Throughout history, sanctions have served as a political tool, even finding roots in ancient Athens with the Megarian decree of 432 BC, which limited trade with neighboring Megara. In the modern era, nations continue to utilize sanctions as a means of achieving foreign policy objectives by leveraging their economic power. Businesses operating on a global scale must diligently comply with these restrictions to avoid violating international law.
Since the conclusion of World War II, the number of international sanctions has witnessed a significant rise, as major economies increasingly prefer economic influence over costly military engagement. The United Nations Security Council alone has implemented 30 distinct sanction actions since its establishment, with 14 currently ongoing. These sanction regimes are enforced by entities such as the UK’s Her Majesty’s Treasury, the US’s FBI, and the Office of Foreign Assets Control (OFAC). Moreover, individual nations impose their own sanctions, with the United States, as the world’s largest economy, having imposed sanctions on over 30 countries.
Sanctions represent political measures aimed at exerting influence on foreign states, individuals, or groups to accomplish specific goals, typically by affecting their economy or wealth. For instance, prohibiting the import or export of goods to and from a particular country can inflict significant damage on its economy. Sanctions can serve as a form of non-military punishment or as a bargaining tool to incentivize the targeted state to take specific actions. A recent example is the passage of the H.R. 850 bill by the United States, effectively halting Iran’s international sale of oil in response to its nuclear arms program.
Sanctions can generally be classified into two categories. Unilateral sanctions are imposed by a single country, while multilateral or bilateral sanctions involve multiple nations acting in concert. The nature of restriction can also vary, with economic sanctions entailing trade embargoes or prohibitions on specific goods, and non-economic sanctions encompassing diplomatic measures such as embassy closures or ambassador recalls. Economic sanctions may be narrowly focused, targeting specific commodities, or broad in scope, encompassing all forms of trade. Common methods include quotas, tariffs, non-tariff barriers, asset freezes and seizures, embargoes, diplomatic sanctions, military sanctions, and sports-related sanctions.
Sanctions have a powerful negative impact on the target country’s economic situation. A 2015 study examined 68 countries between 1976-2012 to measure the effect of U.S. and UN sanctions on a nation. It concluded that moderate UN multilateral sanctions reduced a target’s GDP growth rate by up to 3.5%, while severe UN multilateral sanctions reduced the target’s GDP growth by more than 5%. The adverse effect on a target of UN multilateral sanctions was measurable even ten years later, and the target’s aggregate decline in GDP-capita was 25.5% on average. U.S. unilateral sanctions against a target country carried a GDP growth reduction of less than 1%. The adverse effect on a target of U.S. unilateral sanctions was measurable only seven years later. Even the threat of a sanction can have an impact in the form of an anticipation effect. The amount of trade increases when the threat is levied, as the state and business within it stockpile needed goods to prepare for future limitations.
The target country suffers the worst effects, but the imposing country’s economy is also sanctioned in its way. Its companies have fewer available markets and investment opportunities, and some experts fear that the overuse of sanctions results in an isolated, less influential economy. Recent research suggests that U.S. imposed sanctions cost its economy $15-$19 billion in potential exports every year, including 200,000 potential jobs in the import/export industry. The negative effects associated with economic sanctions have been given as a reason to discontinue their use. In contrast, British diplomat Jeremy Greenstock famously suggested that sanctions are
