions

Policymakers employ economic sanctions far more than they should and often without fully appreciating the downsides to their use. While economic sanctions can appear like an attractive alternative to military force, they are not well-suited for accomplishing many foreign policy objectives. There are also a number of substantial and frequently intractable impediments that prevent economic sanctions from succeeding.  Additionally, there are multiple pathologies associated with why policymakers sometimes choose to adopt sanctions and why ineffective sanctions are left in place. By employing sanctions either too quickly or remaining overly committed to sanctions-based diplomatic strategies, policymakers can make bad situations worse or forgo opportunities to make bad situations better.

No other country employs economic sanctions more than the United States. The U.S. Government employs sanctions to curb nuclear proliferation, stop human rights abuses, encourage democratization, disrupt conflicts, and eliminate unfair trade practices. Whereas some of its sanctions achieve their goals in a matter of months or years, other U.S. sanctioning efforts have lingered on unsuccessfully decades. Using the most optimistic of benchmarks, U.S. economic sanctions are only successful around a third of the time (Hufbauer, Schott, Elliot, and Oegg 2007). In pursuing U.S. foreign policy interests, policymakers should be cautious in employing sanctions, circumspect in their expectations for success, and remember than sanctions are a means to end not an end unto themselves.

This essay offers an overview of the challenges associated with effectively employing economic sanctions as a tool of statecraft. It explains why economic sanctions appear attractive to policymakers despite their significant limitations and adverse externalities. The conclusion of the essay discusses how economic sanctions can be employed more effectively, given that sanctions are likely to remain foreign policy mainstay well into the future.

Pain, Weakness, and Isolation: Theory versus Reality in the Imposition of Economic Sanctions

Economic sanctions are government-imposed restrictions on economic transactions with foreign actors in order to compel a change in their behavior. They can destabilize, weaken, and ostracize their targets, raising the target’s costs for not complying with the sanctioner’s demands. Economic sanctions can be used to target individuals, organizations or government agencies, or entire countries. For example, the U.S. Government has imposed targeted sanctions on individuals in South Sudan that have allegedly engaged in human rights abuses and broad spectrum trade and financial sanctions against North Korea for nonproliferation purposes.

While the scope and severity of economic sanctions can vary, in theory they are all expected to work in the same way.  If the sanctions imposed on the target can be made sufficiently painful, then the target should prefer conceding to the sanctioner’s demand instead of continuing to resist the sanctions. Making sanctions sufficiently painful, though, can be quite difficult in practice.

First, not all actors are equally vulnerable to economic sanctions. For U.S. economic sanctions to really hurt their targets, their targets have to possess some sort of economic dependence upon the United States or constituents that it can influence. If a country does not trade heavily with the U.S., for example, trade sanctions will be of limited use against it. Similarly, targeting a foreign leader with financial sanctions meant to freeze his or her bank accounts will only work if the leader keeps money in banks within the U.S. Government’s jurisdiction or subject to its suasion (see: Zarate 2013).

Second, the economic and social pressure exerted by economic sanctions does not translate directly into political pressure (Kirschner 1997). Those most affected by adverse effects of economic sanctions often do not possess the power to influence the policies that sanctions were imposed to alter. In authoritarian governments like North Korea under Kim Jong Il and Iraq under Saddam Hussein, for example, the countries’ elites were largely insulated from the political consequences of the suffering that U.S. and international sanctions economic sanctions inflicted upon their populations (Meuller and Meuller 1999).  Leaders can also use economic sanctions as an excuse to crackdown on dissidents (Wood 2008; Peksen 2009a), impose restrictions on the media (Peksen 2010), and consolidate more power within their regime (Peksen and Drury 2010). President Vladimir Putin’s response to U.S. and European Union sanctions after Russia’s annexation of Crimea exemplifies such responses.

