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6 April 2019

Preserving the Power of U.S. Economic Sanctions in a Multipolar World

Kimberly Ann Elliott 
Economic sanctions are not a panacea for national security and other foreign policy challenges, though American policymakers often treat them as such. Just in the past year, the Trump administration has imposed new sanctions against Iran, North Korea, Russia and Venezuela, many of them building on sanctions previously imposed by the Obama administration. The overall results are mixed, although in some of these cases, sanctions have contributed to changes in foreign behavior that the United States finds discomfiting or dangerous.

Tough United Nations sanctions against Iran, under President Barack Obama, and North Korea, under President Donald Trump, forced both Tehran and Pyongyang to the bargaining table. In the Iranian case, those negotiations produced the multilateral agreement, known as the Joint Comprehensive Plan of Action, to prevent Iran from developing a nuclear weapons capability in exchange for lifting international sanctions. But Trump railed against the deal while running for president, and once in office, he withdrew from it—over the strong objections of American allies in Europe who had helped negotiate the agreement—and imposed new sanctions. Getting Kim Jong Un to the table has not yet produced an agreement to constrain the nuclear threat from North Korea, though the regime in Pyongyang has refrained from testing nuclear devices or missiles for over a year


Meanwhile, the U.S. and European Union sanctions against Russia may have prevented a further push by Moscow-backed separatists into Ukraine, but a low-level conflict continues in the eastern part of the country. U.S. intelligence agencies and the Justice Department have also concluded that Russia continues to interfere in American elections. In Venezuela, President Nicolas Maduro stubbornly clings to power despite an intense U.S.-led pressure campaign.

Research shows that sanctions can be an important tool. But when politicians use them cavalierly, as a handy way to demonstrate to the American people that they are doing something, or when Washington acts aggressively and unilaterally, the associated economic and diplomatic costs undermine the effectiveness of sanctions. That’s why some of the obstacles to making sanctions more effective are the result of self-inflicted wounds. These include Trump reneging on the Iran deal, which makes U.S. negotiators less credible; rewarding Kim with high-profile summit meetings and contradicting his own Cabinet officials on the imposition of new sanctions—without receiving anything significant in return; and sending mixed messages over the sanctions on Russia.

But the continued utility of U.S. economic sanctions faces much broader challenges that will persist long after this administration, according to a new report from some members of the Center for a New American Security’s Task Force on the Future of U.S. Sanctions. In the interests of full disclosure, I was one of the members of the task force who signed on to the findings and recommendations of the report, which identified five key trends in the use of sanctions: 

• More aggressive use of unilateral sanctions, including secondary sanctions against third parties
• A more assertive role by Congress in sanctions policy
• More unintended consequences arising from private sector responses to uncertainty and perceptions of risk related to sanctions enforcement
• Growing efforts around the world to circumvent U.S. financial markets, and thereby mitigate the impact of sanctions or threats of sanctions
• Changes in technology, such as cryptocurrencies and blockchain, that could make enforcement harder

Of these, the first two are the most critical trends to address, which would also reduce unintended consequences and sanctions evasion around the world. The U.S. has long wielded economic sanctions more than other countries, but globalization has gradually eroded unilateral American leverage, especially when it comes to trade sanctions. Congress, frustrated with the lack of support for sanctions from U.S. allies and trading partners, has repeatedly passed legislation since the 1990s pushing the executive branch to be more aggressive in its use of sanctions, and threatening secondary sanctions against countries refusing to cooperate with U.S. efforts. The White House responded to globalization’s challenges by increasingly turning to the use of financial leverage, given the continued dominance of the American market. Against Iran and North Korea—the two most prominent cases—multiple U.S. administrations used the leverage of financial markets to coerce cooperation from third parties in support of sanctions.

The U.S. has long wielded economic sanctions more than other countries, but globalization has gradually eroded unilateral American leverage.The increasing use of secondary sanctions to support measures unilaterally decided in Washington hurts the prospects for multilateral cooperation, which often plays a role in the overall effectiveness of sanctions. As emphasized in the report, the aggressive use of financial measures to coerce cooperation with the U.S. is stoking a backlash, with Russia, China and even the EU moving to reduce their reliance on American financial markets by creating new payment systems and alternatives to the U.S. dollar for international transactions. In so doing, they hope to insulate themselves from U.S. sanctions pressures, whether they are the primary or secondary target. While it will likely take many years before these initiatives have a significant impact, they are a long-term threat to the global centrality of the American financial system. 

A growing tendency by Congress to micromanage the imposition and implementation of sanctions is another challenge for policymakers. Under the Global Magnitsky Act, passed in 2016, Congress gave itself a role in nominating individuals or specific entities for sanctions. In 2017, a bipartisan majority of legislators, concerned about Trump’s soft approach to Russian President Vladimir Putin, passed the Countering America’s Adversaries Through Sanctions Act, which requires congressional review before the administration can remove a designated individual or entity from the Russia sanctions list. Although there have been cases in the past where Congress intervened, these provisions go well beyond the traditional congressional role of setting the parameters of sanctions policy and giving the executive branch broad authority to implement it.

These measures raise serious concerns because they reduce the flexibility the executive branch needs to calibrate sanctions in response to changes in the targeted regime’s behavior. After all, the ability to lift sanctions as a reward for positive policy changes is a crucial part of an effective negotiation—as Iran showed most of all. But as the Iranian case also clearly demonstrates, there is often intense disagreement between Congress and the White House on what constitutes adequate movement on the part of a targeted regime. If the executive’s hands are too tightly tied when it comes to lifting sanctions, targeted regimes will have no incentive to make concessions, undercutting the effectiveness of U.S. negotiations.

The harsh reality when assessing sanctions policy is that the world is increasingly multipolar and economically integrated. It is no longer a place where the United States is powerful enough to set the agenda and expect other countries to fall in line. In both Congress and the White House, policymakers need to recognize that and spend more time and resources planning how and when to deploy sanctions effectively and with a minimal loss of America’s inevitably waning leverage.

Kimberly Ann Elliott is a visiting scholar at the George Washington University Institute for International Economic Policy, and a visiting fellow with the Center for Global Development. Her WPR column appears every Tuesday.

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