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- Jin Liangxiang
- Senior Research Fellow
- Center for west Asian & African Studies
- Institute for International Strategic Studies
May 04 2014
Do sanctions always bite?
By Jin Liangxiang
Sanctions have always been an instrument that the United States and the West employ for political purposes. Yet 2013 through 2014 witnessed several cases of both effective and ineffective sanctions. Sanctions did work in changing Iran's policy on the nuclear issue, but failed to reverse Russia's annexation of Crimea. This suggests that sanctions ordered by the West do work in some scenarios, but are not panaceas in a globalized world.
The West is gradually losing its power of sanctions in this globalized world. Sanctions, though widely regarded as useful instruments in international politics, are actually mainly used by the West headed by the United States. Over the past decades, it was the West that only had the sufficient market power in terms of both quantity and quality to launch sanctions.
Nevertheless, things have changed greatly in the past 10 years. The newly rising economies have grown to become another market power. According to known statistics, the new economies represented by China, India, Russia, Brazil and South Africa already took up 40 percent of the total global economy by late 2013, and will have a proportion of 63 percent by 2030.
This kind of change will greatly undermine the power of sanctions of Western developed countries. The targeted countries can easily escape sanctions as they can find alternative economic opportunities with new economies.
Judging by these, the West might still command the power of sanctions, but their effectiveness will be conditioned on the consensus with new economies.
That's why Russia's Putin turned a deaf ear to the sanctions threat of the West regarding the Ukraine issue. Putin has certainly made it very clear he can find market and business alternatives within those newly rising economies.
Globalization has also made it very difficult for the West to sanction others without hurting itself. In Russia's case, though the sanctions on Russia's oil sector might reduce Russia's income, they could also undermine the energy security of European countries. That is why the West cannot apply any sanctions on Russia's energy sector.
Iran's case also is illustrative in this regard. The West did launch severe and effective sanctions on Iran, but they did feel the pain themselves since their enterprises lost their business in Iran. Importers of Iranian oil, including Spain and Greece, are among those which oppose the sanctions most.
The sanctions on Iran's financial sectors are regarded as the most severe economic punishment in history. Yet these are based on the status of the U.S. dollar as the international trade payment currency. Financial sanctions, though biting, actually cannot be frequently used. For instance, if used too often, more and more countries will turn to other currencies for payment, which will in turn undermine the hegemonic power of the U.S. dollar.
That all in all explains why financial sanctions are not being used against Russia. Russia has a GDP of more than US$2 trillion. Sanctions on Russia's financial sectors will make Russia pay and get paid with other currencies for its international trade. That will reduce the power of the U.S. dollar while simultaneously enhancing the power of other currencies.
On a next note, sanctions do not work on all targeted countries. Different economies are dependent on external markets to different degrees. Sanctions work on those whose economies are heavily dependent on any given external market, but do not work on those with less dependence.
It is believed that it was in fact sanctions that changed Iran's behavior in the Iran nuclear issue. Iran's national economy is dependent on the external market. Because of the sanctions, Iran's oil export was reduced from 2.5 million barrels a day in late 2011, to 1 million barrels a day by late 2012. Iran's income from oil export therefore has been reduced by half.
Nonetheless, sanctions have failed to produce any significant effects in Cuba's and North Korea's cases. Both are merely modestly dependent on an external market, if not at all.
Sanctions are usually difficult to be removed, which might become a real problem for decision makers. Politicians and scholars usually understand and discuss sanctions as to be employed as effective instruments. However, very few would consider the option of targeted countries complying because of the sanctions. In theory, the sanctions, once having delivered their desired outcomes, would be removed. Yet in practice, sanctions can never easily be removed because of domestic mechanisms -- even if the sanctions had worked. In this light, sanctions could be a trap for decision makers laid by themselves.
Iran's case is also very illustrative in this regard. Barack Obama's administration is currently facing the problem of whether he can remove the sanctions if Iran complies with international pressure. It seems that even if Iran does whatever the United States requires, it is least likely that U.S. Congress will actually remove them. It will undermine U.S. credit in the international community. The EU is in a similar case. It is believed that the EU can hardly get all of its 28 members to vote for the removal of the sanctions.
