The Routledge Handbook of the Political Economy of Sanctions (Routledge International Handbooks) [1 ed.] 9781032355634, 9781032355665, 9781003327448

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THE ROUTLEDGE HANDBOOK OF THE POLITICAL ECONOMY OF SANCTIONS

The Routledge Handbook of the Political Economy of Sanctions examines the core issues and debates surrounding this controversial topic, introducing readers to essential concepts and terms. It communicates the evolving character of international sanctions from diverse perspectives, with a particular emphasis on questions of efficacy, legality, and legitimacy of sanctions, as well as the mechanisms by which they are applied. This interdisciplinary book explores the international political economy of sanctions in the constantly changing context of geopolitical rivalry. The authors investigate various theoretical and historical approaches to sanctions and apply these to specific case studies, such as the African Union, China, Cuba, India, Russia, Turkey, and the United States. The book gives a voice to sanctioned states and considers the impact of secondary sanctions. It analyses sanctions with reference to wider political debates such as national security, state sovereignty, economic warfare, and sustainability. This handbook will be of immense interest to students, researchers, and scholars in the fields of political economy, international sanctions, political science, international relations, and foreign policy. It will also be useful for all those employed by political institutions, businesses, and nongovernmental organisations when assessing current sanctions regimes. Ksenia Kirkham is a Lecturer in the Department of War Studies at King’s College London, UK. Her current research interests include economic warfare, energy security and sustainable development, the political economy of sanctions, and welfare state regimes.

ROUTLEDGE INTERNATIONAL HANDBOOKS

THE ROUTLEDGE HANDBOOK OF THE POLITICAL ECONOMY OF SANCTIONS

Edited by Ksenia Kirkham

Cover image: © Getty Images First published 2024 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2024 selection and editorial matter, Ksenia Kirkham; individual chapters, the contributors The right of Ksenia Kirkham to be identified as the author of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Kirkham, Ksenia, editor. Title: The Routledge handbook of the political economy of sanctions / Ksenia Kirkham. Description: Abingdon, Oxon ; New York, NY : Routledge, 2024. | Includes bibliographical references and index. Identifiers: LCCN 2023022058 (print) | LCCN 2023022059 (ebook) | ISBN 9781032355634 (hardback) | ISBN 9781032355665 (paperback) | ISBN 9781003327448 (ebook) Subjects: LCSH: Economic sanctions--Case studies. | International economic relations--Case studies. Classification: LCC HF1413.5 .R65 2024 (print) | LCC HF1413.5 (ebook) | DDC 327.1/17--dc23/eng/20230726 LC record available at https://lccn.loc.gov/2023022058 LC ebook record available at https://lccn.loc.gov/2023022059 ISBN: 978-1-032-35563-4 (hbk) ISBN: 978-1-032-35566-5 (pbk) ISBN: 978-1-003-32744-8 (ebk) DOI: 10.4324/9781003327448 Typeset in Times by KnowledgeWorks Global Ltd.

CONTENTS

Notes on Contributors

ix

Introduction Ksenia Kirkham

1

SECTION I 

Theoretical and Historical Aspects of Sanctions 1 The Evaluation of Sanctions Efficacy Clara Portela

11 13

2 A Brief Overview of the Historical and Current Use of Unilateral Sanctions Hazar Kaan Özkonak 3 Theoretical Aspects of Sanctions Hajime Okusako

25

37

4 Theoretical Identification of the Mechanisms of Sanctions Ksenia Kirkham, Yifan Jia, and Yeseul Woo

48

5 Sanctions, Deterrence and the Recent Case of Russia Wyn Bowen and Matthew Moran

59

v

Contents SECTION II 

Political Economy of Sanctions

77

6 International Sanctions on Oil: Why Some Target States are More Capable of Avoiding Them Adnan Vatansever

79

7 Financial Blacklisting and the Return Toward Indiscriminate Sanctions  Joy Gordon

91

8 The Termination of International Sanctions: Actors, Processes and Consequences Hana Attia, Julia Grauvogel, and Christian von Soest

101

9 Violence at a Distance: Correcting International Law’s Short-Sighted Vision of Economic Coercion Alexandra Hofer

112

10 Sanctions When Sanctions Fail: Decoupling and US Policy towards China Zeno Leoni, Mariam Qureshi, and Sandra Watson Parcels

124

11 Unilateral Sanctions as Sustainable Development Decelerators Vira Ameli SECTION III 

134

Target States: Voices from the Sanctioned States

149

12 Do Sanctions Really Work? The Case of Contemporary Western Sanctions against Russia Ivan Timofeev

151

13 The US Sanctions and the Chinese Political Economy Zhun Xu and Lingyi Wei 14 Iranian Discourses and Practices regarding the US Sanctions: Rouhani and Raeisi Administrations Heidarali Masoudi 15 The Political Economy of Sanctions: The Case of Cuba Raúl Rodríguez Rodríguez

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174 187

Contents

16 The Unintended Consequences on African Union Sanctions of Member States: Myths and Realities Francis Boateng Frimpong

SECTION IV

197

Third Parties: The Impact of Secondary Sanctions

209

17 Implications of Drifting Sanction Policies by Japan and Korea Noboru Miyawaki

211

18 The U.S. Sanctions Offensive: Implications for “Third Parties” and the Transatlantic Relationship Alan Cafruny 19 The Impact of Western Sanctions on Global Supply Chains and the Green Transition: The Case of EV Battery Manufacturing in South Korea and the EU Ksenia Kirkham and Alen Toplišek 20 How Do Third Parties React to Commodity Sanctions? Martijn C. Vlaskamp

223

234

249

21 Overview of Secondary Sanctions: Turkey under the Ghost of Western Economic Sanctions260 Mehmet Onder 22 Emerging India and Sanctions: Balancing Norms and Interests274 Rishika Chauhan

SECTION V

Hot Debates: Legal Aspects of Sanctions

289

23 Humanitarian Impact of Unilateral Sanctions Alena F. Douhan

291

24 US Secondary Sanctions: Lawful After All? Joshua Andresen

305

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Contents

25 The Principle of Non-Intervention and the Dilemma of the Legality of the Unilateral Coercive Measures Pouria Askari

318

26 Assessing the Legality of the EU Sanctions Imposed on the Russian Federation from 2022 Antonino Alì

330

Index339

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NOTES ON CONTRIBUTORS

Antonino Alì is a Professor of International Law at the Faculty of Law and at the School of International Studies of the University of Trento, Italy. His research interests focus on the effects of international and European law on national security, as well as on EU sanctions, the regulation of foreign direct investment screening for reasons of security and public order, digital surveillance, the legal boundaries of cloud computing, and the localisation and routing of digital data. Vira Ameli is a Doctoral Candidate in the Department of Social Policy and Intervention at the University of Oxford, UK. She is an interdisciplinary researcher of health and wellbeing, interested in the interlocking contexts of international relations and sustainable development, particularly where sanctions targeted against the state are instead experienced by ordinary citizens of those states. Joshua Andresen is an Associate Professor of Law at the University of Surrey School of Law, UK, working in Public International Law, especially issues related to armed conflict, human rights, and sanctions. Pouria Askari is an Associate Professor of International Law at Allameh Tabataba’i University (ATU), Iran. He is also a lawyer and holds multiple positions, including as a member of the Executive Council of the Asian Society of International Law (ASIANSIL), a Board Member & Secretary General of the Iranian Association for UN Studies (IAUNS), an attorney at law, and an arbitrator at the Iran Chamber of Commerce. His main interests are IHRL, IHL, and international law of foreign investment. Hana Attia is a Research Fellow at the German Institute for Global and Area Studies (GIGA) in Hamburg, Germany. Her research interests centre on economic statecraft, more precisely the imposition, management, and termination of economic sanctions.

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Notes on Contributors

Francis Boateng Frimpong is a Senior Lecturer at the Royal Docks School of Business and Law at the University of East London (UEL), UK. His research interests include neoliberalism and financialisation, poverty alleviation, the political economy of Africa, big data, and data analytics. He is Associate Director of the Centre for the Study of States, Markets and People (STAMP). Wyn Bowen is a Professor of Non-proliferation and International Security in the Department of War Studies and Co-Director of the Freeman Air and Space Institute in the School of Security Studies, at King’s College London, UK. He is a Visiting Scientist at the Center for Global Security Research at the Lawrence Livermore National Laboratory in the US. He has written on Libya’s nuclear programme and rollback, US policy towards missile proliferation, American security policy, Iran’s nuclear behaviour, trust in nuclear disarmament verification, and G8 threat reduction. Alan Cafruny is the Henry Platt Bristol Professor of International Affairs at Hamilton College, USA. He is the author of numerous books and scholarly articles in the areas of international political economy, European politics, and the transatlantic relationship. Rishika Chauhan is a MacArthur-funded Post-Doctoral Researcher in the Department of War Studies and the Centre for Science and Security Studies (CSSS) at King’s College London, UK. Her research focuses on sanctions and nuclear non-proliferation, with an emphasis on the Indian and Chinese perspectives. Alena F. Douhan is a Professor of International Law at the Belarusian State University. She is also a UN Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights. Her sphere of research interest includes international public law, the law of international security, the law of human rights, sanctions in international law, and law of international organisations. Joy Gordon is the Ignacio Ellacuría, S.J. Chair in Social Ethics at Loyola University-Chicago, USA. She has published extensively on legal and ethical aspects of economic sanctions, including Invisible War: The United States and the Iraq Sanctions (Harvard University Press). Julia Grauvogel is a Senior Research Fellow and Spokesperson of the Research Team “Interventions and Security” at the German Institute for Global and Area Studies (GIGA) in Hamburg, Germany. Her research interests include international sanctions and authoritarian rule. Alexandra Hofer is an Assistant Professor in Public International Law at Utrecht University, The Netherlands. Her research interests include sanctions, the principle of non-intervention, and the use of force. She frequently conducts interdisciplinary research in international law, integrating international relations and international law to address common issues. Yifan Jia is a Doctoral Candidate and Visiting Lecturer at King’s College London, UK. Her research interests are the law of sanctions, international law, human rights, and criminal justice. Ksenia Kirkham is a Lecturer in the Department of War Studies at King’s College London, UK. Her current research interests include economic warfare, energy security and sustainable development, the political economy of sanctions, and welfare state regimes.

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Notes on Contributors

Zeno Leoni is a Lecturer in Defence Studies at the Defence Studies Department of the Lau China Institute at King’s College London, UK. He is also Executive Director at the International Team for the Study of Security, Verona, Italy. His research interests include various aspects related to the world order, US-China relations, and the new cold war. Heidarali Masoudi is an Assistant Professor of International Relations at Shahid Beheshti University, Iran. He teaches many courses such as IR theories, Research Methodology, Foreign Policy Analysis, and American Politics. His main scholarly interests are IR theories, Iranian–American relations, and Iranian foreign policy. Noboru Miyawaki is a Professor at Ritsumeikan University, Japan. He gained the Award of Excellence from the Japan Association of Simulation and Gaming in 2020, and his work focuses on Eurasian politics, and on the simulation and gaming frameworks for analysing geopolitics. Matthew Moran is a Professor of International Security and Head of the Department of War Studies at King’s College London, UK. He has published widely on security-related issues. Hajime Okusako is an Associate Professor at the School of Social Sciences at Waseda University in Tokyo, Japan, His research interests include theoretical aspects of global governance, and sanctions as an instrument of governance. Mehmet Onder is a faculty member at The Center for Peace and Conflict Studies (CPCS) at Wayne State University in Detroit, Michigan, USA. His research interests focus on international economic sanctions outcomes and the role of opposition parties within developing countries. Hazar Kaan Özkonak is a Doctoral Candidate at Utrecht University, The Netherlands. His research focuses on the limits on the use of unilateral sanctions pursuant to the international rule of law principles. He also holds the Attorney-at-Law License and is a member of the European Society of International Law and Ius Commune Research School. Clara Portela is a Professor of Political Science at the Law School of the University of Valencia, Spain. Her research focuses on multilateral sanctions, arms control, and EU foreign policy. She is the recipient of the THESEUS Award for Promising Research on European Integration. Mariam Qureshi is a Doctoral Candidate at the University of Reading, UK. Her research interests include the effect of sanctions on Middle Powers. Raúl Rodríguez Rodríguez is a Full Professor and currently the Director of the Center for Hemispheric and United States Studies at the University of Havana, Cuba. He is also the Director of the National Program of Social Sciences and Humanities of Cuba and a member of the working group on US Studies of the Latin American Council on Social Sciences. His research focuses on the evolution and system impact of the US sanctions on Cuba’s economy, politics, and society. Ivan Timofeev is an Associate Professor at MGIMO-University, Russia, and Director General at the Russian International Affairs Council (RIAC). His personal background includes research on economic sanctions and the risk of sanctions for Russian and international business.

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Notes on Contributors

Alen Toplišek is a Senior Lecturer in Global Affairs and Politics at the University of Derby, UK. His research interests lie in the political economy of Central and Eastern Europe and industrial policy. Adnan Vatansever is a Reader in Russian Political Economy in the King’s Russia Institute, UK. His research focuses primarily on the political economy of energy and economic policy-making in Russia/Eurasia. He has previously worked as a senior associate in the energy and climate program at the Carnegie Endowment for International Peace, a senior associate in Russian and Caspian energy at IHS Cambridge Energy Research Associates, and a consultant for the World Bank. Martijn C. Vlaskamp is an Assistant Professor and the Juan de la Cierva Incorporación Research Fellow at the Institut Barcelona d’Estudis Internacionals (IBEI), Spain. His research interests include natural resource governance, political violence, and EU Foreign Policy. In his work, he often combines these different areas of research. Christian von Soest is a Lead Research Fellow and Head of the Peace and Security Research Programme at the German Institute for Global and Area Studies (GIGA) in Hamburg, Germany. He is also an Honorary Professor at the University of Göttingen, Germany, and a member of the GIGA Office Berlin. His research focuses on international sanctions and interventions, authoritarian politics, and political legitimacy. Sandra Watson Parcels is a Doctoral Candidate in the Department of Defence Studies at King’s College London, UK. She has a background in international business and is currently a researcher on the Asia & China Team at the International Team for the Study of Security (ITSS) in Verona, Italy. Her research focuses on liberal international order, global security, and China’s use of economic statecraft to advance military objectives. Lingyi Wei is a Doctoral Candidate in the Department of Economics at the University of Utah, USA. Her research interests include political economy, economic development, and Chinese economy. Yeseul Woo is a Doctoral Candidate in the Department of War Studies, and Graduate Teaching Assistant, at King’s College London, UK, and Developing Scholar at the Hudson Institute, USA. Her research focuses on the role of middle powers in nuclear crises, nuclear energy and nonproliferation policy, as well as Korean peninsula issues. She was previously a journalist. Zhun Xu is an Associate Professor of Economics at John Jay College and the Graduate Center at the City University of New York, USA. His main research interests include political economy, economic development, and the Chinese economy.

xii

INTRODUCTION Ksenia Kirkham

Economic sanctions have appeared in different types and forms throughout history, as states have used various instruments of non-military coercion to force their rivals to change their course of actions. Sanctions remain a very powerful foreign policy instrument today. Although the phenomenon is not new, there are nevertheless novel developments in the political economy of sanctions. The objective of the Handbook of the Political Economy of Sanctions is to trace these new developments in sanctions policies. A wide collection of chapters not only contributes to the longstanding debates over sanctions effectiveness but also responds to an urgent need of delineating apparently workable ‘effects’ of sanctions from their long-term side effects. The authors in this book have tried to capture emerging ‘hot topics’ related to recent cases and trends in sanctions legislation to gain a deep understanding of long-term political, economic, and societal transformations of all the parties involved – both state and non-state actors, be they sanctions ‘senders’, ‘targets’, or ‘third parties’. The number of sanctions cases has grown exponentially over the first decades of the twentyfirst century. Yet, the world has not become any safer, rather the opposite – hostilities within and among states have reached unprecedented levels. The sequence of various crises, from the global financial crisis of 2008 that pointed to the limits of the neoliberal growth model, the Eurozone crisis, multiple environmental disasters, and more recently, the outbreak of the COVID-19 pandemic and new military conflicts – all of these shockwaves reversed the normal patterns of globalisation and contributed to the escalation of tensions worldwide. While sanctions seem to be a plausible and effective political and economic weapon, their multiple side effects make it necessary to reconsider existing approaches, designs, and policies. The failure to do so will inevitably result in unwelcome ‘surprises’ and counterproductive tendencies that would ultimately undermine the power mechanisms deployed by sender states, such as US dollar hegemony, dominance in trade, and control over supply chains or production. The Handbook offers a step-by-step structure for such ‘reconsideration’. The first step is not only to explore the continuities, to mobilise the lessons from history for a better understanding of the current sanctions policies, but also to explore the discontinuities, to place the analysis in a constantly changing context. Section I is devoted to various theoretical and historical aspects of sanctions to draw novel directions and trends in the field of study. Section II traces various political economy aspects of sanctions by examining complex interrelations between sanctions and DOI: 10.4324/9781003327448-1

1

Ksenia Kirkham

other aspects, related to markets (e.g. global commodity markets, technologies, and finance), or to broader issues, such as sustainable development, inter-state violence, financial ‘blacklisting’, and sanctions termination. Section III aims at getting a better understanding of the processes that evolve in target states, such as China, Iran, Russia, Cuba, and African states. Section IV analyses the impact of sanctions on various state and non-state actors that are caught in between the sender states and targets – i.e. ‘third parties’, such as Japan, South Korea, India, Turkey, and some EU member states. Sections III and IV of the Handbook are distinctive because the assessment of selected cases is mostly done by the authors who live and work in target countries and therefore know the situation from within. Thus, one important objective of the Handbook is to hear the voices coming from different cultural backgrounds and geographical locations, to overcome West-centric ‘groupthink’. The problem is not so much that most books and handbooks on sanctions are funded by Western political institutions, but rather that they are written by experts who have never lived or worked in the societies they analyse, and often do not even speak the language of the countries in which they specialise. To grasp historical and cultural changes that drive transformation in ‘target’ states or ‘third parties’, the analysis should escape the Western-centric mind-set. The final Section V on Hot Debates is devoted to legal and humanitarian aspects of sanctions, to the dilemma of the importance of economic sanctions as the legal mechanism to address various violations of international law, on one side, and the legality of extraterritorial sanctions from the non-intervention point of view – on the other side.

Theoretical and Historical Aspects While most research on Western sanctions is pegged to the assessment of US policy, it is nevertheless important to keep in mind that there is no such thing as a monolith ‘West’ when it comes to sanctions policies, as the nature, the rationale and the political objectives that lie behind sanctions are very distinct. In contrast to the US geoeconomic aims that drive sanctions legislation, the aims of EU sanctions policies remain within the normative terrain. In Chapter 1, Clara Portela challenges some traditional theoretical accounts that assess sanctions effectiveness. The traditional view departs from Galtung’s ‘naïve theory’ (1967), according to which effective sanctions generate economic deprivations, sufficient to compel the leadership in a target state to change their policies in accordance with the sender’s demands. The main shortcoming of such accounts, according to Portela, is that the effects of sanctions are ‘measured’ in purely political (e.g. political change in the behaviour of the target state) or economic (e.g. economic damage to the target party) terms, but fail to counterpose the ‘policy effectiveness’ against intended objectives. This shortcoming could be overcome by establishing the ‘actual intent’ of top decision-makers and the legal justification for sanctions imposition. The case of EU sanctions against Russia, very costly for Europe, is used by the author as a perfect illustration of a ‘normative intent’ of sanctions as an ‘instrument of peace’. No matter whether sanctions are conceptualised as an instrument of peace, or the mechanisms of waging wars, most criticism nowadays is addressed towards unilateral sanctions imposed by sender states both in wartime and peacetime. In Chapter 2, Hazar Kaan Özkonak provides a historical overview of unilateral sanctions by drawing on famous examples from antiquity to modern times. The author traces the evolution of the objectives, types, and implementation methods of unilateral sanctions in various historical periods – i.e. the Ancient, Commercial Revolution, Late Modern, and Contemporary. A closer examination of all these periods suggest that throughout history, no matter the objective and the context unilateral sanctions have always had the negative humanitarian impact on civilian populations. Despite the efforts to minimise the ‘collateral damage’ 2

Introduction

to the civilian populations today (e.g. targeted approaches, humanitarian exemptions, etc.), unilateral sanctions nevertheless cause potentially strategically devastating impacts on targeted states. Moreover, sanctions as the cause of the outbreak of wars between senders and targeted states’ dates goes back to ancient history. Sanctions have been conceptualised within different schools of thought with polarising underpinning ontologies. It is no wonder that academics never agree on the definitions, on the nature and purposes, and effects of sanctions. In Chapter 3, Hajime Okusako offers a ‘comprehensive and systematic’ definition of economic sanctions as actions by sender parties (state and non-state actors) designed to modify or change targets actors’ behaviour or policy by exercising economic power (sometimes auxiliary to a military campaign), to promote ‘vital’ security interests, on the pretext of legal and moral reasons. The author argues for a necessity and urgency in creating an institutionalised framework of global governance – the one that would consider new modes of ‘non-territorial governance’ and would aim at resolving the problems of ‘various trans-scalar actors’ – for fairer global sanctions policies. Chapter 3 ends up with some valuable suggestions for some practical steps to set a ‘Multi-Sectoral Governance’ system. Theoretical debates continue in Chapter 4, where Ksenia Kirkham, Yifan Jia, and Yeseul Woo provide a brief overview of some important ‘mainstream’, or positivist accounts, as well as alternative theories of sanctions that analyse sanctions in a broader context of domestic power relations and geopolitical rivalry. The aim of the chapter is threefold. First, to explain why the boundaries between theories are fluid rather than fixed – that opens the possibility of a progressive theoretical merger, necessary for the development of a genuinely multidisciplinary theoretical approach to sanctions. Second, to suggest why the short-termism of a political vision of the mainstream accounts that examine sanctions ‘effectiveness’ fails to explain the paradox of why in some instances sanctions happen to be counterproductive. Third, to explore existing critical theories of sanctions to suggest how this myopic approaches could be overcome. Among the suggestions is the Welfare State Regime (WSR) approach that enables a strategic evaluation of the long-term processes that sanctions trigger in target states (Kirkham 2022). The need to reassess the theoretical reconceptualisation and political practices of sanctions is evidenced in the literature on the role of sanctions in deterrence. In Chapter 5, Wyn Bowen and Matthew Moran consider the effectiveness of sanctions as a mechanism of deterrence. They argue that most analyses frame the effects of sanctions in terms of ‘coercive diplomacy’, compellence, and the extent to which sanctions can be used to bring about a change in behaviour, while the impact of a threat of sanctions to deter states is overlooked. Clearly, not only sanctions that have already been applied but also just the threat of sanctions can influence the actions of target states. Therefore, the analysis of the failure of sanctions, complemented by the analysis of the failure of the threat of sanctions as a mechanism of deterrence, provides a valuable contribution not only to the literature on sanctions but also to deterrence theory. The authors buttress their theoretical argument with reference to the recent case of Russia, suggesting that although sanctions and the threat of sanctions as a mechanism of deterrence did little to prevent Russia’s aggression, their use was nevertheless necessary for its ‘signalling’ and ‘galvanising’ effects, and as part of the Western political objective of ‘recalibrating longer term interdependencies with Russia’.