Third, the targets of economic sanctions do not just passively accept the costs they inflict. Instead, they actively seek out new trading partners to replace those affected by economic sanctions and also can seek the patronage of other sympathetic regimes. As I show in my book Busted Sanctions (Early 2015), there are often droves of profit-seeking firms in third-party countries not participating in sanctioning efforts that are still willing to do business with the targets of U.S. sanctions. The harsher the sanctions imposed against a target country, the greater the potential returns are for trading with them. Additionally, there are governments like China that are willing to aid the targets of U.S. sanctions like in the cases of North Korea and Cuba. When countries receive the support of foreign sanctions busters, it dramatically undermines the likelihood of sanctions being successful (Early 2015). Preventing third-party sanctions-busting through creating multilateral sanctions coalitions can be difficult and costly, but it can payoff in making sanctioning efforts more effective in some circumstances (Early and Spice 2015). Obtaining the EU’s support for the nonproliferation sanctions against Iran was certainly critical for getting Iran to the negotiating table for eventual brokering of the Joint Comprehensive Plan of Action (JCPOA) to deal with its nuclear program.

The fourth key challenge is that economic sanctions are a double-edged sword that often hurt the economies of both those states that impose them and their targets. Sanctions aimed at restricting trade, financial relationships, and investment disrupt otherwise profitable commercial opportunities for firms in sender states. Sanctions not only impose immediate economic losses upon firms in sender states, but that lost business is often re-directed to those firms’ commercial competitors in other states (Early 2012). One estimate at the yearly cost of sanctions to the U.S. economy put them at $15-19 billion and up to 200,000 jobs (Hufbauer, Elliot, Cyrus, and Winston 1997). The harsher and more disruptive the sanctions that a sender government imposes on a target actor, the more those sanctions will tend to hurt its own economy as well. As such, leaders are often reluctant to impose harsh sanctions that would have the greatest chances of working due to concerns about how much harsh sanctions would harm their citizens’ economic welfare. The significant reluctance of many EU states to impose harsh sanctions against Russia over the annexation of Crimea perfectly illustrates this dynamic.

Fifth, economic sanctions can create a myriad of unintentional consequences that may clash with the goals for which the sanctions were imposed. For example, the U.S. Government employs economic sanctions to compel leaders into democratizing their governments and to stop engaging in human rights abuses. Yet, it has also been shown that the leaders of sanctioned states often respond to being sanctioned by increasing repressive behaviors to prevent their domestic grip on power from being destabilized (Peksen 2009a; 2009b; Peksen and Drury 2010). As such, using sanctions to promote democratization or prevent human rights abuses might be counterproductive in some cases. While punishing human rights abusers with sanctions may look good and feel good, in many cases it doesn’t actually do good.

And finally, given their weak track record of success, some have argued that economic sanctions are often imposed for their symbolic value (Barber 1979; Whang 2011). According to this view, it’s the act of imposing sanctions against a target rather than their actual consequences that really matter. By sanctioning a target leader or government engaged in objectionable behaviors, policymakers can offer a public display of condemnation that appears more forceful than words alone. This can stigmatize and lead to the political isolation of the sanctions’ target (Peterson and Drury 2011), but such stigma doesn’t necessarily extend to all areas (Early and Jadoon 2016). Such actions may also be domestically popular, because the sanctions allow leaders to tell constituents that they have actually “done something” about the problem. This suggests that some sanctions are imposed with little regard for their likely prospects of success.

All these challenges indicate that economic sanctions face substantial barriers to working how they are supposed to in theory. Indeed, economic sanctions rarely play a singular, decisive role in obtaining their objectives. According to one database of sanctions episodes, sanctions alone were able to fully achieve their objectives in only 5% of the cases (Hufbauer et al. 2007). This suggests that economic sanctions are best understood as part of package of policies that leaders should employ to accomplish their foreign policy goals. This could include the use of incentives, the threat or use of military force, or the willingness to engage in broader diplomatic negotiations. Rarely can sanctions alone accomplish everything that policymakers want.

Effective Sanctions versus Effective Sanctions Policies

Policymakers can make their sanctioning strategies more effective and less costly, but there are some tradeoffs between the two. The most effective economic sanctions are often the ones that never get imposed. It has been found that threatening sanctions can sometime succeed at obtaining concessions without having to follow through on them. Rather than imposing sanctions right away, governments are often best served by levelling sanctions threats first (Drezner 2003; Bapat et al. 2013). This strategy is a particularly cost-effective form of coercion as it can allow the government to achieve its goals without having to bear the costs of imposing the sanctions. For threats to be effective, though, they must be both costly and credible. This means that the governments issuing such threats have to demonstrate their willingness to adopt costly sanctions and rarely back away from the threats they have issued in order for their threats to be taken seriously (Peterson 2013). To maximize the general likelihood that targets will concede to sanctions threats, sender states may have to follow through in imposing sanctions that are likely to be both costly and ineffective to demonstrate their threats’ credibility. Policymakers should thus employ sanctions threats sparingly and primarily when they are willing to follow through on whatever threats they level.

