How the sanction became America’s foreign policy tool of choice

How the sanction became America’s foreign policy tool of choice

By Luke Vargas   
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“Wake” is a weekly foreign policy broadcast produced by Talk Media News and hosted by Luke Vargas from U.N. Headquarters in New York.

The following is a complete transcript of Episode 17, “Sanctions in All Shapes and Sizes.”

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Luke Vargas: Read, watch or listen to the news and you’re likely hear about a sanctions threat. With military action often too costly or politically unpopular, the sanction looms as the tool of choice to respond to events in North Korea, Iran, Russia or Venezuela.

So how did we get here? Why are American policymakers so in love with the sanction? What questions should the public be asking to understand the effect these sanctions have on US foreign policy?

We’re taking on those questions next, on Wake.

Thanks for joining us. We’re coming to you today from U.N. headquarters in New York, where the Security Council is working on new sanctions against North Korea. When those are done they’ll be added to a 165 page long U.N. document listing all the people, groups or businesses currently being sanctioned.

In Washington, the sanctions obsession seems even stronger.

Venezuela holds fraudulent elections? Sanction the legislature and consider oil sanctions!

Russia interferes in the U.S. election? Kick out their diplomats, sanction government officials.

Iran continues its ballistic missile development? Time for new sanctions!

Do you get the point?

To help us understand sanctions, we’ve brought together experts who’ve designed and enforce sanctions against America’s adversaries, as well as those who’ve studied the theory of sanctions / the way we talk about them, their limitations and how they fit into the broader foreign policy tool bag.

And we start with Richard Nephew, a research scholar at Columbia University’s Center on Global Energy Policy, and until very recently was helping set U.S. sanctions policy at the State Department, as the principal deputy coordinator for sanctions policy. Richard, welcome to the program.

Richard Nephew: Thanks very much for having me.

Luke Vargas: Let’s start with some history. How did we get here, to this place where sanctions seem to be a tool of first-resort for U.S. policymakers?

Richard Nephew: Basically I think it’s a confluence of two separate factors that all came together at once. The first is that there’s a lot of international problems that are out there, and the United States has a special role in trying to deal with those problems.

First, as one of the largest powers that was still remaining after World War II, and then as a part of the competition with the Soviet and then eventually as the sole superpower in the 1990s. With all these various different problems there’s a need to have what we in the business call leverage, the ability to put pressure on people to accept solutions that you want.

And some of these points of leverage can be just talking, some of them can be financial incentives, but oftentimes we found that using the threat of punishment – the threat of access being lost to the US economy – was a potentially valuable point.

The second thing is that the other point of leverage the people usually look to is military force, but throughout the 20th century we found that military force was increasingly costly, increasingly dangerous. There was a lot of casualty concern in the United States, especially after Vietnam. And so we arrived at a point in which we needed to do something about problems, we needed points of leverage to get to a solution, and we didn’t have military force as a go-to tool.

So sanctions sort of stepped into the breach to give us the kind of force and power that we needed to apply to address some of these problems.

Luke Vargas: Ricard, I imagine that, when tallied up, the total number of countries and people being sanctioned by the U.S. these days is pretty large. Can you put any numbers on that?

A list of recent Treasury Department sanctions actions

Richard Nephew: Yeah. Right now the U.S. government has 26 separate sanctions programs that are active today, and the deal with everything from the big ticket items that everyone knows about – Iran, North Korea, ISIS – but they also go to even smaller things that people might not be aware of – human rights issues, things like the rough diamond trade which has a big role to play in conflicts in Africa in particular.

So sanctions right now are being used to address problems both big and small.

Luke Vargas: Let’s talk about the Iran sanctions, an effort you helped lead during the Obama administration. Those sanctions are credited with helping push Iran to the negotiating table on the nuclear deal. Recap for us what those sanctions actually did – 

Richard Nephew: Well the sanctions really changed over time, got more severe as our concerns with Iran’s nuclear activities were growing.

But they started off with first a U.S. embargo where we decided that we weren’t going to do any business with Iran anymore. And that was in 1995 and 1996. But we found that after the conflict we had with Iran in the 1970’s that we didn’t actually have a lot of trade to cut off. And so we needed to try and find ways of persuading other countries to cut off their trade as well.

At first we started with just a blunt force tool: if you do business in Iran than you can’t do business in the United States. And that didn’t probe terribly successful.

So in time we started being a little bit more careful, a little bit more selective about targeting individual parts of the Iranian economy or, for instance, Iran’s access to banking, and then persuading banks themselves, rather than governments, that they should try to get out of doing business with Iran.

So over time we used private sector repetitional interests and concern about their reputation to try and persuade them to get out, which in the end made it a lot easier to go to governments and say, you don’t even have much of an economic interest there anyway, why don’t you look as a matter of policy to try and withdraw from Iran?

