How Effective are Sanctions in Enforcing Compliance and when do they Backfire?

How do Sanctions Work?

Often, we read about the United Nations or the United States imposing sanctions on nations and businesses in order to force compliance with their agendas as well as to make the recalcitrant entities be more responsible.

Indeed, while the UN sanctions are usually aimed at enforcing compliance with global norms of human rights and peace, the US on the other hand, imposes sanctions on those that it deems as hostile to it or otherwise a threat to global peace.

As recent events and happenings over the last one year have shown, the US is especially “gung ho” in imposing sanctions on Russian nationals and businesses as well as the much talked about Iranian threat.

While the UN imposed sanctions require all the Five Permanent Members to approve the sanctions, the US is not constrained much, since the Congress and the Senate are the only checks and balances and they too can be overridden with a Presidential Veto.

Thus, this means that the US President is often free to act in ways that can be described as “bullying tactics” by numerous critics in the Third World.

When are Sanctions Effective?

Having said that, sanctions are often useful and effective in enforcing compliance and to force “behavioural changes” as far as the sanctioned entities are concerned.

Indeed, what ultimately led to the downfall of Saddam Hussein in Iraq were the sustained and prolonged sanctions against the Iraqis that also came at a great human cost in terms of suffering and deaths of countless children and those whose only crime was that they were Iraqis.

While the merits and demerits of the humanitarian costs of sanctions are often debated, the fact remains that in the world of geopolitics, it is usually the cold logic of national interest that determines whether sanctions have to be imposed.

Moreover, in recent days, we have been reading much about how the US under President Trump is ratcheting the pressure on Iran and consequently, has imposed several rounds of sanctions, including the latest move aimed at forcing even those nations that are friendly to the United States such as India to stop buying oil from Iran.

Indeed, many experts believe that sanctions have now become a tool for creating a “Race to the Bottom” where hostile nations have to be “brought to their knees” and hence, dealt with accordingly.

When do Sanctions Backfire?

On the other hand, sanctions are not always effective and they can backfire on account of several reasons including the pure economic logic that is at the heart of the need to use sanctions.

For instance, over the last year or two, President Trump imposed sanctions on numerous Russian businesses that included the Aluminium Giant, Rusal that ultimately led to a steep hike in the price of this commodity as Rusal was the global leader in this segment.

This made several businesses lobby the American Government to rollback the sanctions on Rusal which ultimately happened and hence, this can be construed as an example of how sanctions backfire.

Further, instead of forcing compliance, sanctions can also have the negative effect of pushing the already “cornered” entities into hitting back and going to war and hence, old school diplomats often advise nations not to enter into this Zero Sum Game where the end result is war or annihilation.

However, this moderating and calibrating influence is somewhat diminished in recent years due to a number of reasons, the most important being the prevailing Tense Geopolitical situation where each side is determined to “finish off” the other. Thus, we are indeed in unchartered territory and it is anybody’s guess as to how the outcome would play itself out.

Exorbitant Privilege and why the United States gets its Way?

The reason why sanctions work as far as the US is concerned is that the global financial system is dominated by the Dollar as the Reserve Currency or in other words, as the Dollar is used by all participants, any entity wishing to do business has to “bow down” to its Hegemony.

Further, global institutions such as the IMF or the International Monetary Fund and the World Bank are dominated by the US as the primary driver of influence and hence, nations and businesses wishing to remain in circulation have to “toe” the line of the United States.

As some experts have pointed out, this amounts to an “Exorbitant Privilege” as far as the US is concerned and despite moves to replace the Dollar as the Reserve Currency, it is unlikely that this privilege is likely to be dethroned anytime soon.

More importantly, the Oil payments are settled in Dollars in the global markets and hence, any nation or entity wishing to export or import oil has to necessarily use the Dollar.

This has resulted in severe problems for India as well as it is friendly with Iran but is now being forced to look for alternatives. Indeed, even Mukesh Ambani’s Reliance is now being asked to not trade with Iran or Venezuela and this shows the power of the US as far as sanctions are concerned.

Conclusion

Lastly, as mentioned earlier, sanctions work in some conditions and backfire in other cases. Thus, it is our argument that sanctions be used wisely and not arbitrarily if the global powers wish to create a more peaceful world.

Ultimately, it is the people who suffer on account of sanctions and hence, there is a need to take the humanitarian interests into account. After all, what is national interest if it does not serve the people’s interests?

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