Economic sanctions are a core component of international politics, designed to punish individuals and organizations that break global law. They can include a variety of measures like blocking financial institutions’ access to US dollars or preventing the transfer of funds from sanctioned nations. Those who violate sanctions risk huge fines and even loss of business. For example, in a record settlement, France’s largest bank lost the right to process dollars for blacklisted Cuban, Iranian, and Sudanese entities.
Sanctions aim to coerce governments into changing policy or behavior by disrupting market activities. But they also carry collateral costs. Moreover, their effectiveness depends on the extent to which third-country governments will retaliate against companies in their own economy. Consequently, the utility of sanctions is diminished as the world becomes increasingly interconnected and the US’s ability to exert influence as a dominant power diminishes.
For example, the cost of the US-led semiconductor export control regime on China arguably hampered its impact as foreign firms learned to avoid American technology by designing their products to exclude US intermediate goods and technology. Such “unreliable supplier” effects can persist well after sanctions are lifted.
The US, and other major economies, must make sure to consider these trade consequences of their sanctions, as they increasingly rely on them. And they must do so in the context of broader international challenges like climate catastrophe and species loss, and a growing divide between rich and poor. Daniel Drezner is a Distinguished Professor at Tufts and the Director of the Fletcher School’s Program on International Relations and Security Studies.