Having committed to imposing economic sanctions and decided upon their scope and severity, there still remains a lot of work to be done in imposing sanctions. Effectively implementing economic sanctions can require substantial investments of governmental resources (Morgan and Bapat 2003). Governments must publicize the sanctions to their relevant industries, education about what the compliance requirements are, and the invest resources in monitoring and enforcing compliance (Early 2016). If economic sanctions exist only on paper, then they are not likely to be effective.

Leaders should also consistently evaluate whether their economic sanctions are having the intended effects, whether continuing to impose them is worth the costs, and whether sanctions remain a better option than alternative strategies. Economic sanctions sometimes can take years to work, but if they are allowed to persist longer than dozen years they almost never succeed. Policymakers should regularly evaluate whether it is best to maintain existing sanctions, enhance them, or abandon them in light of their prospective costs and odds of success. Problematically, policymakers can sometimes get tunnel vision with respect to sanctions in which they perceive the only option for addressing their ineffectiveness is to escalate the sanctions’ severity.  Research has shown, though, that gradually slowly the severity of sanctions is not nearly as effective as imposing very harsh, disruptive sanctions all at once (Hufbauer et al. 2007). If economic sanctions appear unlikely to work, as is the case when target states have established extensive sanctions-busting relationships (Early 2015), policymakers are often best served by giving up on sanctions or, at the very least, beginning to pursue other forms of engagement.

In the case of the U.S. sanctioning effort against Cuba initiated in 1960, for example, Cuba secured extensive foreign assistance from the Soviet Union shortly after the sanctions were imposed in addition to forging trade-based sanctions-busting with a number of the United States’ commercial competitors.  Following the Cold War’s conclusion, Cuba was able to obtain the patronage of both Venezuela and China—while expanding its trade relationships with many European states, Canada, and Mexico.  U.S. efforts to escalate its sanctions against Cuba in the 1990s constituted a major failure (Early 2015). Only recently has the Obama Administration sought a different course by making robust diplomatic entreaties with Cuba and relaxing at least some of the sanctions restrictions. After five-plus decades of relying almost exclusively on sanctions, the U.S. Government is finally pursuing a broader set of policies more likely to yield meaningful reforms in Cuba. At the very least, President Obama’s strategy has initiated a renaissance in Cuban-American relations that had been antagonistic for half a century—and even after the Cold War had concluded.

Knowing when to remain committed to economic sanctions versus giving up or pursuing other policy options is by no means an easy task. A good heuristic, though, is that policymakers should generally consider giving up on sanctioning efforts that have not worked after a decade—either by abandoning the goals being pursued or by adopting alternative policy options to achieve them. Once sanctions have persisted beyond ten years, it’s difficult to credit them with success in achieving their goals or to necessarily justify their accumulated costs.

The recent set of democratizing reforms taking place in Myanmar are a good example of how U.S. economic sanctions may be associated with the achievement of their goals but may not have much to do with their acquisition. The U.S. Government first sanctioned Myanmar (then called Burma) back in 1988 after its military-led government lethally cracked down on democratic protests. The military-led regime remained in power, nullifying the results of the 1990 election in which the opposition party (the National League for Democracy) won over 80 percent of the seats in parliament and imprisoning many of its members.  Myanmar’s government continued to engage in host of politically repressive and human rights-abusing policies for more than twenty years. From 1990-2011, Freedom House (2016) assigned Myanmar its lowest scores possible on both its measures of political rights and civil liberties. According to Wood and Gibney’s (2010) Political Terror Scores, the Myanmar Government engaged in civil and political rights violations that affected most or the entirety of the country during this period. In the midst of this period, the U.S. Government strengthened its sanctions against Myanmar in 1997 by banning U.S. investments in the country as a result of the “severe repression” of the country’s population (Hadar 1998). These sanctions did not cause any improvement in Myanmar’s political or human rights policies over the ensuing decade.