All in all, in a globalized world, sanctions bear their own limits. Though there is the successful example of the sanctions used in the Iran nuclear issue, the role of the Western developed countries' sanctions has been gradually weakened.
The West is gradually losing its power of sanctions in this globalized world. Sanctions, though widely regarded as useful instruments in international politics, are actually mainly used by the West headed by the United States. Over the past decades, it was the West that only had the sufficient market power in terms of both quantity and quality to launch sanctions.
Nevertheless, things have changed greatly in the past 10 years. The newly rising economies have grown to become another market power. According to known statistics, the new economies represented by China, India, Russia, Brazil and South Africa already took up 40 percent of the total global economy by late 2013, and will have a proportion of 63 percent by 2030.
This kind of change will greatly undermine the power of sanctions of Western developed countries. The targeted countries can easily escape sanctions as they can find alternative economic opportunities with new economies.
Judging by these, the West might still command the power of sanctions, but their effectiveness will be conditioned on the consensus with new economies.
That's why Russia's Putin turned a deaf ear to the sanctions threat of the West regarding the Ukraine issue. Putin has certainly made it very clear he can find market and business alternatives within those newly rising economies.
Globalization has also made it very difficult for the West to sanction others without hurting itself. In Russia's case, though the sanctions on Russia's oil sector might reduce Russia's income, they could also undermine the energy security of European countries. That is why the West cannot apply any sanctions on Russia's energy sector.
Iran's case also is illustrative in this regard. The West did launch severe and effective sanctions on Iran, but they did feel the pain themselves since their enterprises lost their business in Iran. Importers of Iranian oil, including Spain and Greece, are among those which oppose the sanctions most.
The sanctions on Iran's financial sectors are regarded as the most severe economic punishment in history. Yet these are based on the status of the U.S. dollar as the international trade payment currency. Financial sanctions, though biting, actually cannot be frequently used. For instance, if used too often, more and more countries will turn to other currencies for payment, which will in turn undermine the hegemonic power of the U.S. dollar.
That all in all explains why financial sanctions are not being used against Russia. Russia has a GDP of more than US$2 trillion. Sanctions on Russia's financial sectors will make Russia pay and get paid with other currencies for its international trade. That will reduce the power of the U.S. dollar while simultaneously enhancing the power of other currencies.
On a next note, sanctions do not work on all targeted countries. Different economies are dependent on external markets to different degrees. Sanctions work on those whose economies are heavily dependent on any given external market, but do not work on those with less dependence.
It is believed that it was in fact sanctions that changed Iran's behavior in the Iran nuclear issue. Iran's national economy is dependent on the external market. Because of the sanctions, Iran's oil export was reduced from 2.5 million barrels a day in late 2011, to 1 million barrels a day by late 2012. Iran's income from oil export therefore has been reduced by half.
Nonetheless, sanctions have failed to produce any significant effects in Cuba's and North Korea's cases. Both are merely modestly dependent on an external market, if not at all.
Sanctions are usually difficult to be removed, which might become a real problem for decision makers. Politicians and scholars usually understand and discuss sanctions as to be employed as effective instruments. However, very few would consider the option of targeted countries complying because of the sanctions. In theory, the sanctions, once having delivered their desired outcomes, would be removed. Yet in practice, sanctions can never easily be removed because of domestic mechanisms -- even if the sanctions had worked. In this light, sanctions could be a trap for decision makers laid by themselves.
Iran's case is also very illustrative in this regard. Barack Obama's administration is currently facing the problem of whether he can remove the sanctions if Iran complies with international pressure. It seems that even if Iran does whatever the United States requires, it is least likely that U.S. Congress will actually remove them. It will undermine U.S. credit in the international community. The EU is in a similar case. It is believed that the EU can hardly get all of its 28 members to vote for the removal of the sanctions.
All in all, in a globalized world, sanctions bear their own limits. Though there is the successful example of the sanctions used in the Iran nuclear issue, the role of the Western developed countries' sanctions has been gradually weakened.
Source of documents：China.org.cn