Sanctions are now a central tool of governments’ foreign policy (2023)

IN 2016 JACK LEW, America’s then treasury secretary, reflected on how his country had, over decades, “refined our capacity to apply sanctions effectively”. But he also gave a warning: overuse “could undermine our leadership position within the global economy, and the effectiveness of our sanctions themselves”.

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If the message was “proceed with caution”, it was lost on Donald Trump, who became president soon after. The screw was turned against China, Iran, Russia, Venezuela and others. The steady increase in sanctions “proved to be a rare constant” on Mr Trump’s watch, says Adam Smith of Gibson Dunn, a law firm. During Mr Trump’s four-year term, the Office of Foreign Assets Control (OFAC), which oversees American sanctions programmes, targeted roughly twice as many entities and individuals a year as it had during the two-term presidencies of George W. Bush and Barack Obama (see chart).

Those who thought Joe Biden would sound a retreat were quickly set straight. True, his administration, hoping to revive a nuclear deal with Iran struck by Mr Obama but abandoned by Mr Trump, is talking to the Islamic Republic about easing his predecessor’s “maximum pressure” sanctions. However, his first few months in office have also seen a host of new sanctions.

Sanctions are now a central tool of governments’ foreign policy (1)

On April 15th America announced sweeping measures against Russia for election-meddling, cyber-attacks and more. A month earlier America and Western allies had imposed asset freezes and travel bans on several Chinese officials for their role in human-rights abuses in Xinjiang. Since Mr Biden took office America has also sanctioned officials deemed to have undermined Hong Kong’s autonomy; announced curbs on China’s access to American technology for supercomputers; and targeted companies linked to the junta behind Myanmar’s coup.

Such measures show how sanctions have become a central tool of foreign policy. Governments increasingly see them as a way to try to change other states’ behaviour in situations where diplomacy alone is insufficient, but military intervention is seen as too risky or heavy-handed.

As the use of sanctions has grown, so has their variety. What was once a smattering of trade embargoes has become a global mesh of coercive tools, some covering countries or whole economic sectors, others single firms or individuals. Mr Trump’s targets included Huawei, a Chinese 5G-network provider, and TikTok, a video app; Mr Biden’s sanctions cover a Russian troll farm and a Pakistan-based firm that allegedly creates fake IDs used by trolls.

Mr Biden is likely to make use of America’s Magnitsky Act (named after a lawyer who died in a Russian prison) to move against foreign officials accused of corruption or serious human-rights abuses. Western countries—including Britain as it looks to forge a post-EU sanctions policy—are increasingly adopting “thematic, values-based policies” that target such miscreants, says Emil Dall of the Royal United Services Institute (RUSI), a think-tank.

This sophistication is partly a matter of necessity. Targets were once mostly economic small fry, such as Cuba and North Korea; now they include much bigger fish, such as China and Russia. As targets have grown, so has the potential for collateral damage. A blanket embargo on China for locking up Uyghurs, say, could produce intolerable economic blowback.

Large targets, however, also feel more emboldened to hit back. China responded to the Xinjiang sanctions with counter-measures against European politicians, diplomats and a think-tank. Its growing economic clout means it can wound when it retaliates. It may also, over the longer term, have a corrosive effect on sanctions: the more the large targets respond by seeking to reduce their reliance on American finance and technology, the weaker America’s global economic leverage becomes—and the less potent sanctions’ impact.

The first recorded use of sanctions was in 432BC, when the Athenian Empire banned traders from Megara from its marketplaces, thereby strangling the rival city-state’s economy. However, “not until the 20th century did modern concepts of international sanctions—a collective denial of economic access designed to enforce global order—become prominent,” writes Benjamin Coates, a historian, in an essay published last year.

(Video) Are Sanctions Working?

The League of Nations led in forging multilateral sanctions in the early 20th century. The UN later did the same against obnoxious regimes from white-supremacist Rhodesia to Saddam Hussein’s Iraq. America, for its part, stepped up its unilateral sanctions after the second world war. OFAC was created in 1950, a decade after a forerunner had been set up to freeze the US assets of the Danish and Norwegian governments, in order to stop the Nazis seizing them. During the cold war, Congress gave the president new powers to impose sanctions. Cuba was a favourite target.