Political Economy Among target states, we find several major oil producers, with economies highly dependent on energy export revenues. In Chapter 6, Adnan Vatansever draws a comparative analysis of the effectiveness of Western ‘oil sanctions’ against Russia, Venezuela, and Iran. The author 3

Ksenia Kirkham

determines target states’ ability to ‘neutralise’ sanctions by developing the concept of ‘sanction rents’ and the set of ‘endogenous’ factors that affect sanctions effectiveness (i.e. the dynamics of the target state’s oil industry, the target state’s broader macroeconomic context, and the capabilities to circumvent sanctions through ‘sanction rents’). The evaluation of such ‘ability’ is critical for a deeper understanding of the effectiveness of ‘smart’ sanctions. What is clear is that for Venezuela, Iran, and Russia, oil sanctions resulted in discounts for their oil in international markets. At the same time, unlike Venezuela and Iran, in Russia the levels of oil production and exports were not affected. The Russian Government secured ‘a moderately competitive market structure’, conservative tax regime, and low dependence of operation activities on foreign capital – these policies helped to keep the levels of oil production unaffected. The reader of this chapter will learn more about why this was the case, as well as will learn about the complex mechanisms of oil price formation and the distribution of ‘sanction rents’ across the value chain of sanctioned oil. Contemporary research on sanctions pays much attention to the effectiveness of ‘smart’ targeted sanctions. Since the acknowledgement of the devastating effects of comprehensive sanctions on the population of the target state, as in the case of the UN multilateral sanctions against Iraq in the 1990s, there has been a search for ways of making sanctions policies ‘smarter’ by maximising their effectiveness while minimising the dreadful humanitarian consequences. However, a closer investigation of targeted sanctions, such as financial sanctions or asset freezes on selected individuals demonstrates that targeted sanctions are not as smart as initially expected. In Chapter 7, Joy Gordon provides a compelling examination of why and when financial targeted sanctions prove counterproductive and evoke a new range of problems for the population of the target state. The cases of ‘smart’ sanctions against some individuals and corporations of Iran, Cuba, and Venezuela in the form of financial listing and asset freezes (OFAC’s SDN Lists) show that designations not only deprive targets from a just court trial and put them in a legally precarious position but also seemingly ‘individual’ listings in practice hamper entire sectors and economic damage spills over to the population. ‘Narrowly’ targeted sanctions affect strategically important corporations and ultimately undermine major sources of revenue and disrupt the country’s key infrastructure and the channels for social welfare provision. While lots of literature is devoted to the effectiveness of sanctions, very little has been said so far regarding sanctions termination. This is partly explained by the absence of global legal mechanisms of sanctions termination. The issue has become especially acute for long-term sanctions regimes. In Chapter 8, Christian von Soest, Julia Grauvogel, and Hana Attia, building upon the International Sanctions Termination (IST) dataset, distinguish between two different ways of sanctions ending – i.e. ‘sanctions termination’ (in the result of target compliance) and ‘sender capitulation’ (in the case of unsuccessful sanctions) that happens in a gradual and often asymmetric manner, especially when it comes to multilateral sanctions. An assessment of various variables in the chapter explains multiple asymmetries of sanctions termination, related to the timing and pace of the lifting of sanctions, types of sanctions, economic and political strength of the target state, and economic costs and gains. All these point to the urgency for the development of a more systematic approach to the consequences of sanctions termination for different parties for future research on sanctions. Apart from the issue with sanctions terminations, another problem is that unilateral sanctions are largely unregulated in international law. The legitimisation of sanctions as an ‘alternative to war’ in international law relies on a limited definition of ‘violence’ and ‘coercion’ (e.g. the

4

Introduction

principle of non-intervention). The concept of ‘violence’ is restricted to physical and interpersonal expression. In Chapter 9, Alexandra Hofer scrutinises the notion of ‘violence’ by suggesting that a narrow definition conceals the lethality of economic forms of violence – i.e. sanctions are a form of structural economic inter-state violence that not only negatively affects the well-being of target populations but also causes some serious deprivations in basic needs and potentially lethal physical harm to the most vulnerable groups. If the definition of ‘violence’ in international law were broadened and revised, then most arguments in defence of the legality of harsh sanctions would be broken. Overall, according to the author, even when sanctions appear as ‘legal’ – the way sanctions are defined in domestic legal acts of sender states and the way the notion of ‘violence’ is defined in international law conceals the sufferings of those that sanctions allegedly aim to protect – the civilians. Along with the definition of violence in international law, a no less important topic of the political economy of sanctions is related to geopolitics. Most politicians, academics, and public are puzzled now by how to adjust their lives and businesses to the new reality of the US – China’s rivalry in the technological sphere that is dramatically spilling over into the military sphere. The US shift from the policy of ‘engaging’ China to China’s containment by Obama’s Administration in 2011, Obama’s ‘pivot to Asia’ (i.e. the redeployment of military forces from Europe and the Middle East to the Asia Pacific, modest restrictions on China’s FDI in the US, etc.) was further intensified with Trump’s sanctions against China’s technological giants. China’s technological progress and influence in global supply chains (e.g. in AI, quantum, satellite and communications, etc.) made China the US main strategic enemy. The containment was reinforced by Joe Biden’s China ‘de-coupling strategy’, characterised by bestselling analysis as the US intention to ‘kill’ China’s technological sector (Miller 2022). In Chapter 10, Zeno Leoni, Mariam Qureshi, and Sandra Watson Parcels see the US sanctions against China as part of the US ‘positive decoupling’ strategy. The strategy aims to secure global market conditions for ‘the expansion of next-generation industries’ for the US and its ‘Five Eyes’ allies. Positive decoupling is conceptually wider than sanctions, as it also involves a long-term marked future projection, coalition building, and industrial planning efforts. Overall, the authors pose an important question of whether the relationship between the US and China has entered another Cold War phase, which they call the Iron Curtain 2.0. In this case, the traditional use of sanctions as a legal mechanism has become the legacy of the past – as sanctions have become geostrategic. With sanctions becoming more geostrategic, there is a necessity to address the problem of how sanctions might affect the purpose of sustainable development set by the UN Sustainable Development Group (SDG). The objective to ‘accelerate’ sustainable development by 2030 was promoted in the 2015 Millennium Development Goals and the 2030 Sustainable Development goals. National governments and the international community are expected to actively contribute to the creation of a global and local environment favourable for sustainable development. However, according to Chapter 11 by Vira Ameli, what we have been witnessing so far looks more like the ‘deceleration’ rather than acceleration of sustainable development goals. The author explores the ways in which unilateral economic sanctions on poor states deprive the poorest citizens from their right to development. For instance, sanctions against central banks and financial sectors of Iran, Syria, and Venezuela, considerably contributed to already existing economic and ecological problems. At the same time, sanctions is just a part of the problem, another problem with sustainable development is the over-reliance on growth models (i.e. GDP-based paradigm) while alternative conceptualisation of sanctions, ‘acceleration’, and sustainability (i.e. ‘de-growth’ and ‘a-growth’) are totally forgone.

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Target States The most prominent outstanding cases of target states at the moment are Iran, Russia, and China. In Chapter 12 on Russia, Ivan Timofeev argues that despite the economic constraints and even damage that sanctions have brought to Russia in the short term, Moscow, with its wide range of capabilities, has nevertheless preserved some chances to adapt to new realities. This adaptation could be problematic for the sender states, as their potential to affect Moscow’s strategy and political actions will be inevitably eroded. Moreover, if the real goal for the US sanctions stringent legislation against Russia in 2017–2022 had been to prevent further escalation of tensions and Russia’s military actions, then sanctions proved highly inefficient. At the same time, according to the author, the limits to Russia’s economic durability remain unclear, and a lot depends on whether the country will be able to upgrade its own industries and maintain a trustful relationship with other partners, such as China and India. Russia learned a lot from the long-standing case of Iran’s resistance to sanctions, a country which is economically less developed and is more dependent on oil revenues for its survival than Russia. Therefore, according to Ivan, in the near future any prospects of more or less sanctions on Russia would hardly serve as a motivation for the Kremlin to change its political course. Sanctions against Russia have undoubtfully affected domestic and foreign politics of the People’s Republic of China, a country with a long history of being flexible and wise enough to learn from other nations’ experiences and adjust their lines of action. Rising geoeconomic tensions drew academic attention towards US – China sanctions crossfire. Although the number of publications on US sanctions against China has grown dramatically, very little attention has been paid to the assessment of how US sanctions are perceived inside China. In Chapter 13, Zhun Xu and Lingyi Wei fill this gap by examining discourses on sanctions by different social groups – i.e. nationalists, liberals, and leftists. The authors challenge a common misjudgement in the West that the liberal camp in China sees itself in direct opposition to the nationalist camp. Both camps were bound on many grounds as nationalistic tendencies prevail across the entire political spectrum of China’s society. Nationalism with its deep historical and cultural roots has always been a major political force in modern China. It was one of the driving forces for the Chinese revolution, for anti-imperialist struggles during the Mao era. Also, nationalism set preconditions for internationalism in the postMao era, when market reforms were seen as the road to ‘national rejuvenation’. Today the official response of the CPC to US sanctions contains the ‘elements from different camps’, as the Chinese government has skilfully managed to create a balance for the coexistence of all political forces. Overall, as the chapter warns, although nationalism has always been kept ‘within a safe range’ in Chinese politics, excess pressures on China might push the nationalist line too far, to a point that would not be in the national security interest of the rival states. In contrast to China which has a long period of active cooperation with the United States, the case of Iran is one of the longstanding cases in modern history of a country that has been struggling to survive under the pressures of economic sanctions. A very short period of relief from sanctions was achieved with the conclusion of the JCPOA – a diplomatic breakthrough by the European Union states as mediators between Washington and Tehran, which was undermined by Trump’s withdrawal from the deal. Much harsher new US sanctions targeted the most important political, economic, and financial institutions (i.e. the Central Bank of Iran and the IRGC) that were declared ‘foreign terrorist organisations’. In Chapter 14, Heidarali Masoudi examines the efforts by the last three US Congresses in proposing sanctions legislation. The author also traces official discourses and practices in Iran that have been recently developed to withstand increasing geopolitical pressures. Some Iranian leaders, including the Supreme Leader Ayatollah Khamenei, 6

Introduction

believe that the consequences of sanctions for Iranian society are more positive than negative, as sanctions contribute to further consolidation of Iranian society. To increase the resilience of the economy, the Iranian government undertook some effective measures, such as the promotion of a knowledge-based economy, and setting closer trade relations with China, the Eurasian Economic Union, and other states in the region. The interest in the case of Cuba is predicated upon the fact that the U.S. unilateral measures against Havana was the first large-scale case of US extraterritorial sanctions. In Chapter 15, Raúl Rodríguez Rodríguez examines the objectives, the rationale, and the evolution of a ‘comprehensive blockade’ (‘bloqueo’) of Cuba over the last six decades. The author points to the devastating economic, political, and humanitarian impact of sanctions, but also to the extraterritorial consequences of sanctions for Cuba’s main trading parties in the Global South. The Cuban case also fits well in the contemporary debates over the legality of the secondary sanctions due to the recent reactivation of the contradictory Helms–Burton Act of 1996 by the Trump Administration in 2019 (it had been previously suspended due to the strong opposition from Canada and the EU). The perception of sanctions by the Cuban population has hardly changed since the 1990s – sanctions are seen as a neo-colonial legacy and as an act of aggression and war by a powerful hegemony against a week and economically unstable society. Other countries of the Global South are also worthy of attention. Western literature on sanctions quite often overlooks the African states (South Africa being an exclusion). Sanctions are a powerful political tool, used not only by Western powers but also by regional institutions, such as the African Union (the AU). Chapter 16 by Francis Boateng Frimpong looks inside Africa to reveal some myths and realities of the AU’s sanctions against its member states over the period from 2003 to 2022. The ultimate penalty is a suspension of the membership of the Union. According to the author, the AU policies against its members, which at the moment of writing has reached fifteen, was empowered and legitimised by the Lomé Declaration. However, paradoxically, instead of resolving the internal political problems in target states, the AU’s ‘interventionism’ has been poorly designed and therefore just exemplifies instability, impedes economic growth, induces poverty, causing significant humanitarian problems.

Third Parties The main focus of literature on sanctions lies on their impact on targeted states. However, extraterritorial sanctions increasingly affect the national interests of various actors that do not belong to the jurisdiction of the target state. With the intensification of unilateral sanctions against Iran, China, and Russia, coupled with target states’ countermeasures, third parties have been caught in between. From the standpoint of national economic security, sanctions affect third parties in two ways. First, third parties are expected to follow the lead of sanctions policies against target states; however, very often such a course of action undermines their national economic interests. Second, third parties aim at responding to sanctions by reducing the risks of non-compliance. In Chapter 17, Noboru Miyawaki traces the ways Japan and South Korea are trying to mitigate sanctions related risks by taking a ‘lighter’ and more balanced approach to sanctions. The chapter presents a novel ‘as-if game’ framework for analysis which explains Japan’s and South Korea’s sanctions ‘ambiguity’. The author suggests that such ‘ambiguity’ has a protective feature when it comes to complex decisions in international affairs: historically, it is rooted in Japan’s cultural preference for strategic ‘Tamamushi-iro’ (‘iridescent’) approach to decision-making that overcomes the simplistic ‘black or white’ duality in judgements. The framework is also useful for explaining the reason for a recent shift to harsher sanctions by Japan and South Korea against Russia in 2022. 7

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No matter how ‘ambiguous’ the decision-making in some states is, what is clear is that the historical role of sanctions has tilted into the geoeconomic terrain. In Chapter 18, Alan Cafruny defines sanctions as an instrument of shifting ‘the playing field’ in favour of national economic interests of the sender state. Sanctions promote the interests of US corporations and lobbying groups, active in support of sanctions legislation. According to the author, US sanctions against China’s tech giants (e.g. ZTE, Huawei, and SMIC) justified on national security grounds have clear commercial motives and serious implications and side effects for third countries, including the EU. Within the transatlantic space, the US economic and political leadership has been dramatically strengthened following Russia’s invasion of Ukraine. This power dynamic has been particularly painful for Germany: the country’s economic and industrial leadership deteriorated as a result of energy-driven inflation. The demise of Germany’s leading role in the EU energy markets paved the way for further empowerment of Poland as the closest US ally in the military and energy spheres. Moreover, the author believes that even if Germany were to restore its relations with Russia at some point in the future, Washington will ‘not easily relinquish its geopolitical and commercial spoils’, following its decades-long resistance to Ostpolitik and its ‘crusade’ against the Nord Stream pipeline. The ‘extraterritorial’ effects of sanctions are disruptive not only for Germany but also for global supply chains. Sanctions divert the supply routes of goods, critical raw materials, and services, already severely disrupted by the COVID-19 pandemic. In Chapter 19, Ksenia Kirkham and Alen Toplišek argue that sanctions do not only hit target states but also spill over across global supply chain networks, industries, and markets, undermining the performance of non-targeted companies sharing a common supply chain with targeted enterprises. Spillover effects could be traced through increased costs of production, transportation, additional transaction costs, but most importantly – through a setback for the development of sustainable economies in response to climate change. By analysing the situation in the battery electric vehicles (BEV) markets in South Korea and the EU, the chapter shows how the US-China sanctions crossfire affects the entire production process and the supply of vital raw materials. This eventually slows down the transition to net zero neutrality by stalling further adoption of other important developments technologies. Moreover, the de-coupling US strategy against China makes third countries more, not less, dependent on China, which controls the supply of key minerals and materials necessary for the production of green technologies. There has been some research on the impact of secondary sanctions on ‘third parties’. However, little has been said so far about the main reactions of third actors to commodity sanctions, nor about the reasons for those reactions. In Chapter 20, Martijn C. Vlaskamp offers a novel structural perspective on actual and potential reactions of state and non-state actors in third party jurisdictions to extraterritorial sanctions on various commodities. The analysis is not only limited to the overquoted cases of sanctions against major oil and gas exporters (i.e. Russia, Iran, Venezuela, and so forth) but also includes very interesting and frequently omitted analysis of other critical mineral commodity markets (e.g. China’s ban on sales of rare earth elements to Japan, Russia’s suspension of its export of several types of timber products to hostile states, etc.). The author reiterates the point that companies that operate in the private sector in ‘third party’ states, make decisions autonomously from their governments’ plan of actions when it comes to sanctions compliance. The author assesses various scenarios for decision-making based upon two sets of variables: first, the political course of the third party state regarding extraterritorial sanctions of a sender state (i.e. support of sanctions, oppositions to sanctions, and neutrality), and second, choices made by independent businesses in third country jurisdictions (i.e. sanctions compliance and ignorance). Therefore, not only can third parties be harmed by secondary sanctions but they can also benefit economically from inter-state sanctions crossfire, by covering gaps in the market that result from sanctions regimes. 8

Introduction

As argued by Mehmet Onder in Chapter 21, secondary sanctions have increasingly been used to boost the intensity of primary sanctions and are ‘comprehensive in nature’ for their extraterritorial reach. Despite some problems that sender states face when they are trying to enforce secondary sanctions, related to sanctions legitimacy, despite the existence of back markets and multiple strategies that businesses use to evade sanctions compliance (e.g. some tricks to cover the origins of goods and services, etc.), there are nevertheless multiple ways of how a sender state could increase the effectiveness of sanctions. Among those ways are the rise of the risks due to increased costs of non-compliance, the scope of the penalties, communication strategies to deliver ‘credible threats’, and other sanctions enforcement strategies. For instance, the US successfully used ‘warning letters’ – official notifications that American state officials directly posted to Turkish politicians and businessmen with demands to curb business relations with Russia. As well as Turkey, India has become increasingly affected by US sanctions. Chapter 22 by Rishika Chauhan analyses the increasing impact of sanctions crossfire on India’s domestic and international political agenda. The author stresses the rising capability and aspiration of India to influence world politics; therefore, the country has been quite successful in balancing between competing powers and finding a ‘middle ground’ between ‘global norms’, such as nuclear nonproliferation, and India’s strategic interests. In doing so, India simultaneously refrains from taking sides in Russia’s war in Ukraine, but at the same time avoids any explicit official political statements in this regard. The accusations by Indian Prime Minister Narendra Modi of Russia’s invasion do not go further that some occasional political statements, such as the one that he expressed during his meeting with Vladimir Putin, during which Mr Modi just mentioned that ‘today’s era is not of war’ but for universal merits of ‘democracy, diplomacy, and dialogue’. Such a cautious position by India brings economic benefit in the form of new cheap oil from Russia.

Hot Debates There is no consensus among specialists in international law, nor among politicians and academics regarding the legality of unilateral sanctions from the standpoint of the universal principles of the Westphalian structure of international law, such as state sovereignty, non-interference in internal affairs, and human right to life. In Chapter 23, Alena Douhan, with reference to UN Security Council Resolution 2664 (2022) on ‘humanitarian principles’ (i.e. humanity, neutrality, impartiality, and interdependence), provides a mass of evidence of the detrimental impact of sanctions on almost all categories of human rights. The way sanctions affect the most vulnerable groups (e.g. the elderly, women, children, the disabled, migrants, and the poor) undermines the line of criticism of sanctions proponents and defenders of their legality who suggest that all the suffering is the effect of the target states’ inefficiencies rather than the sanctions themselves. The problem of over-compliance by institutions directly involved in humanitarian aid, the vague character of securing humanitarian exemptions for delivering humanitarian aid in the absence of any institutional accountability and global mechanisms for human rights protection against unilateral sanctions – all point to the necessity of a ‘cumulative’ assessment of the humanitarian impact of unilateral sanctions. Fairly enough, the matter of the legality of the secondary, or ‘extraterritorial’, sanctions is very contentious and causes hot debates among politicians and academics. Indeed, with multiple contradictory definitions of different legal terminology, in the absence of international treaties to regulate unilateral sanctions from the standpoint of general international law, some claims regarding the ‘illegality’ of secondary sanctions could be easily broken down. In Chapter 24, Joshua Andresen makes the point that from the ‘purely legal perspective’ – i.e. under general principles of international law (e.g. of non-intervention) and under the international law of jurisdiction – US 9

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secondary sanctions are not unlawful for the lack of the codified mechanism of proving that this is the case. The analysis of the legal status of US secondary sanctions in the chapter departs from the arguments made by Ruys and Ryngaert in ‘Secondary Sanctions: A Weapon Out of Control? The International Legality of, and European Responses to, US Secondary Sanctions’, published in The British Yearbook of International Law in 2020. However, as Andresen maintains, the most prominent argument in support of the claim that US secondary sanctions undermine economic and political sovereignty of other states is problematic. Through sanctions, the US ‘leverages its market position to impose costs on choices’, while states’ ‘ability to make economic choices’ are not undermined, as was the case with the US sanctions against Iran: third parties in the EU were still free to choose whether to continue their transactions with Iran or not. Legally, third parties in the EU have a chance to ‘choose’ whether to comply with sanctions or not, but would they really use this right once their financial position and sometimes their very existence is at risk? In Chapter 25, Pouria Askari questions the legality of the ‘utilisation’ of financial and economic leverage by a very powerful state to enforce its policy directly on ‘nationals’ in third countries. The author refers to the extraterritorial effects of the US sanctions against Iran on the nationals and companies in third countries. The compliance with US sanctions forces some non-US companies to breach domestic legislation set to withstand the extraterritoriality of the American jurisdiction (e.g. the EU Blocking Statute or the similar Ministry of Commerce Blocking Rules in China, etc.). Overall, according to the author, secondary sanctions imposed by sender states against nationals and entities that belong to another jurisdiction (i.e. third party) undermine the third state’s sovereignty by interfering with their domestic legislation and affecting their internal and external affairs. In continuation of the accusations regarding the legality of secondary sanctions, it would be incredibly interesting to assess all the complexities of the mechanisms of decision-making and the promotion of the rule of law within the European Union. Chapter 26 by Antonino Alì is an important real contribution to the debates over sanctions’ legality. The analysis assesses the EU sanctions regime against Russia established post-2014, with specific focus on the legal cases implemented after 2022. The role of the Court of Justice of the European Union has been specifically important, and the ways judgements are made have had a profound impact on the development of the EU’s sanctions policy. Ali investigates the legal cases that were brought before the Court of Justice after sanctions were imposed by the EU against Russia, such as sanctions against the leading state oil producer Rosneft in 2017, the measures against the ‘Yanukovych regime’, the legal case against ‘RT France’, etc. This analysis offers a valuable contribution not only to the literature on the legal aspects of sanctions but also to the long-standing academic and political debates regarding the role of the Court of Justice in political decision-making and legislation processes, which significantly exceeds the Court’s original role as an ‘observer’ of EU law in the interpretation and application of the treaties.

