Do Sanctions Work?

Russian President Vladimir Putin at the Kremlin on December 22, 2014. Maxim Shipenkov/Pool/Reuters

Amid the buzz around new U.S. and EU sanctions being imposed on Russia, sanctions on another country, on the other side of the world, were being gently lifted. In October, following elections, America and Australia removed all remaining sanctions on Fiji, which had included travel bans for top officials, an embargo on arms sales and limits on financial assistance.

The sanctions can be at least partly credited for holding President Frank Bainimarama, the retired rear admiral who seized power in a bloodless 2006 coup, to his promise of holding elections in 2014, albeit having failed to persuade him to move the timetable forward.

A sanctions postmortem is never simple, but in the long history of sanctions, this can be marked up as a moderate victory on a decidedly mixed scorecard.

In a comprehensive study, "Economic Sanctions Reconsidered," four academics examined 174 cases in the 20th century, from the Allied blockade of Germany in the First World War through to the U.S. and Organization of American States sanctions against Ecuador in 2000.

They found sanctions to be at least partially successful in 34 percent of cases. But this success rate is heavily influenced by the type of policy change pursued. Where it is modest—the release of a political prisoner, for example—the rate jumps up to half of cases. Regime change or efforts to disrupt a military adventure fare less well.

In the mid-19th century, the term "pacific blockade" became common to describe naval blockades in peacetime, normally imposed on target countries to force them to pay their debts. From 1827 until the outbreak of the First World War, 21 pacific blockades were deployed, normally by big European countries against smaller ones both in Europe and in Asia and Latin America.

The postwar period has witnessed a boom in the use of sanctions. The simple naval blockade has been modernized to encompass broader restrictions on trade, financial flows and the free movement of people. Moreover, sanctions now include confiscation of the international property of the target country, boycotting of sporting and cultural events and withholding of diplomatic recognition. At the same time, sanctions have been used to achieve broader aims, including nuclear nonproliferation, defending human rights and environmental protection.

For the future, the past's failures are perhaps more instructive than its successes. Cuba is a good place to start. The embargo began in 1960, a year before Barack Obama was born. But sanctions have done little to help remove either of the Castro brothers.

Two things are notable. First, Cuba shows how sanctions can allow the autocrat to present himself as a victim and rally allies both inside and outside the country. The second is that for sanctions to be used as a tool of leverage, as with Bainimarama, the imposing party must be able to credibly remove them if its demands are met. In the case of Cuba, only an obstructive Congress can remove the sanctions, and so Obama has little to offer besides loosening travel restrictions.

The days of trade embargoes, though, have long been numbered. Up to the 1990s, the logic went that to have the maximum effect, sanctions should impose the maximum cost on the target country's economy. British and U.N. sanctions against Rhodesia, from 1965 to 1979, and against Biafra during the Nigerian civil war, from 1967 to 1970, imposed costs of more than 10 percent of gross national product.

It was the U.S. and U.N. sanctions against Iraq, however, that turned the tide, and marked the peak of the "shotgun" style of trade sanctions, which hit indiscriminately. It has been estimated that the cost to Iraq was as much as 48 percent of GNP. Academics had pointed to the bluntness of such sanctions before, but it took the evidence from Iraq of the immense human suffering caused by them to shift the consensus toward more focused measures.

It also became clear how such sanctions affected the domestic economy of the targeted state. In Iraq, the sanctions actually nullified any resistance to Saddam Hussein and allowed his allies to consolidate power over what trade was left.

Yugoslavia is another example where the scarcity brought about by the early-1990s sanctions had unintended consequences that not only empowered President Slobodan Milosevic but scarred the economy even after he fell. Rationing became an excuse for corruption. Sanctions tore at the fabric of society and drove many to criminality.

So in the '90s, led by the U.N., the world began to craft what became known as "smart sanctions" – the sniper to the erstwhile shotgun. Such sanctions aim to raise the pain for the target country's regime while avoiding general suffering among an innocent population.

Examples include asset freezes, travel bans on leaders and arms embargoes. Targets included Rwanda in 1994 and the Unita faction in Angola in 1993. It was Sergey Lavrov, now Russia's foreign minister but then Russia's U.N. ambassador, who declared that "we will propose sanctions [in Angola] with no humanitarian consequences."

However, later reviews from academics found that these sanctions also had little effect. An edited volume looking at 14 cases of U.N. smart or at least smarter sanctions between 1990 and 2002 found that the shotgun still trumped the sniper and that "where economic and social impact had been greatest, political effects had also been the most significant."

This failure, combined with sanctions' more frequent use, led to a backlash by foreign policy thinkers such as Richard Haass, who argued that sanctions had unwisely become the U.S.'s foreign policy tool of choice at a cost to U.S. companies but with little strategic benefit.

