Home Commentary Do Sanctions Work or Backfire? Russia and Iran as Two Case Examples

Do Sanctions Work or Backfire? Russia and Iran as Two Case Examples

by internationaldirector

By: Darren Morris, Columnist, International Director

Economic sanctions are means to an end. Oftentimes their objective is to induce a change in the behavior of a foreign government state. In modern history, those sanctions are often used by Western powers (through the United Nations) against non-cooperative governments or regimes such as those of North Korea, Iran andothers. Economic sanctions have been used by the Security Council since the Cold War against nearly 12 targets. They have been varied. And many cases have been controversial.  And while sanctions are a better alternative to an all-out war against any of those states, rarely do they produce their intended results. For example, the success of the agreement between Iran and foreign governments regarding its nuclear program can still be counted as an exception rather than a rule about the success of sanctions. Nonetheless, it eventually fell apart. And in most other cases, sanctions produce opposite results.

Very small success rate

Of course, the case of sanctions against Iran and its (temporary) success is not the only example. An analysis of many cases of sanctions in a book called Economic Sanctions Reconsidered by Gary Clyde Hufbauer, Jeffrey J. Schott and Kimberly Ann Elliott assessed the outcome of sanctions from 1914 to 2008. The results showed that only 13 cases were successful in deterrence or achievement of another policy objective. This number looks very small when considering that the authors looked at more than 200 sets of sanctions, out of which only 13 cases succeeded. The majority of those successful cases were against small nations, which had little room to maneuver.

Unilateral sanctions have a lower success rate.

As economic and financial systems evolve, so do nations’ responses to economic or other sanctions. In many cases, the success of those sanctions depends on the universality of sanctions, so that multilateral sanctions are bound to be more effective than unilateral sanctions. Two examples come to mind here: Russia and Iran.

The case of sanctions against Russia

Russia is a known popular target for US sanctions. Due to its actions in Ukraine and its annexation of the Crimean Peninsula, US sanctions have targeted many Russian officials for “malign activities”. But Russia has promised precise and painful counter sanctions in response. In previous incidents, when former US President Barack Obama expelled Russian diplomats from the United States, the Russian response was far from predictable. Instead of retaliating with the same, President Vladimir Putin announced that he was inviting all children of US diplomats accredited in Russia to the New Year’s Christmas celebration in the Kremlin. If that was not enough, Russian embassies around the world posted on their Twitter accounts pictures and tweets mocking the US actions and making witty jokes about the incident.

Economic sanctions rely on the hegemony of the US dollar.

But aside from sassy jokes, Russia’s actual response to sanctions today could prove to be effective. For American sanctions to be effective, they need to be actually restrictive. And the only way for them to be restrictive is through the hegemony of the US dollar over the global financial system. The US dollar has been dominant for more than 70 years, but its status is being undermined with US President Donald Trump’s trade wars against China, Russia, Turkey andthe European Union. Those countries have responded by dropping the US dollar in their commercial transactions and agreeing to deal in their own local currencies instead. This could effectively help them bypass the US financial system and avert sanctions altogether, and even mitigate the impact of a tradewar.

Dmitry Medvedev, the Russian prime minister, also announced that Russia will reduce its US-dollar investments to the minimum—including US bonds—in response to US sanctions on the Russian banking system.

Iran’s case and the loss of oil supply

Iran, on the other hand, has less clout to deal with sanctions in the same way that Russia does. But this does not mean that it is entirely helpless against them. The sanctions have deeply affected the economy, and there is concern that they may even lead to social unrest. Food prices have increased, and the Iranian currency, the rial, has depreciated. Iran showed a willingnessto cooperate with other member countries that had signed the initial agreement regarding its nuclear agreement. And European countries vowed to keep Iran’s deal. European diplomats stated that the remaining parties in the agreement will maintain effective financial channels with Iran to ensure its continued export of oil and gas.

The global economy has an interest in bringing Iranian oil back to the market. Oil prices have already hit $80 per barrel, and they seem to be on their way to hitting the $100 psychological level. This spells dire consequences for the global economy, the value chains of which remain heavily dependent on oil. The answer, again, lies not only in working with Tehran and giving diplomacy a chancebut also in bypassing the US dollar, given that oil prices are denominated in US dollars.

Final thoughts

Sanctions work only in very few cases and when certain conditions are met. When imposed to achieve the interests of a certain state on the account of another, sanctions become merely bullying tactics. Countries will avert sanctions if they are able to do so, and large countries such as Russia have the necessary clout not only to work around sanctionsbut also to retaliate against them in some cases. Although sanctions are a diplomatic means to an end, their success rests on the collaboration of the international community, and the power (or lack thereof) of the target government, entity or individual. In all cases, sanctions are better used to impose higher moral standards rather than to obtain unfair concessions from their targets.

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