Luke Vargas: What do you make of the frequency of sanctions threats? Does the overuse or over-mentioning of sanctions diminish their utility?

Richard Nephew: Yeah I absolutely do. And I think part of the problem both that it cheapens, a little bit, the currency. Because if every problem merits a big approach to sanctions, then really at some point or another, you don’t have an ability to communicate to other states or to industry and companies that this is a really big problem, we need to try and address it.

But the other problem that you start to get to is that if you have too many different sanctions regime, at some point they’ll say, well gee, who can we trade with? Who can we do business with?

And it both has a limiting effect on U.S. economic access – at some point we’re going to run out of countries where opportunities potentially are for our own countries and banks and individuals to invest in – but it also starts making everybody else around the world who wants to do business in the United States and abroad, at one point they’ve got to ask if it’s just too cumbersome to do business in the Unites States. Is it worth it? Is it worth it when it means so much exclusivity as opposed to doing business in other places, but also means that we ourselves are now being scrutinized by the Americans far more than we wish to.

The U.S. Treasury Department. Flickr photo: Roman Boed
The U.S. Treasury Department. Flickr photo: Roman Boed

Luke Vargas: Richard, there’s a phenomenon in Washington in which it’s easier to appropriate money for something, and then harder to defund it. Does the same hold true for sanctions? Is it easier to levy new sanctions than it is to dismantle old sanctions?

Richard Nephew: Yeah, sanctions are in a rough kind of place, because it’s both hard to keep them going if a lot of fatigue starts to set in and people say we haven’t seen a result here yet and we’ve been cutting ourselves off from having access to this good or that good or this country or that country.

But you’ve also got the problem that when you start to say, alright we’re going to take the sanctions down, there’s a lot of political weight trying to keep them in place. Just look at Cuba for an example of this.

And then there are just more fundamental questions about confidence on the banking and industry side, where they’re a little unsure as to how permanent the solution is that got rid of the sanctions. And frankly, they start to fear that they’re going to have sanctions reimposed against them that will undermine their own economic interests going forward.

So I think one of the things we’ve definitely found is that it’s much easier to start a sanctions regime than to take one apart. And that’s especially the case where you still have unresolved issue with whatever country or issue is being addressed.

Luke Vargas: And what about enforceability? There must be, what, thousands of people and companies that the U.S. is economically sanctioning, prohibiting from trading a certain item or prohibiting from traveling. Has it become difficult for the U.S. to enforce all the sanctions we’ve imposed?

Richard Nephew: Yeah absolutely. I mean there are only so many different federal officials who have got the time, energy and the mandate to investigate sanctions enforcement problems.

At the Treasury Department, for instance, there’s about 400 people who are responsible for enforcing U.S. sanctions law. And that sounds like a lot, until you realize that some are lawyers, some of them are professional investigators and some of them are secretaries.

And you don’t have the kind of wide-ranging law enforcement presence you need to not only enforce sanctions after they’re violated, but also prevent the underlying activity from happening in the first place. It’s just much more difficult to do that when you’ve got so many different sanctions provisions and sanctions regimes that exist, and you don’t have the kind of manpower that you can really apply.

Luke Vargas: Richard Nephew is a research scholar at Columbia University’s Center on Global Energy Policy and former sanctions coordinator at the State Department. Richard, thanks for joining us today.

Richard Nephew: Thank you.

Luke Vargas: We’ll be right back.


Luke Vargas: Welcome back to “Wake,” where we explore how events overseas affect our shores. I’m your host Luke Vargas at United Nations headquarters in New York City.

This week we’re focusing on international sanctions – looking at how they work, how they fit into the suite of options that American diplomats consider, and why they’re talked about so dang often these days.

Let’s bring in two guests now.

Jonathan Kirshner is a professor of International Political Economy at Cornell University, and author of “American Power After the Financial Crisis.” Jonathan, thanks for being with us. Welcome to Wake.

Jonathan Kirshner: Pleasure to be here.

Zachary Selden is professor at the University of Florida and former international affairs analyst at the Congressional Budget office, after which he went to work defense and security issues at NATO Parliamentary Union. Thanks for joining us as well.

Zachary Selden: Great. Thanks for having me.

Luke Vargas: The U.S. is sanctioning big countries and little countries. Weak countries, without much of a government to speak of, and revolutionary governments like North Korea or Venezuela that have very strong national narratives. Zach, are there any generalizations we can make about the countries that are easiest to affect with sanctions?

Zachary Selden: Well I think when you start breaking down in that regard, the “rogue regimes” tend to have very limited commercial intersections with the United States, and therefore sanctions are perhaps not symbolic, but they don’t necessarily directly impact on their economy in the same way that sanctions against countries with whom we are far more friendly might.