In the fall of 2009, the Obama Administration decided to adopt a new strategy that focused on direct diplomatic engagement with Myanmar’s ruling regime and limited cooperation in areas of mutual interest. At least initially, President Obama left the existing sanctions in place.  Shortly thereafter, Myanmar’s military regime initiated a set of transformative changes to its political policies. It held open elections, released political prisoners, and respected the results of the election won by the opposition through the formation of a “quasi-civilian government” (Martin 2013: 1-2). This included the release of Nobel Peace Prize winner Aung San Suu Kyi, who had spent 15 years under house arrest due to her involvement in Myanmar’s political opposition. She was allowed to run for the parliament in 2012 and became Myanmar’s State Counsellor in 2015. Certainly, the Obama Administration has used the relaxation of sanctions as tool for supporting and encouraging Myanmar’s democratization. Yet, it was the Obama Administration’s diplomatic engagement rather than U.S. sanctions that was the major catalyst for change. If anything, U.S. economic sanctions were most strongly associated with the Myanmar regime’s most brutal periods of repression rather than forcing the regime to reform or respect its citizens’ human rights.  Just because U.S. economic sanctions were in place against Myanmar when the regime initiated political reforms does not mean the sanctions achieved the goals for which they were imposed 20-plus years earlier. Rather than being a sanctions success story, the best that can be said for the sanctions is that they have played a partially constructive, secondary role in incentivizing political change in Myanmar after more than two decades of failure.

Economic Sanctions, the Goldilocks Trap, and Policy Inertia

Despite their limited chances of success and potential to be counterproductive, U.S. policymakers still continue to rely on economic sanctions more than any other country in the world. Why? A large part of that answer likely lies in the nature of policy options that policymakers have in dealing with international disputes and crises (Baldwin 1999). Doing nothing may often be an unattractive option because it can make leaders appear weak, indecisive, or apathetic. Offering no response also limits the likelihood of a bad situation improving. Diplomatic responses may also be viewed as insufficient, especially if initial diplomatic entreaties have failed to resolve the issue. On the other end of the spectrum, threatening or employing military force may be too risky or too costly to consider. Using military force for certain objectives may also be inappropriate or unjustifiable.

Economic sanctions are often viewed as occupying the middle-ground between diplomacy and military force. Just like Goldilocks considering which porridge option best-suited her palette, policymakers often decide that the most attractive policy falls in between a cold war of words and a hot conflict. This is aided by the fact that economic sanctions tend to be easy for policymakers to adopt, either through executive order or legislation.  As described above, a key challenge with respect to economic sanctions resides in their implementation and the policymakers that decide to impose sanctions often have little to do with following through on their implementation.

Contributing to the problem is that, whereas policymakers can be criticized for doing nothing, offering only “empty” words, or for the fallout of military actions gone awry, policymakers are almost never held liable for ineffective sanctions policies. Part of this stems from the long time lines that required to judge sanctions’ effectiveness. It also relates to the difficulty of evaluating the full set of costs associated with imposing economic sanctions and the cumulative set of negative externalities they have. By the time that the full set of costs and consequences from failed sanctions policies can be fully evaluated, the policymakers that made those decisions and the public’s attention will have often already moved on. All this can help make sanctions appear to be the most expedient, low-risk, “just right” option available to policymakers. Again and again, that’s a large part of why policymakers keep gravitating back to economic sanctions in order to address their foreign policy problems.

Another pathology relates to when sanctions policies become accepted as the status quo government policy towards a particular target. With regard to government policies, it’s always much harder to adopt new policies than to let old ones persist. Economic sanctions can accumulate entrenched interests that benefit from maintaining the status quo. In the case of the U.S. sanctions against Cuba, for example, the U.S. sugar industry has benefited enormously from the embargo against Cuban sugar imports. For the sugar industry, the embargo serves as a projectionist benefit that keeps the price of U.S. sugar higher than it otherwise would be and it has lobbied to keep the sanctions in place. The politics surrounding the removal of sanctions can be politically contentious for non-economic reasons as well. The American-Israeli Political Action Committee (AIPAC), for example, strongly lobbied Congress to block President Obama’s efforts at offering sanctions relief negotiated as part of the JCPOA with Iran. The U.S. “State Sponsors of Terrorism” list subject to mandatory sanctions represents another good example of the inertia that sanctions can take on. Once a country gets on that list, getting off of it can be incredibly difficult for governments to do even if they have clearly stopped supporting terrorism.  Sanctions written into legislative statute are the hardest to remove. Governments and, in particular, the United States can thus become locked-in to sanctions-dominated foreign policy strategies even if they no longer appear to be effective. Policymakers may thus lose out on otherwise promising opportunities to resolve disputes or find compromises because sanctions get in the way of rather than facilitating positive outcomes.

