Theories of Economic Sanctions
The Anatomy of Economic Sanctions
A nation that is boycotted is a nation that is in sight of surrender. Apply this economic, peaceful, silent, deadly remedy and there will be no need for force. It is a terrible remedy. It does not cost a life outside the nation boycotted, but brings a pressure upon the nation which, in my judgment, no modern nation could resist.
-- Woodrow Wilson, U.S. President, 19191
Russia is becoming an imperial power of the 20th century; we no longer need physical control over territory, we can have economic influence.
-- Sergei Karaganov, head of the Foreign and
Defense Policy Council (Russia), 19972
I. The Definition of Economic Sanctions
Economic sanctions have been long used in international relations. According to Gary Hufbauer, Jeffery Schott, and Kimberly Elliot (hereafter HSE), there were at least 13 prominent cases of economic sanctions before World War I.3 The most celebrated early use of economic sanctions occurred in 432 B.C. when Pericles issued the “Megaran decree” limiting the entry of Megara’s products into Athenian markets. The subsequent refusal to lift the Athenian boycott of Magara helped to trigger the Peloponnesian War.4
In the increasingly integrated global economy of the twentieth century, economic sanctions have become a popular tool of statecraft, particularly in the United States in the 1990s. In 1919, Woodrow Wilson believed that the “economic, peaceful, silent deadly remedy” of economic sanctions could be used by the League of Nations to police international society.5 Albert Hirschman shows how states tried to minimize their vulnerability to the interruption of strategic imports while maximizing others’ need to trade with them. In order to influence other countries’ behavior, Nazi Germany was particularly aggressive at cultivating economic dependency in its eastern European neighbors.6 There has been resurgence in the use of economic sanctions, especially since the end of the Cold War. Great powers, stymied by the price of military intervention in places such areas as Bosnia, Chechnya, and Somalia, are looking to alternative policy instruments to pursue their national interests.7 For instance, in 1997 Sergei Karaganov, head of the Foreign and Defense Policy Council8, articulated Russian policy by stating that economic influence bestows Russia with imperial power without a need to have physical control over another territory.9
According to HSE, 165 cases of economic sanctions were launched between 1914 and 1998, of which 115 cases involved the United States, and of which 68 cases were unilateral U.S. initiatives.10 In addition, the Russian Federation employed economic sanctions on more than 35 occasions between 1992 to 1997 as a way of extracting political concessions from the Newly Independent States (NIS).11 The United Nations Security Council imposed sanctions only twice in the first 45 years of its existence, against Rhodesia in 1966 and South Africa in 1977. However, during the 1990s, the Security Council imposed comprehensive or partial sanctions more than 16 times.12 These unprecedented activities have generated substantial discussion of economic sanctions in policy and academic circles.13 These discussions have addressed the following issues: (1) Have sanctions been effective, and what is meant by “effective”; (2) What variables affect the degree of effectiveness? (3) How does one assess the importance of unintended side effects? (4) What are the effects on the side imposing sanctions?
For lawyers, negative sanctions are measures of enforcement, which follow violations of law. They are penalties, which indicate the limits of permissible conduct and encourage compliance with known rules. Margaret Doxey defines economic sanctions as “penalties threatened or imposed as a declared consequence of the target’s failure to observe international standards or international obligations.”14 M. S. Daoudi and M. S. Dajani define economic sanctions as “punitive actions initiated by a number of international actors, particularly a world organization such as the League of Nations or the United Nations, against one or more states for violating a universally approved charter, as inducements to follow, or refrain from following, that particular course of conduct and conform with international law.”15
In the 1920s and early 1930s, in line with the concept of enforcement of international law, economic sanctions meant League of Nations sanctions. According to HSE, there were only five cases of economic sanctions in total employed by the League of Nations: against Yugoslavia in 1921, Greece in 1925, Paraguay and Bolivia in 1932, and Italy in 1935.16 Although UN sanctions have recently become quite common, it would be unrealistic to limit the economic sanctions label to UN enforcement measures, or to measures imposed by any international body against its members. It is important to establish a more precise definition of economic sanctions, which now feature so prominently in state practice for other purposes.
Essentially, economic sanctions imposed by a state, a group of states, or an international organization become a form of power exercised to influence other countries’ behavior or policy, which does not necessarily violate international law. For example, Johan Galtung defines economic sanctions as “actions initiated by one or more international actors (the ‘senders’) against one or more others (the ‘receivers’) in order to punish the receivers by depriving them of some value and/or to make the receivers comply with certain norms the senders deem important.”17 Makio Miyagawa has a similar definition.18
Miroslav Nincic and Peter Wallensteen define economic coercion as “the imposition of economic pain by one government on another in order to attain some political goal. It is implemented, or at least initiated, by political authorities who intervene in the ‘normal’ operation of economic relations.”19 [Emphasis added] James Lindsay defines economic sanctions as “measures in which one country (the initiator) publicly suspends a major portion of its trade with another country (the target) to attain political objectives.”20 Robert Pape, Ernest Preeg, Daniel Drezner, Neta Crawford, Jean-Marc Blanchard, Edward Mansfield, Norrin Ripsman, Steve Chan, and A. Cooper Drury have a similar definition.21 The use of the term political goals/objectives is intended to rule out cases in which sanctions are used to obtain commercial ends.
In their seminal work, Economic Sanctions Reconsidered, HSE define economic sanctions as “the deliberate, government-inspired withdrawal, or threat of withdrawal, of customary trade or financial relations. ‘Customary’ does not mean ‘contractual’; it simply means levels of trade and financial activity that would probably have occurred in the absence of sanctions.”22 Based on her literature review, Donna Kaplowitz defines economic sanctions as “economic or financial prohibitions taken by one or more countries – the senders – to punish another country or countries – the target – or force change in the target’s policies, or demonstrate to a domestic or international audience the sender’s position on the target’s policies.”23 Obviously, both objectives can also be sought simultaneously, that is, to change the target’s behavior and provide valued symbols to domestic or international constituencies.
Economic sanctions, sometimes synonymous with “economic coercion,” are distinct from economic warfare (strategic embargo), economic inducements, and trade war, in terms of forms, purposes, and occasions. In essence, economic sanctions, according to David Baldwin, are only one category of economic statecraft, which refers to influence attempts relying primarily on resources which have a reasonable semblance of a market price in terms of money. Economic warfare (strategic embargo) seeks to weaken an adversary’s aggregate economic potential in order to weaken its military capabilities, either in a peacetime arms race or in an ongoing war. Economic warfare represents a long-term approach to dealing with adversaries while economic sanctions usually have immediate political goals. Economic inducements involve commercial concessions, technology transfers, and other economic carrots that are extended by a sender in exchange for political compliance on the part of a target. “Economic inducements” are also called “positive sanctions.” Trade wars are disputes over economic policy and behavior instead of political/security goals.24
This study defines economic sanctions as the threat or act by a state or coalition of states, the sender, to disrupt customary economic exchange with another state, the target, in order to punish the target, force change in the target’s policies, or demonstrate to a domestic or international audience the sender’s position on the target’s policies. The sender is designated as the country or international organization that is the principal author of the sanctions. The target is designated as the country that is the immediate object of the sanctions. Economic sanctions do not include economic warfare, economic inducements, and trade wars. The following sections will elaborate further on the types, goals, logic, costs, and effectiveness of economic sanctions.