Sanctions Effectiveness

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This entry is adapted from the peer-reviewed paper 10.3390/economies11050136

As the context of geopolitical instability has worsened, economic sanctions have become an increasingly used instrument to condition international economic relations and the global strategies of the great powers. Thus, the study of the types of sanctions and the mechanisms that contribute to their effectiveness has become an increasingly relevant topic.

sanction objectives sanction types sender capitulation

1. Introduction

With the advance of economic globalization, several instruments emerged that have been used by countries or institutions with the purpose of influencing the behavior of other countries, with sanctions being one of these mechanisms. These sanctions gradually increased in the post-Cold War period and have captured the interest of academics and politicians, generating multiple debates and placing them at the center of international politics. However, economic science has not consolidated a robust theoretical and methodological basis to study its impacts, despite the evidence of its effect on reducing economic growth, employment, and purchasing power in target countries.

Sanctions imposed by multilateral organizations, individual states, or coalitions of states (sanctioners) on other countries (sanctioned) are a mechanism for putting pressure on the policies of some countries in order to change them. According to Lopez and Cortright (1995), sanctions lie between the traditional diplomatic approach and the military route, so their imposition encounters less national and external resistance as they are seen as a substitute for military action. Sanctions can have different purposes, namely promoting human rights and democracy, combating terrorism and nuclear proliferation, destabilizing autocratic regimes, and accelerating the resolution of military conflicts. Sanctioning entities may limit trade or foreign aid to target countries, restrict travel, block assets, and deny access to financial institutions to specific individuals or groups.

The sanctions have focused on different aspects, from their causes to their impacts and their effectiveness, i.e., the degree of success obtained. Indeed, assessing whether sanctions incite changes in a country’s conduct or whether they end up without obtaining any concessions is relevant for policy design. Alongside the extent and nature of changes in target states, some studies have analyzed the duration of sanctions, a relevant aspect for sender states (Bolks and Al-Sowayel 2000; Krustev and Morgan 2011; Attia et al. 2020), which have increasing costs with the duration of sanctions. Some authors have analyzed the factors that lead to the rescission of sanctions (Bolks and Al-Sowayel 2000; McGillivray and Stam 2004; Allen 2005), whether by successfully changing the behavior of the sanctioned state or by the capitulation of the sender state.

Despite the long use of sanctions, their real contribution to changing the policies of target countries has been highly contested (DuBard 2021). On this issue, the profuse literature on sanctions in economics and political science has generated a diversity of results that do not allow robust and unequivocal conclusions to be drawn about their effectiveness (Elliott and Hufbauer 1999; Beladi and Oladi 2015). Indeed, there have been several perceptions about the success of sanctions, as economics evaluates them based on their economic impacts, while political science evaluates them against the fulfillment of objectives.

Political science has been looking for arguments that rationalize the inconsistency: if sanctions have not been effective in achieving the stated objectives, why do they continue to be applied at an increasing rate? Several explanations have been advanced for such a pertinent question. In a seminal study, Barber (1979) identified three categories of sanctions objectives: the primary ones, focused on the behavior and policies of the targets; the secondary ones, related to the international status of sanctioners; and the tertiary ones, which concern the structure and functioning of the international system. Further to this argument, Kaempfer and Lowenberg (2007) argue that stated and real objectives are different, especially when one of the purposes is to support domestic interests, while Lindsay (1986) argues that sanctions aim at symbolic objectives.

2. Sanctions Effectiveness

International sanctions and the debate over their effectiveness and the extent of the costs they entail are at the heart of international politics. International sanctions have been around for a long time, with their most expressive use in the post-Cold War period. For a long time, sanctions only implied restrictions on foreign trade, which are known as conventional sanctions. More recently, targeted sanctions have been used, named ‘smart’ sanctions, which include financial and travel restrictions and arms embargoes, seeking to more effectively reach social strata linked to the economic and political elite of the target state and, at the same time, to protect more vulnerable social groups (Hufbauer and Jung 2020). Such an evolution is legitimized by the impacts of sanctions on the most disadvantaged population of the target country (Hoskins 1997; Alnasrawi 2001; Petrescu 2016). Hence, smart sanctions have been gaining more expression (Weiss 1999; O’Sullivan 2003; Kaempfer and Lowenberg 2007; Drezner 2011).

