I would like to start this essay with a disclaimer that I will start putting on everything I write from now on. Policy exists in the nexus between what we know and when we act. If policy is enacted only when the full scope of information possible became known, even if it is all available, then nothing would ever be acted on. If policy is enacted at impulse without any retrospection or fact gathering, then all policy would be myopic and counterproductive. This paper has been created in that nexus, and thus may be changed in the future as more information on the topic becomes known. -Stephen Howard
Sanctions have become an integral part of US geoeconomic policy around the world. From Russia to Cuba to North Korea to Iran the list of targets, potential and actual, encompasses the planet. It’s not hard to see why, sanctions are a way to show displeasure or signal intentions with a state’s doings and not have to use military force to enforce them. Further, with the US dollar being the world reserve currency, US sanctions hold a powerful bite wherever they are imposed that other states just can’t match. In essence, they are politically cheap, relatively effective, and asymmetric in a way that can make them a powerful tool.
But more than any US policymaker would like to admit, sanctions are also flawed in multiple respects.
First, there is a problem with the theoretical implementation of sanctions that needs to be taken very seriously, in the search for applicable targeting. Second, there is an ethical and moral problem which is often glossed over, mainly how sanctions are supposed to work. Third, there is a practical backlash that US sanctions impose on itself, mainly the asymmetric power of the weapon depends on the rest of the world. Fourth, there is a political problem which is exclusive to democratic states which renders any sanctions imposed much more than they are bargained for, this being the nature of how policymakers have to justify their actions to constituents. I’ll attempt to cover each of these flaws in turn, and provide an overarching view of what sanctions mean to the United States in the end.
THEORY
In Arms and Influence, Thomas Schelling goes through multiple different scenarios of deterrence and compellence, trying to define how best to achieve these within the scope of strategic and tactical weapons. First, to define the difference between these two: “Deterrence involves setting the stage – by announcement, by rigging the trip-wire, by incurring the obligation, and waiting.” (p. 71) “Compellence, in contrast, usually involves initiating an action (or an irrevocable commitment to action) that can cease, or becomes harmless, only if the opponent responds.” (p. 72)
These two definitions seem arcane and esoteric, but provide two different paths that sanctions can take. As Schelling goes on to say, the two ways of looking at compellence and deterrence are as offense and defense. For instance, the United States can threaten that if Russia interferes with the US elections in 2018, massive sanctions will be imposed on them. This is deterrence, because it only happens if Russia does something to spring them. Alternatively, the US can implement sanctions on Iran after Iran has already begun to create nuclear weapons, saying that the sanctions will continue until the behavior of Iran changes. This is compellence, because the only way the sanctions stop is if Iran acts.
The United States deals mostly in the latter, compellent, kind of sanctions. It responds to situations around the world, and tending to be reactive rather than proactive. This leads to a second point which Schelling discusses: “There are undoubtedly some good reasons for designing a compellent campaign that is connected with the compliance desired. One is that it helps to communicate the threat itself; it creates less uncertainty about what is demanded, what pressure will be kept up until the demands are complied with and then relaxed once they are…Second, if the object is to induce compliance and not start a spiral of reprisals and counteractions, it is helpful to show the limits to what one is demanding, and this can often be best shown by designing a campaign that distinguishes what is demanded from all other objectives that one might have been seeking but is not…Contingent actions, not actions initiated to induce compliance, but actions threatened against potential provocation- often need the credibility that connectedness can give them.” (all p. 88)
In essence what Schelling is saying is that for compellent threats (in this case sanctions) to be effective, they should intrinsically relate to the topic which the threats are designed to change. This is not something which can be established with word of mount of even a blunt statement or press release. As Schelling points out, because states at tensions with each other will necessarily have multiple issues which they would like to see rectified, and the state under sanction could interpret the sanctions as against any number of those issues regardless of what the imposing state wants (due to vague language or irrationality), only intrinsically related compellence threats can be guaranteed to relate what needs to be changed. For instance: if the US explicitly sanctions a Russian arms company or oil company (Russia’s two biggest exports) to compel Russia to stop its cyberwarfare against the US, there is room for interpretation. Of course the US is saying that the sanctions are targeted at their cyber program, but from the Russian point of view these two industries are vitally linked to other Russian efforts, like that in Ukraine. Surly the Americans are trying to be cunning in Ukraine by pretending to go after something as relatively inconsequential as cyber.