Sanctions are now a central tool of governments’ foreign policy (2)

Use intensified in the 1990s, with America targeting Iran as it flirted with nuclear-bomb-making. But the most dramatic shift in America’s approach followed the 9/11 terror attacks in 2001. The Patriot Act, passed soon after, targeted terrorist coffers. Thus began an era of more carefully tailored, or “smart”, sanctions that sought to hamstring terrorists, dictators and others by restricting their access to American-owned or influenced financial plumbing (an example of the latter being the SWIFT interbank network). This change of tack “made sanctions so much more powerful than they were before”, says Mr Coates.

Double-edged swords

Another inflection point came around 2010, as America upped its use of “secondary sanctions”, which target not only the perceived bad guys but also threaten anyone doing business with them with financial excommunication. Their power was most apparent in Iran: European firms saw golden opportunities there after the 2015 nuclear deal but backed away in droves after Mr Trump reimposed sanctions, and added secondary ones, in 2018.

American policy has undergone two further shifts over the past decade. The first, sparked by Russia’s annexation of Crimea in 2014, was to go after bigger fish. America and other Western powers unveiled sanctions against dozens of Russian agencies, companies and members of Mr Putin’s circle. In doing so they were taking on an economy more than twice the size of any other previously targeted with such comprehensive sanctions.

The second shift was Mr Trump’s splattergun approach. So varied were his targets and so devoid of diplomacy his manner (he once threatened to “obliterate” the economy of Turkey, a NATO ally, during a spat over Syria) that sanctions wonks were left wondering if there was any method in the madness. But his administration undeniably displayed creativity. “What Trump came upon were nuances in ways to target big players like Russia and China, with sanctions that were not quite sanctions,” says a former OFAC official. His restrictions on Chinese tech and telecoms firms, for instance, hit their ability to design chips, source components or operate effectively in many Western countries.

They also greatly added to the stress on banks and companies that have to comply with sanctions. Unlike conventional sanctions, which work by freezing trade, the financial sort “turn private actors into enforcers”, says Mr Coates. The cost of steering clear of blacklisted people and entities has risen relentlessly, especially for banks. An executive at one global bank says that after being caught and fined for breaching American sanctions, it has spent “a couple of billion” dollars on hiring more compliance people and installing better screening technology to avoid a repeat.

A big outlay, to be sure, but falling foul of OFAC can cost even more. Until around a decade ago, sanctions enforcement was a technocratic backwater. Today penalties can run into the billions, with operating restrictions often tacked on to increase the pain. In 2014 BNP Paribas, a French bank, pleaded guilty to processing thousands of transactions involving countries blacklisted by America, paid an $8.9bn fine and was forced to suspend its dollar-clearing operations in New York for a year.

The cost would be easier to bear if sanctions usually achieved their aims. Measuring success is difficult; even American government departments involved in sanctions don’t carry out their own assessments. But it is clear that many fail. The maximum-pressure measures against Iran have neither dislodged its theocratic regime nor halted its nuclear ambitions; the country has more enriched uranium now than when Mr Trump took office.

Moreover, sanctions provoke counter-measures. The most direct way is for the target country to issue counter-sanctions. An alternative is to use legal mechanisms to negate sanctions. “Blocking statutes” aim to shield domestic companies by prohibiting them from complying with another country’s sanctions. The EU’s statute dates back to the 1990s, and was strengthened after Mr Trump pulled out of the Iran accord. It has sparked litigation in Britain, Germany and the Netherlands, and several cases are before the European Court of Justice (ECJ). In Britain, Metro Bank is being sued by a group of Iranian clients who argue that the bank’s closure of their accounts without warning—after Metro found it had breached American sanctions—violated the blocking statute. The outcomes will have big implications for European firms operating in Iran, or wishing to, but caught between competing sanctions regimes. China issued a blocking statute in January (based on Europe’s), but is yet to flesh out the extraterritorial measures to which it applies.

