One instrument is becoming increasingly popular in traffic between states: economic sanctions. The USA and the EU in particular are using their central position on the world market to put governments under pressure. The list is long and growing: Russia, Cambodia, China, Venezuela, Iran, North Korea, Syria, Cuba, and Turkey and Belarus are expected to join soon. As popular as economic sanctions are, it is unclear whether they will achieve their goals. The question of effectiveness is old. What is new, however, is that the global economic powers are increasingly applying sanctions to each other.
In recent years, economic sanctions have “become the method of choice,” according to a research group led by Gabriel Felbermayr, head of the Kiel Institute for the World Economy. The Global Sanctions Database, which he helped to design, but which only lasts until 2016, shows an increase in measures from 50 in the 1970s to around 180. Since then, the number has probably increased significantly. The declared goals of sanctions range from the enforcement of human rights to regime change and ending wars. The USA is the main actor in this field, followed by the EU. It has significantly increased its sanctions arsenal “to compensate for its lack of military power,” explains Gerald Schneider from the University of Konstanz.
It is no wonder that the USA and Europe in particular are pursuing foreign policy with sanctions. Sanctions are an instrument reserved for the powerful. Because in order for them to be effective, there must firstly be intensive business relationships with the sanctioned country. “Sanctions cannot change the behavior of the governments concerned if the volume of trade between sender and addressee is negligible,” explains Peter van Bergeijk from the Erasmus University Rotterdam. Second, the damage for the addressee must be greater than for the sender, i.e. the business relationships must be asymmetrical. Consequence: “Countries in North-West Europe have imposed the largest number of sanctions against African countries,” said Felbermayr. At the same time, there is not a single case of trade barriers by an African country against North-West Europe. Similarly, in the case of Russia: “Since the Russian economy is so much smaller than that of the Western countries, Moscow cannot respond to the sanctions effectively without seriously damaging itself,” explains Anders Aslund from the Atlantic Council.
Globalization has made it easier for the EU and the US to exert economic pressure. Because it intensifies world trade and thus creates more dependencies. Washington is making increasing use of this. While wars were still waged under President George W. Bush to achieve foreign policy goals, since Barack Obama “economic sanctions have become an essential feature of US foreign policy,” explains Aslund. What is remarkable is the previously unknown use of tariffs as economic sanctions to enforce the policy of “America First”.
Another mixture of trade and sanctions policy is the increasingly popular »blacklisting«: companies, institutions and individuals are placed on black lists and thus their access to the market is restricted. Washington’s “Entity List” now includes dozens of Chinese corporations, which are now only allowed to purchase US software to a limited extent. President Donald Trump justified this with dangers to “national security”. Other Chinese companies are listed because they are supposed to be involved in the suppression of the Uyghurs in China, for example one of the world’s largest providers of video surveillance, Hangzhou Hikvision. Still other firms are being punished for helping Beijing consolidate its military presence in the South China Sea.
China responds with its own list of “unreliable authorities” who “seriously harm the legitimate interests of Chinese companies.” In the case of Hong Kong, there is currently a showdown: While the USA is imposing a drastic restriction on the banks to do business with the ex-crown colony, Beijing is threatening all companies that follow the instructions of the USA with sanctions. The global corporations increasingly have to choose whose side to take.
It is controversial whether sanctions or sanction threats are effective at all. According to Schneider, they “often achieve their goal,” and economic coercion worked on average in 30 to 50 percent of the cases. For the same reason, other economists criticize sanctions as ineffective. Because a 30 to 50 percent success rate means: 50 to 70 percent of the cases the target is missed. The reasons for the failure are numerous: Affected countries can look for other supplier or buyer countries. For example, Iran recently signed an investment agreement with China that opens up new sales and procurement markets for the country. “The longer the sanctions are in force, the easier it is for the target country to adapt,” explains Bergeijk.
However, there is one thing that science is unanimous in: economic sanctions are more effective, the more united the sanctioning side appears, i.e. when the USA and the EU and others pull together. However, this unity of the world powers is being undermined more and more frequently as the US government uses the means of sanction according to its own interests, without consultation with its allies. In order to force the allies to comply with the US decisions, Washington is resorting to so-called secondary sanctions more and more frequently: Not only are American companies prohibited from doing business with one country, but companies all over the world are threatened with violating the important Lock out the US market. For example in the case of Venezuela: Ex-US security advisor John Bolton warned foreign companies against being excluded from the US market if they should become involved in Venezuela. Or in the case of Iran: While the EU has lifted parts of the sanctions against the country, the US is even expanding its bans. These bans are not legally binding for Europe’s corporations. But “in view of the gray areas created by US sanctions, they shy away from new investments or move away from affected markets,” states the Science and Politics Foundation. The EU is powerless against this. In addition, Washington is politicizing the energy markets with its sanctions against Iran, Venezuela and Russia and »undermines the strategic autonomy of Europe«.
As a global sanctioning power, the EU is therefore coming under pressure on several levels: Firstly, as in the case of the Russian-German Nord Stream 2 gas pipeline, it is increasingly falling into the sanction sights of the USA itself. Second: In order to be able to adopt sanctions against other countries, the EU needs the consent of all its members. If, as is currently the case with Belarus, an EU country rejects sanctions, they cannot be waived. This week, “our credibility is at stake”, complained EU Commissioner Josep Borrell. And thirdly, as in the Iranian case, the EU is unable to defend itself against the US’s secondary sanctions, which weakens its foreign policy threat potential. No wonder that at its summit next week, the EU is primarily concerned with one thing: “strategic autonomy”. Because only those who are economically independent can credibly threaten others.