So when you look at the sort of historical record, generally speaking, economic sanctions have been most effective when used against states where the United States has generally friendly relations or decent relations and significant commercial ties, and the issues at stake are relatively small.

They generally do not work to any large extent when you’re dealing countries over very large issues, particularly if the issue deals with regime change, for example. There’s very little in the way of economic pressure that you can do that’s going to make it cause the toppling of a regime outright.

Luke Vargas: Often when we hear about sanctions, we hear that we’re going to prevent one country from engaging in a certain type of trade. North Korea can’t export steel. The E.U. won’t buy Russian fish. Are things ever so clear cut in reality – are the intended benefits of sanctions often the end result?

Zachary Selden: Well you say benefits, here we have to start to think about the unintended consequences of playing around with the laws of economics and the basic laws of supply and demand.

So if for example you cut off the supply of goods to a particular country, you may simply encourage that country to begin country of that or import from other sources. So we have good examples of that.

South Africa, when it was under fairly stringent international sanctions during the Apartheid era, there were restrictions and sanctions on South Africa regarding arms transfers. And so South Africa actually developed a very significant arms industry to substitute for that and eventually became a significant exporter of arms. And I don’t think that was really anyone’s major talked about effect that they wanted to see occur out of this, but that’s what happened.

Thousands of people marched through central London to protest against British arms sales to South Africa on 17 March 1963. Courtesy: Henry Grant Collection / Museum of London
Thousands of people marched through central London to protest against British arms sales to South Africa on 17 March 1963. Courtesy: Henry Grant Collection / Museum of London

And you can see that in other cases as well. During the sanctions on Serbia during the Yugoslav wars we had fairly strict sanctions on Serbia. They ended up pumping a huge amount of money into the criminal elite in Serbia that was able to bring gasoline into the country, which was sanctioned, which gave them an enormous amounts of political power because they pumped a lot of that money into the most radical Serbian extremist parties that kept the conflict going because it was good for them, it was a good financial investment for them.

So I think we have to be very careful about the unintended consequences when you start to talk about who actually benefits from these things.

Luke Vargas: Alright, we’re now talking about sanctions within a larger global economic perspective. In this globalized, interconnected economy, how much can a unilateral sanction do, or must we look to global or multilateral sanctions in order to achieve results? Jonathan?

Jonathan Kirshner: Well I think it would be a plain fact that the more cooperation the U.S. would have in enacting and enforcing its sanctions, the more effective those sanctions would be if they were wisely designed. Although the U.S. is still a remarkably large and influential economy, and so the decisions it makes on its own will matter. But certainly in many cases you can see that multilayer sanctions will be more effective than bilateral sanctions.

And clearly in the case of Iran, when the U.S. administration talks about possibly changing the nature of the nuclear agreement with Iran, it would be very hard to recreate the multilateral sanctions that have brought Iran to the negotiating table in the first place, and that would be something to keep in mind.

Luke Vargas: Jonathan, some foreign policy thinkers say we shouldn’t be so focused on the effect sanctions have on targets. But instead, the gap between effects on the target country and the sender country. Should we pay more attention to this gap in the effect of sanctions?

Jonathan Kirshner: I think that makes sense, but for most of the sanctioning that the United States does, for example, it’s pretty asymmetrical – often we’re very large and they’re very small.

If we were going to try and sanction, say, China over a trade dispute. I think that would be an enormously important consideration. And it was an important factor in the nature of the sanctions against the Soviet Union, the grain embargo President Carter imposed during the Cold War.

A 1980 Time magazine cover on the U.S. grain embargo against the Soviet Union

But I think the bigger question really is not how much the target suffers, but as was suggested earlier, who suffers. What are the political consequences of the sanctions within the country that you’re targeting. And that will matter much more than the weight of the sanctions as a whole, and even the relative costs of the sanctions.

Luke Vargas: Zach, I’m curious about your thoughts on looking at sanctions through the lens of the gap in effect between sender and target. Do you think that’s a useful way to see all this current talk of sanctions?

Zachary Selden: Once again it depends very much on the particular case that you’re looking at. In particular I think you have to understand that theoretically, at least in game theoretic sense, if you are bearing a cost to yourself as the sender, it makes the sanctions themselves far more credible, because it says you’re seriously committed.

And I think we have to understand sanctions are sort of an important part of the foreign policy tool kit in large part because they can signal that the United States is committed to this course of action, that it means something, that we are serious about this issue, we might take further action.

I think a more important thing to consider is the impact within the target country on different populations within it. And this has led to the idea of “smart sanctions” and trying to target more, to try and hit the individuals who are responsible for the policies we want to change.

And that is why sanctions in particular on Russia and Iran have often been focused on particular individuals or particular corporations and banks we want to target. And the idea is to try and limit the kind of gross impact on the population at large.