Bibliography Galtung, Johan. 1967. On the Effects of International Economic Sanctions, With Examples from the Case of Rhodesia. World Politics, 19(3), 378–416. doi:10.2307/2009785 Kirkham, Ksenia. 2022. The Political Economy of Sanctions: Resilience and Transformation in Russia and Iran. Palgrave Macmillan Miller, Chris. 2022. Chip War: The Fight for the World’s Most Critical Technology. Scribner. UN. 2022. “UN Security Council Resolution 2664.” Retrieved 13 January 2023 (http://unscr.com/en/ resolutions/2664).

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SECTION I

Theoretical and Historical Aspects of Sanctions

1 THE EVALUATION OF SANCTIONS EFFICACY Clara Portela

Introduction Mainstream analyses of sanctions regimes, increasingly frequent in the media, typically portray sanctions regimes as unsuccessful. However, most assessments tend to be based on the direct observation that targets refrain from changing their foreign policy course. In reality, the practice of sanctions evaluation is characterised by a diversity of approaches, which reflect disciplinary fragmentation, but also follow the diving line between the academic and practitioners’ communities. No standard evaluation method is applied by sender institutions (Drulakova et al. 2010; Eriksson 2011; Mack and Khan 2000). Economists and political scientists focus on different aspects when they assess sanctions impacts (Stępień et al., 2016), and even among political scientists, no common methodology exists. This chapter assesses the set of criteria normally applied with a view to producing a picture of sanctions effectiveness. In order to do so, it takes a step back to critically interrogate the objectives behind sanctions. With this aim in mind, this chapter develops a better understanding of the purposes and effectiveness sanctions. This question is particularly relevant as sanctions are increasingly recognised as a preponderant tool in the EU responses to international crises (Bendiek et al. 2020; Caldwell 2014; Wessel et al. 2021). The present contribution proceeds as follows: it opens with an overview of the theoretical conditions for sanctions effectiveness, and analyses the empirical evidence of sanctions effects. The chapter then turns to the limitations of the current approach to sanctions assessment and identifies challenges in gauging the effects displayed by sanctions. Despite its exceptional character (Helwig et al. 2020), the EU current sanctions against Russia is used as an empirical case to support the argument.

Theory Identifying Conditions for Sanctions Success In a seminal article that inaugurated sanctions scholarship, Galtung (1967) measured success against two separate criteria: the extent of deprivation to which the target is subjected, and the modifications observed in its political behaviour. Subsequent scholars adopted the idea that two DOI: 10.4324/9781003327448-3

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separate effects existed that ought to be assessed separately, namely economic damage and political impact. Terminology varies: Bergeijk (2009) distinguishes “effectiveness” from “success”, while Cortright and Lopez (2000) speak of “economic” and “political” success. Both effects are not regarded as equally significant: the second aspect bears paramount importance, as the first (economic damage) is considered a means to an end (modification of political behaviour). This dovetails with the theory of economic sanctions operation formulated by Galtung (1967): according to his “naïve theory”, sanctions are expected to generate sufficient economic deprivation to galvanise the population against the leader, who is then compelled to comply with the demands of the sender in order to re-establish the previous level of wealth, or face being unseated. A breakthrough in sanctions research was introduced by Hufbauer, Schott and Elliott with the publication of a study reviewing the sanctions practice of the 20th century (1980). Undoubtedly, the most influential study evaluating the success of sanctions, its principal aim was to establish a methodology for the identification of the conditions leading to success. Exploring a number of economic and political factors as determinants of sanctions success, the study finds that sanctions are more likely to succeed when they target states characterised by instability and strong links to the sender, and when the sanctions pursue modest goals and inflict significant costs to the target but few to the sender. Relying on a review of assessments by historians, the study credits sanctions with success in roughly one-third of the episodes, when sanctions “appeared to contribute to the achievement of stated policy goals” (Elliott 1998, 52). The yardstick of a successful sanctions regime is an “observable change in behaviour”, with policy outcomes being judged “against the stated policy goal of the sender country” (Hufbauer et al. 1980). Pape cautioned against the risk of wrongly crediting sanctions for policy outcomes promoted more directly by other tools, and formulated some criteria for establishing causality (Pape 1997). Testing the data produced by Hufbauer et al. (2007), Bergeijk identifies a core equation that provides an empirical shorthand description of the key factors behind success of economic sanctions: the higher the probability that an economic sanction succeeds in changing the target’s behaviour, the larger the pre-sanction trade linkage, the more democratic the target’s political system and the shorter the period of sanctions imposition (2009, 130). One of the first insights yielded by economic analyses of sanctions is the lack of correlation between the magnitude of the economic hardship inflicted on the target and the success of sanctions: even sanctions causing severe economic disruption may fail (McLean 2021). Still quantitative research has identified severe costs on targets as robustly related to sanctions success at every stage of the sanctions episode (Bapat et al. 2013). The evidence that the involvement of international organisations is a determinant of success is even more consensual (Drezner 2000). Economic accounts of sanctions success have increased in sophistication over time. Departing from the neoclassical assumptions that underlie the study by Hufbauer’s team, public choice approaches acknowledge that different groups are impacted differently in the target society, highlighting that embargoes can create interests in its continuation as it limits foreign competition (Kaempfner and Lowenberg 2007; Kirshner 1997). This strand of research first produced the insight that sanctions against democracies have a higher chance to succeed than sanctions against autocracies. Finally, other authors have applied game theory to explain sanctions success. One of the most refreshing perspectives is that adopted by Hovi et al. (2005). They contest that, contrary to popular belief, the imposition of a sanction represents a coercive attempt. Instead, they argue that when sanctions are imposed, the attempt to persuade the target to change course has already failed. If the target leadership was afraid of the sanctions, it would have changed course when the sanctions were threatened. If it does not, it means that the target is willing to accept the costs of sanctions, judging this outcome preferable to their imposition. Therefore, sanctions represent a 14

Evaluation of Sanctions Efficacy

failure of a coercive attempt rather than a coercive attempt in itself. Therefore, they posit that a target under sanctions is unlikely to change course after sanctions are in place. Only if the target realises that the costs of sanctions are more severe than anticipated will it consider to change course, correcting his original miscalculation. Game theory has yielded the insight that sanctions are most effective at the threat stage. Despite the progress made in economic analyses of sanctions efficacy, two limitations still remain. One of them is that it only considers economic sanctions, while contemporary sanctions practice includes a diverse set of measures, including visa bans and diplomatic sanctions (Portela and Charron 2023). A second limitation is that its analyses are invariably premised on the assumption that sanctions aim at promoting a change in the behaviour of the target. As the next section elaborates, this is not always the case.

Multiple Functions of Sanctions Sanctions are routinely defined as restrictions that pursue the compliance of the target with sender demands. Accordingly, compliance constitutes the conventional focus of sanctions research (Baldwin and Pape 1998; Blanchard and Ripsman 2002; Elliott 1998; Pape 1997). Yet, compliance is not the only, and sometimes not even the primary objective of sanctions; it may not even feature among its actual objectives (Lindsay 1986). The importance allocated by senders to different objectives pursued by sanctions might vary over time (Barber 1979), and “policymaker’s true goals may be hidden behind the public rhetoric” (Elliott 2010, 86). Already at an early stage, research acknowledged that sanctions fulfil several functions and that the accomplishment of compliance-related stated goals is only one of them (Doxey 1972; Hoffmann 1967; Wallensteen 1968). In his seminal article on UN sanctions on Rhodesia, Galtung (1967, 409) posited that alongside formal goals, an intrinsic purpose of sanctions was “to punish the receivers by depriving them of some value and/or to make the receivers comply with certain norms”, thereby acknowledging a punitive function to sanctions that must not be related to efficacy. Several efforts to build some categories capturing the variety of their objectives followed. Barber (1979) distinguished three types of objectives of sanctions, each of which relate to a different audience. A first category of objectives is concerned with the behaviour of the target, and refers to compliance with declared policy objectives. A second category of objectives relates to domestic audiences and a desire to “demonstrate the effectiveness of the imposing government”; a “willingness and capacity to act”, sometimes in an effort to “anticipate or deflect criticism” (Barber 1979, 380). The final category of objectives is geared to the broader international audience, and is guided by a desire to maintain “a certain pattern of behaviour in international affairs”, or shows “support for a particular international structure”, such as a multilateral organisation (Barber 1979, 382). Lindsay (1986) complemented Barber’s three-fold distinction by adding the goals of “subversion” and “deterrence”. The contribution of these early scholars does not only consist in identifying the existence of goals beyond that of “compliance” but also in formulating the idea that their success may not forcibly depend on target compliance. As noted by Barber, “contributing to alliance solidarity does not depend on compliance by the target” (Barber 1979, 381). Building on this scholarship, and on an increasingly popular tripartition (Elliott 2010), Giumelli (2011, 32–35) recently classified different goals of sanctions by distinguishing three categories derived from the dimensions of power in international relations: coercion (“win conflicts”), constrain (“limit alternatives”) and signal (“shape normality”). Biersteker et al. (2016) apply these categories admitting their overlap rather than treating them as mutually exclusive, thereby improving their analytical value. Assessments following this approach are available (Moret et al. 2016), but remain rare. 15

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Finally, it is worthwhile mentioning research examining unintended consequences. Formally, this strand is not concerned with the evaluation of sanctions efficacy. However, it is connected with sanctions efficacy because, other than achieving their stated goals or otherwise, sanctions can also display undesirable effects that decrease their attractiveness as policy tools. In addition, sanctions can also have perverse effects that aggravate the policies they intend to avoid. It has been decried that standard evaluations follow an effectiveness scale whose worse possible outcome is zero as an unsuccessful attempt, excluding any value under zero to capture situations in which sanctions exacerbated misbehaviour (Peksen 2019).

Operation of Sanctions Standard analyses measure the success of sanctions by the extent of deprivation to which the target is subjected and the modifications observed in its political behaviour. Economic damage and political impact are distinct effects which ought to be assessed separately – the first constitutes the focus of economists (Felbermayr et al. 2020; Ghodsi and Karamelikli 2022) while the second is the focus of political scientists. But how is this behavioural change to be achieved? The factors relevant to success identified above can be linked to two different modes of operation: i Firstly, the classical model aims at affecting the target economy across the board: sanctions are expected to generate sufficient economic deprivation to galvanise the population against the leaders, compelling them to comply with sender demands to restore wealth or face being unseated, along the lines identified by Galtung (1967). ii Secondly, an alternative, selective logic emphasises how sanctions attempt to alter the power balance within the target country. There, the measures are meant to favour and mobilise the elites receptive to sender demands, while disadvantaging the ruling regime and their associates, in a bid to sway the elites away from the ruling regime and towards the opposition. Both approaches entail an economic element. They rely on the idea that business, military and religious elites back the ruling regime because they benefit from it politically and, above all, economically (Escribà-Folch 2012). As association to the regime ceases to be lucrative, they will withdraw their support from the leadership and transfer their allegiance elsewhere. Hence, sanctions discourage elites from supporting the ruling regime by making their association less attractive. At the same time, they disadvantage the ruling regime by reducing the revenue available to nurture elite loyalty, to fund the repression of dissenting elements and to continue the policies condemned by the sender. Policy effectiveness ought to be assessed against the intended goals of the measures. Thus, to assess the effectiveness of sanctions, one must first establish their actual intent. What are the objectives of CFSP sanctions regimes? The justification for sanctions imposition in CFSP acts and the criteria determining the targets provide some insights. The same is true for statements by top decision-makers.

A Case Study: EU Sanctions Regimes against Russia (2014–2023) Having identified multiple approaches to the evaluation of sanctions efficacy, developed both in economic and political science scholarship, we now move to discuss their application to the EU sanctions on Russia as a case study. The EU first sanctions regime agreed on Russia took place 16

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in the context of the Chechen war of 1999. Denouncing Russia’s disproportionate use of force and the perpetration of human rights violations by Russian troops, the European Council mandated the adoption of sanctions. However, the Council of Ministers watered down its own measures, eventually agreeing on little more than suspending the signature of a scientific agreement and redirecting funds earmarked for technical co-operation towards humanitarian aid (Portela 2010). The Council lifted the measures shortly after in the absence of any step taken by Moscow warranting termination.

From 2014 to February 2022 Compared to that episode, the sanctions regime initiated in 2014 constituted a breakthrough. The sanctions regime under discussion was first launched in March 2014, and was expanded in three waves in the course of the same year, combining different types of measures limiting relations with Russia: diplomatic sanctions, freezing of assets and travel bans on individuals, economic and financial restrictions (Christie 2016). This gave rise to three separate, albeit simultaneous, sanctions regimes: i The initial sanctions regime was applied in response to the annexation of Crimea, which is not recognised by any EU member. Measures are particularly severe as they entail a full trade embargo applies on the Crimean peninsula, a prohibition for EU vessels to call at its harbours, and assets freezes and visa bans on selected actors. ii The second sanctions regime responds to the destabilisation of Eastern Ukraine by Russiabacked forces. Although the sanctions regime initially consisted of visa bans and asset freezes against individuals and entities, it was tightened following the downing of Malaysia Airlines flight MH17 over Ukraine in July 2014. The EU restricted access to primary and secondary capital markets for some Russian banks and companies, banned trade in arms as well as the export of dual-use goods for military purposes, and limited access to some technologies and services for oil production and exploration. iii The third, often overlooked sanctions regime addresses the misappropriation of state assets by the regime ousted as a results of the protests of 2014. While, strictly speaking, this sanctions regime does not target Russia as it concerns the former Ukrainian leader and his entourage, it retains some linkage to Russia given that the countries host most designees (Portela 2022b). These sanctions regimes exist separately from each other, as they are enacted in different legal acts that are independent from each other. The fact that the sanctions regimes are organised in separate sanctions regimes rather than as single, consolidated sanctions regime has implications for their sustainability and prospects for a possible lifting. The removal of the Crimea embargo would probably require the peninsula’s restoration to Ukraine, or at least some kind of accommodation with Kiev (Moret et al. 2016). The de-listing of individuals under the asset freeze for misappropriation presupposes the recovery of the stolen assets, or the annulment of the designations by the Court of Justice of the EU. By contrast, since 2015, the sanctions regime addressing the destabilisation of Eastern Ukraine has been tied the prolongation of sanctions to the implementation of the Minsk agreements, a package of measures to alleviate the ongoing war, agreed between Russia and Ukraine, with the participation of Berlin and Paris in the so-called “Normandy format”. Thus, full implementation would bring about the end of the sanctions regime. In the absence of progress, sanctions have been extended every six months. 17

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After the crisis of 2014, policies conducted or inspired by Russia that met with condemnation by the EU have not led to the tightening of the package. Instead, the EU listed Russian targets in newly created thematic or horizontal sanctions regimes. This concerns the sanctions list addressing cyberattacks, the use of chemical weapons and the global human rights sanctions regimes, all of which saw the light between 2018 and 2020 (Portela 2021). Indeed, while these sanctions regimes are disconnected from any geographical delimitation, a common denominator of all these lists is the presence of Russian targets, accompanied by North Koreans in the cyberattacks regime, Syrians in the chemical weapons sanctions regime and Eritreans, Libyan and Chinese in the human rights sanctions regime. After 2014, the EU’s condemnation of the Kremlin’s policies did not translate into any further tightening of the sanctions. Instead, the EU included Russian targets in thematic sanctions regimes addressing cyberattacks, chemical weapons and human rights breaches. While these sanctions regimes are disconnected from any territory, their common denominator is the presence of Russian targets (Portela 2022a).

From February 2022 to Present The Russian invasion of Ukraine launched on 24 February 2022, preceded by the Duma’s recognition of the provinces of Donetsk and Luhansk as independent, triggered several new waves of sanctions adopted in close succession. This entailed the tightening of the 2014 sanctions regime supporting the territorial integrity of Ukraine and the introduction of a new one. After Russian forces penetrated into Donetsk and Luhansk, Brussels banned the import into the EU of goods originating in these territories (unless granted a Ukrainian certificate of origin) as well as trade in goods and technology, and services in the transport, telecommunications, tourism, energy and mineral exploitation sectors. For its part, the sanctions regime supporting the territorial integrity of Ukraine experienced no less than 14 upgrades from February 2022 to July 2022 (Portela and Kluge 2022). The full suspension of the visa facilitation agreement with Russia in September 2022 was followed in October by further restrictions, including on technology exports. The resulting sanctions regime is atypical in its setup. Routinely, sanctions regimes see the addition of new goals as the situation evolves. The ongoing sanctions regime on Belarus, for example, responds to actions as diverse as internal repression, aiding illegal migration and involvement in the aggression against Ukraine (Miadzvetskaya and Challet 2022). By contrast, current EU sanctions against Russia consist of multiple regimes organised according to the types of measures imposed. The regime on Crimea imposes an economic embargo on the peninsula. The regime on Donetsk and Luhansk extends the embargo to these territories. The regime in support of Ukraine’s sovereignty entails listings of individuals and entities responsible for military operations, holding an illegal referendum and breaching international humanitarian law. Objectives of the measures were spelt out in the legislative documents. The sanctions regimes enacted following the annexation of Crimea and the destabilisation of Eastern Ukraine called for the withdrawal of troops, access for international monitors and negotiations between Ukraine and Russia. Designation criteria targeted those “responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine” (Council of the EU 2022). The Donetsk and Luhansk sanctions regime was adopted after the EU had repeatedly warned Russia of “massive consequences and severe costs, including a wide array of sectoral and individual restrictive measures” in case of further aggression against Ukraine. Condemning the recognition of Donetsk and Luhansk as a breach of international law, the Council urged Russia to “reverse 18

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the recognition, uphold its commitments in finding a peaceful settlement to this conflict, abide by international law and return to the discussions within the Normandy format and the Trilateral Contact Group” (Ibid.). The designation criteria of the territorial integrity regime were amended to include individuals and entities “supporting and benefiting from the Russian government”, “providing a substantial source of revenue to it” or “associated with listed persons or entities” (Council of the EU 2022).

