Stratfor on Economic Sanctions
Video Transcript:
Video Transcript
While an imperfect foreign policy tool, economic sanctions are frequently used by major powers to compel changes in the political behavior of the weaker states that they are targeting. More often than not, economic sanctions will fail in this objective and need to be supplemented with other coercive measures as part of a broader pressure campaign to elicit results. Economics sanctions can take several forms. A country can place tariffs on products imported from the target country, block the shipment of goods into or out of the country, or seize or freeze the overseas assets of the country. The country imposing sanctions can target insurance firms and banks to make everyday transactions difficult. It can also deny the target country's trading partners trade and investment privileges with itself, forcing the partners to make a choice between trade with the political pariah or trade with the major economic player.
A sanctions regime can never be airtight. The more restrictions imposed in the market, the more opportunities are presented for various players in the system to turn a higher profit if they are willing to take some risk. Sanctions regimes often give rise to a smuggler's paradise, as middlemen, front companies and falsely flagged merchant ships become critical nodes of the supply chain. So then what do sanction offer?
First and foremost, they offer a path to avoid or at least delay military conflict. Sanctions assume the targeted country cannot or will not resort to military action to counter sanctions. But there are exceptions. When the U.S. halted the shipment of oil and raw materials to Japan in trying to shape Japanese policy on China and Indochina, the crippling effect of the sanctions led to Pearl Harbor. Sanctions can also risk playing to the regime's benefit if the country enforcing sanctions is viewed as the aggressor against an embattled people. If the logic of sanctions is to create social unrest to topple a regime, the country imposing the sanctions has to first deal with the political consequences of contributing to the economic hardship of the masses that it is trying to support.
Sanctions are difficult to politically sustain. A sanctions campaign will appear most intimidating at the time of implementation, as companies, insurers and banks are trying to gauge just how strong the enforcement mechanisms of the sanctions are. Maintaining a coalition of economic powers to uphold and enforce those sanctions can pose a very serious challenge as divergent national interests come into play and as other powers try to undermine the policies of the country imposing the sanctions for their own political gain.
At the very least, sanctions allow a country in a difficult political situation to appear to be acting while avoiding the risks of acting. This is certainly true for the present case of the United States in dealing with Iran as Washington lacks the appetite for another lengthy military engagement in the Islamic world that would reverberate through the markets at a particularly delicate time for the global economy.