The issue presented then is: in an ever more complex world, with issues blurring between economic, political, military, civil, and any other domain, how can sanctions be geared to be intrinsically linked to the issue we would like to see changed? The target list in most countries will shrink to paltry numbers, because the targeted institutions, people, or other actors are intrinsically linked to other issues which, while the US might want to see them changed, are not the issue they want changed by the sanctions. Another example: if the US is trying to signal its hostility for Chinese adventurism in the South China Sea, who should be considered a real target for sanctions? Chinese state-owned enterprises (SOEs) are certainly crucial in this adventurism, but they are also involved in “dumping” capital across the world, in addition to supplying North Korea with valuable materials circumventing sanctions, leading to room for misinterpretation. The military is also involved, but it is also involved in repression of the Uighur minority and cyberespionage against companies around the world, again room for misinterpretation. Sanctioning the government would be the most obvious case of being unable to identify what the sanctions are really about.
So the only targets left to sanction become specific people with specific involvement in the South China Sea adventurism. But what good does this really do? Sure, we’ve registered our displeasure, but in a way that really won’t impact the situation all that much. We’ve made a few people’s lives more difficult, but that’s it. Thus the intellectual exercise of just finding a target becomes a mighty task, and finding a target that matters almost impossible.
ETHICS AND MORALS
I’m sure most people reading this will immediately wonder, well why not just sanction the entire country? We’ve done this to North Korea and Iran, and in both cases imposed secondary sanctions which mean we further sanction anyone who does business with either state, completely debilitating the economies of both states. In a traditional sense, yes, we are imposing grave economic costs to both states. Further, from a political side, we are impacting major punishment without having to use the US military, which makes the domestic audience happy. But this ignores what the point of these type of sanctions are: statewide sanctions such as this are created to hurt the civilians of any given state until one of two things happens, 1) the sanctioned state decides that the goal it is pursuing is not worth the toll on its civilian population, or 2) the civilians of the sanctioned state become so unhappy with the pain they are enduring that they rise up and create a civil conflict, destabilizing the sanctioned state and hopefully derailing its maligned pursuit.
Either way, such sanctions are a slow burning equivalent to the bombing of Dresden in WWII, hurt the civilians in hope of getting the government to comply. In other cases, this would be considered a war crime. Think of Russia targeting the Syrian civilians in an attempt to get them to comply with the Syrian government, and the outrage that has caused. Now compare that to Iran, where statewide sanctions have caused the country’s currency to rapidly inflate, destroying the health and economic wellbeing of millions in an attempt to get the country’s leaders to give up its nuclear program. The only thing that separates both is the immediacy of what Russia does in comparison to the slow burn of what sanctions do.
Further, sanctions necessarily impact the poor first, the middle class second, and the rich decision makers last. Consider the price of food’s impact on the propensity to save/spend. We can understand the propensity to save/spend as the cost of basic living necessities subtracted from the income of a person, and how much of that income they can save or have to spend. As there is a base cost of necessities (food, water and shelter cost something), the poorer you are the larger percentage of your wealth you have to spend and the less you can save. As the cost of food rises, that baseline cost for necessities moves up and the amount that any one person can save goes down, but the middle class and rich are not affected as dis-proportionally as the poor, who have little to no saving percentage (for instance, a rise in the cost of living on $200 may reduce the amount the rich can save by 1%, the middle class by 10%, but the poor could have their savings completely wiped out). As the necessities cost continues to rise, the poor might find that they can no longer afford basic necessities and the middle class will struggle, but the rich decision makers are still not affected as much. As this logic continues, it becomes clear that the people harmed by sanctions the most are the ones with the least influence on decision making.