Debating the Effectiveness of EU Sanctions on Russia The traditional view would examine the level of economic damage and political impact. Such calculation relies on the logic of Galtung’s “naïve theory” of sanctions (1967), according to which sanctions are expected to generate sufficient economic deprivation to compel the leadership to conform to sender demands. Applying this perspective renders a disappointing picture of sanctions effectiveness. Examining the impact of different measures after the sanctions package has been in place for one year, Connolly (2016) concludes that most of them have had a marginal economic impact. The economic downturn that occurred in Russia following the imposition of sanctions is largely attributable to the worldwide drop in oil prices, and even if sanctions played a role, it is difficult to quantify the extent to which they contributed to the downturn. The prohibition on lending from European financial markets is the only measure that displayed a noticeable economic effect. By contrast, the impact of the arms embargo has been marginal as arms trade intensifies with non-Western countries. Finally, the embargo on technology required for energy exploration has not displayed any impacts. In terms of political effectiveness, the annexation of Crimea persists, and although the intensity of fighting in Eastern Ukraine subsided, no significant progress was recorded in the implementation of the Minsk agreements. This assessment, despite its robust scientific foundation, has been qualified by Christie (2016, 53), who claims that sanctions were neither intended nor designed to cause major economic disruption on the target, positing that “in order to assess the impact and effectiveness of these measures, one must first establish their actual intent, based on their initial design criteria”. This emphasis on design criteria seems warranted: any analysis of sanctions effectiveness ought to be preceded by a determination of its stated objectives. The design criteria corroborate the idea that they were not meant to inflict major economic harm, as the explicitly mention that “the costs to Russia should be significant, but not catastrophic” (European Council 2014). On the basis of this reconsideration of the goals of sanctions, the purported lack of effectiveness of the measures has been challenged. Some economists brought in a refreshing perspective in highlighting that Russian companies that were included in Western blacklists have performed significantly worse than others (Ahn and Ludema 2019; Korhonen et al. 2018). This approach is highly meaningful. Sanctions are purposefully designed to hit specific individuals and entities, in line with the notion of targeted sanctions (Brzoska 2003; Giumelli 2015), to which the EU has subscribed programmatically (Council of the EU 2004, 3; Council of the EU 2012), and implemented since the mid-1990s (Portela 2010). Thus, it follows that their impact ought to be measured by the comparative disadvantage that it creates vis-à-vis non-targeted firms. Regarding political effectiveness, more differentiated analyses have been attempted, examining progress towards several sanctions goals (Moret et al. 2016). It has been posited that the announcement of sanctions curbed escalation by deterring an attack on the Ukrainian town of Mariupol, an important harbour and industrial centre which was expected to fall to Russian-backed separatists (Gould-Davies 2020). It has also been convincingly argued that the threat of new sanctions incited Russia to refrain from recognising the results of the 2014 elections in the separatist territories of 19

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Eastern Ukraine, thereby depriving separatist political structures in Donbass from legitimation (Secrieru 2015). Further insights on sanctions objectives can be obtained from the public statements of leading EU figures such as the High Representative for Foreign Affairs and Security Policy/Vice President (HR/VP) Josep Borrell and Commission President Ursula von der Leyen. When Commission President von der Leyen first announced sanctions following the invasion of Ukraine, she claimed they aimed to “cripple Putin’s ability to finance his war machine” (European Commission, 2022). She described the fourth package of sanctions as aiming “to further isolate Russia and drain the resources it uses to finance this (…) war”. She spoke of “pressuring Russian elites close to Putin as well as their families and enablers” and mentioned the determination to “stop the group close to Putin and the architects of his war” and “hit a central sector of Russia’s system, deprive it of billions of export revenues and ensure that our citizens are not subsidising Putin’s war” (European Commission 2022). For his part, HR/VP Borrell highlighted that in addition to limiting the economic resources of the target country, sanctions fulfil a symbolic function by messaging the unacceptability of its behaviour: “The political signal is now very strong: Europe is willing to take significant economic risks to coerce Russia for its invasion and to extend its political margin of manoeuvre vis-à-vis Moscow in the future” (Borrell 2022). Interestingly, the statements by von der Leyen and Borrell seem to have different emphases. While von der Leyen’s discourse aggressively highlights the expected impact of sanctions on Russia’s ability to wage war, Borrell stresses the normative and symbolic aspects. Following the idea that sanctions fulfil multiple functions beyond compliance, their effectiveness can be assessed in accomplishing other roles. One of these roles is to compel third countries to position themselves in the dispute between Moscow and Kiev, highlighting its value as an element of grand strategy (Taylor 2010) and as a sign of support to allies (Borzyskowski and Portela 2018). In its neighbourhood, the EU employed its invitations to countries to align with its sanctions to produce this outcome (Hellquist 2016), although the positioning on sanctions has had ramification in regions well beyond its neighbourhood, such as in Asia-Pacific (Shagina 2020). This connects with the idea that the collective use of sanctions can be seen as a means to define the identity of the EU as an international actor by providing it with a tool allowing it to express its view of what constitutes deplorable behaviour. It signalises towards its domestic constituencies that EU foreign policy is guided by values. It also helps constructing the EU as an entity endowed with a single voice: instead of being a purely economic organisation, or a composite actor paralysed by the disagreements among its member states over foreign policy, it is ready to stand up in support of morality. Vis-à-vis third parties, the imposition and persistence of the sanctions regime helps establish the credibility of the EU’s sincere commitment to the values it intends to promote. This credibility needs to be established arguably with target and domestic audiences, but also with regard to third countries to the extent that foreign policy sanctions strengthen the presence of the EU on the international stage (Blavoukos and Bourantonis 2014), they have had the effect of raising its profile as an international actor, positioning it in favour of the preservation of international law and specifically of the principles of respect for the territorial sovereignty of states and the inviolability of borders. Moreover, the joint sanctions imposition under the CFSP enhances its presence on the world stage as an advocate of international law, democracy and human rights, as demonstrated by the EU’s discourse. It allows the EU to portray itself as a unified entity – “the EU stands firmly with the brave people of Ukraine”— thanks to “sanctions we have adopted” (von der Leyen 2022). It also aligns Brussels with its global allies in what is presented as a joint endeavour: “the EU and our partners in the G7 continue to work in lockstep to ramp up the economic pressure against the Kremlin” (von der Leyen 2022). The normative intent of sanctions finds reflection in the EU 20

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discourse, as a price to pay for breaching internationally agreed principles: “Russia cannot grossly violate international law and, at the same time, expect to benefit from the privileges of being part of the international economic order” (Borrell 2022). Closely connected to the magnitude of the violation, public support for the sanctions against Russia remains high on average, although it varies across EU Member States (Portela et al. 2021).

Discussion This brief attempt at an evaluation of the effectiveness of EU sanctions on Russia provides us with a number of insights. Firstly, mainstream exercises of sanctions evaluation are exceedingly focused on the analysis of economic impacts. Undoubtedly, such analysis is essential for our understanding of the sanctions regimes and its impact, but sanctions evaluation does not exhaust itself in this exercise. Secondly, the evaluation of sanctions efficacy should adopt the habit of first interrogating the goals of sanctions before proceeding to assess the extent to which they have been realised. Sanctions scholarship offers some solid foundations to identify the myriad of roles played by sanctions in international politics (Jones and Portela 2020). This said, research is not solely responsible for focusing almost exclusively on quantifying the hardship inflicted from an economic viewpoint and compliance with political perspective. To the extent that the evaluation exercise relies on the identification of stated objectives, it is the senders’ task to make them explicit. Regrettably, their public articulation of goals and functions of sanctions remains confusing. The EU Global Strategy, for instance, mentions sanctions always in combination with diplomacy, and often in conjunction with peace and human rights: “long-term work on pre-emptive peace, resilience and human rights must be tied to crisis response through (…) sanctions and diplomacy” (Mogherini 2016, 51). While sanctions are portrayed as instruments of peace, claiming that “restrictive measures, coupled with diplomacy, are key tools to bring about peaceful change” (Ibid., p. 32), individual sanctions regimes typically provide little information, if any, of how they aim to promote such peaceful change, leaving it up to the imagination of researchers to establish whether and to what degree sanctions are contributing to this objective.

Conclusion This brief overview of sanctions evaluation reveals a number of counterintuitive – if not contradictory – characteristics. Firstly, the persistence of the scholarly divide setting apart the disciplines of economics and International Relations is still perceptible in the former’s understanding of sanctions effectiveness to predominantly (or sometimes merely) economic impacts. Most importantly, sanctions scholarship moved to assess the effectiveness of sanctions before discussing the measurement, and above all, the goals against which they ought to be evaluated. While goals other than compliance were identified discussed by a number of authors, mainstream scholarship dismissed their measurement as inviable, or simply ignored it. Current scholarship still shows a focus on compliance, two additional functions are often considered: messaging and constraining. Yet, this practice seems to limit the roles of sanctions to these three purposes, leaving out any additional function. By contrast, a cursory overview of the justifications put forward to justify the sanctions against Russia reveals a variety of purposes that follow different logics. If the veracity of those diverse set of objectives is to be believed, this lends credence to the notion that sanctions are not only about compliance. It follows that the evaluation of their performance ought to be expanded well beyond the goal of compliance that dominates the field, and even beyond the tripartition of “coercing–messaging–constraining” that is becoming popular with recent scholarship. 21

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Evaluation of Sanctions Efficacy news-and-events/news/european-union-and-its-partners-are-working-cripple-putins-ability-finance-hiswar-machine-president-2022-02-26_en Felbermayr, G., Kirilakha, A., Syropoulos, C., Yalcin, E. and Yotov, Y. (2020) “The Global Sanctions Data Base”, European Economic Review, 129, 1–23. Galtung, J. (1967) “On the Effects of International Economic Sanctions, With Examples from the Case of Rhodesia”, World Politics, 19. Ghodsi, M. and Karamelikli, H. (2022) “The Impact of Sanctions Imposed by the EU Against Iran on Their Bilateral Trade”, World Trade Review, 21(1), 33–57. Giumelli, F. (2011) Coercing, Constraining and Signalling, Colchester: ECPR Press. Giumelli, F. (2015) “Understanding United Nations Targeted Sanctions: An Empirical Analysis”, International Affairs, 91(6). Gould-Davies, N. (2020) “Russia, the West and Sanctions”, Survival, 62(1), 7–28. Hellquist, E. (2016) “Either with Us or against Us? Third Country Alignment with EU Sanctions against Russia/Ukraine”, Cambridge Review of International Affairs, 29(3). https://doi.org/10.1080/09557571. 2016.1230591 Helwig, N., Jokela, J. and Portela, C. (2020) “EU-Sanktionspolitik in Geopolitischen Zeiten”, Zeitschrift Für Integration, 4, 278–94. Hoffmann, F. (1967) “The Functions of Economic Sanctions: A Comparative Analysis”, Journal of Peace Research, 4(2), 140–159. Hovi, J., Huseby, R. and Sprinz, D. (2005) “When Do (Imposed) Economic Sanctions Work?”, World Politics, 57, 479–99. Hufbauer, G.C., Schott, J.J. and Elliot, K.A. (1980) Economic Sanctions Reconsidered. History and Current Policy, Washington, DC: Institute for International Economics. Hufbauer, G.C., Schott, J.J., Elliot, K.A. and Oegger, B. (2007) Economic Sanctions Reconsidered. History and Current Policy, Washington, DC: Institute for International Economics. Jones, L. and Portela, C. (2020) “Evaluating the Success of International Sanctions: A New Research Agenda”, Afers Internacionals, (125), 39–60. Kaempfner, W. and Lowenberg, A. (2007) “The Political Economy of Economic Sanctions”, in T. Sandler and K. Hartley (eds.) Handbook of Defense Economics, North Holland: Amsterdam, pp. 867–911. Kirshner, J. (1997) “The Microfoundations of Economic Sanctions”, Security Studies, 6(3). Korhonen, I., Simola, H. and Solanko, L. (2018) “Sanctions, Counter-Sanctions and Russia − Effects on Economy, Trade and Finance”, BOFIT Policy Brief 4/2018. Lindsay, J. (1986) “Trade Sanctions as Policy Instruments: A Re-Examination”, International Studies Quarterly, 30. https://doi.org/10.2307/2600674 Mack, A. and Khan, A. (2000) “The Effectiveness of UN Sanctions”, Security Dialogue, 31(3), 279–292. McLean, E. (2021) “Economic Coercion”, in J. Pevehouse and L. Seabrooke (comps.), Oxford Handbook of International Political Economy, New York: OUP. Miadzvetskaya, Y. and Challet, C. (2022) “Are EU Restrictive Measures Really Targeted, Temporary and Preventive? The Case of Belarus”, Europe and the World: A Law Review. https://uclpress.scienceopen. com/hosted-document?doi=10.14324/111.444.ewlj.2022.03 Mogherini, F. (2016) Shared Vision, Common Action: A Stronger Europe. A Global Strategy for the European Union’s Foreign and Security Policy, EU: Brussels. Moret, E. et al. (2016) The New Deterrent: International Sanctions against Russia, Graduate Institute: Geneva. Pape, R. (1997) “Why Economic Sanctions Do Not Work”, International Security, 22 (2). https://repository. graduateinstitute.ch/record/294704 Peksen, D. (2019) “When Do Imposed Economic Sanctions Work? A Critical Review of the Sanctions Effectiveness Literature”, Defence and Peace Economics, 30(6), 634–647. Portela, C. (2010) European Union Sanctions and Foreign Policy, London: Routledge. Portela, C. (2021) “Horizontal Sanctions Regimes: Targeted Sanctions Reconfigured?”, in C. Beaucillon (ed.) Research Handbook on Unilateral and Extraterritorial Sanctions, Cheltenham: Edward Elgar, pp. 441–457. Portela, C. (2022a) “EU-Sanktionen gegen Russland: Ein Überblick über Evaluierungspraxis”, Osteuropa, 71(10–12), 103–113. Portela, C. (2022b) “Las sanciones PESC como instrumento en la lucha contra la corrupción y la promoción de la buena gobernanza en la política exterior de la UE”, in S. Sanz (ed.) La Unión Europea y El Reto Del Estado De Derecho, Aranzadi-Thomson Reuters, pp. 157–177.

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Clara Portela Portela, C. and Charron, A. (2023) “The Evolution of Databases in the Age of Targeted Sanctions”, International Studies Review, 25(1). Portela, C. and Kluge, J. (2022) Slow-Acting Tools. Evaluating EU Sanctions against Russia after the Invasion of Ukraine, Brief 11, Paris: EUISS. Portela, C., Pospieszna, P., Skrzypczyńska, J. and Walentek, D. (2021) “Consensus against All Odds: Explaining the Persistence of EU Sanctions on Russia”, Journal of European Integration, 43(6), 683–99. Secrieru, S. (2015). “Have EU Sanctions Changed Russia’s Behaviour in Ukraine?” in On Target? EU Sanctions as Security Policy Tools, European Union Institute for Security Studies Report No. 25. Shagina, M. (2020) “Asia-Pacific’s Responses to the Ukraine Crisis: Third-Party Alignment with Sanctions on Russia”, Afers Internacionals, (125), 139–164. Stępień, B., Pospieszna, P. and Skrzypczyńska, J. (2016) “Challenges in Evaluating Impact of Sanctions – Political vs Economic Perspective”, Przegląd Politologiczny, 4, 155–168. Taylor, B. (2010) Sanctions as Grand Strategy, London: IISS. von der Leyen, U. (2022) European Commission “Statement by President von der Leyen on Further Measures to React to Russia’s Invasion of Ukraine”, 26 February 2022. Wallensteen, P. (1968) “Characteristics of Economic Sanctions”, Journal of Peace Research, 3. https://ideas. repec.org/a/sae/joupea/v5y1968i3p248-267.html Wessel, R., Anttila, E., Obenheimer, H. and Ursu, A. (2021) “The Future of EU Foreign, Security and Defence Policy: Assessing Legal Options for Improvement”, European Law Journal, 26(5–6).

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2 A BRIEF OVERVIEW OF THE HISTORICAL AND CURRENT USE OF UNILATERAL SANCTIONS Hazar Kaan Özkonak

Introduction The term ‘unilateral sanctions,’ also known as unilateral coercive measures or restrictive measures, can be used to refer to non-forcible measures which have been taken since antiquity both in wartime and peacetime. These sanctions can be imposed by both pre-modern and modern states and/or international organizations (the European Union [EU] is the only example so far), i.e., ‘sanctions senders’, unilaterally without or beyond the authorization of a higher authority, such as the United Nations Security Council (UNSC), or the prior consent of their targets. Sanctions senders can impose them against the following ‘sanctions targets’: states, international organizations or persons, i.e., individuals or entities. The latest examples of unilateral sanctions are sanctions imposed by the United States (US) and the EU against the Russia Federation in response to the invasion of Ukraine in 2022. As a foreign policy tool in international politics, sanctions senders impose unilateral sanctions to achieve a wide range of objectives by inducing their targets to change specific internal or international behaviors. These objectives have become diversified in various cases throughout history. Some of them are as follows: pursuing religious matters, ensuring national security, conducting ‘traditional [or wartime] economic warfare’ (Lowe and Tzanakopoulos, 2010, para. 31) to end capacity of the enemy to wage war, and conducting peacetime economic warfare to weaken their rivals by broad unilateral economic sanctions which can ‘resemble traditional means of economic warfare’ (Ibid, para. 28). Starting from the 19th century when international law started to be universalized as a global legal order, sanctions senders have imposed unilateral sanctions in response to the violation of norms and principles of international (and transnational) law such as aggression, human rights violations, support of terrorism, drug trafficking and corruption. Thus, seeking legal remedy, i.e., enforcing norms and principles of international (and transnational) law, is another objective of unilateral sanctions, and unilateral sanctions have also been used as a legal remedy tool since the 1800s. Since antiquity, sanction senders have in practice adopted different types of unilateral sanctions that could be categorized according to the activities restricted in various areas such as trade, finance, foreign aid, military, diplomacy, correspondence, education, culture and sports. Of these types, the following prominent ones are covered in this chapter to indicate the evolution of the DOI: 10.4324/9781003327448-4

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use of unilateral sanctions throughout history: (1) Trade sanctions (embargoes) typically restrict partial or total exports to, and imports from, the targeted states. (2) Financial sanctions generally prohibit conducting transactions with, and providing financial services to, a person or a state as a whole. Also, freezing the assets of individuals or entities within the jurisdiction of sanctions senders is another popular method of financial sanctions. (3) Travel sanctions limit targets’ access to the territorial jurisdiction of sanctions senders. (4) Correspondence sanctions restrict the communication channels between sanctions senders and targets. In some cases, targeted states may perceive broad objectives and types of unilateral sanctions, in particular economic sanctions, i.e., trade and financial sanctions, as a threat to their political, military and economic strategic plans. In response to these unilateral sanctions such as sanctions impeding their access to natural resources, and until the prohibition of the use of force in international law, it was common to declare war against sender states to force them to remove their sanctions (for a similar approach, see Doughty and Raugh, 1991, pp. 26–28). Hence, there was a correlation between the use of unilateral sanctions creating (or having the potential to create) strategically devastating impacts on the targeted states and the outbreak of war between sanctions senders and the targeted states until 1945. After a long period of silence (1945–2014), this correlation continues today even if the use of force by the targeted states has been replaced with the use of counter-sanctions in practice since 2014. Since antiquity, unilateral sanctions have had severe negative and indiscriminative humanitarian impacts on the civilian populations of targeted states (sometimes referred to as collateral damage), including widespread malnutrition, severe power and water shortages and large-scale unemployment. These negative impacts became most apparent to the international community in the 1990s during the period of broad sanctions on Iraq imposed by the United Nations (UN). The international community accepted comprehensive sanctions, which had been one of the traditional methods of implementing unilateral and multilateral sanctions until the 1990s, as the main reason of such humanitarian issues in peacetime—blockade may be another main reason in wartime. Since then, to diminish the negative and indiscriminative humanitarian impacts, the international community has made two improvements in the use of sanctions which are the encouragement of providing certain humanitarian exemptions and the development of new implementation methods for sanctions, i.e., contemporary implementation methods, such as targeted, selective targeted and sectoral sanctions. Despite these attempts, the problems of applying these improvements in practice and the use of secondary sanctions, another method of implementing unilateral sanctions, have still caused substantial collateral damage to civilian populations. This chapter provides a brief overview of the historical and current use of unilateral sanctions by tracing back certain prominent examples from the Ancient (pre-11th century), Commercial Revolution (11th–19th century), Late Modern (19th century–1945) and Contemporary (1945–Present) periods. It accepts that the objectives, types and implementation methods of unilateral sanctions are distinctive features of the use of unilateral sanctions and follows the evolution of these features in the periods concerned. It also argues that there are two main common features of the use of unilateral sanctions in all these periods. First, there are severe negative and indiscriminate humanitarian impacts of the use of unilateral sanctions on civilian populations of the targeted states which date back a long time in history and may still cause collateral damage to the civilian populations despite recent humanitarian exemptions and the development of contemporary implementation methods of unilateral sanctions. Second, there is a correlation between the use of unilateral sanctions creating (or having the potential to create) strategically devastating impacts on targeted states and the outbreak of war between sanctions senders and targeted states, which dates back a long time in history and continues at the present time as a new form of war, i.e., ‘the 26

The Historical and Current Use of Unilateral Sanctions

war of sanctions’. A brief conclusion is given in the last section to sum up and project the risks of imposing unilateral sanctions in current practice in the light of the two common features of the use of unilateral sanctions.

Ancient Period (Pre-11th Century) As one of the first sanctions senders in history, Athens imposed the Megarian Decree and excluded the merchants of Megara ‘from the market of Athens and the ports in its empire’ in around 433 BCE (Lendering, 2020). This Decree was an ancient example of travel sanctions since it only restricted the access of merchants of Megara to Athens. Athens imposed this sanction in response to the Megarians’ several harmful activities such as the cultivation of the holy land that was consecrated to Demeter, a goddess of agriculture, and the murder of an Athenian herald (Ibid). Thus, the objectives of this ancient unilateral sanction were pursuing religious matters and ensuring the national security of Athens. As portrayed by Aristophanes, because of Athens’s sanction, the Megarians began to ‘die of hunger’ (Aristophanes, 2019, p. 28). Aristophanes thus highlighted the severe negative and indiscriminate humanitarian impacts of Athens’s sanction on the civilian population of Megara. However, it is controversial to what extent Athen’s travel sanction had in fact damaged Megarian trade (for this discussion, see Sealey, 1975, pp. 103–105). It is nevertheless obvious that Athens’s sanction must have changed regular trade practices between parties to some extent, and some Megarians may have been suffered considerable economic hardship in this process. Sparta later started the Peloponnesian War to protect its ally, Megara. Although it is controversial for some whether Athens’s sanction was the ‘real cause’ of the war (Croix, 1972, p. 2), it is obvious that, even if it did not directly target Sparta, Athens’s travel sanction ultimately fueled existing antagonism further between Athens and Sparta and became one of the immediate causes of the long-lasting Peloponnesian War. Hence, this case shows a correlation between the use of unilateral sanctions that had the potential to create strategically devastating impacts on Sparta and its ally Megara and the outbreak of war between Megara, supported by Sparta, and Athens.

