In November of last year, Iran and a six-nation group that included the U.N. Security Council and Germany signed a historic agreement on Iran’s nuclear program. Regardless of whether a permanent deal can be reached, the apparent policy shift on the part of Iranian leaders seems to validate the sanctions imposed by the United States, the European Union, and others. Given the likelihood that sanctions are here to stay, it’s important to consider the ever-changing effectiveness of sanctions in foreign policy.
Economic sanctions, for the most part, are considered to be more humane than outright warfare. In an interview with the HPR, Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, concurs that sanctions are more humane by any measure, stating, “Even the most severe sanctions, such as those imposed on Iraq, Iran, and Cuba, inflict less death and destruction than a light military incursion, much less a full fledged strike.” Despite their apparent flaws, sanctions are a dependable foreign policy tool for expressing diplomatic ire without going to war and causing unnecessary destruction.
The Shortcomings of Sanctions
Economic sanctions have become particularly popular in the West for many reasons, even with their perceivable limitations. Sanctions fit nicely into the capitalist and secular narrative of the common industrialized citizen that underestimates the passion of ethnic conflict, nationalism, or ideology. In this way, the West tacitly believes war to be irrational and unnecessary. Political actors are accustomed to making cost benefit analyses, and thus conclude that conflicts should be resolved peacefully in most scenarios.
If used improperly, sanctions can sometimes be counterproductive to the foreign policy aim. Specifically, scarcity caused by economic sanctions can at times lead to rationing in the sanctioned country, which can then strengthen corrupt state leaders. For example, sanctions on the Central Bank of Iran by the United States allowed Iranian governmental authorities to make an arbitrage profit on the Iranian currency. In 2011, the U.S. Treasury Department revealed that members of the Iranian Revolutionary Guard were taking advantage of the gap between the rial’s supposed value and its actual value. The valuation gap at the time was approximately 40 percent and was directly related to the United States’ sanctions on Iranian monetary institutions. The IRGC successfully obtained foreign currency and exchanged these currencies with Iranian civilians making a large profit.
While regime insiders profited, blameless Iranian civilians suffered under sanctions. Indeed, punishing poor people trapped in a sanctioned country clearly appears morally dubious to say the least. Broad sanctions that affect the entire economy—such as the Central Bank sanctions—have a diminished effect and are most damaging to the poor. Targeted sanctions such as travel and banking restrictions of only the top political and military leaders produce the least amount of collateral damage. But rather than being an argument against sanctions entirely, these shortcomings just suggest the need for a smarter use of sanctions.
Sanctions in a Global World
Ted Carpenter, a senior fellow for defense and foreign policy studies at the Cato Institute, suggested in an interview with the HPR that the consequences of sanctions are tied to an increased reliance on global trade. “Given the greater interdependence of the new global economy,” he said, “sanctions are likely to have greater economic impact than they have in the past.” Interdependence and globalization have all but eliminated loophole opportunities for a sanctioned country to escape sanctions’ effects. For example, increased financial surveillance to protect international trade means targeted financial sanctions on Iran are applied more effectively today than at any time in the past.
In addition to increasing the effectiveness of sanctions, economic globalization also increases the likelihood of sanctions being used at all. In The Lexus and the Olive Tree, Thomas Friedman predicts the of demise of war with globalization, “No two countries that both had McDonald’s had fought a war against each other since each got its McDonald’s.” The dramatic increase in international economic interconnectedness means that war is more expensive to conduct and sanctions are more effectual. The trend has already begun favoring sanctions over war making, and we should only expect economic sanctions to be used even more frequently as a foreign policy tool in the future.
As the world is drawing closer economically it is simultaneously becoming closer on foreign policy matters. Since the end of the Cold War, the world is experiencing a level of international cooperation and interconnectedness never before seen. Cooperation on foreign policy makes multilateral sanctions ever more likely, thereby increasing those sanctions’ effects. “Increased integration,” Kimberly Elliott of the Center for Global Development explained to the HPR, “especially the role of China in the global economy, also means that is more important than ever for sanctions to be multilateral and broadly applied.” In the case of Iran, an agreement became significantly more likely when the European Union joined the sanctions of the United States with their own. If the Iranian issue isn’t solved permanently this time around, a multilateral partnership between the West and the nascent Russia-China alliance may be required for additional pressure.
Smart Sanctions
Years of economic sanctions from the West are finally beginning to have a diplomatic effect. The same sanctions that brought Iranian President Rouhani to the negotiating table are also largely responsible for getting a moderate like Rouhani in power at all. Rouhani himself referred to the sanctions as “oppressive chains that were unrightfully bound on the economic movements of our society” while running on the promise of improving the Iranian economy. Sanctions are having a tangible destructive effect on the Iranian economy, and reaching an agreement to end international sanctions would be a wise step to fulfill that campaign pledge. For example, sweeping sanctions from the United States and European Union are responsible for the drop in Iranian oil exports from 2.2 million barrels a day two years ago to only 700,000 today.
Though a permanent deal may not be reached in the current round of negotiations, the quantifiable effects of sanctions all but guarantee a deal will eventually be reached. As we can see from the Iranian case, economic sanctions are most certainly the foreign policy tool of the future, whether we like it or not. And we should like it.
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