Do Sanctions Work?

2022-03-01

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From Afghanistan to Cuba, more than 20 countries around the world are under U.S. economic, financial and political sanctions that, according to some experts, are unprecedented in severity and scope.

The latest penalties target Russia.

As Russian troops crossed Ukrainian borders, U.S. President Joe Biden made it clear that he will not send U.S. forces to deter Russia's invasion militarily. Instead, he authorized a series of economic and financial sanctions.

"The scale of these sanctions are truly unprecedented," Robert Person, a professor of international affairs at West Point, told VOA while speaking in a private capacity.

This week Russia has been scrambling to prevent a financial meltdown after sanctions cut some banks out of a critical global financial system and froze the assets of Russia's central banks that are held overseas. Western countries also set up a task force to seize assets of Russian companies and politically influential businessmen.

"The cost to Russia will be immediate and profound - to its financial system, to its economy, to its technology base, and to its strategic position in the world," Daleep Singh, deputy national security adviser for international economics at the White House, told reporters on February 24.

"We are settling in for a long-term political-economic conflict with Russia, what some have called 'containment 2.0.' It's worth remembering that it took 74 years for the economic flaws in the Soviet system to finally bring about its collapse," said Person. "Patience in this long struggle will be necessary."

Presidential, congressional power

Under the International Emergency Economic Powers Act of 1977 (IEEPA), the U.S. president can impose sanctions through executive orders.

Sanctions do not require congressional approval, but Congress also can initiate sanctions through legislation.

Sanctions are used when diplomacy fails and when war is not preferred as an option, experts say.

"The exercise of powers granted to the president under IEEPA - the underlying legal authority for most sanctions programs - requires a declaration of national emergency with respect to a threat to the foreign policy, national security, or the economy of the United States that emanates largely from abroad," Brian O'Toole and Samantha Sultoon wrote in a piece for the Atlantic Council.

Most policies regarding sanctions are proposed by U.S. government agencies, such as the State Department, and discussed before being recommended to the president for approval.

Various applications

While many sanctions are economic in nature, some sanctions are also political and aim to address a range of issues such as nonproliferation of arms, human rights violations, terrorism concerns and trade disputes.

As of February 2022, there are 23 countries under various U.S. sanctions.

There are also sanctions related to counter-narcotics trafficking, counterterrorism, cyber operations, foreign interference in U.S. elections, and human rights violations, which can be applied against any country, individual or entity.

Under IEEPA, there is no limit on the number of countries and foreign entities against which sanctions can be applied.

"The limit is really policy-defined, in (terms of) how many sanctions regimes the U.S. government believes it needs (in order) to deal with whatever challenges it is facing," Richard Nephew, a sanctions expert and Columbia University senior research scholar, told VOA.

Execution

Russia's central bank has billions of dollars in foreign currencies held in Western countries which are now frozen. Earlier this year, the U.S. froze some $7 billion of Afghanistan's assets at the New York Reserve.

When sanctions are applied it becomes "illegal for U.S. persons - and foreign persons can face sanctions of their own - if they do business with sanctioned entities and individuals in ways the U.S. government considers material," Nephew said.

The U.S. cannot force other countries to comply with sanctions it imposes but seeks their cooperation to do so.

Sanctions can deprive individuals and entities from a host of financial transactions such as credit loans, mortgage payments and funds transfers unless there are specific exemptions offered within a given jurisdiction.

Under the latest sanctions on Russia, U.S. and European countries have also isolated selected Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an international bank-to-bank transfer system.

"This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally," the European Union said in a statement on February 26.

Russian officials have shrugged off the sanctions as trivial and something that will not cause significant harms, but independent observers say it's too early to say how deep and extensive the impact of the sanctions will be on the Russian economy.

Effectiveness

Sanctions can be modified, eased or removed at any time by the U.S. government.

The Islamic Republic of Iran, the Republic of Cuba, and the Democratic People's Republic of Korea (North Korea) have been under U.S. sanctions for several decades.

The effectiveness of sanctions is passionately debated as both proponents and opponents point to specific cases.

In a June 2019 Foreign Affairs article, a majority of experts quoted said sanctions were causing more harm than good.

"Sanctions impose costs on both parties: the sender and the target," said Person of West Point. "There's also a long-term concern that aggressive sanctions like these will accelerate a global transition away from the American-led international financial architecture and use of the dollar as the dominant currency of exchange and reserve."

One thing that is clear is the palpable impact of sanctions - even if intended to target only the broader economic standing of a country - on ordinary people.

Speaking on the effectiveness of the new sanctions imposed against Russia, White House official Singh said, "these impacts over time will translate into higher inflation, higher interest rates, lower purchasing power, lower investment, lower productive capacity, lower growth, and lower living standards in Russia."

"To be clear: This is not the outcome we wanted. It's both a tragedy for the people of Ukraine and a very raw deal for the Russian people. But Putin's war of choice has required that we do what we said and to ensure this (invasion) will be a strategic failure."