Commercial Revolution Period (11th–19th Century) The commercial revolution in Europe lasted from the 11th century to the 19th century and significantly increased trade volumes across the world. This also increased the importance of trade as a foreign policy tool in the Middle Ages and the Early Modern era. Sanctions senders thus used trade sanctions, i.e., embargoes, as a predominant, ‘well-conceptualized and continuously employed’ type of unilateral sanctions in this period (Stantchev, 2012, p. 399). The objectives of such unilateral sanctions usually involved conducting traditional (or wartime) economic warfare, pursuing religious matters and ensuring national security. As an example, England restricted trade with Flanders around the 1300s to ensure its national security by gaining Flanders’s support against France (Stantchev, 2012, p. 394). The papacy, which for instance embargoed Muslims, Eastern Christians, pagans in the Baltic, was an important religious-based sanctions sender in the Middle Ages (Ibid, p. 398). In the 16th century, long-standing embargoes in the form of traditional economic warfare were also imposed by the Ottoman and Spanish empires against one another (Bal, 2012, p. 202). The following example marked both humanitarian and strategically devastating impacts of the use of unilateral sanctions in the Commercial Revolution period. Although it was a neutral state during the Seven Years War (1756–1763) between Great Britain and France, the Kingdom of Spain 27

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imposed a total embargo against the British on 10 December 1761 and supported France due to its concerns about the further economic and military power of the British over Spanish territories after the war (Christelow, 1946, p. 25). The objectives of these sanctions involved throwing ‘the whole British industrial system into confusion’, creating ‘widespread unemployment and discontent’, rendering ‘raising money for the war impossible’ and obtaining ‘peace for France and Spain on satisfactory terms’ (Ibid, p. 28). In response to this sanction, Great Britain declared war against Spain on 2 January 1762. This shows that Spain’s broad objectives and trade sanctions must have been perceived by Great Britain as a threat to its political, military and economic strategic plans. Accordingly, similar to the Ancient period, there was also a correlation in this period between the use of unilateral sanctions that created strategically devastating impacts on a targeted state and the war between sanctions senders and their targeted states. In addition, it is very likely that such an embargo would create severe negative and indiscriminate humanitarian impacts on the British population such as widespread unemployment and discontent.

Late Modern Period (19th Century–1945) There were large-scale international armed conflicts that occurred from the 1800s to 1945 in international politics. Sanctions senders thus generally resorted to unilateral sanctions only during wartime in this period. In certain cases in which they were imposed in peacetime, their use also provoked war, and they become wartime sanctions, as exemplified below by the US sanctions against Japan on the eve of its participation in World War II. The prominent types of such wartime unilateral sanctions were trade sanctions and early examples of correspondence and financial sanctions. For instance, during the Napoleonic Wars (1803– 1815), France issued the Berlin Decree of 1806 that established the Continental System requiring a total embargo on British products in Europe. Article II of this Decree also prohibited posting ‘letters or packets, addressed either to England, to an Englishman, or in the English language’ which could refer to an early example of correspondence sanctions. One century later, during World War I (1914–1918), the Allies, i.e., the United Kingdom (UK), France and their allies, imposed ‘unprecedented’ blockades and unilateral sanctions against the Axis, i.e., Germany, the AustroHungarian Empire and the Ottoman Empire and their allies (Mulder, 2022). In particular, they controlled and interrupted their enemies’ ‘flows of goods, energy, food and information’ (Mulder, 2022) by inter alia ‘denying credit on international bankers’ ledgers’ (Dehne, 2019) which could be considered an early example of financial sanctions. In this period, sanctions senders’ main objectives were typically conducting traditional economic warfare to weaken the enemy in wartime and ensuring national security in peacetime. However, since international law universalized as a global legal order starting from the 19th century (Lorca, 2010, p. 475), seeking legal remedy has become one of the objectives of unilateral sanctions since the Late Modern period both in wartime and peacetime. One of the first examples of seeking legal remedy was the Berlin Decree above. In response to certain allegedly unlawful acts of the UK, to enforce the international legal order in the 1800s, Napoleonic France issued the Decree and argued under Preamble 1 that the UK did not ‘admit the right of nations as universally acknowledged by all civilized people’. Similar to the previous periods, the use of unilateral sanctions in the Late Modern period also created severe negative and indiscriminate humanitarian impacts on civilian populations of the targeted states in certain cases. For instance, owing to the Allies’ unilateral sanctions that were supported with blockade during World War I, ‘thousands died of hunger and disease and civilian 28

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society was gravely dislocated’ in the targeted regions (Mulder, 2022). Some of these sanctions and blockade continued to be imposed against Germany, even after the armistice in November 1918, until the Treaty of Versailles was signed on 28 June 1919 (Howard, 1993, 161–162). Despite the examples in wartime above, unilateral sanctions were also imposed in peacetime in this period. However, there were cases in which they often quickly became the immediate cause of war because such sanctions escalated tensions and provoked war between sanctions senders and targeted states. For example, after the stationing of the Japanese Army on Indochina in July 1941, the US imposed a full embargo and froze all Japanese assets in the US (The Office of the Historian, n.d.). The British and Dutch later joined the US and imposed similar restrictions against Japan (Doughty and Raugh, 1991, p. 28). These sanctions prevented the Japanese from accessing strategic supplies that were vital for their industry (Ibid). To be able to remove these restrictions, on 7–8 December 1941, Japan attacked the US fleet at Pearl Harbor and the regions of Malaya, Singapore, and Hong Kong which were controlled by the British, and the parties entered World War II against each other. Since Japan went so far as to use its military power to react to these sanctions, it seems that Japan perceived these sanctions as a threat to its political, military and economic strategic plans in Asia. Accordingly, similar to previous periods, a correlation in this period exists between the use of unilateral sanctions that created strategically devastating impacts on targeted states and the war between sanctions senders and targeted states.

Contemporary Period (1945–Present) The Contemporary period shows the evolution of the objectives, types and implementation methods of unilateral sanctions starting from the aftermath of World War II. The use of unilateral sanctions in the Contemporary period could be divided into two geopolitical periods: the Cold War (1945–1991) and the post-Cold War period (1991–Present). Unless the differences of these geopolitical periods in the use of unilateral sanctions are specifically shown below, sanctions senders’ practice is the same in both geopolitical periods. In this period, sanctions senders have imposed the most developed and the best designed versions of all types of unilateral sanctions compared to early versions of them in the previous periods. In particular, trade, financial, aid, military, diplomatic and travel sanctions have been frequently imposed by sanctions senders. The US was the predominant sanctions sender until the 1990s because of its economic, political and military hegemony especially in the early period of the Cold War (Hufbauer et al., 2007, p. 125). After the EU established its Common Foreign and Security Policy in 1992 by the Maastricht Treaty, it has also become another leading sanctions sender (Russell, 2018, p. 2). During the post-Cold War period, the US and the EU have imposed around 30 separate country-based and themed sanctions regimes and thousands of sanctions aiming at states, individuals and entities. Despite such widespread use of unilateral sanctions by western countries, other developed and developing countries have also resorted to unilateral sanctions in international politics. For example, from 2017 to 2021, the Kingdom of Saudi Arabia, the United Arab Emirates and the Kingdom of Bahrain and the Arab Republic of Egypt imposed wide-ranging trade, financial, diplomatic, travel sanctions on Qatar. Due to the security- and ideology-based political climate during the Cold War, it could be argued that sanctions senders from both the Western Bloc and the Eastern Bloc mainly imposed unilateral sanctions until the 1990s as a foreign policy tool rather than a legal remedy tool (Hufbauer et al., 2007, pp. 125–126). Their objectives inter alia included ensuring national security, conducting peacetime economic warfare, changing regimes in opposing or allied countries (Ibid, pp. 52–53 and 67–69), inducing various ‘modest’ (Ibid, pp. 52 and 66–67) and ‘major’ 29

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(Ibid, pp. 53 and 72–73) policy changes and seeking legal remedy in response to aggression (Ibid, pp. 53 and 69–70 mentioning ‘disrupting a military adventure’) and the non-compliance with ‘nuclear nonproliferation safeguards’ (Ibid, p. 12). Although ‘[defending] human rights became a (…) priority goal of US sanctions policy’ in the late 1970s, the US was still reluctant to impose tight sanctions in this regard for fear of losing their allies in the Cold War as exemplified in the cases of El Salvador and Guatemala (Ibid, p. 13, 128). Certain prominent examples of Cold War sanctions were as follows: the Arab oil embargo against states supporting Israel in the 1970s, the US sanctions against Iran following the hostage crisis and certain terrorist attacks in the 1980s, the US sanctions against Cuba which were first imposed to weaken its communist regime and have been in effect since the early 1960s with several rounds of modifications. The dissolution of the Soviet Union on 26 December 1991 ended the Cold War and lifted the ‘global security threat’ of ideological differences (Hufbauer et al., 2007, p. 126). This date marked the start of the post-Cold War geopolitical period in which new global and regional powers have emerged in international politics. These new powers have faced ‘fresh diplomatic fronts’ such as ‘ethnic strife, civil chaos, human rights and democracy, terrorism, narcotics, and others’ (Ibid, p. 126). Thus, unlike during the Cold War, sanctions senders in this geopolitical period have increasingly resorted to prolific and diversified unilateral sanctions as not only a foreign policy tool but also a more effective legal remedy tool. Certain objectives of post-Cold War unilateral sanctions have included ensuring national security, conducting peacetime economic warfare, restoring or promoting democracy—generally by the US and EU(Ibid, 68)—inducing various policy changes and more effectively seeking legal remedy in response to aggression, non-compliance with nuclear nonproliferation safeguards, human rights violations, support of terrorism, drug trafficking and corruption and so forth. After World War II, while the UN system has not regulated the use of unilateral sanctions in any way, it has established its own centralized peacetime multilateral sanctions mechanism and prohibited the threat or use of force by states individually or collectively, except self-defense, under Articles 2(4) and 51 of the UN Charter. Following this, armed conflicts have sharply decreased in international politics, and the use of unilateral and multilateral sanctions, in particular broad economic sanctions, have gradually become an alternative to armed conflict (Lowe and Tzanakopoulos, 2010, paras. 28–30). Rather than waging war, states have preferred imposing unilateral (or multilateral) sanctions in this period to solve the issues between them, and targeted states (or states the citizens of which are targeted) have accordingly reacted against the use of unilateral sanctions by merely minor or symbolic unilateral sanctions. Therefore, unlike the previous periods, it has been very rare in the Contemporary period until recently to find a correlation between the use of unilateral sanctions creating (or having the potential to create) strategically devastating impacts on the targeted states and outbreak of war between sanctions senders and the targeted states. However, after a long period of weak responses (1945–2014), the targeted states (or states the citizens of which are targeted) have started resorting to prominent ‘counter’ (unilateral) sanctions against sanctions senders, particularly western actors, imposing strategically devastating sanctions starting from the imposition of counter-sanctions by Russia in response to western sanctions related to the annexation of Crimea in 2014. Moreover, unlike previous ad hoc counter-sanctions, some targeted states have even specifically legislated the framework of their counter-sanctions regimes such as the Law on Counter-Sanctions by Russia (Federal Law No. 127-FZ, 2018) and the Anti-Foreign Sanctions Law by China (Anti-Foreign Sanctions Law, 2021) which were imposed in response to western sanctions. This shows that a correlation still exists in practice between the use of unilateral sanctions and outbreak of war between the parties of such sanctions. Even though 30

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it is not a full-scale war involving armed forces as in the past, it is ‘the war of sanctions’ today which is a new form of war and an alternative to armed conflict. In parallel to the previous periods, the use of unilateral sanctions in the Contemporary period has also created severe negative and indiscriminate humanitarian impacts on the civilian populations of targeted states. The following paragraphs explore these humanitarian impacts and how these impacts still exist despite certain humanitarian exemptions and contemporary implementation methods of unilateral (and multilateral) sanctions which have been encouraged and developed to diminish these negative impacts since the 1990s. During the Cold War, the humanitarian impacts of both unilateral and multilateral sanctions were not easily visible. While states targeted by unilateral sanctions were able to find alternative elbow room in the opposing bloc if they were sanctioned by one bloc, multilateral sanctions of the UN were imposed very rarely during the Cold War due to ideological conflict between blocs (Gordon, 2011, p. 316). However, this invisibility trend has started changing since the 1990s when the UN imposed a broad multilateral sanctions regime against Iraq which remained in force from 1990 to 2003. Since these sanctions were imposed multilaterally by all UN members, Iraq could not find alternative methods to evade these sanctions. Iraqis thus faced ‘widespread malnutrition, the deterioration of the national health care system, severe shortages of electricity’ and so on in this term (Ibid, p. 316). The international community has accepted comprehensive sanctions, that had been one of the traditional implementation methods of (unilateral and multilateral) sanctions until the 1990s, as the main reason of such humanitarian issues in peacetime. Comprehensive sanctions are broad sanctions regimes that prohibit all activities within any type of sanctions, e.g., trade, financial or travel sanctions, with an entire state such as a total embargo, or a total flight ban. If they prohibit all types of sanctions with an entire state, known as all-encompassing comprehensive sanctions, they cause more collateral damage to the civilian population. To diminish negative and indiscriminative humanitarian impacts of the use of unilateral (and multilateral) sanctions, the international community has made the following two improvements in the use of (unilateral) sanctions. First, it has encouraged sanctions senders to provide certain humanitarian exemptions to their sanctions for civilian populations in the targeted states such as establishing of the Oil-for-Food Programme regarding the UN’s Iraq sanctions or creating certain licensing systems which allow the exportation of humanitarian goods and services to the targeted state. Second, it aimed to replace these sanctions with the contemporary implementation methods of (unilateral) sanctions. As this chapter focuses on unilateral sanctions, the following paragraphs deal with these improvements to the extent that they have affected the use of unilateral sanctions. For this reason, the contemporary concept of targeted (smart) sanctions was developed as a new implementation method for (unilateral) sanctions in the late 1990s and early 2000s (Gordon, 2011, pp. 318–321). As per this concept, sanctions senders list certain individuals and entities pursuant to their designation criteria and restrict all activities between these blacklisted persons and their citizens. Financial sanctions by freezing assets and travel sanctions by a visa ban are used as the most frequent types of sanctions in this regard. Targeted sanctions are generally imposed against the ‘leadership’, i.e., state actors, of the targeted states who are in fact responsible for the decision-making process (Ibid, p. 318). Later, this new trend has also been extended to non-state actors due to their close relations with the leadership or their role on theme-based activities such as terrorism or drug dealing irrespective of their location. When they target the latter, they are also known as horizontal sanctions (Portela, 2019). The use of targeted sanctions has become a trend in the realm of sanctions and almost completely taken the place of comprehensive sanctions since the 2000s. 31

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In the same time interval, the use of comprehensive sanctions has also frequently been replaced with selective sanctions which was another traditional implementation way of sanctions until the 1990s. Selective sanctions restrict certain activities within any type of sanctions with an entire country such as a partial embargo. In some cases, the leadership of the targeted states may benefit from the flow of specific products to the targeted states, such as arms, petroleum products, timber or diamonds, to continue performing a wrongful act such as aggression (Gordon, 2011, pp. 318 and 326). If such a flow is prohibited by sanctions to impede the leadership from using it, such selective sanctions may also be considered ‘within the realm of smart sanctions’ (Hufbauer et al., 2007, p. 138) and could be called selective targeted (or smart) sanctions. According to the common view, the use of targeted sanctions has remarkably diminished the humanitarian impacts of (unilateral) sanctions because they are smart by only targeting wrongdoer individuals rather than the whole state (Gordon, 2011, p. 332). However, if these targeted sanctions are imposed on (government) individuals or entities effectively operating in critical sectors of the state economy such as ‘electricity generation, transportation or telecommunication’, they may still cause collateral damage on the civilian population (Gordon, 2021, p. 96). In addition, not all selective targeted sanctions may be humanitarian enough if they target at ‘a nation’s financial system, or critical industries or exports’ without effective humanitarian exemptions (Gordon, 2011, p. 332). For example, the US and EU have gradually imposed far-reaching selective sanctions regimes, amounting to almost all-encompassing comprehensive sanctions, against Syria after the outbreak of the national crisis in 2011. These sanctions have been criticized for causing collateral damage to Syrian civilians and for ineffective humanitarian exemptions in practice (Jazairy, 2018). While responding to the annexation of Crimea by Russia in 2014, western sanctions senders decided to design and implement their sanctions more carefully, to prevent another crisis in the global economy after the 2007–2008 financial crisis (White, 2020). Thus, as a new implementation method for unilateral sanctions, sectoral (or surgical) sanctions are generally narrower than targeted sanctions by prohibiting to conduct only particular transactions with the backlisted persons in a certain sector (for example, see The Office of Foreign Assets Control [OFAC], 2017). Although these sanctions do not typically cause collateral damage in general as they only restrict particular activities of certain people, they may still create negative and indiscriminate humanitarian impacts if they target at (government) individuals or entities, such as a state-owned oil company or a central bank, that conduct critical activities or effectively operate in critical sectors of state economy (Gordon, 2021, p. 96). Despite the attempts of the development of the contemporary implementation methods described above to diminish the negative and indiscriminative humanitarian impacts of unilateral sanctions, the use of unilateral sanctions targeting at third parties may increase these impacts. It is therefore necessary to evaluate the following two additional implementation methods of unilateral sanctions which have been developed according to who the targets of unilateral sanctions are: primary and secondary (or extraterritorial) sanctions. Primary sanctions refer to the use of unilateral sanctions by state A to restrict the activities between its territories and state B (including individuals and entities located in these territories) (Ruys and Ryngaert, 2020, p. 7). In practice, if sanctions senders aim to strengthen the effectiveness and success of their primary sanctions regimes, they may enhance their sanctions’ targets to third parties. Secondary sanctions thus refer to the use of unilateral sanctions by state A to restrict the activities between the territories of state B which has already been subject to primary sanctions and the third-party state C (including individuals and entities located in these territories) (Ibid, p. 7). The US has been the predominant secondary sanctions sender in the Contemporary period. Unlike other secondary sanctions senders, it also imposes ‘draconian civil and criminal penalties’ 32

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(Ibid, 2020, p. 16) on non-US individuals and entities which has been criticized by many international actors including the US’s allies such as the EU (Lewis, 2021). One contemporary secondary sanctions example is sanctions imposed by the US on the trafficking of US property in Cuba in 1996 regulated under Title III of the Helms-Burton Act (Libertad, 1996)—which was suspended due to heavy international criticism but reimposed by the Trump Administration in 2019. Another example is the prohibition of U-turn transactions regarding Iran in 2008 (Iranian Transactions Regulations, 2008)—which was waived in 2016 for significant financial transactions by foreign financial institutions in relation to the Joint Comprehensive Plan of Action but reimposed in 2018. If secondary sanctions are imposed broadly or specifically targeted at a critical activity between third parties and primarily targeted state without effective humanitarian exemptions, they may also create severe negative and indiscriminative humanitarian impacts on both civilian populations of the primarily and secondarily targeted states (or states the citizens of which are targeted by those sanctions). For example, as many international contracts are denominated in US dollars, unless there are effective humanitarian exemptions, U-turn secondary sanctions of the US impede or becloud foreign trade between a third-party and primarily sanctioned states. In the event of this restricted trade is related to energy (petroleum or natural gas etc.), aviation, foodstuff, medicines and medical equipment, this would cause collateral damage to both civilian populations in those states as has happened with Iran and its trade partners due to the US’s Iran sanctions above. Compared to other secondary sanctions senders, such negative impacts may increase more owing to US sanctions because third parties have excessively complied with US sanctions regimes, namely the concept of over-compliance (for more information about the humanitarian impacts of overcompliance, see The Office of the High Commissioner for Human Rights [OHCHR], n.d.), in order not to lose their ‘lucrative US market[s]’ (Ruys and Ryngaert, 2020, p. 3) and abilities to conduct trade in the US dollar that is a reserve currency (Geranmayeh and Rapnouil, 2019).

Conclusion The evaluation of the historical and current use of unilateral sanctions indicated that, in each of the periods above, sanctions senders (have) imposed unilateral sanctions with a variety of objectives, types and implementation methods which could be accepted as distinctive features of the use of unilateral sanctions. The Ancient period marked one of the first unilateral sanctions in history that was the Megarian Decree in which comprehensive and selective travel sanctions were imposed by Athens to pursue religious matters and ensure national security. During the Commercial Revolution period, since trade became an important foreign policy tool, comprehensive and selective trade sanctions were predominantly imposed by sanctions senders, such as England, Venice, the papacy, the Ottoman Empire and Spain, to conduct traditional (or wartime) economic warfare, pursue religious matters and ensure national security. Since there were large-scale international conflicts in the Late Modern period, sanctions senders frequently imposed comprehensive and selective trade sanctions in wartime during this period. While Napoleonic France imposed early examples of comprehensive correspondence sanctions, the Allies imposed early examples financial sanctions during World War I. In this period, the objectives of unilateral sanctions were typically conducting traditional economic warfare to weaken the enemy in wartime, ensuring national security in peacetime and seeking legal remedy (the first time used in the case of Napoleonic France sanctions against the UK). In the Contemporary period, sanctions senders have imposed the most developed and the best designed versions of all types of unilateral sanctions in multiple implementation ways, in particular 33

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trade, financial, aid, military, diplomatic and travel sanctions, compared to early versions of them in the previous periods. While the US was the predominant sanctions sender in the Cold War, both the US and EU have become leading sanctions senders in the post-Cold War period. As the use of force is prohibited by the UN system, unilateral sanctions have generally been imposed in peacetime in this period. Certain objectives of sanctions senders inter alia have included ensuring national security, conducting peacetime economic warfare, inducing various policy changes and seeking legal remedy in response aggression, the non-compliance with nuclear nonproliferation safeguards, human rights violation, support of terrorism, drug trafficking and corruption and so forth. In all the periods concerned, it could be argued that there are two main common features of the use of unilateral sanctions. A common feature is that the use of unilateral sanctions has created severe negative and indiscriminative humanitarian impacts on civilian population of the targeted states since antiquity. For instance, the Megarians in the Ancient period, the British in the Commercial Revolution period, civilian populations of the Axis in the Late Modern period and Syrian and Iranian civilians in the Contemporary period have suffered from these humanitarian impacts of unilateral sanctions. This chapter briefly analyzed why the attempts to diminish such impacts have been ineffective in practice and how the use of unilateral sanctions may thus still create negative and indiscriminative humanitarian impacts. First, there have been ‘difficulties in making use of humanitarian exemptions’ in practice (Jazairy, 2018, pp. 8–12). Second, although the replacement of comprehensive sanctions with targeted, selective targeted or sectoral sanctions has prima facie reduced the humanitarian issues, they may still cause collateral damage without effective humanitarian exemptions if they are imposed on (government) individuals or entities that conduct critical activities or effectively operate in critical sectors of state economy or they target at a selective and critical activities of a state. Moreover, secondary sanctions may also cause collateral damage to civilian populations of both primarily and secondarily targeted states (or states the citizens of which are targeted by those sanctions). Under these circumstances, one of the main risks of imposing unilateral sanctions is to create negative and indiscriminative humanitarian impacts on civilian populations. To overcome such humanitarian concerns, sanctions senders should provide effective humanitarian exemptions in practice and allow more effective legal assessment of their use of unilateral sanctions. Another common feature of the use of unilateral sanctions in all the periods concerned is that there has been a correlation between the use of unilateral sanctions creating (or having the potential to create) strategically devastating impacts on the targeted states and outbreak of war between sanctions senders and the targeted states since antiquity. This correlation was exemplified in various cases throughout history such as Megara, supported by Sparta–Athens War in the Ancient period, Great Britain–Spain War in the Commercial Revolution period, Japan–US War (World War II) in the Late Modern period. Following the establishment of multilateral sanctions mechanism and the prohibition of the threat or use of force by the UN system, states have weakly reacted against the use of unilateral sanctions against them until recently. However, after a long period of weak responses (1945–2014), targeted states (or states the citizens of which are targeted) have started resorting to prominent counter-sanctions against sanctions senders, particularly western actors, starting from the imposition of counter-sanctions by Russia in response to western sanctions related to the annexation of Crimea in 2014. Currently, certain counter-sanctions senders such as China and Russia have even specifically legislated the framework of their counter-sanctions regimes. This shows that a correlation still exists in practice between the use of unilateral sanctions and outbreak

34

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of war—it is ‘the war of sanctions’ today which is a new form of war and an alternative to armed conflict—between the parties of such sanctions. Consequently, although imposing unilateral sanctions seems an effortless and peaceful way in international politics, it contains the risk of war and war of sanctions in practice. If the war of sanctions is spread globally, it could seriously damage the global economy which has already been facing several difficulties because of the COVID-19 pandemic and the Russian invasion of Ukraine. Furthermore, it should be underlined that strategically devastating impacts of unilateral sanctions are perceived subjectively by the targeted states (or states the citizens of which are targeted), and they choose how to react against them. Thus, in the worst-case scenario, counter-sanctions senders may strike back by using military force, and this may even lead to a new global conflict. To overcome this, it seems more crucial to promptly strengthen the effectiveness and binding force of the UN system than ever before. In this way, particularly in case of the violation of international law such as Russia’s aggression against Ukraine, the issues could be settled multilaterally, and the tension will decrease compared to the use of unilateral sanctions.