The use of courts to challenge sanctions goes beyond blocking statutes. Maya Lester, a London-based barrister, has worked on several cases on the impact of sanctions on commercial contracts, and many more involving individuals and entities—including Iranian banks—suing to be removed from blacklists. Several have succeeded. There are legal challenges in America, too. Last year a court halted Mr Trump’s attempted blacklisting of TikTok. In March a federal judge suspended a similar ban on Xiaomi, a smartphone-maker.

The biggest long-term threat to sanctions’ effectiveness involves efforts by targets to circumvent them. A time-honoured way to do this is to trade through sanctions-busters: black-marketeers using shell companies, fake trade paperwork and other dark arts. Turkey and Dubai—particularly the latter’s trading houses and free-trade zones—have been weak links in enforcing Western sanctions on Iran.

(Video) Economic sanctions: Assessing their use and implications for US foreign policy

More important, countries targeted by sanctions, and those that want to trade with them, are exploring ways to decouple economically from those that impose them, particularly America. China has responded to American technology bans by scaling up plans to invest in producing chips at home. It is also trying to reduce its reliance on the dollar and American banks by, for instance, making the yuan more appealing in international finance.

Digitisation might help it do so. China’s central bank is a world leader in developing a digital currency, which is being tested in several cities. It “could fundamentally change how Chinese companies do business by 2022 or 2023”, says the head of one globally active bank. If successful, it may then start to be adopted in other parts of Asia and later farther afield. China would also like to loosen America’s grip on the cross-border payments infrastructure. It has its own version of SWIFT, called CIPS, which simplifies cross-border payments in yuan.

Europe, too, is seeking to strengthen its single currency’s role in global commerce. The euro is now used to settle some international oil shipments, for instance by commodities firms buying from Russia. (The oil trade has traditionally been denominated in dollars.) Russia’s capital markets have become much less reliant on foreign investors since the Crimea-linked sanctions were imposed seven years ago—one reason why its markets shrugged off America’s latest restrictions.

It would be easy to exaggerate this trend. The EU’s attempt to create a barter mechanism to help its firms get around American sanctions has failed to take off. China’s financial system is opaque and largely closed. The yuan accounts for just 2.4% of global payments, while the dollar makes up 38%. CIPS is minuscule. Still, the direction of travel is clear.

For now, the sanctions-compliance world remains fixated on policy in Washington. There are few signs of a significant let-up in the pressure applied by the Trump administration, except perhaps, with strict conditions, on Iran. That said, Mr Biden is likely to work harder than his predecessor to “pair sanctions with diplomacy”, says RUSI’s Mr Dall.

The changes in China’s approach to sanctions, however, may be more dramatic. It shows signs of becoming more assertive, including by being quicker to retaliate. It has growing leverage as a huge market for foreign firms hawking everything from consumer goods to commodities, and as financier-in-chief of America’s national debt. It may also be developing a taste for pre-emptive sanctions. A report by the Centre for a New American Security, a think-tank, counted ten such cases in 2010-18, triple the number in 1978-2000. In 2019 China announced sanctions on American arms-makers that supply Taiwan. More recently, it imposed an unofficial ban on Australian coal over Canberra’s “offensive” anti-China rhetoric.

China will also continue to try to turn Western sanctions to its advantage. They have helped it advance its interests abroad, for instance by filling the economic void left by American sanctions on Iran and Venezuela. In March China reportedly signed a $400bn, 25-year deal to invest in Iran’s energy sector and upgrade its transport and manufacturing infrastructure.

This increased muscle-flexing underlines that the world of sanctions is becoming less unipolar. China’s reach may be limited by its small role in international finance, relative to trade. But its share is growing, and it is not alone in looking for ways to reduce reliance on the greenback. A China no longer reliant on America or other outsiders for financial plumbing or critical technologies is likely to feel more emboldened to, say, attack Taiwan.

And this raises the spectre of the irreversible shift Mr Lew warned of: that a tool designed to be one of the most forceful expressions of American power instead fatally undermines its economic hegemony. The stakes could hardly be higher.

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This article appeared in the Finance & economics section of the print edition under the headline "Handle with care"

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Sanctions are now a central tool of governments’ foreign policy (3)

From the April 24th 2021 edition

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(Video) The History and Future of U.S. Sanctions Policy


Why does the US use sanctions as a tool of foreign policy? ›

Economic sanctions can attempt to induce compliance with the sanctioning nation's foreign policy goals, enhance that country's prestige or status, or punish or deter target nations.