It should be said that this is effective in most cases, North Korea withstanding. Governments don’t want to be engulfed by civil conflict because the majority of their citizens can’t meet basic levels of needs, and as Iran has shown, will eventually give in. But is this ethical or moral? It can probably be justified, but as these type of sanctions becomes all the more prevalent, the ethical and moral hurdles begin to appear less problematic, in the way that anything which as seen as common just isn’t questioned. Thus, while alternatives might exist to waging war on civilians in certain scenario’s, the impulse to move first to sanctions due to their ease of use may actually harm civilians more than a limited military strike would.
PRACTICAL BACKLASH
US sanctions have a particularly hard bite to them, owing to the status of the US Dollar as the staple world reserve currency. This ensures that almost all transactions across the world (between countries) are made in US Dollars. It is true that there are other up-and coming currencies, notably the renminbi and euro, but these have yet to achieve the ubiquity that the dollar has. This ubiquity means that when the US applies sanctions and secondary sanctions to a state (both as defined earlier), the sanctions can literally shut off a countries access to the world market. This again was the case with Iran, where sanctions applied by US Presidents Bush and Obama effectively shut off Iran from the rest of the world economically, because the US threatened that any state or institution that does business with Iran would be formally shut off from being able to use the US Dollar and other US financial institutions.
But, as Napoleon Bonaparte was reported to have said, “You must not fight too often with the same enemy, or you will teach him all your art of war.” Of course, this was in reference to conventional military might, but it flows well to what is happening with the US Dollar. As the United States uses its asymmetric advantage with the dollar to its benefit, other states are taking notice of the asymmetry and working to resolve it. For instance, many oil states have begun to accept payment in not just dollars but also in euro’s, giving them insulation from this particular type of US sanctions. China in particular, according to Jennifer Harris and Robert Blackwill in War by Other Means, “By removing itself from the dollar system and becoming less reliant on low-yield government bonds from developed markets…will gain greater pricing power over global commodities markets, where China is already often the largest consumer.” (p.142) What they mean by this is that other countries are taking advantage of the sanctions to sell commodities to sanctioned states in renminbi. While renminbi isn’t a global reserve currency yet, this does enable the two states to do bilateral business. For example, if Iran sells China 3 million barrels of oil outside of sanctions by paying for the oil in renminbi, Iran can’t turn around and use the renminbi to purchase weapons from Russia. Instead, Iran has to use that renminbi to purchase back from China, creating an advantageous situation for China – one that China has already begun to leverage.
It bears notice that this isn’t commonplace yet, and the authors go on to say that the change from a US dollar system to any other type of currency is still a long way out, and that sanctions in the near term future are not in danger. Still, each use of sanctions on the financial systems of a country makes the international system acutely aware of the political strength the dollar gives the US, and that much more eager to change it. The practical implication is that, while effective, each use of financial sanctions makes the next round of sanctions that much weaker as ways around them are found. As noted, with sanctions now being the go-to for US policy makers, there is a risk of “spamming” sanctions so much that it hastens the demise of financial sanctions as an effective policy tool.
DOMESTIC POLITICAL
The nature of democracy is that its leadership is elected. Those leaders do what they believe is in the best interest of the state, and then the citizens evaluate that leader at the ballot box at a later time. This allows for accountability in any state actions, and creates as Winston Churchill put it, “…the worst form of Government except for all those other forms that have been tried from time to time…”.
One of the evolutions of democracy, though, has been the evolution from the decision makers from a leader to a servant role. In this, instead of the Edmund Burke philosophy of “Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”, the modern politician uses the opinions of his/her constituents to decide what their judgement should be. While it is outside the scope of this paper to examine this change and reflect on it, it does bear major consequences for the use of sanctions, as George Kennan foresaw. In American Diplomacy, Kennan laments that this style of statesmanship allows a dangerous, and unwanted, escalation of hostilities any time sanctions are used.
In his analysis, Kennan points out that because policymakers have to justify their actions immediately to their constituents, they have to not only justify why sanctions were placed on a regime (usually self-evident to the domestic populace), but also why those sanctions should be removed when the sanctioned state has fulfilled what was expected of it. Kennan went further to explain the domestic political impetus which demands the overextension of sanctions once applied, to the point of unconditional surrender. The citizens of any given state have a Manichean view of the world: good and bad (most citizens have lives to live, and they don’t have time to pay attention to the nuances of international politics). Thus, if your country has a problem with a state they are bad, if not they are probably good.