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Hazar Kaan Özkonak Lewis, R. (2021) ‘US Secondary Sanctions Provoke Strong Backlash Among Both Friends and Foes Around the World’, Lexology. Available at: https://www.lexology.com/library/detail.aspx?g=84f1f477-ad074063-9964-c6a030779bb7 (Accessed 20 February 2023). Lorca, A. B. (2010) ‘Universal International Law: Nineteenth-Century Histories of Imposition and Appropriation’, Harvard international law Journal, 51(2), pp. 475–552. Available at: https://heinonline.org/HOL/ LandingPage?handle=hein.journals/hilj51&div=10&id=&page= (Accessed 10 January 2023). Lowe, V. and Tzanakopoulos, A. (2010) ‘Economic Warfare’ in Max Planck Encyclopedias of International Law. Available at: https://opil-ouplaw-com.proxy.library.uu.nl/display/10.1093/law:epil/9780199231690/ law-9780199231690-e292 (Accessed 20 January 2023). Mulder, N. (2022) ‘The History of Economic Sanctions as a Tool of War’, Yale University Press. Available at: https://yalebooks.yale.edu/2022/02/24/the-history-of-economic-sanctions-as-a-tool-of-war/ (Accessed 19 March 2023). Portela, C. (2019) ‘The Spread of Horizontal Sanctions’, Centre for European Policy Studies. Available at: https://www.ceps.eu/the-spread-of-horizontal-sanctions/ (Accessed 10 December 2022). Russell, M. (2018) ‘EU Sanctions: A Key Foreign and Security Policy Instrument’. European Parliamentary Research Service. Available at: https://www.europarl.europa.eu/RegData/etudes/BRIE/2018/621870/ EPRS_BRI(2018)621870_EN.pdf [Accessed 13 January 2023]. Ruys, T. and Ryngaert, C. (2020) ‘Secondary Sanctions: A Weapon out of Control? The International Legality of, and European Responses to, US Secondary Sanctions’, British Yearbook of International Law. Available at: https://doi.org/10.1093/bybil/braa007 (Accessed 11 May 2021). Sealey, R. (1975) ‘The Causes of the Peloponnesian War’, Classical Philology, 70 (2), pp. 89–109. Available at: https://www-jstor-org.proxy.library.uu.nl/stable/267930?searchText=&searchUri=&ab_segments=& searchKey=&refreqid=fastly-default%3A386ac022d983d7d0baff73fc392f1ed8 (Accessed 21 February 2023). Stantchev, S. (2012) ‘The Medieval Origins of Embargo as a Policy Tool’, History of Political Thought, 33(3), pp. 373–399. Available at: http://www.jstor.org/stable/26225793 (Accessed 9 December 2022). The National People’s Congress of the People’s Republic of China (2021) 中华人民共和国反外国制裁法 (Anti-Foreign Sanctions Law of the People’s Republic of China). Available at: http://www.npc.gov.cn/ npc/c30834/202106/d4a714d5813c4ad2ac54a5f0f78a5270.shtml?ref=chinatrademonitor.com (Accessed 8 January 2023). The Office of Foreign Assets Control (OFAC) (2017) Directive 1 (As Amended on September 29, 2017) Under Executive Order 13662. Available at: https://ofac.treasury.gov/media/8696/download?inline (Accessed 19 February 2023). The Office of the Federal Register, National Archives and Records Administration (2008), 73 Fed Reg 66,541 - Iranian Transactions Regulations. Available at: https://www.govinfo.gov/app/details/FR-2008-11-10/ E8-26642 (Accessed 12 February 2023). The Office of the High Commissioner for Human Rights (OHCHR) (n.d.) ‘Guidance Note on Overcompliance with Unilateral Sanctions and Its Harmful Effects on Human Rights’. Available at: https://www. ohchr.org/en/special-procedures/sr-unilateral-coercive-measures/resources-unilateral-coercive-measures/ guidance-note-overcompliance-unilateral-sanctions-and-its-harmful-effects-human-rights (Accessed 10 February 2023). The Office of the Historian (n.d.) ‘Japan, China, the United States and the Road to Pearl Harbor, 1937– 41’, Department of State of the United States of America. Available at: https://history.state.gov/ milestones/1937-1945/pearl-harbor (Accessed 4 June 2022). The United States Congress (1996) Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996. Available at: https://www.congress.gov/bill/104th-congress/house-bill/927/text (Accessed 19 January 2023). White, T. (2020) ‘Secondary and Sectoral Sanctions: A Transformation in the Application of US Economic Sanctions’, AML Right Source. Available at: https://www.amlrightsource.com/news/secondary-and-sectoral-sanctions-a-transformation-in-the-application-of-us-economic-sanctions (Accessed 19 December 2022).

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3 THEORETICAL ASPECTS OF SANCTIONS Hajime Okusako

Introduction Currently, theoretical investigation of economic sanctions has become one of pressing issues in economic sanctions studies. The main purpose of this chapter is to reinvestigate concepts of economic sanctions as comprehensively as possible, especially in the context of globalization, and to develop theoretical framework for more effective institutional designs to build up a fairer global economic sanctions governance. Although economic sanctions are very old policy tools which were used even before the modern times, as the case of Pericles’s Megarian decree (432 BC) in the ancient Greece shows (Hufbauer et al., 2007: 9), before the 20th-century sanctions policies before the 20th century were only complementary and “were used primarily as part of a broader military strategy during times of war” (Alexander, 2009: 3). It was not until the early 20th century, especially after the end of the World War I when rules of economic sanctions were provided in the Covenant of the League of Nations (Article 16) that conceptualized and institutionalized economic sanctions as a relatively autonomous policy tool in lieu of exercising military force came to attract attention. There are two major background factors that were a driving force for economic sanctions as a policy tool, used quite independently from military actions in the 20th century. The first factor is a dramatic increase in scale and destructive power of wars caused by abrupt scientific and technological innovation in the latter half of the 19th century. This urged countries to avoid dealing with their adversaries with military means as much as possible and to seek nonmilitary means to reduce or to resolute them. The second one is a remarkable development of international economic interdependence led by rapid progress in technology, especially in transportation and telecommunication. The deepening of international economic interdependence caused abrupt reduction of rationality of military actions by states, especially by powerful states, and it opened a way to develop policy tools other than use of military force, such as an economic policy, making use of asymmetrical interdependence between countries. Recent methods and problems of economic sanctions have come to assume new characteristics since the end of the Cold War under the impacts of increasing development of globalization. First, economic sanctions policies were traditionally analyzed only in the context of inter-state relations. DOI: 10.4324/9781003327448-5

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However, various non-state actors (companies, private foundations, charity groups, local governments, and even individuals) have been involved more and more deeply in affairs of economic sanctions both as objects and even subjects. Moreover, accompanied with this movement, many researchers pay attention to the issues of legitimacy or legality of economic sanctions, or issues of human rights of those who live in a target country, or those who are put on a blacklist of targeted economic sanctions. Thus, the first section will investigate a very ambiguous concept of economic sanctions. Then, the second section will deal with issues of effectiveness and legitimacy of economic sanctions, especially from the perspective of power and fairness. The third section will argue about the necessity and the significance of creating an institutional framework of global governance for a more effective and fairer application of economic sanctions. This will be followed by several suggestions for the future theoretical research on the institutional design of sanctions policies.

Semantic Issues Economic sanctions have long been a policy tool broadly used in international relations (IR), but the definition or typology has not necessarily been clarified, and the concept of economic sanctions remains as remarkably ambiguous as those of the national interest and security. Therefore, in this first section, the author will consider conceptual ambiguities of economic sanctions on several issues, and then, will state a clearer and more comprehensive concept of economic sanctions.

Collective Sanctions and Unilateral Sanctions According to Takehiko Yamamoto, economic sanctions generally refer to states’ actions whose purpose is “to stop another state’s unlawful act, to recover their violated rights or interests (particularly, national security interests), or to restore international peace by exercising their economic power,” for example through constraining or stopping trade/financial transactions, and reducing or withdrawing economic benefits such as economic aids. However, economic sanctions policies are also often enforced by particular states, especially strong powers, like ‘arms’ “to attain their specific foreign policy goals,” on the other (Alexander, 2009: 196; Early, 2015: 5; Kawada and Ohata, 2003: 188; Marossi and Bassett, 2015: 71). Furthermore, Max Planck Encyclopedia of Public International Law (MPEPIL) argues for “the reservation of the term ‘sanction’ for coercive measures imposed or mandated by competent international organizations following a serious breach of international law in order to constrain the targeted entity to restore legality” (Marossi and Bassett 2015: 135). However, in fact, economic sanctions are often “used not as much to restore legality as to force or at least influence a country, entity, or individual to change policies (or even its government), or at least demonstrate the sender’s opinion about the other’s policies” (Marossi and Bassett, 2015: 135). To sum up, depending on differences in applied forms, economic sanctions can be classified into two types. First, collective sanctions carried out by an unspecified large number of countries based on a resolution at an international organization with competence to authorize them to enforce economic sanctions (such as the League of Nations and the United Nations), in order to redress a grave violation of international law (such as invasion of international peace and security). Second, unilateral sanctions that sender states apply as a policy tool for seeking values (like human rights) and interests (such as national security interests), in order to modify or to change specific another actor’s behavior. In addition, economic sanctions “implemented 38

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by international organizations” other than the UN or “by a group of states through international cooperation” (like the European Union), “may be called ‘organized unilateral sanctions’” (Marossi and Bassett, 2015: 75). However, we should keep it in mind here that it is not adequate to understand these two types of economic sanctions separately or in dichotomous/binary relationship with each other. For, even when a particular state implements sanctions for specific unilateral purposes or reasons, it may hope that the sanctions will be recognized as universal ones based on a resolution in the UN Security Council as much as possible. In another case, a specific country participating in certain collective sanctions through the UN system may enforce some additional unilateral sanctions because it deems them as insufficient and ineffective enough. Therefore, in this sense, economic sanctions policies should be understood and be analyzed on a wide spectrum from the pole of purely collective sanctions on one hand, to the pole of pure unilateral ones.

Negative Sanctions and Positive Sanctions Although we may generally tend to imagine economic sanctions as some negative actions (retaliation, reprisal, retortion, or punishment, etc.), policies or behaviors classified as economic sanctions include not only negative actions for reducing or depriving other actors’ values/interests, but also positive efforts to change the target actors’ policies/behaviors through giving them some rewards or incentives (Baldwin, 1985). Thus, also in this context, we should assume a certain spectrum without separating positive sanctions from negative ones. We can say that the most optimal economic sanctions policy is the one sought by combining these two approaches (Alexander, 2009: 11), as Arnold Wolfers pointed out the necessity of “a two-fold policy” on national security issues over 60 years ago (Wolfers, 1962: 161). For example, it can be pursued by presenting options of giving some rewards or interests, or, at least by clarifying conditions for lifting sanctions beforehand to the targeted actors. This is why we need more flexible and more comprehensive conceptualization of economic sanctions to better understand the dynamics of economic sanctions policies. One latest research seeks such a two-fold approach through exploring the relationship between economic sanctions and international mediation for conflict resolution (Biersteker et al., 2022: 180–202).

Diversification of Actors As mentioned above, traditionally, economic sanctions were analyzed mainly as statecentric phenomena. However, recently, diverse non-state actors have been attracting more and more attention both as objects and as subjects who can have great impacts on economic sanctions. As globalization in capitalist/liberal economy accelerated after the 1970s, and transnational economic activities increasingly developed, more and more private actors such as transnational companies and financial organizations became targets of various types of sanctions. In the 1980s, when negative effects of the comprehensive economic sanctions on Iraq, particularly on the weak population (the elders, children, and handicapped, etc.) were revealed, this was a turning point, to with this as a turning point, more targeted, or the so-called “smart sanctions”. As a result, new methods of sanctions were increasingly applied to particular groups or individuals like political leaders or elites, rather than to an entire nation. In addition, after the end of the Cold War, under rapid trans-nationalization of criminal organizations and their networks, developed countries such as the United States extended economic sanctions targets to terrorists 39

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or drug-traffickers. Especially after 9.11 in 2001, the objects of economic sanctions have been further expanded to front-companies, underground financial organizations, even charity groups or innumerable individuals who have allegedly supported terrorist activities with or without intention (Alexander, 2009: 2). Focusing on the aspects of non-state actors as subjects of economic sanctions, we can find that almost all of them have recently taken significant roles directly or indirectly as active players of economic sanctions activities. For example, NGOs (e.g. consumers’ groups) have become the senders of sanctions by imposing boycotts against products or services of target companies, allegedly notorious for committing illegal or immoral practice (e.g. environmental pollution or illegal child labor). Socially Responsible Investment (SRI) promoted by business players as a part of Corporate Social Responsibility (CSR) activities, have similar characteristics as economic sanctions. Furthermore, local governments became influential senders of economic sanctions. For example, in the 1980s, 23 states and 80 cities in the United States participated in the boycott campaigns against apartheid in South Africa. In the 1990s, some state governments in the United States deployed economic sanctions against companies operating in developing countries allegedly violating international obligations (e.g. human rights protection), by controlling management of pension funds, regulating purchasing of products/services by public expenditure. Moreover, in the 1990s, the US Congress “enacted a set of statutes that created legal remedies for court by pursuing civil actions for damages, compensation and restitution against foreign states, third country persons and international terrorists” (Alexander, 2009: 196–197). The 1996 Cuban Liberty and Democratic Solidarity Act (Helms-Burton Act) is one of the typical examples. These extra-territorial economic sanctions have caused fierce debate and criticism in the international community. Last, non-state actors, especially profit-seeking companies and private financial institutions, are not only a role of “sanction-senders,” but also “sanction-busters” who diminish or even annul effects of economic sanctions. Moreover, not only companies in a targeted country and its neighboring ones, but also companies in developed sender countries can be such sanction-busters (Early, 2015: 3). Based on the aforementioned considerations, the author defines a concept of economic sanctions as follows: Economic sanctions are actions by sanctions sender actors (including state and non-state actors) to modify or change of sanctions targets’ (state and non-state actors) behavior or policy by exercising economic power (sometimes also with military power as a background factor), “vital” security interests or values (including human or non-traditional security), on the basis of, or on the pretext of certain judicial/moral reasons. Facing trans-nationalization of social and economic arenas led by the deepening process of globalization, political space is also required to be trans-nationalized, at least to some degree, in order to control and regulate socio-economical activities efficiently. In this sense, international economic sanctions regimes will need to be restructured by creating multilateral/multi-level governance institutions in regional and global scales, in which various non-state actors are to participate as potent stakeholders who take not only rights and authorities but also obligations and responsibilities. Thus, the next section investigates some important issues of power and legitimacy of economic sanctions, followed by some topics for research on institutional design of more effective and fairer global economic sanctions governance in the future. 40

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Issues on Power and Legitimacy Power and Economic Sanctions As stated previously, economic sanctions are a policy instrument which has come to be used frequently in lieu of, or as a supplement to military actions whose rationality as a means of international conflicts resolution has been degrading in the process of deepening international interdependence in the wake of innovation in technology and spread of liberal economy. However, it goes without saying that economic sanctions still have to be understood as a policy tool accompanying use of coercive power which can sometimes cause massive damage to the targets including largescale sufferings in life, even without military power as an immediate means. In this respect, Nema Milaninia argues as follows: In the spectrum of international relations, extending between peaceful relations and armed conflict, both the purpose and effect of sanctions makes them appear similar to acts of conflict and thus closer to the latter end of that spectrum. Sanctions are by definition coercive tools applied when normal diplomatic relations either break down or are deemed futile. They are often accompanied by threats of additional sanctions or even the use of force. They are designed to compel the targeted State to comply with the demands of the international community or the sanctioning State(s). In employing such pressures, sanctions place a significant toll on those inside the targeted State. (Marossi and Bassett, 2015: 102) Therefore, when we evaluate validity of a particular economic sanctions policy, it is required to define and apply some sort of standards of moral, legal and sociological legitimacy equivalent to those to evaluate military actions. In this sense, a series of theoretical and philosophical insights on moral choice or moral self-restriction in power politics constructed by classical realists through security studies, still has rich relevance in considering adequacy of economic sanctions policies. Related to this issue, there is also recent research which critically evaluates ethical legitimacy of targeted sanctions based on just war theory, especially in terms of the principles of discrimination and proportionality (Early and Schulzke, 2019: 57–80). With regard to legal legitimacy of economic sanctions, Ali Z. Marossi, an international law scholar, discusses legality of unilateral economic sanctions in terms of the exception clauses to Article 2 (4) of the UN Charter, that is, Article 51 (Marossi and Bassett, 2015: 169–170). Moreover, according to him, several provisions of international economic accords such as Article 2102 of NAFTA Chapter XXI and Article XXI of GATT are also examples of exceptional clauses authorizing member states to impose unilateral trade restrictions “which they may consider necessary for the protection of their ‘essential security interests” (Marossi and Bassett, 2015: 169–170). In short, economic sanctions which can be legally legitimated in terms of international law, are nothing but ones conducted based on the following two standards. One is collective sanctions authorized by Chapter 7 of the UN Charter, and the other is unilateral ones as exercise of the right of individual/ collective self-defense provided in Article 51 of the UN Charter. However, as Arnold Wolfers also pointed out, due to ambiguity of the concept of national security, almost any economic sanctions policy may be legitimatized as a policy for attaining “security” interests, so that it can lead to abuse of the exceptional clauses, an excessive application of unilateral sanctions that will eventually undermine legal stability and reliability (Wolfers, 1962: 147–165). This problem has been exemplified by recent extension and proliferation of the concept 41

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of security (human security, non-traditional security issues, and arguments on “securitization”, etc.). For example, when the EU, resisting to the US Cuban Liberty and Solidarity (the HelmsBurton Act) enacted in 1996, tried to settle the conflict in the WTO dispute settlement bodies, the US government refused this option according to GATT Article XXI. In the end, “the United States and the EU settled their differences outside of the WTO dispute settlement system” (Marossi and Bassett, 2015: 169–170), through inter-governmental political negotiations. In general, in most cases, economic sanctions have been used by powerful states (especially the United States), “acting alone or cooperatively, to express their displeasure with the policies of less powerful States in a range of issue areas, and to bring pressure to bear on those target States to change their behavior” (Marossi and Bassett, 2015, 85–86). In addition, after the end of the Cold War, economic sanctions, whether unilateral or collective, have been increasingly applied quite easily, so it is an urgent subject to review critically the problems of power politics in economic sanctions.

