[An updated version of this article can be found at Sanctions in the 2nd edition.]
Throughout most of modern history, economic sanctions have preceded or accompanied war. Sanctions often have taken the form of a naval blockade intended to weaken the enemy during wartime. Only when the horrors of World War I prompted President Woodrow Wilson to call for new methods of dispute settlement were economic sanctions seriously considered as an alternative to war. Sanctions were incorporated as a tool of enforcement in each of the two collective security systems established in this century—the League of Nations between the two world wars and the United Nations since World War II. But individual countries, especially the United States, often use economic sanctions unilaterally.
Purposes of Economic Sanctions
Students of international law frequently argue that only economic measures deployed against states that have violated international standards or obligations may properly be classified as "sanctions." According to this view sanctions should be distinguished from national uses of economic power in pursuit of narrow national interests. But common usage of the term economic sanctions typically encompasses both types of actions. The broader meaning is used here. Specifically, economic sanctions are the deliberate, government-inspired withdrawal, or threat of withdrawal, of customary trade or financial relations. ("Customary" refers to the levels of trade or financial activity that would probably have occurred in the absence of sanctions.)
Although individual countries, as well as various ad hoc groups, have frequently imposed sanctions in response to perceived violations of international law, institutionally endorsed sanctions have been rare and have enjoyed mixed success. The League of Nations imposed or threatened to impose economic sanctions only four times in the twenties and thirties, twice successfully. But the league faded from history when its ineffectual response failed to deter Mussolini's conquest of Ethiopia in 1935 and 1936. The United Nations Security Council—divided because of the cold war—imposed sanctions only twice prior to the August 1990 embargo of Iraq. The first imposition was against Rhodesia beginning in 1966, the second an arms embargo against South Africa imposed in 1977. The British Commonwealth also imposed broader sanctions against South Africa (against the wishes of the United Kingdom).
The motives behind international uses of sanctions parallel the three basic purposes of national criminal law—to punish, to deter, and to rehabilitate. Like states that incarcerate criminals, international institutions that impose sanctions may find their hopes of rehabilitation unrealized, but they may be quite satisfied with whatever punishment and deterrence are accomplished.
Similarly, individual countries, particularly major powers, often impose economic sanctions even when the probability of forcing a change in the target country's policy is small. In addition to demonstrating resolve and signaling displeasure to the immediate transgressor and to other countries, politicians may also want to posture for their domestic constituencies. It is quite clear, for example, that U.S., European, and British Commonwealth sanctions against South Africa, as well as U.S., European, and Japanese sanctions against China in the wake of the T'ienanmen Square massacre, were designed principally to assuage domestic constituencies, to make a moral and historical statement, and to send a warning to future offenders of the international order. The effect on the specific target country was almost secondary. World leaders often decide that the most obvious alternatives to economic sanctions are unsatisfactory—military action would be too massive, and diplomatic protest too meager. Sanctions can provide a satisfying theatrical display, yet avoid the high costs of war. This is not to say that sanctions are costless, just that they are often less costly than the alternatives.
Types of Sanctions
A "sender" country tries to inflict costs on its target in two main ways: (1) with trade sanctions that limit the target country's exports or restrict its imports, and (2) with financial sanctions that impede finance (including reducing aid). Governments that impose limits on target countries' exports intend to reduce its foreign sales and deprive it of foreign exchange. Governments impose limits on their own exports to deny critical goods to the target country. If the sender country is important in world markets, this may also cause the target to pay higher prices for substitute imports. When governments impose financial sanctions by interrupting commercial finance or by reducing or eliminating government loans to the target country's government, they intend to cause the target country to pay higher interest rates, and to scare away alternative creditors. When a poor country is the target, the government imposing the sanction can use the subsidy component of official financing or other development assistance to gain further leverage.
Total embargoes are rare. Most trade sanctions are selective, affecting only one or a few goods. Thus, the economy-wide impact of the sanction may be quite limited. Because sanctions are often unilateral, the trade may only be diverted rather than cut off. Whether import prices paid by (or export prices received by) the target country increase (or decrease) after the sanctions are applied depends on the market in question. If there are many alternative markets and suppliers, the effects on prices may be very modest and the economic impact of the sanctions will be negligible.