What is an example of sanctions in foreign policy? ›

Examples may include economic-commercial measures (the arms embargo), financial measures, or individual sanctions such as the prohibition of entry into a State or the freezing of assets.

Are economic sanctions a foreign policy tool utilized by the government? ›

Economic sanctions are used as a tool of foreign policy by many governments. Economic sanctions are usually imposed by a larger country upon a smaller country for one of two reasons: either the latter is a perceived threat to the security of the former nation or that country treats its citizens unfairly.

What is the purpose of sanctions? ›

Diplomatic sanctions are political measures taken to express disapproval or displeasure at a certain action through diplomatic and political means, rather than affecting economic or military relations.

What are the tools of foreign policy? ›

Tools of the Trade: Economics

Broadly, we have three categories of foreign policy tools: Economic Tools, Military Tools and Humanitarian Tools. Each of these allow us to move nations in different ways. Today let's focus on Economic Tools.

Who is responsible for sanctions? ›

Office of Foreign Assets Control, Department of the Treasury – OFAC plays a primary role in administering and enforcing many U.S. sanctions programs.

What are examples of US sanctions? ›

Types of sanctions imposed by the United States include:
  • bans on arms-related exports,
  • controls over dual-use technology exports,
  • restrictions on economic assistance, and.
  • financial restrictions such as: ...
  • Visa designations that prevent from entering the U.S.

What countries does the US have sanctions against? ›

Sanctions Programs and Country Information
Active Sanctions ProgramsProgram Last Updated
Syria SanctionsMay 30, 2023
Syria-Related Sanctions (Executive Order 13894 of 2019)Feb 21, 2023
Transnational Criminal OrganizationsFeb 08, 2023
Ukraine-/Russia-related SanctionsMay 12, 2023
34 more rows

What is the goal of a sanction quizlet? ›

The purpose of a sanction is to provide for just the punishment, deterrence, rehabilitation, deunciation and community proctection. For young offenders, rehabilitation is the principal consideration.

Why does the US use economic sanctions? ›

The U.S. government has increasingly used economic sanctions as a tool to combat threats to U.S. interests.

Does the US have economic sanctions? ›

Most recently, the United States of America has been involved in multiple trade wars and imposed economic sanctions on multiple countries such as The People's Republic of China, Iran and Russia. In retaliation, multiple countries have imposed economic sanctions on the United States of America.

What is an economic sanction quizlet? ›

Definition of economic sanction: states use economic pressure (trade and financial restrictions) against other states to create policy or behavioral change.

What is the importance of sanctions in society? ›

Social sanctions enforce a standard of behaviour that is deemed socially acceptable and this is essential for society to regulate itself and maintain order. Social cohesion and cooperation depend on social sanctions and they are essential for organisations, social groups and society to work together effectively.

What is the real meaning of sanction? ›

sanc·​tion ˈsaŋk-shən. 1. : a punitive or coercive measure or action that results from failure to comply with a law, rule, or order. a sanction for contempt. : explicit or official approval.

What can sanctions apply to? ›

Sanctions measures can include: • Restrictions on trade in goods and services • Restrictions on engaging in commercial activities • Targeted financial sanctions (including asset freezes) on designated persons and entities • Travel bans on certain persons.

What are the three most important tools of foreign policy? ›

The president employs three tools to conduct foreign policy: Diplomacy. Foreign aid. Military force.

What are the three most important tools of foreign policy quizlet? ›

What are the three tools of foreign policy? Military, economic, and diplomatic.

What is the purpose of foreign policy? ›

The main objective of foreign policy is to use diplomacy — or talking, meeting, and making agreements — to solve international problems. They try to keep problems from developing into conflicts that require military settlements. The President almost always has the primary responsibility for shaping foreign policy.

Is a sanction a law? ›

Sanctions, in law and legal definition, are penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules and regulations. Criminal sanctions can take the form of serious punishment, such as corporal or capital punishment, incarceration, or severe fines.