Issues on Fairness As issues on basic human rights including human security have attracted much attention after the end of the Cold War in 1990s, the trend has also spread to arguments and debates on economic sanctions. Especially, the economic sanctions under the UN program imposed on Iraq in the first half of 1990s exposed that comprehensive and indiscriminative economic sanctions can bring about enormously severe costs and sufferings on civilians, particularly elder people and small children, because of extremely scarceness in food, medicines, and essential fuels. Thereafter economic sanctions programs have shifted to targeted sanctions, or the so-called “smart sanctions” relying on trade embargoes on strategic goods and services, travel restrictions for designated persons, and freezing of their financial assets, and so on. Nonetheless, some doubts have been raised on whether a travel ban preventing “targeted individuals from leaving a country to seek medical aid, or financial sanctions so stringent that a target does not have resources to buy basic goods, such as food, can be called really ‘smart’,” and some improvements in the UN sanctions programs have been considered and sought in these respects (Marossi and Bassett, 2015: 221). Problems on human rights raised by economic sanctions are not limited to costs on a civil population in targeted countries (the so-called collateral damage). Since 9.11 in 2001, many countries (particularly the United States) have designated specific persons and groups as terrorists or terrorist supporters in blacklists, and have been increasingly applying both unilateral and collective targeted sanctions against them by freezing or confiscation of their assets, interrupting their financial transactions, and travel ban. However, if targeted sanctions are imposed on them without due process of law including “prior notice and opportunity for a public hearing”, “smart” sanctions will have serious flaws in their fairness (Alexander, 2009: 1). In fact, although the UNSC Resolution 1373 “requests UN member states to freeze all the assets of designated terrorist groups and entities supporting such terrorists”, there is much room for serious political biases or arbitrariness in these processes, because both “the method of designating terrorist groups” and “the legal principles by which financial sanctions are imposed” are different from state to state (Alexander, 2009: 315). The Counter-Terrorism Committee (CTC) in the UN “has not applied uniform standards in these areas”, and many objections and disputes have often happened among states, private groups, and civil populations with respect to basic human rights, because “it has required member states to recognize the freeze orders of other member states directed at particular individuals or groups accused of terrorism without providing any international standards” (Alexander, 2009: 315). There have been some cases in which persons or groups designated as terrorists or their alleged supporters “have been shown not to have 42

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been involved in any terrorist activity” (Alexander, 2009: 319). Although establishing a certain judicial review system is desirable to prevent such unfortunate cases from taking place by guaranteeing due process, there remain few institutional mechanisms for such remedies in the existing UN system. Thus, individuals or groups targeted by UNSC resolutions “have attempted to raise fundamental rights complaints in different fora” like the European Court of Justice or the European Court of Human Rights “in order to have such resolutions invalidated or declared inapplicable or otherwise ineffective” (Marossi and Bassett, 2015: 221). Furthermore, methods for crime investigation such as espionage activities before designation of terrorists and their supporters have raised serious human rights issues. For example, tapping communication by (cellular) phone, internet, e-mail or texting, threatens the right of privacy, freedom of expression and religion, and use of torture against alleged terrorists should be considered as illegal in light of international humanitarian law. It is also a serious problem that sources or evidences of the information acquired through such unwarranted crime investigation are rarely clarified in public places. In addition, extra-territorial economic sanctions have a high possibility to bring about intense disputes among various actors, because they can violate economic freedom of individuals and corporate bodies, let alone state sovereignty. “Pipe-Line Dispute” in 1982, aforementioned “HelmsBurton Act” in 1996, and “Iran/Libya Sanctions Act” in 1996 are typical cases of extra-territorial or secondary economic sanctions. With that being said, it is also another fact that “most systems of criminal and civil law are territorially based” and “are ill suited to attack the transnational operations” of criminals like terrorists utilizing “a vast and complicated network” (Alexander, 2009: 315). Therefore, certain multilateral fora or institutions for cooperation and coordination are necessary to overcome the problems caused by extra-territorial/secondary economic sanctions by coping effectively and fairly with them. Thus, the existing international economic sanctions regimes centering on the UN system have serious problems and limits on issues of legitimacy. We need to construct multi-level/multilateral global governance institutions different from current international regimes for aiming at truly smart economic sanctions in this globalization era.

Significance and Potential of Global Economic Sanctions Governance Necessity of Global Governance in Economic Sanctions As far as the author knows, there exists little research which deals with issues on economic sanctions from the perspective of global governance in the existing literature. On the other hand, there is a consensus among many researchers that “building effective multilateral institutions” are “necessary for developing a more legitimate international regulatory system to oversee economic sanctions policy” (Alexander, 2009: 301). We need a certain framework of global governance on economic sanctions beyond international regimes. For, although many of actual economic sanctions policies have been implemented deviating grossly from the aforementioned two ideal types (collective one and unilateral one), there are not any potent regulatory institutions to oversee and restrain such deviant behaviors. In fact, many of actual economic sanctions policies led by major developed countries (particularly the United States), like extra-territorial/secondary sanctions the United States has often used, and a series of additional organized unilateral sanctions to reinforce the existing collective sanctions based on UNSC resolutions, have been deployed with their legal identification so ambiguous and unclear, which remain much room for great political arbitrariness and capriciousness. 43

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On the other hand, the existing UN economic sanctions regime has major problems and limits to overcome, in that the decision-making processes are greatly influenced by major powers’ concerns over their specific interests, because the five permanent members (P5) almost dominate the decision making in the UNSC. Therefore, the current international economic sanctions regimes led or dominated by the western developed countries are required to be restructured into global economic sanctions governance systems accessible and available to various actors in every region, and at every geographical level. If so, where can we find a clue for designing institutions of more effective and fairer global economic sanctions governance?

Significance of Multi-Level Governance Globalization, especially economic one, has precipitated “a triple cross-border trend” (Yamamoto, 2010: 112–113) transforming the contemporary social world, which compels us to reconsider politics thoroughly. First, a process promoting “deterritorialization,” that is, large-scale transformation of the spatial organization of social relations and transactions, has been increasingly revealed at all levels from local to global, and also in issue areas as broad as economy, environment, health, and so forth (Marchetti, 2009: 137). Facing this spatial transformation, many students of global governance have questioned the intellectual and practical relevance of a predominant assumption in IR that we can analyze international interactions separately from those in other levels. Many of them reinterpret world politics as a multi-level system from local, national, regional to global, and pay attention to linkages among different levels (Dingworth and Pattberg, 2006: 192). Second, the complex characters of global issues, that is, “cross-bordering among different issue areas” have been increasingly exposed. For example, toady, policymaking about international trade is causing significant impacts not only to global economy, but also to ecology and security issues. As a result, this makes it necessary for us to consider multiple issue areas at the same time in a single decision making. For example, in the global pandemic caused by Covid-19, have been urged to take not only epidemiology and health, but also economical, human rights, and gender issues, into account. Furthermore, we need to design, construct, and operate some complex regimes through cross-disciplinary approaches, because these complex issues are intertwined tightly with each other beyond the borders among bureaucratic agencies and academic disciplines, and we cannot deal with them adequately by the functional division of labor among individual professional fields (Benner et al., 2004: 194). Third, as a corollary of the aforementioned two cross-border trends, cross-bordering among actors has been developed both vertically (among geographical levels) and horizontally (among different social sectors). In order to adequately cope with the new complex issues caused by globalization, we are required to promote “open sourcing” of information and knowledge of professionals and stakeholders from other than public sector (Benner et al., 2004: 194). In fact, recently, various non-state actors have come to participate in public policy-making processes at multi-levels, and they are beginning to play an important role in public policies as important political subjects as well as objects of public regulation. The emergence of global public policy networks through cross-border partnerships between public sector, market sector, or/and civil society reflects and represents this trend of cross-bordering among actors. What implications do such historical and structural transformations have on future academic and practical efforts for designing and constructing frameworks for global governance on economic sanctions? First, relating to the cross-border trend in social space, international economic sanctions regimes also have to be reorganized into multi-level governance institutions from local to global, as our economic activities have been increasingly transnational in a global scale. 44

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Second, concerning the cross-border trend among various issue areas, the more diversified and complex objectives sought through economic sanctions policies have become in the same way as concepts of security have been extended and proliferated, the more transversal co-ordination, liaison and collaboration among various actors with professional knowledge and skills in different issue areas, have come to be required for making decisions on, and enforcing economic sanctions policies. Third, from a view point of the cross-border trend in social sectors, it has been increasingly necessary to create certain new fora where various state and non-state actors can work and cooperate together for making and taking public policies on economic sanctions, because various non-state actors such as corporations, private foundations, charity groups, and even individuals, have been playing important roles not only as targets but also as senders of economic sanctions. From the perspective of democratic accountability, in seeking fairer economic sanctions, we need to found some institutional structures enabling any actors seriously affected by public policies to involve and participate in making and implementing them as active subjects. From the above, we should pay attention to multi-sectoral governance, especially three-sectoral global public policy networks as one of new institutional modes of governance with rather high potential.

High Potentials of Multi-Sectoral Governance New modes of “nonterritorial governance” (Hale, 2008: 75) comprised of “various trans-scalar actors” (Scholte, 2007: 316) have been formed in “the transnational policy space” (Stone, 2008: 19). Especially, hybrid modes of public policies, that is, global multi-sectoral governance, have increasingly attracted a lot of researchers’ interests. They can be one of the means of public policy networks formed to overcome both the government failure and the market failure, through “institutionalized trans-boundary interactions between public and private actors” (Schäferhoff et al., 2009: 455). Their core nature is “both horizontal (across social sectors) and vertical (from local to global) collaboration” (Bexell and Mörth, 2010: 180). Development of such global public policy networks is a phenomenon suggesting “reconfiguration of authority in contemporary world politics”, and raise essential problems about restructuring politics in the globalization era (Schäferhoff et al., 2009: 451). Many researchers argue that global multi-sectoral governance networks can raise the legitimacy of global politics both in effectiveness and in fairness. As to effectiveness, they expect them to be a public policy mechanism which can contribute to providing public goods necessary to solve global public issues through pooling, exchanging, sharing, and applying all the resources (finance, skills, technology, information, knowledge, etc.) from every sector in collaborative relationships (Benner et al., 2004: 197). Some researchers highly praise them as public policy tools that can overcome the deficiency and limits of existing governance mechanisms, in that they make it possible to respond to various stakeholders flexibly and smoothly (Martens, 2007: 32–33). Moreover, others point out that global multi-sectoral governance can improve compliance because they enhance ownership by participation of broad various actors in public policy-making processes (Schäferhoff et al., 2009: 458). With regard to fairness, global multi-sectoral governance is considered as contributing to democratization of global politics, in that they can provide “places and opportunities of communication and deliberation” for people and groups who have been forced to be marginalized before (Schäferhoff et al., 2009: 458). In this respect, many researchers point out the values of the hybrid nature global governance systems have in common. For example, Terry Macdonald argues that “in the context of globalization”, it is required to “exercise public power effectively to protect basic 45

Hajime Okusako

rights” and to construct institutions “to enable democratic control on it” (Macdonald, 2008: 549), and it is the hybrid institutions with the merits of state actors and those of non-state actors that hold “the greatest potential” (Macdonald, 2008: 544). Furthermore, many other researchers point out the potential of global multi-sectoral governance in promoting democratization of global politics by deliberation. For example, Garrett Walles Brown evaluates them as “a new form of global governance based on the principles of democratic accountability and fair multi-sectoral participation” (Brown, 2010: 511–513). Thus, global multi-sectoral governance is expected to play a role as a catalyst to innovate global governance both in effectiveness and in fairness. The Kimberly Process Certification Scheme (Kimberly Process) is a multi-sectoral governance institution deeply related to economic sanctions. It is a global certification system regulating sales and transportation of diamond, whose origin was an UN-led targeted economic sanctions program against UNITA rebels in Angola and revolutionaries in Sierra Leone, and against diamonds sold by them (Alexander, 2009: 27).

Conclusion This chapter investigated closely the very ambiguous concept of economic sanctions, and presented a definition of its more comprehensive and systematic version in the first section, followed by critical considerations on the existing economic sanctions policies in terms of power and fairness in the second section. Then the third section argued that the current international economic sanctions regimes should be transformed into global economic sanctions governance systems in order to make economic sanctions further “smarter”, and clarified the significance and high potential of the multi-sectoral governance approach as one of the promising models for institutional design of global governance frameworks of economic sanctions. The discussion in this chapter leads to the conclusion that it is worthwhile to introduce research of economic sanctions into global governance studies for developing theoretical and empirical research on institutional design of smarter global economic sanctions governance. In this regard, recently, many researchers have been developing arguments and debates on the pros and cons of multi-sectoral global economic sanctions governance. In fact, one of the latest articles presents a critical evaluation of transnational hybrid governance of economic sanctions, and advocates “solutions to address the payment problems that exporters of vital goods in sanctioned jurisdictions face” through introducing “blockchain and other digital payment systems” (Mallard et al., 2020: 121–153). Last but not least, as mentioned above, contemporary economic sanctions have highly complex and multifaceted nature, and their impacts intersect diverse issue areas (e.g. economy, human rights, gender, and public health). Therefore, it goes without saying that we need cross-disciplinary dialogues and cross-fertilization beyond the borders among diverse IR theories. This chapter has presented its vision of how such cross-theoretical and cross-disciplinary approaches could be developed by suggesting to look deeper into issues on power, fairness, and legitimacy.

Bibliography Alexander, K (2009), Economic Sanctions: Law and Public Policy, Basingstoke, UK: Palgrave Macmillan. Baldwin, D., (1985), Economic Statecraft, Princeton, NJ: Princeton University Press. Benner, T., Reinicke, W. H. and Witte, J. M (2004), “Multisectoral Networks in Global Governance: Towards a Pluralistic System of Accountability,” Government and Opposition 39 (2): 191–210. Bexell, M. and Mörth, U., eds. (2010), Democracy and Public-Private Partnerships in Global Governance, London: Palgrave Macmillan.

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Theoretical Aspects of Sanctions Biersteker, T. J., Brubaker, R. and Lanz, D (2022), “Exploring the Relationship between UN Sanctions and Mediation,” Global Governance 28 (2): 180–202. Brown, G. W (2010), “Safeguarding Deliberative Global Governance: the Case of The Global Fund to Fight AIDS, Tuberculosis and Maralia,” Review of International Studies 36 (2): 511–530. Dingworth, K. and Pattberg, P (2006), “Global Governance as a Perspective on World Politics,” Global Governance 12 (2): 185–203. Early, B. R. (2015), Busted Sanctions: Explaining Why Economic Sanctions Fail, Stanford: Stanford University Press. Early, B. R. and Schulzke, M (2019), “Still Unjust, Just in Different Ways: How Targeted Sanctions Fall Short of Just War Theory’s Principles,” International Studies Review 21 (1): 57–80. Hale, T. N (2008), “Transparency, Accountability, and Global Governance,” Global Governance 14 (1): 73–94. Hufbauer, G. C., Shott, J. J. and Elliott, K. A., and Oegg, B. (2007), Economic Sanctions Reconsidered, 3rd Edition, Washington, DC: Peterson Institute. Kawada, T. and Ohata, H., eds. (2003), Encyclopedia of International Political Economy, revised edition, Tokyo: Tokyo Shoseki. Macdonald, T (2008), “What’s So Special About States? Liberal Legitimacy in a Globalising World,” Political Studies 56 (3): 544–565. Mallard, G., Sabet, F and Sun, J (2020), “The Humanitarian Gap in the Global Sanctions Regime,” Global Governance 26 (1): 121–153. Marchetti, R (2009), “Mapping Alternative Modes of Global Politics,” International Studies Review 11 (1): 133–156. Marossi, A. Z. and Bassett, M. R., eds., (2015), Economic Sanctions Under International Law: Unilateralism, Multilateralism, Legitimacy, and Consequences, The Netherlands: Asser Press. Martens, J. (2007), “Multistakeholder Partnerships: Future Models of Multilateralism?” Dialogue on Globalization: Occasional Papers 29. Schäferhoff, M., Campe, S. and Kaan, C (2009), “Transnational Public-Private Partnerships in International Relations: Making Sense of Concepts, Research Frameworks, and Results,” International Studies Review 11 (3): 451–474. Scholte, J. A (2007), “Civil Society and the Legitimation of Global Governance,” Journal of Civil Society 3 (3): 305–326. Stone, D (2008), “Global Public Policy, Transnational Policy Communities, and Their Networks,” The Policy Studies Journal 36 (1): 19–38. Wolfers, A. (1962), Discord and Collaboration: Essays on International Politics, Baltimore and London: Johns Hopkins University Press. Yamamoto, T., ed. (2010), New Frontier of International Relations, Tokyo: Seibundo.

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4 THEORETICAL IDENTIFICATION OF THE MECHANISMS OF SANCTIONS Ksenia Kirkham, Yifan Jia, and Yeseul Woo

Introduction As Robert Cox has argued, ‘theory is always for someone and for some purpose. All theories have a perspective. Perspectives derive from a position in time and space, specifically social and political time and space’ (Cox 1981), and the academic research on sanctions is no exception. With the exponential rise of the use of sanctions in the 21st century the academic and political debates over the causes and effectiveness of sanctions have heated up to unprecedented levels. Sanctions have been conceptualised within different schools of thought with polarising underpinning ontologies. On one side, we encounter ‘problem solving’ positivist, or ‘mainstream’, accounts, preoccupied with the ‘effects’ of sanctions. By investigating the question of ‘if’ sanctions work; they explore various possibilities of the use of various types of sanctions as instruments of political coercion and deterrence. By contrast, ‘interpretivist’ and critical realist accounts chase the mechanisms through which sanctions work by digging deeply into the long durée of social formations and various contextual settings of domestic power relations and geopolitical rivalry (Braudel 1958). Yet, critical realists hold the middle ground in these debates by combining the most advanced ideas from mainstream theories with valuable interpretivist accounts that explore latent and hidden (and therefore ignored by positivists) layers of human power relations or conflict zones. Nevertheless, the boundaries between theories are fluid rather than fixed (Kirkham 2018) – this gives hope for a progressive theoretical synthesis, necessary for the development of a genuinely multidisciplinary theoretical approach to sanctions. Many observers have concluded that sanctions do work by effectively constraining the military and material capabilities of various target states, be they Iran, Russia, China, Venezuela, Cuba, North Korea, and others, to proceed with aggressive actions, postures, and policies against the ‘free and “rules-based” world. In fact, in our globalised and interconnected world, although becoming increasingly fragmented and anarchic, it is hardly possible to overestimate the scale of economic hardships that sanctions engender to some target states, especially at times of crisis, as with the case of Iran during the pandemic (Ameli 2020). Indeed it is generally assumed that the international community’s imposition of sanctions in the 1980s played a significant role in ending apartheid in South Africa (Crawford and Klotz 1999). However, the main problem with the idea of ‘effectiveness’ is short termism of a political vision, while a truly effective strategy presupposes 48

DOI: 10.4324/9781003327448-6

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‘an ability to look up from the short term and the trivial to view the long term and the essential, to address causes rather than symptoms, to see woods rather than trees’ (Freedman 2013). Russia’s full-scale ‘special military operation’ in Ukraine, Iran’s return to its nuclear weapon program, China’s and enhanced militarisation are just a few extreme examples of the consequences of a strategic myopia and a diplomatic unprofessionalism that sees sanctions as an effective tool of containment. A longer-term strategic calculation of national security threats and geoeconomic risks is required to avert further escalation of tensions. Moreover, the engineering of sanctions policies should account for the physical size, economic and military potential of a ‘target’ state, as well as for no less important factors, such as historical and cultural legacies, strategic ties, collective memories, ideologies and religion. A strategic departure from short termism presupposes overcoming the restraint of ‘groupthink’ (Janis 1982) that considers sanctions the cheapest political tool (Ruys and Ryngaert 2020) that enables moral and legal justification for what Woodrow Wilson referred to as an ‘alternative to war’. With this goal in mind, this chapter will, first, examine some mainstream accounts on sanctions in the section ‘Sanctions as an Alternative to War’. The purpose of the section is to highlight the most useful ideas and insights that could be applied to a critical evaluation. The following section ‘Sanctions as an Instrument of War’ introduces alternative accounts that will logically lead the reader to the section ‘Look Inside the Target State’ that will offer a brief overview of an analytical framework – i.e. the Welfare State Regime (WSR) approach that enabled a strategic evaluation of the long-term processes that sanctions trigger in a target states, based on the comparative analysis of Russia and Iran under sanctions (Kirkham 2022). This framework offers ground for future research on the mechanisms of sanctions and on states under sanctions and can be appied usefully to China, Venezuela, North Korea, etc. Most importantly, it sheds light on the paradox of why, despite the talks of sanctions ‘effectiveness’, long-term strategic effects are often counterproductive. In the long run sanctions (and counter-measures by target states) contain the potential to undermine the very essence of geopolitical strength of sender (and target) states – e.g. the United States’ ‘exorbitant privilege’ and financial hegemony; the United States’ and China’s dominance and control over global supply chains; Russia’s leading position in global energy markets. Eventually, sanctions warfare contributes to the rise of neoprotectionism that moves the world away from neoliberal ideological hegemony, away from the global paradigm of business effectiveness based on profit maximisation – as the orientation for profit has been depleted by sanctions over-compliance.