For example, Australia cut off shipments of uranium to France from 1983 to 1986 because of France's refusal to halt testing of nuclear weapons in the South Pacific. In 1984, however, the price of uranium oxide dropped nearly 50 percent. France was able to replace the lost supply, and at a price lower than the one specified in its contract with the Australian mine. Because Australia was unable to find alternative buyers for all the uranium intended for France, the Australian government ultimately paid Queensland Mines $26 million in 1985 and 1986 for uranium it had contracted to sell to France.
In contrast, financial sanctions are usually more difficult to evade. Because sanctions are typically intended to foster or exacerbate political or economic instability, alternative financing may be hard to find and is likely to carry a higher interest rate. Private banks and investors are easily scared off by the prospect that the target country will face a credit squeeze in the future. Moreover, many sanctions involve the suspension or termination of official development assistance to developing countries—large grants of money or concessional loans from one government to another—which may be irreplaceable.
Another important difference between trade sanctions and financial sanctions lies in who are hurt by each. The pain from trade sanctions, especially export controls, usually is diffused through the target country's population. Financial sanctions, on the other hand, are more likely to hit the pet projects or personal pockets of government officials who shape local policy. On the sender's side of the equation, an interruption of official aid or credit is unlikely to create the same political backlash from business firms and allies abroad as an interruption of private trade. Finally, financial sanctions, especially involving trade finance, may interrupt trade even without the imposition of explicit trade sanctions. In practice, however, financial and trade sanctions are usually used in some combination with one another.
The ultimate form of financial and trade control is a freeze of the target country's foreign assets, such as bank accounts held in the sender country. In addition to imposing a cost on the target country, a key goal of an assets freeze is to deny an invading country the full fruits of its aggression. Such measures were used against Japan for that purpose just before and during World War II. In the 1990 Middle East crisis, the United States and its allies froze Kuwait's assets to prevent Saddam Hussein from plundering them.
Effectiveness of Sanctions
Senders usually have multiple goals and targets in mind when they impose sanctions, and simple punishment is rarely at the top of the list. Judging the effectiveness of sanctions requires sorting out the various goals sought, analyzing whether the type and scope of the sanction chosen was appropriate to the occasion, and determining the economic and political impact on the target country.
If governments that impose sanctions embrace contradictory goals, sanctions will usually be weak and ultimately ineffective. In such cases the country or group imposing sanctions will neither send a clear signal nor exert much influence on the target country. Thus, it may be the policy—not the instrument (sanctions)—that fails. For example, the Reagan and Bush administrations imposed economic sanctions against Panama beginning in 1987 in an effort to destabilize the Noriega regime. But because they wanted to avoid destroying their political allies in the Panamanian business and financial sectors, they imposed sanctions incrementally and then gradually weakened them with exemptions. In the end the sanctions proved inadequate, and military force was used to remove Noriega.
In many cases sanctions are imposed primarily for "signaling" purposes—either for the benefit of allies, other third parties, or a domestic audience. If the sanctions are not carefully targeted or if they entail substantial costs for the sender country, however, the intended signal may not be received. It may be overwhelmed by a cacophony of protests from injured domestic parties, which may force a premature reversal of the policy. For example, American farmers howled with outrage when President Carter embargoed grain sales to the Soviet Union following the invasion of Afghanistan. The protests, buttressed by candidate Reagan's promise to lift the embargo if elected—which he did within three months of his inauguration—undermined the seriousness of intent that Carter wanted to convey. Efforts to extend sanctions extraterritorially may produce similar effects abroad. Thus, sanctions imposed for symbolic or signaling purposes must be carefully crafted if they are to convey the intended signal.