There’s a good reason for this, other than the sort of general moral and humanitarian aspects that you don’t want to punish innocent people, there’s an other consideration, which is that politicians within the targeted country can oftentimes use the sanctions to rally support for their cause, to say, hey all the problems we’re experiencing in this country are the fault of somebody else who is doing this to us.

And certainly we’ve seen in Venezuela that the Maduro government has used this quite skillfully in their own internal propaganda. Whether it has dramatic effect politically in the country, I don’t know. But it’s certainly something they’ve tried to use.

Venezuelan President Nicolás Maduro greets supporters at a 2015 climate change conference in Quillacollo, Bolivia. Photo: Luke Vargas
Venezuelan President Nicolás Maduro greets supporters at a 2015 climate change conference in Quillacollo, Bolivia. Photo: Luke Vargas

Luke Vargas: A final question to both of you. First to Jonathan. Do you have any final advice to the public, to the press, about how we could talk about sanctions more accurately? To help enrich the public discourse on this important subject.

Jonathan Kirshner: Yes. I actually think that this is a very important point. There’s a common trope out there that says economic sanctions don’t work. And that is not a good way to think about international politics.

Your first guest – who made a number of great points – talked about the costs and the dangers associated with war, and maybe therefore you use economic sanctions to avoid those costs and dangers. But that still implies that war somehow works whereas sanctions may not work.

But if you look around, many times the use of force doesn’t really work either. By work we simply mean achieve the political goals for which the device was introduced. So whether thinking about the use of force or thinking about the introduction of an economic sanction, one must always think clearly about: What is the political goal? Why am I doing this? What are the political costs, and what are the political benefits?

There will be many occasions in which you could say well, force would “work,” but it would work at unacceptably high political costs. And so you have to always think about the introduction of any foreign policy measure within the aspirations of the goals of the policy. And I think that’s something that’s often missing from the debate.

Luke Vargas: Jonathan, I know you think there’s been too little discussion about the costs of military action against Iran compared to sanctions. Could you explain that?

Jonathan Kirshner: I’d be happy to. Often you hear frustration about economic sanctions against Iran as opposed to the use of force, although as you’ve heard the sanctions were actually largely effective at bringing Iran to the table.

But in thinking about sanctions “working” versus military force “working,” one must always keep in mind the politics.

So a large military attack against Iran would “work” in that it would destroy things and knock down buildings and have that effect on the ground. But where would the U.S. be with regard to advancing its political goals 30 days after a major military strike on Iran as opposed to the day before a military strike on Iran? That is a very complex question that must be thought through carefully.

As with economic sanctions and with military force, the metric, the measure of success always has to be, where am I politically after I’ve done this? Will I have achieved the political goals for which the instrument was introduced, be it a trade sanction or a massive bombing campaign.

And I mention this because there are good reasons to believe that we haven’t fully calculated the broad range of international political consequences of such a strike on Iran. As we’ve seen in recent U.S. military activities, sometimes there are political effects from the other side of them that we regret.

An aerial view of Tehran, Iran. Flickr photo: Gilbert Sopakuwa
An aerial view of Tehran, Iran. Flickr photo: Gilbert Sopakuwa

Luke Vargas: Zach, any advice to the public, to reporters and commentators, as we consider the use of sanctions?

Zachary Selden: One that I would put out there is that there’s always second-order effects to any time you make any choice in policy, whether it’s involving the use, covert action or economic sanctions, or anything in between. So you sort of need to understand what the possible second-order effects or unintended consequences might be.

Obviously there are times when the use of force, even if it’s possible, is highly ill-advised, or times when it simply doesn’t fit with the problem at hand.

And I would put this in the context right now of sanctions against Venezuela, where we have a very serious issue in Venezuela, but obviously the use of force simply doesn’t apply in this. The question is how do we get Venezuela back on a better track? How do we push that government into some more hospitable framework certainly for the population there?

So it’s a very tricky issue, but we have to understand that sanctions – it’s not a matter of working or not working, it’s that sometimes they can help push u sin the right direction, sometimes they might not be terribly effective, and other times they can be quite counter-productive. But we have to understand how those effects can march out over the course of time. And that’s oftentimes not done, I think, in a policymaking environment.

Luke Vargas: Zachary Selden is a professor at the University of Florida and former international affairs analyst at the Congressional Budget Office. Zach, thanks so much for being with us.

Zachary Selden: Sure, no problem.

And Jonathan Kirshner is a professor of International Political Economy at Cornell University, and author of “American Power After the Financial Crisis.” Jonathan, thanks to you as well.

Jonathan Kirshner: Thanks for having me. It’s been a pleasure.

Luke Vargas: I’m Luke Vargas, signing off, join us again next week, on Wake.

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