What is a sanction policy? ›

Sanctions Policy means the SEG Awards sanctions policy from time to time forming part of the SEG Awards Policies and Procedures and setting out the rules, procedures and sanctions that may be applied by SEG Awards in the event of a failure by the Centre to comply with the provisions of the Centre Agreement.

What are the four sanctions? ›

Bentham, however, suggests there are four other types of sanction that may deter offenses: moral, sympathetic, religious, and physical.

Did the U.S. sanction China? ›

Sanctions under the Biden administration

In January 2023, the U.S. Treasury Department sanctioned Spacety China, also known as Changsha Tianyi Space Science and Technology Research Institute Co. Ltd., for providing satellite imagery to the Wagner Group.

How do sanctions work in practice quizlet? ›

How do sanctions work in practice? They include trade embargoes on, and bans on investment in, the targeted country.

Why was Russia sanctioned? ›

Western countries and others began imposing limited sanctions on Russia when it recognised the independence of self-declared Donbass republics. With the commencement of attacks on 24 February, a large number of other countries began applying sanctions with the aim of devastating the Russian economy.

How do you get a sanction lifted? ›

If you've been sanctioned, you can ask the Department for Work and Pensions (DWP) to rethink their decision to sanction you if you think they shouldn't have sanctioned you. This is called 'mandatory reconsideration'. If the DWP refuses to change their decision, you can then make an appeal.

What are the four main goals of criminal sanctions in the United States? ›

Four major goals are usually attributed to the sentencing process: retribution, rehabilitation, deterrence, and incapacitation.

Is a sanction a reward or punishment? ›

Sanctions can either be positive ( rewards ) or negative (punishment). Sanctions can arise from either formal or informal control. With informal sanctions, ridicule or ostracism can realign a straying individual towards norms. Informal sanctions may include shame, ridicule, sarcasm, criticism, and disapproval.

Which one of the following is a positive sanction? ›

The terms “positive sanction” and “positive social sanction” are used interchangeably in a sociological context. Positive sanctions include awards, certificates, honors, medals, orders, praise, titles, and trophies.

What is the US economic sanctions Act? ›

The bill provides sanctions for activities concerning: (1) cyber security, (2) crude oil projects, (3) financial institutions, (4) corruption, (5) human rights abuses, (6) evasion of sanctions, (7) transactions with Russian defense or intelligence sectors, (8) export pipelines, (9) privatization of state-owned assets ...

Do sanctions actually work? ›

She says a review of all U.S. sanctions since 1970 shows that targeted countries altered their behavior in a way that the U.S. hoped they would just 13 percent of the time. "The reality is that sanctions are sometimes effective, but most often not, and it is hard to accurately predict when they will work," she says.

Who and what can be targeted by sanctions? ›

Targeted sanctions are intended to be directed at individuals, companies and organizations, or restrict trade with key commodities. The following instruments can be applied: Financial sanctions (freezing of funds and other financial assets, ban on transactions, investment restrictions)

Who enforces US economic sanctions? ›

The Office of Foreign Assets Control administers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers.

What are the two primary goals of American foreign policy? ›

Promoting freedom and democracy and protecting human rights around the world are central to U.S. foreign policy.

Which type of threat poses the greatest risk to information systems? ›

Malware and social engineering attacks are the single greatest threat to an organization and its users. Outdated software often contain vulnerabilities that are not present in the current version and pose a security risk.

What is economic resources in sanctions? ›

(2)In this Act “economic resources” means assets of every kind, whether tangible or intangible, movable or immovable, which are not funds but can be used to obtain funds, goods or services.

What are examples of sanctions in society? ›

Some examples of sanctions for nonconformity include shame, ridicule, sarcasm, criticism, disapproval, social discrimination, and exclusion, as well as more formal sanctions such as penalties and fines. Different people and groups also tend to sanction in different ways.

What is a positive sanction? ›

Economic statecraft takes many different forms, including both positive and negative sanctions. Negative sanctions are actual or threatened punishments, whereas positive sanctions are actual or promised rewards.

What is a negative sanction? ›

Negative sanctions are actual or threatened punishments, whereas positive sanctions are actual or promised rewards.