The cost of sanctions to the sanctioner should not be underestimated. In a famous case, the 1980 U.S. embargo on grain exports to the USSR ended up costing the Soviets only $233 million, as they turned to other sources while leaving U.S. producers with costs of at least $2.3 billion and a loss of a dominant market share that was never recovered.

Others, however, simply argued that the early failure of smart sanctions to deliver was one of implementation, particularly by U.S. allies who lacked either statutory authority or the bureaucratic means to put U.S. financial sanctions into place.

It was 9/11 that changed this. It served as the impetus for sweeping enhancements in the United States's ability to impose smart sanctions, and in particular financial ones. In the weeks after the attacks, the U.N. imposed unprecedented obligations on member states to combat terrorism financing. Subsequently, a beefed-up team in the U.S. Treasury devised ways to squeeze the U.S.'s other enemies with limitations on their ability to use the global financial system. Juan Zarate, a former Treasury official and author of Treasury's War, described this as "smart sanctions on steroids."

Whereas traditional smart sanctions had required the Treasury to freeze specific assets, which stumbled when trying to catch all variants of the target's name, the new tactic took advantage of the private financial world's aversion to dealing with anyone even tainted by international terrorism or nuclear proliferation and fear of being designated a "money-laundering concern" under the U.S. Patriot Act.

Many credit the Treasury's assault on Iran's financial system for its recent willingness to slow the development of its nuclear program in exchange for relief from sanctions. In particular, Iran was blocked in 2012 from the Swift network for international inter-bank payments after pressure was put on the institution by the EU and U.S. The effect of this and other measures was immediate. After inflation shot up, some estimate that in real terms private pay dropped by 35 to40 percent. GDP fell 5.8 percent in 2012.

The staggering effectiveness of the financial sanctions against Iran has led many to call for similar tools, such as Swift, to be used against Russia. But these sanctions have come full circle; they are no longer smart or targeted. Iran's population suffered dearly, and the imposition of such heavy financial sanctions on Russia would have even more deleterious effects.

Iran may be the high-water mark in the effectiveness of financial sanctions. The power of Zarate and his colleagues came from the West's economic hegemony and control of global financial architecture. Wielding this threat too aggressively is spurring Russia and China to explore alternative global financial architecture.

And indeed it may not even be financial sanctions that are most effective. In the case of Iran, it was as much the clampdown on the Iranian oil trade that brought Iran back to the table. Oil exports fell by 60 percent in 2012 after the EU banned imports of Iranian oil and made it difficult to insure ships carrying Iranian oil.

For Russia, the real pinch at this point is also falling energy revenues, prompted not by sanctions but by falling prices. Saudi Arabia's raising of oil output is a more potent, indirect weapon.

On the sanctions, Russians we have spoken to claim the immediate effect has been to rally people behind President Vladimir Putin. Along with the military action in Ukraine and Crimea, it has brought Putin patriotic reinforcement.

As with the rallying to the flag, the glue of popular support against sanctions may not last. Businesses are privately complaining bitterly of the impact on vital foreign investment and even routine trade. But here, too, it may be Putin's arbitrary disrespect for the law more than the sanctions that is hurting trade. And whatever the verdict on their importance, few would suggest they will be the decisive factor in resolving the Ukraine crisis.

Yet if sanctions offer a mixed record of success, at best, what replaces them? The world badly needs a quiver of nonmilitary responses to states that willfully put themselves beyond the pale. What we seek from sanctions is leverage. In the case of Fiji, that meant turning the screws on Bainimarama and his allies to return to democracy. In Russia, neither Putin's motivations nor the West's demands are so clear-cut.

Nevertheless, we can draw important lessons from the history of sanctions. The first is that enshrining them in U.S. law, particularly, removes any element of White House leverage and makes them a hostage to congressional politics, potentially dooming Russia and the West to another generation of disharmony.

The U.S. Senate Foreign Relations Committee unanimously passed such a legislative proposal in September, and after the Republican victory in November's midterm elections, it could well go further. It took until 2012 for Congress to remove the Jackson-Vanik Amendment, passed in 1974 to put pressure on the Soviet Union to lift its restrictions on Jewish emigration, despite those limits elapsing with the Soviet Union's fall.

The second is that sanctions with greater universality, and hence greater legitimacy, are harder to portray as Western imperialist attacks. A reformed U.N. Security Council, easier said than done, would help enable this.

Lastly, civil society campaigns may often be a bigger rebuke than government action. During the apartheid era, sporting, cultural and academic boycotts did as much to sap the white South African spirit as economic sanctions did.

There is a delicate balance to be struck between temporary isolation and permanent dislocation. Sanctions work if the target country feels it has something to lose from further sanctioning and something to gain from cooperation. Those gains and losses are determined by the skill of the sanctioner, but also by the defiance of the sanctioned. Russia is no Fiji.

Mark Malloch-Brown is a former deputy secretary-general of the United Nations and an ex-U.K. minister. Harry Gibson is an economist. This article first appeared on the website of London's Chatham House, the Royal Institute of International Affairs.

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