Economic sanctions

This article is about economics. For other uses, see Embargo (disambiguation).

Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted country, group, or individual. Economic sanctions may include various forms of trade barriers, tariffs, and restrictions on financial transactions. An embargo is similar, but usually implies a more severe sanction. Economic sanctions are not necessarily imposed because of economic circumstances—they may also be imposed for a variety of political, military, and social issues. Economic sanctions can be used for achieving domestic and international purposes.

An embargo (from the Spanish embargo, meaning hindrance, obstruction, etc. in a general sense, a trading ban in trade terminology and literally "distraint" in juridic parlance) is the partial or complete prohibition of commerce and trade with a particular country or a group of countries. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, to elicit a given national-interest result from the country on which it is imposed. Embargoes are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war.

Embargoes can mean limiting or banning export or import, creating quotas for quantity, imposing special tolls, taxes, banning freight or transport vehicles, freezing or seizing freights, assets, bank accounts, limiting the transport of particular technologies or products (high-tech) for example CoCom during the cold-war.

In response to embargoes, an independent economy or autarky often develops in an area subjected to heavy embargo. Effectiveness of embargoes is thus in proportion to the extent and degree of international participation.

Politics of sanctions

Economic sanctions are used as a tool of foreign policy by many governments. Economic sanctions are usually imposed by a larger country upon a smaller country for one of two reasons—either the latter is a threat to the security of the former nation or that country treats its citizens unfairly. They can be used as a coercive measure for achieving particular policy goals related to trade or for humanitarian violations. Economic sanctions are used as an alternative weapon instead of going to war to achieve desired outcomes.

Some policy analysts believe imposing trade restrictions only serves to hurt ordinary people.

Effectiveness of economic sanctions

Regime change is the most frequent foreign policy objective of economic sanctions. There is controversy over the effectiveness of economic sanctions in their ability to achieve the stated purpose. Haufbauer et al. claimed that in their studies 34 percent of the cases were successful When Robert A. Pape reexamined their study, he claimed that only five of their forty so-called "successes" stood out, dropping their success rate to 4%. Success of sanctions as a form of measuring effectiveness has also been widely debated by scholars of economic sanctions. Success of a single sanctions resolution does not automatically lead to effectiveness, unless the stated objective of the sanctions regime is clearly identified and reached.

It also affects the economy of the imposing country to some degree. If import restrictions were made, the consumers in the imposing country would have fewer choices of goods. If export restrictions were made or sanction prohibited businesses in the imposing country from doing business with the target country, the imposing country could lose markets and investment opportunities to competing countries.

Jeremy Greenstock suggests that the reason sanctions are popular is not that they are known to be effective, but "that there is nothing else between words and military action if you want to bring pressure upon a government".

Implications for businesses

Companies must be aware of embargoes that apply to the intended export destination. Embargo check is difficult for both importers and exporters to follow. Before exporting or importing to other countries, firstly, they must be aware of embargoes. Subsequently, they need to make sure that they are not dealing with embargoed countries by checking those related regulations, and finally they probably need a license in order to ensure a smooth export or import business. Sometimes the situation becomes even more complicated with the changing of politics of a country. Embargoes keep changing. In the past, many companies relied on spreadsheets and manual process to keep track of compliance issues related to incoming and outgoing shipments, which takes risks of these days help companies to be fully compliant on such regulations even if they are changing on a regular basis. If an embargo situation exists, the software blocks the transaction for further processing.

Examples

An undersupplied U.S. gasoline station, closed during the oil embargo in 1973

The Embargo of 1807 was a series of laws passed by the U.S. Congress 1806–1808, during the second term of President Thomas Jefferson. Britain and France were engaged in a major war; the U.S. wanted to remain neutral and trade with both sides, but neither side wanted the other to have the American supplies. The American national-interest goal was to use the new laws to avoid war and force that country to respect American rights.

One of the most comprehensive attempts at an embargo happened during the Napoleonic Wars. In an attempt to cripple the United Kingdom economically, the Continental System – which forbade European nations from trading with the UK – was created. In practice it was not completely enforceable and was as harmful if not more so to the nations involved than to the British.

The United States imposed an embargo on Cuba on February 7, 1962. Referred to by Cuba as "el bloqueo" (the blockade), the US embargo on Cuba remains one of the longest-standing embargoes. The embargo was embraced by few of the United States' allies and apparently has done little to affect Cuban policies over the years. Nonetheless, while taking some steps to allow limited economic exchanges with Cuba, President Barack Obama reaffirmed the policy, stating that without improved human rights and freedoms by Cuba's current government, the embargo remains "in the national interest of the United States."

In 1973–1974, Arab nations imposed an oil embargo against the United States and other industrialized nations that supported Israel in the Yom Kippur War. The results included a sharp rise in oil prices and OPEC revenues, an emergency period of energy rationing, a global economic recession, large-scale conservation efforts, and long-lasting shifts toward natural gas, ethanol, nuclear and other alternative energy sources.

In effort to punish South Africa for its policies of apartheid, the United Nations General Assembly adopted a voluntary international oil embargo against South Africa on November 20, 1987; that embargo had the support of 130 countries.