Is a sanction a crime? ›

Definition. Criminal sanctions are the penalties imposed on those who commit crimes. Whether a sanction is criminal or civil flows not from the nature of the penalty, but from the wrongdoing it punishes (or from the law that imposes the liability).

What does sanction power mean? ›

verb. give authority or permission to. type of: authorise, authorize, empower. give or delegate power or authority to.

What is the closest meaning of sanction? ›

Some common synonyms of sanction are accredit, approve, certify, and endorse. While all these words mean "to have or express a favorable opinion of," sanction implies both approval and authorization. the President sanctioned covert operations.

Why does the US have sanctions on China? ›

Sanctions after the 1989 Tiananmen Square protests and massacre. Following the Tiananmen Square massacre, the Bush Sr. administration imposed an arms embargo against the PRC after the massacre of the protesters.

What is one major goal of the US economic foreign policy? ›

Expanding employment in the United States, maintaining access to foreign energy supplies, promoting foreign investment in the United States, and lowering prices for American consumers are all aims of American foreign economic policy.

Who does the US have sanctions against? ›

Sanctions Programs and Country Information
Active Sanctions ProgramsProgram Last Updated
Hong Kong-Related SanctionsDec 20, 2021
Hostages and Wrongfully Detained U.S. Nationals SanctionsApr 27, 2023
Iran SanctionsJun 09, 2023
Iraq-Related SanctionsDec 28, 2022
34 more rows

Do any countries sanction the US? ›

Most recently, the United States of America has been involved in multiple trade wars and imposed economic sanctions on multiple countries such as The People's Republic of China, Iran and Russia. In retaliation, multiple countries have imposed economic sanctions on the United States of America.

Why does the US have sanctions on Russia? ›

The United States and its allies have imposed sweeping sanctions, export controls, and other measures following the start of Russia's war against Ukraine. Since February 2022, Treasury has implemented more than 2,500 sanctions in response to Russia's war of choice.

What is the most important foreign policy for the United States? ›

Promoting freedom and democracy and protecting human rights around the world are central to U.S. foreign policy.

What are the benefits of foreign policy? ›

Foreign policy is often directed for the purpose of ensuring national security. Governments forming military alliances with foreign states in order to deter and show stronger resistance to attack. Foreign policy also focuses on combating adversarial states through soft power, international isolation, or war.

What is the main goal of foreign policy? ›

The main objective of foreign policy is to use diplomacy — or talking, meeting, and making agreements — to solve international problems. They try to keep problems from developing into conflicts that require military settlements. The President almost always has the primary responsibility for shaping foreign policy.

What is sanction risk? ›

Risks in sanctions compliance are potential threats or vulnerabilities that, if ignored or not properly handled, can lead to violations of OFAC's regulations and negatively affect an organization's reputation and business.

What are US government sanctions? ›

United States sanctions are imposed against countries that are perceived to violate the interests of the United States. Sanctions are used with the intent of damaging another country's economy in response to unfavorable policy.

What happens when you get sanctions? ›

Sanctions, in law and legal definition, are penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules and regulations. Criminal sanctions can take the form of serious punishment, such as corporal or capital punishment, incarceration, or severe fines.

Which of the following is an example of sanction? ›

Graduation certificates, pay raises, promotions, awards, and medals are examples of positive formal sanctions.

How are sanctions a form of social control? ›

Through maintaining social control, sanctions preserve rules and order in a society (Klotz, 1996). The preservation of social norms and values especially take place through informal sanctions, since these are often enforced by one's peers or broader social group.


1. Advancing National Security Foreign Policy Through Sanctions, Export Controls, Other Economic Tools
(Senate Banking Housing and Urban Affairs Committee)
2. Examining U.S. Sanctions Policy, Implementation, and Enforcement
(House Foreign Affairs Committee Democrats)
3. Do Sanctions Work?
(Foreign Policy Association)
4. Economic Tools of Foreign Policy
(Noah Zerbe)
5. Four Years of Sanctions: Assessing the Impact on the Russian Economy and Foreign Policy
(Center for Strategic & International Studies)
6. The Impact of Sanctions on Humanitarian and Peacemaking Operations
(Center for Strategic & International Studies)
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