This gross and inevitable oversimplification makes targeted sanctions politically impossible to carry out. If the single issue which the sanctions were targeted at is solved (say, removal of support for the Pakistani Taliban), that doesn’t mean that any of the other issues were solved (maybe they still support the Afghani Taliban). Hence, when the statespeople try to justify why they are removing sanctions on the country in question, the citizens don’t understand that the sanctioned country has fulfilled what the sanctions were supposed to be about, they just see that their politicians are removing sanctions from a “bad” country. This means that the statesperson who voted to remove sanctions from this country might face this issue in an upcoming election, and is removing sanctions because they have been fulfilled really a good reason to risk losing their seat in congress?
The case in point here is Iran, where major sanctions (as noted earlier) were applied to the country due to its nuclear program. In 2015 the P5+1 (permanent five members of the UN Security Council plus Germany) announced the Joint Comprehensive Plan of Action (JCPOA), or Iran deal. With this deal, Iran agreed to give up the majority of its nuclear capability in return for removal of most sanctions. Again, whether the JCPOA was right or wrong is outside of the scope of this paper. Instead, the issue here is that after the JCPOA was enacted Iran fulfilled what was required by it to have the sanctions removed, the ending of the nuclear program, many citizens wanted to keep sanctions on Iran because of their ballistic missile program, human rights abuses, and other issues they had with them. Iran’s government was “bad”, and so sanctions should be kept regardless of what Iran did. In fact, the current US President Donald Trump is considering invalidating this agreement and unilaterally re-imposing sanctions just this month. If you recall the theoretical problems with sanctions from earlier, this is the exact problem that Schelling worried about when sanctions are overly broad – they can flow to other issues that both countries have against each other.
Apart from the theoretical vindication of Schelling, this is worrisome for state like Democratic Peoples Republic of Korea (DPRK). As the United States engages with North Korea for the removal of its nuclear program, what will happen if the DPRK decides it will give up its nuclear weapons? Ostensibly we will remove sanctions from it, but it will still have the most egregious human rights abuses of any country bar none. It will still create provocations with the Republic of Korea (ROK). Should sanctions then be re-imposed? Domestically, it might be impossible to not impose some other forms of sanctions for everything else we don’t like about them.
The logical conclusion from section two about the ethical and moral problems involved in sanctions now comes into play. As stated, any state under sanction has two choices: give in for the sake of its people or risk civil conflict. As democracies seem to remove the former option from the table to appease their constituents, sanctions become a tool of regime change seemingly by mistake (as in policy makers don’t consider how sanctions may evolve as detailed here). Now, if other states perceive the only end goal of sanctions to be regime change, what incentive to they have to cooperate with the sanctions in the first place? Further, this now ties the sanctioning state to the sanctioned state for as long as its citizens consider the sanctioned state “bad”. It is doubtful whether even the United States can remain engaged in every conflict across the world for an unlimited duration like this without impacting serious harm on its own domestic consensus.
CONCLUSION: SO WHAT THEN?
As Jennifer Harris and Robert Blackwill state in their book, there is no easy answer to whether sanctions are an appropriate solution to any given issue or not. In terms of geoeconomics, you can only weigh the utility and consequences of a given option compared to the next best solution available to you. Necessarily, then, sanctions will sometimes be the best solution. How should the United States have stopped Iran from pursuing nuclear weapons other than by economic means? The next best solutions in this scenario are bomb Iran, or let Iran get a nuclear weapon. It is arguable then that even given the flaws of the sanctions on Iran, it was still the best solution. The problem is that policy makers, statespeople, and even normal citizens see sanctions as a low-cost solution to any problem – which it obviously isn’t. There are many different options when it comes to geoeconomics and geopolitics in how to respond to any given situation, including trade policy, foreign aid, monetary policy, military posturing, international consensus, and so forth. Hopefully, sooner rather than later, the United States becomes aware of all options on the table and interacts with each to divine the best outcome for the problem at hand.