In fact, financial and travel restrictions, by their nature, seem to reduce collateral damage, affecting mainly the elites of the target state. As these have greater influence on the governments of the countries, they can cause changes in their behavior, leading them to comply with what is required by the sanctioning entity. They will be ‘fairer’ than trade sanctions, which cause losses for producers and consumers in the target country, via ‘spillover’ effects (Ahn and Ludema 2020), but will have a slight effect on financial and political elites (Lektzian and Souva 2003).

The seminal approach to smart sanctions occurred within the scope of political science, and only more recently has economic science studied this type of sanction (Beladi and Oladi 2015; Ahn and Ludema 2020). In fact, according to Felbermayr et al. (2021), the combination of political and economic visions will be more adequate to understand its effects and success. In this line, Beladi and Oladi (2015) use a game theory model for an oligarchic economy and consider that a reduced group of agents with economic power can influence the government, generating situations of exchange of favors, often linked to corrupt activities.

The result of the imposition of smart sanctions has allowed some conclusions to be drawn. Their effectiveness seems to increase with the level of per capita income in the target country. Furthermore, there is an argument in favor of smart sanctions when there is a strong oligarchic economy (Beladi and Oladi 2015). The literature also recognizes that sanctions are more effective the greater the cost inflicted on sensitive economic sectors of the target country (Bapat et al. 2013). In this respect, Ahn and Ludema (2020) admit that smart sanctions are less effective when the government of the target country strategically protects those economic sectors.

Most conventional sanctions include restrictions on international trade, so external dependence has been considered an influential factor in the results of sanctions. The theoretical expectation is that the greater the trade dependence of the target countries, the greater the incentive for them to give in to the pressure exerted by sanctions on their economies. However, most studies do not recognize that the degree of economic dependence of targets has a significant effect on the decision to resist sanctions or to capitulate (Bapat et al. 2013; Jeong and Peksen 2019). The ability of target countries to survive economic pressure depends on their ability to create new commercial and financial relationships with third countries (Peksen and Peterson 2016) and also to resort to the black market and other illicit channels to access external goods and services or to sell their own goods (Early and Peksen 2019).

Sanctions also have effects on the sender country, and the negative impacts can lead to their failure (Besedeš et al. 2021). This is due to the target country’s inter-firm relations with non-sanctioned countries, which may also have economic relations with the sender state. Therefore, through the triangulation of business networking, sanctioned and sanctioning countries continue to interact through companies from a third country (Crozet et al. 2021). The well-known “black knight” effect occurs when relevant companies in the sender state put pressure on their governments not to impose (or withdraw) sanctions. The authors studied Germany’s financial sanctions between 1999 and 2014, considering the economic relevance of the target country. From the analysis, they conclude that, with exceptions such as Russia, financial restrictions were imposed on countries with little relevance for the German economy, allowing firms to redirect their activities to non-sanctioned states. Thus, a possible explanation for the performance indicators of firms in the sender country not having the expected negative effect has to do with the diversion of activities to third countries.

The existence of third countries with which the sender or target country has some kind of relationship (friendship or enmity) is relevant to the success of sanctions (Kwon et al. 2022). The network of stakeholders involved in the sanctioning process was studied by Joshi and Mahmud (2020) when addressing the impacts on the sender entity that may jeopardize the issuance or continuity of sanctions. In fact, sanctions have redistributive effects in sender countries and in target countries and may operate as ‘bust’ effects since sectors affected by the recessive effect of sanctions may oppose their imposition (Besedeš et al. 2021).

With regard to the sender entity, the literature has stressed the influence of its characteristics on sanctions effectiveness. For example, in the case of the EU, it will be difficult for any member state not to comply with sanctions, as the legal framework that supports them is approved in the Council by a qualified majority and is binding on all members. The cultural and historical attributes of the entities involved in the sanctioning process, something neglected in the literature, must also be considered (Kaempfer and Lowenberg 2007).