Current sanctions

By targeted country

• Burma – the European Union's sanctions against Burma (Myanmar), based on lack of democracy and human rights infringements.
• China (by EU and US), arms embargo, enacted in response to the Tiananmen Square protests of 1989.
  • European Union arms embargo on the People's Republic of China.
• Cuba (United States embargo against Cuba), arms, consumer goods, money, enacted 1958.
• EU, US, Australia, Canada and Norway (by Russia) since August 2014, beef, pork, fruit and vegetable produce, poultry, fish, cheese, milk and dairy. On August 13, 2015, the embargo was expanded to Albania, Montenegro, Switzerland, Japan, Iceland, and Liechtenstein.
• Gaza Strip by Israel since 2001, under arms blockade since 2007 due to the large number of illicit arms traffic used to wage war, (occupied officially from 1967 to 2005).
• Guatemala
• Indonesia (by Australia), live cattle because of cruel slaughter methods in Indonesia.
• Iran: by US its allies, notably bar nuclear, missile and many military exports to Iran and target investments in: oil, gas and petrochemicals, exports of refined petroleum products, banks, insurance, financial institutions, and shipping. Enacted 1979, increased through the following years and reached its tightest point in 2010.
• Japan, animal shipments due to lack of infrastructure and radiation issue after the 2011 Tohoku earthquake aftermath.
• North Korea
  • international sanctions imposed on North Korea since the Korean War of 1950–1953 eased under the Sunshine Policy of South Korean President Kim Dae Jung and of U.S President Bill Clinton. but tightened again in 2010.
  • by UN, USA, EU), luxury goods (and arms), enacted 2006.
• Qatar by surrounding countries including Saudi Arabia, United Arab Emirates, Bahrain, and Egypt.
  • United Nations Security Council Resolution 1718 (2006) – a reaction to the DPRK's claim of a nuclear test
• Russia
• Sudan by US since 1997.
• Syria (by EU, US), arms and imports of oil.
• Turkish Republic of Northern Cyprus, (by UN), consumer goods, enacted 1975.
  • International sanctions during the 2013–15 Ukrainian crisis

By targeted individuals

• List of individuals sanctioned during the 2013–15 Ukrainian crisis
• There is a United Nations sanction imposed by UN Security Council Resolution 1267 in 1999 against all Al-Qaida- and Taliban-associated individuals. The cornerstone of the sanction is a consolidated list of persons maintained by the Security Council. All nations are obliged to freeze bank accounts and other financial instruments controlled by or used for the benefit of anyone on the list.

By sanctioning country

• United States embargoes
• The 2002 United States steel tariff was placed by the United States on steel to protect its industry from foreign producers such as China and Russia. The World Trade Organization ruled that the tariffs were illegal. The European Union threatened retaliatory tariffs on a range of US goods that would mainly affect swing states. The US government then removed the steel tariffs in early 2004.

By targeted activity

• In response to recent cyber-attacks on April 1, 2015 President Obama issued an Executive Order establishing the first-ever economic sanctions. The Executive Order will impact individuals and entities (“designees”) responsible for cyber-attacks that threaten the national security, foreign policy, economic health, or financial stability of the US. Specifically, the Executive Order authorizes the Treasury Department to freeze designees’ assets.
• In response to intelligence analysis alleging Russian hacking and interference with the 2016 U.S. elections, President Obama expanded presidential authority to sanction in response to cyber activity that threatens democratic elections. Given that the original order was intended to protect critical infrastructure, it can be argued that the election process should have been included in the original order. It can be further argued that democratic elections are our most critical infrastructure.

Bilateral trade disputes

• Vietnam as a result of capitalist influences over the 1990s and having imposed sanctions against Cambodia, is accepting of sanctions diposed with accountability.
• In March 2010, Brazil introduced sanctions against the US. These sanctions were placed because the US government was paying cotton farmers for their products against World Trade Organization rules. The sanctions cover cotton, as well as cars, chewing gum, fruit, and vegetable products. The WTO is currently supervising talks between the states to remove the sanctions.

Former sanctions

• 2006–07 economic sanctions against the Palestinian National Authority
• Sanctions against Iraq (1990–2003)
• Disinvestment from South Africa
• ABCD line, Japan pre-WWII
• Federal Republic of Yugoslavia (by UN).
• North Vietnam (1964–1975) and later Vietnam (1975–1994), trade embargo by the US.
• Republic of Macedonia (by Greece), complete trade embargo (1994-1995).
• Libya (by United Nations), weapons, enacted 2011 after mass killings of Libyan protesters/rebels and ended later that year after the overthrow and summary execution of Gaddafi.
• India (by UK), nuclear exports restriction.
• Mali (by ECOWAS) total embargo in order to force Juntas to give power back and re-install National constitution. Decided on April 2, 2012.
• Pakistan (by UK), nuclear exports restriction, enacted 2002.
• Serbia by Kosovo's unilaterally declared government, since 2011.
• Embargo Act of 1807.
• Former Yugoslavia Embargo November 21, 1995 Dayton Peace Accord.
• Georgia (by Russia), agricultural products, wine, mineral water, enacted 2006, lifted 2013.
• United States embargo against Nicaragua.
• CoCom.
• Italy by League of Nations (October 1935) after the Italian invasion of Abyssinia.

See also

• Arms embargo
• Boycott
• International sanctions
• Non-tariff barriers to trade
• Oil embargo
• United States embargoes
• Political economy
• Trade war
• Embargo
• Hegemony
• Individual and group rights
• Universal Declaration of Human Rights
• Economic freedom
• Globalization

External links

• The International Bank for Reconstruction and Development / The World Bank (2007). "International Trade and Climate Change: Economic, Legal, and Institutional Perspectives" (PDF). Retrieved 2015-01-25.
• Tamiotti, Ludivine; Robert Teh; Vesile Kulaçoğlu; Anne Olhoff; Benjamin Simmons (2009). "Trade and Climate Change A Report by the United Nations Environment Programme and the World Trade Organization" (PDF). World Trade Organization. {{cite web}}: Unknown parameter |last-author-amp= ignored (|name-list-style= suggested) (help)