Economic Sanctions and Smarter Statecraft

As this essay has shown, there are significant challenges in employing economic sanctions successfully under optimal circumstances and there are a myriad of reasons why economic sanctions might suffer from flawed implementation. The major criticisms highlighted above can be summarized as follows:

  • Economic sanctions face numerous significant and often intractable barriers to achieving their political goals
  • Imposing economic sanctions can entail significant, but difficult to estimate economic costs for their senders and also have a broad range of adverse, unintended consequences
  • Policymakers often employ economic sanctions for reasons other than their prospects for success
  • Once imposed, it can be very difficult for policymakers to break away from sanctions-based foreign policy strategies

Together, these findings suggest that policymakers should approach the use of economic sanctions much more carefully than they presently do. Imposing economic sanctions may appear like an attractive option for reasons other than their likelihood of success, but that is often because so many of their adverse consequences can be difficult to assess prior to their imposition. This does not mean that economic sanctions cannot play a useful role in states’ foreign policies altogether, but that how policymakers use sanctions should change.

Policymakers should give more careful consideration to economic sanctions’ prospective costs and negative externalities, limit the use of sanctions to the circumstances in which they are most appropriate, and subject ongoing sanctioning efforts to regular evaluations regarding the benefits of maintaining them.  The new wave of research on sanctions’ externalities suggests that policymakers can potentially account for the unintended effects that their economic sanctions will have on the behavior their targets. Econometric forecasting models can also be used to estimate the projected domestic economic costs of imposing sanctions, both immediately and into the future. By incorporating a broader scope analysis of the total range of costs associated with economic sanctions, policymakers can better evaluate whether non-instrumental, immediate benefits of imposing sanctions are worth the longer range costs. Policymakers should also factor in the extent to which economic sanctions are actually conducive to achieving those goals. In the case of promoting human rights, for example, sanctions may not be appropriate. Finally, policymakers should be cognizant that economic sanctions polices can take on a life of their own. This should give policymakers pause in whether imposing them is warranted, but they can also adopt provisions that subject sanctions policies to period review. One approach would be to build in long-term sunset clauses into sanctions legislation. While a short-term sunset clause might cause the targets of sanctions to question the sender’s resolve, a sunset clause that forced the sanctions to be actively renewed after 10 years could be useful.

Another important insight from this essay is that strategies relying on the pure coercive nature of economic sanctions rarely succeed in their goals. In the cases of the U.S. sanctions against Cuba, Myanmar, and Iran, overcoming the antagonism that had built up over decades-worth of sanctions required active diplomatic outreach. In the cases of Cuba and Myanmar, the Obama Administration combined bold diplomacy with promises of relaxing sanctions in order to improve relations and start down the path of achieving the sanctions’ goals. Sanctions alone, however, were not capable of forcing either country to make the desired concessions. After decades of ineffective sanctions against Iran, the U.S. was able to forge a strong multilateral coalition that supported the sanctioning effort against Iran at beginning of the Obama Administration. Rather than trying force Iran into making unilateral concessions, though, President Obama used those sanctions to bring Iran to the bargaining table and negotiate from a position of strength.  Imposing economic sanctions is easy, but making them actually work—especially on their own—is hard. Policymakers should avoid narrowly committing themselves to sanctions-based foreign policy strategies without regularly considering other options for engagement.

Economic sanctions will continue to be used irrespective of whatever critiques are made against them because of how easily and expediently policymakers can employ them to “do something” in response in response to foreign policy challenges. Economic sanctions provide policymakers with a potentially useful alternative to military force when coercive statecraft is warranted, but they are associated with their own set of unique challenges, costs, and risks. Even compared to the use of military force, economic sanctions are not always the least costly option, especially in the long-term, and they are associated with numerous pathologies that can limit their effectiveness and even make them counterproductive. U.S. policymakers, in particular, should be mindful of the perils of overly relying on economic sanctions and exercise significant discretion in their use.


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