Sanctions can be imposed by a country or by a supranational entity; the effects of unilateral and multilateral sanctions are diverse. In general, the results indicate that multilateral sanctions are more effective as a result of international cooperation (Early and Spice 2015), since they impose a higher cost on the target by reducing its ability to find alternative markets that help to circumvent the effects of sanctions (Joshi and Mahmud 2020). The greater effectiveness of multilateral sanctions may also result from differences in decision-making processes in both situations, as shown by Weber and Schneider (2020) when comparing US and EU sanctions. Given the institutional characteristics of the EU, where there can be conflicts of interest among members over sanctions, approval will be more difficult than in the US. Possible conflicts of interest mean that sanctions in the EU are less likely and less severe as the economic ties of EU member states with the target country increase.

In addition to economic impacts, sanctions have political effects (Kaempfer and Lowenberg 2007; Krustev and Morgan 2011). For this approach, the nature and extent of sanctions are defined by pressure from interest groups in the political system of the sender state. The authors also argue that the political effects of sanctions on the target country are sometimes perverse, as they contribute to increasing popular support for the regime, which thus sees itself as more legitimized to oppose compliance with the sanction’s requirements.

The relationship between the duration and effectiveness of sanctions has also been discussed in the literature. It has generally been concluded that the duration of sanctions is negatively related to their effectiveness (Hufbauer et al. 1990; Drury 1998; Kaempfer and Lowenberg 2007; Bolks and Al-Sowayel 2000). The explanation for this fact seems simple since the sanctions that prove to be the most effective are, by nature, those that most quickly generate the desired effects, inducing a faster termination.

The time that a sanction takes to produce effects seems to be linked with whether or not there was a threat to the target country in the period prior to its imposition. Weber and Schneider (2020) then argue that US-imposed de facto sanctions are a ‘negative’ selection of these cases (including unrealized threats) and therefore less successful than EU-imposed de facto sanctions. Studies with data on effective sanctions—based on databases—may have this selection bias (Kaempfer and Lowenberg 2007; Nooruddin 2002; Miller 2014).

The effectiveness of sanctions depends on what is meant by success, an issue on which there is no consensus. For example, of the 115 episodes of sanctions considered in Hufbauer et al. (1990), 40 (i.e., 34%) were classified as successful cases. Applying a more restricted notion of success to the same sample, Pape (1997) only validated five cases of success.1 Other authors adopt a broader notion of success, understanding that this occurs when the target country sufficiently changes its behavior (Baldwin 1985).2

There is an understanding that the bargaining process and the costs that countries bear influence the duration of sanctions. As for bargaining, the inherent coercion in the sanction tries to get the target state to adjust its behavior to that required by the sender. However, if this does not occur, the sender entity will recognize its ineffectiveness and/or the costs it bears, and the sanction will end. According to Krustev and Morgan (2011), the bargaining factors are relevant, but their impact decreases with the duration of the sanction. Rather, domestic realignments due to rising sanction costs become crucial as sanction duration rises. Thus, the authors maintain that, in general, most of the short episodes of sanctions can be explained by the bargaining mechanism, and the longer ones are justified by their redistributive nature.

The way in which the sanction ends (due to compliance with the requirements by the target or by the sender party’s capitulation) is also a relevant topic, although it has received little attention in the empirical literature. Exceptions are Krustev and Morgan (2011), Attia et al. (2020), or Early (2011). The end of the penalty for compliance seems to be all the more likely the higher the costs for the target state, the lower its economic power, and the greater the volatility of its political regime. On the other hand, the end of the sanction by sender capitulation is more likely the higher the cost to the country, the more intense the economic and political links with the target, and the greater the political volatility in the sender entity.

References

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Bolks, Sean M., and Dina Al-Sowayel. 2000. How long do economic sanctions last? Examining the sanctioning process through duration. Political Research Quarterly 53: 241–65.
Krustev, Valentin L., and T. Clifton Morgan. 2011. Ending economic coercion: Domestic politics and international bargaining. Conflict Management and Peace Science 28: 351–76.
Attia, Hana, Julia Grauvogel, and Christian von Soest. 2020. The termination of international sanctions: Explaining target compliance and sender capitulation. European Economic Review 129: 103565.
McGillivray, Fiona, and Allan C. Stam. 2004. Political Institutions, Coercive Diplomacy, and the Duration of Economic Sanctions. Journal of Conflict Resolution 48: 154–72.
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DuBard, Adam. 2021. Why Sanctions Don’t Work. In Marcellus Policy Analysis. Quincy: John Quincy Adams Society.
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1. Introduction

2. Sanctions Effectiveness

References