Sanctions intended to change the behavior or government of a target country are even more difficult to design. In most cases, sanctions must be imposed as quickly and comprehensively as possible. A strategy of "turning the screws" gives the target time to adjust by finding alternative suppliers or markets, by building new alliances, and by mobilizing domestic opinion in support of its policies. Great Britain, followed by the United Nations, adopted a slow and deliberate strategy in response to Ian Smith's "unilateral declaration of independence" in Rhodesia in 1965. Aided by hesitation and delays, the Smith regime was able to use import substitution, smuggling, and other circumvention techniques to fend off the inevitable for over a decade.
Overall, based on an analysis of 116 case studies, beginning with World War I and going through the UN embargo of Iraq, economic sanctions tend to be most effective at modifying the target country's behavior under the following conditions:
2. When the target is much smaller than the country imposing sanctions, economically weak and politically unstable. The average sender's economy in the 116 cases studied was 187 times larger than that of the average target.
3. When the sender and target are friendly toward one another and conduct substantial trade. The sender accounted for 28 percent of the average target's trade in cases of successful sanctions, but only 19 percent in failures.
4. When the sanctions are imposed quickly and decisively to maximize impact. The average cost to the target as a percentage of GNP in success cases was 2.4 percent and in failures was only 1.0 percent, while successful sanctions lasted an average of only 2.9 years versus 8.0 years for failures.
5. When the sender avoids high costs to itself.
It is obvious from this list that effective sanctions, in the sense of coercing a change in target country policy, will be achieved only rarely. Economic sanctions were relatively effective tools of foreign policy in the first two decades after World War II: they achieved their stated goals in nearly half the cases. The evolution of the world economy, however, has narrowed the circumstances in which unilateral economic leverage can be effectively applied. For multilateral sanctions, increasing economic interdependence is a double-edged sword. It increases the latent power of economic sanctions because countries are more dependent on international trade and financial flows. But it also means wider sources of supply and greater access to markets, and thus the possibility that a greater number of neutral countries can undermine the economic impact of a sanctions effort should they choose to do so.
South Africa, Iraq, and the Future of Sanctions
What do the lessons of history tell us about the likely effectiveness of sanctions against Iraq and South Africa, and what do these cases portend for the future of sanctions as a tool of international diplomacy? Going against rule number one, both cases involved extremely difficult goals: forcing the removal of Iraqi troops from Kuwait in the first, and promoting the dismantling of the apartheid system in South Africa in the second. In the Iraq case, however, the level of international commitment and cooperation was unprecedented, trade and financial relations with Iraq were almost completely cut off, and the cost to the target probably approached half of GNP on an annual basis. Although the cost to the anti-Iraq coalition from boycotting Iraqi oil shipments could have been quite high, increased production of oil elsewhere within a few weeks lessened the impact. Thus, the embargo of Iraq had a high probability of achieving the stated UN goal of reversing Saddam Hussein's aggression, probably within a year to eighteen months, based on past history.
In the South Africa case, however, economic sanctions were applied piecemeal over a number of years, often halfheartedly, and at their height were far from comprehensive. The most significant sanctions, embodied in the U.S. Comprehensive Anti-Apartheid Act (CAAA) of 1986, were imposed only after Congress overrode a presidential veto, and administrative enforcement was reportedly weak. Even the CAAA, however, affected only some trade and financial relations, and except for the Nordic countries (Sweden, Norway, Finland, Iceland, and Denmark), other countries' sanctions were even less stringent. Thus, by the summer of 1991, the UN arms embargo had been in place for over a decade, an OPEC oil embargo for a similar number of years, and expanded U.S. sanctions for over five years. Yet the white government and the two major black opposition groups (the African National Congress and Inkatha)—though closer than previously—were still struggling to find common ground on which to begin constitutional negotiations. Assuming that reform is achieved and that South Africa does not degenerate into bloody civil war, sanctions will have made a modest contribution to the happy result.
The confluence of circumstances that resulted in the nearly unanimous condemnation and isolation of Iraq is unlikely to recur soon. Instead, future efforts at sanctions are likely to be plagued by the same economic, political, and diplomatic differences, both within and among countries, that long split the anti-apartheid coalition.
Kimberly Ann Elliott is a research associate, and Gary Clyde Hufbauer the Reginald Jones Senior Fellow, with the Institute for International Economics in Washington, D.C.
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