Sanctions – An ‘Alternative to War’ The use of economic sanctions as a foreign policy tool has become increasingly common in international relations. Some view sanctions as a nonviolent means of coercing states to change their behaviour without resorting to military force. After World War I, US President Woodrow Wilson proposed sanctions as an alternative to war: “applying this economic, peaceful, silent, deadly remedy’ that would eliminate the need for force (Wilson 1923:71). However, as the practice of the League of Nations demonstrated, the effectiveness of sanctions could not be guaranteed, as the impact of sanctions on target states (e.g. Italy and Japan) as well as on ‘third parties’ was rather counterproductive, pushing Germany to solidify self-resilience (Mulder 2022), as it was in the case of the Megarian Decree against Megara (an ally of Sparta) that triggered the eruption of the Peloponessian War. Nevertheless, the question of how sanctions could bring about change within target states remains a subject of considerable academic interest. This section discusses five predominant theories in this regard. 49

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The first theory takes a realist perspective, offering the least optimistic view on the effectiveness of sanctions. Pape (1997) believed that modern states are highly resilient and motivated by nationalism. Nationalism leads the target states to be able to endure considerable economic losses to safeguard their national interests, which also explains why only less than 5% of sanctions achieved their goals. Cooper Drury’s study on the economic sanctions by the United States on the China reaches the same conclusion. He argues that the failure of the sanctions shows that they are ineffective and sometimes counterproductive (Cooper Drury and Li 2006). However, this approach does not account for instances where sanctions have been successful, indicating that there may be other factors that impact the effectiveness of sanctions. In contrast to realists, liberals aim to explain why sanctions work by suggesting that economic pain will translate into desired political outcomes, so the crucial element is to identify those with the power to bring about political change and target them. The traditional liberal view posits that citizens are the ones who push for change, just as Huntington (1968:196) points out, ‘the wealthy bribe; students riot; workers strike; mobs demonstrate; and the military coup’. This view suggests that when people in targeted states feel the pain of economic suffering, they will pressure the government for political changes (Galtung 1967). However, this theory fails to account for cases when sanctions had the opposite effect – such as the UN sanctions against Iraq (1990) that strengthened rather than weakened the government of Saddam Hussein. Then, liberal scholars jumped into defining target ‘people’ in the context of their involvement in the decision-making in the target states, noting that people’s capabilities of influencing decision-making depended on the nature of the regime. While people in democracies may have the power to bring about political and social change, people in autocracies have very limited agency. Cortright and Lopez (2000) argue that the adverse impacts of sanctions are often borne by the most vulnerable members of society, who possess limited ability to coerce their respective governments and therefore become victims. This logic provides ground for targeted ‘smart’ sanctions. Since only specific people have the power to bring about change, sanctions should be deployed on decision-makers responsible for wrongdoings (Cortright and Lopez 2000). However, liberal accounts tend to ignore that democracies and autocracies do not exist in their pure form – most states have a hybrid form; moreover, liberals fail to acknowledge that authoritarian regimes are based not only on coercion but also on legitimacy (Grauvogel and von Soest 2014). Therefore, the influence of social and public opinion in authoritarian systems cannot be entirely disregarded (Brooks 2002). Instead of targeting regular citizens or key decision-makers, public choice accounts suggest that sanctions should focus on relevant interest groups that can influence the decision-making process. The underlying logic of this approach is that pressure to effect change arises from interest groups with diverse motives, and the pressure within a particular group is determined by the private utility maximisation of individual members within those groups (Kaempfner and Lowenberg 1988). Thus, for economic sanctions to effectively reduce objectionable policies of target states, they must be designed in a way that inflicts more harm on the primary beneficiaries of such policies, as compared to the groups that resist them (Kaempfner and Lowenberg 1988). However, this theory oversimplifies the dynamics between interest groups and target states, as it is based on a discredited ‘pluralist vision’ of the state that conceptualizes states as ‘neutral arbiters’ (Jones 2015:27). According to the state’s strategic selectivity, the state’s ability to affect the capacity of different class-oriented forces to pursue their interests through different strategies over time is not inherent, but rather contingent upon the relationship between state structures and the strategies employed by various forces towards the state (Jessop 1982). Therefoe, public choice theory appears to offer a ‘remarkably economically reductionist view of politics’ as it fails to provide a comprehensive explanation for the complexities of 50

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state–society dynamics and the interplay between interest groups in shaping decision-making processes related to the use of sanctions (Jones 2015:28). Given that sanctions are more commonly applied to autocracies than democracies, many scholars have attempted to understand state–society relations and politics in authoritarian settings. Scholars who believe that the different logics of sanctions depend on the difference in regime type are referred to as institutionalists. They believe that in autocracies, citizens’ power is generally lower than in democracies due to the lack of accountability and selection mechanisms inherent in democratic institutions. Thus, groups adversely affected by sanctions may push for political change in democracies, but they are often excluded from political processes in authoritarian regimes. The degree of repression also differs between autocracies and democracies. Especially in a situation when the costs of suppressing opposition potentially are lower than the costs of responding to either the people or the sanctions sender, the sanctions will not be effective (Allen 2008). This approach could provide a plausible explanation for the failure of the comprehensive sanctions imposed on Iraq. Sanctions, especially trade bans, created rent-seeking opportunities for regimeaffiliated groups, failing to lead to the expected objectives of changing behaviour in Iraq (Brooks, 2002). Instead, smuggling in the black markets benefited certain authoritarian coalitions. That is why, overall, comprehensive sanctions are generally considered more appropriate and effective for democracies, while targeted sanctions – for autocracies. This dichotomous classification of political regimes in the theory of sanctions has been challenged in academic literature. Drezner (2012) argues that this approach oversimplifies the situation by failing to account for the various types of authoritarian regimes, each with its distinct decisionmaking dynamics. Then, some scholars have sought to explore the nuances of authoritarianism by investigating its distinct subtypes. Escribà-Folch and Wright suggest that in ‘personalist’ regimes the rulers heavily rely on external revenue to maintain their patronage networks, which makes such regimes more susceptible to international sanctions than other types of authoritarian regimes (Escribà-Folch and Wright 2010). In contrast, ‘single-party’ and ‘military’ regimes may be able to mitigate the effects of sanctions by transferring fiscal pressure from one area to another. The former can rely on strong parties and dependable institutions to co-opt the population, while the latter can resort to repression to quell dissent (Ibid). Although efforts have been made to classify regimes into various subtypes, the weakest point in regime-type approaches has been difficulty in establishing a robust link between subtypes of regimes and the effectiveness of sanctions. For Lee Jones, the regime-type approach is an ‘unconvincing explanatory variable’ due to the challenge posed by the intricate fusion of multiple subtypes in numerous regimes, which significantly limits the explanationary power of ‘institutionalist’ theories of sanctions (Jones 2015:15). Rather than relying on sweeping generalisations regarding regime types, neo-Weberian accounts are believed to be the most advanced ‘mainstream’ theories of sanctions (Jones 2015), for their ability to identify specific variables that may influence the effectiveness of sanctions. Blanchard and Ripsman (2008) identify three factors that constitute ‘stateness’, namely autonomy, capacity, and legitimacy. For them, the effectiveness of sanctions is influenced by the targeted state’s ability to ‘make decisions in the face of domestic political opposition’, to ‘either compensate or coerce those who stand to lose from defying the sender’ and to ‘rally disaffected domestic groups’ (Blanchard and Ripsman 2008:372). However, the problem of the neo-Weberian notion of ‘stateness’ is its reliance on characteristics such as autonomy and capacity that arise from state institutions alone, while the interactions between social forces that constitute these institutions are underexplored (Jones 2015). Thus, ‘stateness’ falls short in terms of providing an explanation for how states acquire these attributes, as it focuses more on the question of when sanctions prove effective, rather than how they function. 51

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Overall, no single one of the five mainstream theories on sanctions – i.e. realist, liberal, public choice, institutionalist, and neo-Weberian (Jones 2015) – can fully account for the complexities of state–society relations and the interplay between interest groups in shaping decision-making processes related to the effect of sanctions. Nonetheless, each of these theories provide important ideas for a deeper understanding that sanctions can be an effective tool for bringing about political change, on the condition that the approach is nuanced, targeted, context-specific, and considers the complexities of social power relations in the target states.

Sanctions – An ‘Instrument of War’ At the present time, economic sanctions are the second most powerful foreign policy instrument, after military force. It is no surprise that the exponential growth of the use of sanctions provokes doubt and criticism regarding sanctions effectiveness. To offer a more nuanced understanding of how sanctions work, a growing number of scholars have moved beyond the theoretical orthodoxy of sanctions ‘as an alternative to war’. The aforementioned mainstream approaches insufficiently appreciate that effective governance stems not only from the ‘formal apparatus of government’, but also from civil society, where ‘institutions like churches, trade unions, schools, and the media…cultivated consent for a particular socio-political order among subordinated groups’ (Jones 2015: 39–40). Drawing on Antonio Gramsci’s critical perspective, Jones sought to evaluate how sanctions impact ‘coalitions of socio-political forces’ that compete within states ‘for power and resources’ (Ibid). According to Gramsci, the ruling elite is inclined to assemble ‘coalitions of socio-political forces’ that comprise members beyond their immediate network – i.e. the ruling elite ‘must secure the loyalty of subordinated groups through material concessions and ideological projects’, while force may be applied to coerce ‘recalcitrant groups outside the ruling bloc’ (Gramsci, 1971: 263 quoted in Jones 2015). Once a coalition has seized state power, it tends to restructure institutions to its benefit and to weaken its competitors. State institutions are consequently not static, as mainstream approaches posit, but evolve according to competing ‘interests, ideologies, and strategies of the various social groups’ (Jones 2015). De-constructing the impact of sanctions on target states through what Jones called ‘Social Conflict Analysis’ (SCA) purchases significant explanatory power for how sanctions work: they impact ‘these forces’ composition, power, resources, alliances, and strategies, conditioning their struggles to control state power and thereby transforming target states, whether in ways desired by sanctions or not’ (Jones 2015). SCA proceeds in three steps: it is necessary to single out the ruling coalition and the opposition coalition that compete for state power and their modus operandi (i.e. how do they seek to incorporate groups into their coalition and how do they seek to subordinate others?) (step 1). This is followed by the analyses of ‘the economics impacts of sanctions’ on the target society across different groups (step 2) as well as their response to sanctions pressures (step 3). Step 3 seeks to determine how sanctions impact the socio-political conflicts identified in step 1 ‘by altering the composition, power, interests, resources, ideologies, and strategies of the coalitions contesting state power, and how this generates political change (or fails to do so)’ (Jones 2015:44). SCA thus offers insights for evaluating how these conflicts are conditioned by sanctions’ material effects’ (Jones 2015:47). It shifts the focus from ‘how much damage is inflicted’ on the target state (and the usual emphasis on the humanitarian effects of sanctions) to how various societal groups respond to sanctions and ‘whether their strategies to control state power are aided, retarded, or transformed’ (Ibid: 47). Indeed, sanctions have a huge impact on the populations of the target states, moving the social landscape into an opposition to the sender state, as it is always the case at times of war between 52

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states. Recent analysis by Nicholas Mulder reveals that despite the claims for sanctions being an ‘alternative to war’, in fact they remain what they have always been in history – an economic weapon – a weapon redesigned by liberal internationalism in the interwar period. The analysis of the origins and deployment of sanctions demonstrates that ‘a nation put under comprehensive blockade was on the road to social collapse’ (Mulder 2022:4). Indeed, ‘the most enduring innovations of the 20th Century and a key to understanding its paradoxical approach to war and peace… [is that] if we compare the three major anti-civilian weapons of the interwar period – air power, gas warfare and economic blockade – it becomes clear that blockade was by far the deadliest’ (Mulder 2022:5). There is thus a high concern in the literature that civilians suffer from sanctions while the power of the ruling elites eventually consolidates (Ibid). Moreover, the unintended effects of sanctions may arise particularly in cases where human rights violations have occurred. In the 1900s, as the cases of sanctions by the international community increased rapidly (with devastating impact on the population as it was in the case of Iraq), the international recognition of a necessity of a closer review of economic sanctions from the perspective of human rights reached the United Nations. According to a 1995 report by the UN Secretary General Boutrous Boutrous-Ghali – “Supplement to an Agenda for Peace”: Sanctions, as is generally recognized, are a blunt instrument. They raise the ethical question of whether suffering inflicted on vulnerable groups in the target country is a legitimate means of exerting pressure on political leaders whose behaviour is unlikely to be affected by the plight of their subjects. Sanctions also always have unintended or unwanted effects. These concerns were later reinstated by UN Secretary General Kofi Annan: When robust and comprehensive economic sanctions are directed against authoritarian regimes, a different problem is encountered. Then it is usually the people who suffer, not the political elites whose behaviour triggered the sanctions in the first place. Indeed, those in power, perversely, often benefit from such sanctions by their ability to control and profit from black market activity, and by exploiting them as a pretext for eliminating domestic sources of political opposition. In fact, several implications could be drawn form the cases of sanctions against Iraq, Venezuela, Cuba, Myanmar, or Iran. Multiple academic papers point to the fact that sanctions result in a decline in the quality of people’s life and further deterriorate human rights of target populations that these very sanctions are expected to protect. Between World War II and 1990 not many politicians or academics considered the humaniratian impact of economic sanctions (Gordon 2011:316). However from 1991 onwards, the international community, e.g. UNICEF, the WHO and other international organisations, have become increasingly vocal about the necessity of reflecting on the lessons learnt from the devastating humanitarian impact of sanctions on Iraq. In 1997, the review of the possible humanitarian effects of imposing sanctions on Sudan by the UN Department of Humanitarian Affairs, resulted in the emergence of the concept of ‘smart’ or ‘targeted’ sanctions to ‘minimise unintended humanitarian consequences and focus coercive pressure on responsible decision makers’ (Cortright, Lopez, and Gerber 2002:107–10). Yet the targeted sanctions movement has not resolved the issue in full. Existing types of targeted sanctions (e.g. arms embargoes, travel bans, sectorial and financial sanctions), have a spill-over effect, spreading across multiple sectors of the target economy and are ineffective in reducing the humanitarian damage completely. In some cases the effect is rather devastating, as it was in the case of Iran during the pandemic 53

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(Ameli 2020:122). Although the international community claimed to have considered only ‘minimal’ sanctions against Iran’s medical and health sectors on humanitarian grounds, political considerations ultimately trumped humanitarian concerns, resulting in the sanctions aggravating the Iranian Covid-19 pandemic situation. Iran is just one example; economic sanctions had a detrimental effect on most target states in the Global South, struggling to survive during the Covid-19 pandemic, or during a devastating earthquake in 2023 (e.g. Syria). Raúl Rodríguez (2020) argues that the Trump administration’s unprecedented economic sanctions against Cuba, imposed from June 2017 onwards, have produced appalling humanitarian consequences in 2020–2021. Although the US government can authorise the sale of medicines and medical equipment to Cuba, the United States does not export to Cuba. The humanitarian aspects of sanctions are not the only factor that makes academics question sanctions ‘efficacy’ and ‘legality’. For instance, Tom Ruys and Cedric Ryngaert assessed the unilateral use of sanctions by the United States, concluding that global institutions should assign specific roles and limits to extraterritorial (or secondary) sanctions in order to prevent illegal actions and policies (Ruys and Ryngaert 2020:4–6). Secondary sanctions present judicial challenges, limiting third states’ sovereignty and control of their economic relations with other countries. For example, the re-imposition of US sanctions against Iran in 2018 following President Trump’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA, or the ‘Iran nuclear deal’), harmed economic interests of some corporations in the European Union and, according to the report published by the European Parliament, undermined sovereignty of some EU member states (Human Rights Watch 2018:55). European leaders attempted to ‘minimise the economic costs of sanctions’ and create ‘a “sovereign Europe” fortified by a closer military and economic integration’ (Cafruny and Kirkham 2020:90). These efforts, however, have been reversed since Russia’s invasion of Ukraine in 2022, when most arguments in support of building an independent European security structure, without alienating Russia by spurring the country’s national security anxieties regarding NATO’s military expansion towards its borders, were silenced. The claims for protecting Europe’s sovereignty against the US ‘extraterritorial’ reach have also been muted. Had this unfortunate scenario been desired by sanctions sender states in 2014, we could have argued that sanctions ‘worked’. However, as the stated political objective for sanctions had been Russia’s deterrence Russia’s invasion called into question sanctions ‘effectiveness’. Moreover, as in the cases of Ancient Greece and the interwar period, the long-term impact of sanctions could be counterproductive: target states can become more self-resilient and adopt a more aggressive posture towards sender states, which could eventually lead to war. To understand why this is the case we need to look inside sanctioned states. The following section suggests a useful framework of how this could be done.

Look Inside the Sanctioned States Jones’s ‘Social conflict analysis’ (SCA) has represented a productive step forward from the mainstream theories of sanctions: the focus from ‘how much damage is inflicted’ on the target state has been shifted to how various societal groups respond to sanctions and ‘whether their strategies to control state power are aided, retarded, or transformed’ (Jones 2015:47). However, there is some ground for improvement. First, the conceptualisation of the state in the SCA overlooks the dynamics of class conflict within the global flow of capitalist social relations; for instance, in the case of South Africa, the assessment of social formations obtain quite a static character, where the future of the sanctioned states is already contained in the dynamics of the present class struggle (Booth 1985:773). Moreover, the impact of transnational capitalist development on the composition of social forces falls out of the neo-Gramscian geopolitical vision of hegemonic rivalry. This 54

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vision draws on the concept of global hegemony within the heartland/contender divide through ‘a differentiation between two main types of ‘state/society complexes’ (Cox 1986:205, cited in Van der Pijl 2012). The counter-hegemonic forces in a taget states play a very important role in building the state’s resilience to sanctions. However, in South Africa the effect of sanctions was tangible rather than predominant for regime transformation: a massive social conflict within the state rather than sanctions predetermined the end of apartheid. Second, the SCA does not specify how the ideological orientation might make some social groups ‘resign itself passively to its losses’ (Jones 2015:43), especially in a situation when the local responses to sanctions are ‘structurally constrained by pre-existing social power relations and conflicts’. Therefore, the formation of public ‘consent’ to different socio-economic and political transformation of the target state is underexplored. Third, the identification of ‘the immediate economic impact of sanctions on the target society’ – the second step of the SCA – is quite problematic due to the complexity of delineating the effect of sanctions from other no less important factors that affect the economy (e.g. the business cycle, situation in the global markets, macroeconomic situation). Moreover, as was the case in Russia in 2014–2022, the negative effects of sanctions were short lived and actually served as a catalyst for the project-driven long-term marcoeconomic restructuring that strengthened rather than weakened the country’s economy. Jones correctly points out that the intensity of the effectiveness of sanctions is identified via its influence on resources available to ruling groups for ‘coercing, co-opting, or gaining consent from subordinate groups’, and on society’s basic compositions – i.e. giving rise to some social groups while marginalising others (Jones 2015:45). However, a step forward would be to see how these two mutually dependent factors correlate, given that the resources that the ruling class require depend on the composition of society, while the way the society is ‘composed’, depends not only on the effect of sanctions, but also on many other factors. What are these factors? What are the external and internal forces that drive the target’s regime transformation? What makes a target state potentially more resilient to sanctions in the long run (or not)? What is in common between the states that manage to adjust to durable pressures and hardships? The analysis of the ‘effectiveness’ of sanctions requires a specification (definition) of mechanisms and an assessment of their contradictory nature. The WSR approach answers all of these questions by exploring the contradictory nature of the mechanisms of sanctions (Kirkham 2022). In doing so, the WSR enriches the neo-Gramscian structural categorisation of social power relations that presents structural power as a blend of three categories of ‘potentials’ – material capabilities, ideas, and institutions – that form the famous concept of a ‘historic bloc’ (Cox 1981:136) with the most valuable functionalist and power resource insights. The theoretical merger proceeds through a multidimensional concept of ‘self-protection of society’, which conflates power structures (institutional, material, and cultural) with welfare state functions (de-commodifying, re-distributive, and connecting) to arrive at the final point of theoretical inquiry – counter-hegemonic mechanisms of the WSR that constitute the regime reproduction. The function of reproduction is a synthesis of the processes that unfolded within society during the period of economic sanctions. This framework emabled the comparative analysis of Russia and Iran under sanctions (Kirkham, 2022). The analysis reverals certain differences and commonalities between Russia and Iran (i.e. ‘counter-hegemonic trends’). Both states experienced power centralisation that went in line with the teleological justification of a Hobbesian ‘fictional view’ of the state (Skinner 2011) based upon strong leadership of a sovereign and a hypothetical social contract that grants the sovereign monopoly over the law. In Russia, however, the social contract was reinforced through the system of tripartism that replaced the legal vacuum of the 1990s and consolidated the ‘economic space’ by strengthening the partnership between state power institutions and large enterprises that reinforced 55

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a stable government–labour–firm commitment to set the rules of the game to reduce capital flight (Kirkham 2022:353); while in Iran, where constitutionalism co-exists with the clerical rule, ‘the consolidation of civic power networks under the supervision of parastatal institutions seemed less centralised, as political power is dispersed through the system of political contestation that maintains the system’s legitimacy by preventing the political landscape from tilting into extremes’ (Ibid: 388). Economic sanctions worked as a catalyst for technological modernisation, driven in Russia by the digitalisation of the economy and the development of the military complex, while in Iran – by the Construction Jihad and economic pragmatism of ‘resistance economy’. Among other similar ‘counter-hegemonic trends’ were strategic partnership and regionalism, the consolidation of a contender bloc, the subordination of constitutional order to public administration, and neoMachialvellian ‘cadre formation’, designed to secure political stability. In both Russia and Iran a ‘new middle class’ of mediators emerged to ‘secure the continuity of patronage politics of the ruling class in order to extinguish the extremes in complex societies, by promoting the ideology (i.e. Islamic values in Iran, and the ‘ideology of statecraft’ in Russia) (Ibid). Despite the immediate short-term shocks of sanctions for target states (that make some observers believe that sancitons ‘work’ and are effective), in the longer run, the processes that evolve in target states eventually make them more self-sufficient, more resilient to sanctions, and more aggressive towards the sender states (Kirkham 2022).

Conclusion The theoretical and conceptual underpinning of sanctions debates is very important, but no less important is our understanding that notions and concepts that have history cannot have one precise definition, as the definition will be changing according to a context. It is useful to recollect a Greek philosopher from Athens – Socrates (470–399 BC) a founder of Western philosophy, famous for the method of questioning, or elenchus – i.e. a sequence of short questions and answers to initiate a dialogue with an expert, to develop a logical pathway to the point when the initial beliefs expressed by an expert enter into a direct contradiction to his follow-up statements. As such, when we deal with theories – there cannot be ‘one true theory fits all approach’– as by doing so we risk to fall into what Socrates called ‘ignorance’. Unfortunately, most theories of sanctions suffer from ‘ignorance’, and the best way to overcome this is to acknowledge the fact that seemingly opposing theories might not be mutually exclusive – they are just keys to the study of the same phenomena from different angles. Realist, liberal, public choice, institutionalist, and neo-Weberian accounts provide different perspectives on some effective approaches to imposing sanctions. Each theory highlights different factors, including the actors who have the power to bring about regime change, the interest groups that can influence decision-making processes, and the type of regime that may be more or less susceptible to sanctions. Realists argue that sanctions are unable to induce political changes, while liberals suggest sanctioning either the whole population or the key decision-makers. Public choice approaches believe that sanctions should target relevant interest groups that can influence decision-making. Institutionalists examine how the type of regime affects the effectiveness of sanctions, while the neo-Weberian notion of ‘stateness’ identifies autonomy, capacity, and legitimacy as important factors influencing the effectiveness of sanctions. Sanctions today are the most rapidly developing mechanisms of economic warfare since the end of the short lived post-Cold War era, however questions continue to be raised about their effectiveness. Especially on the humanitarian side, economic sanctions cause serious harm to the general population of the target states. Even as the pandemic passes, the negative humanitarian 56

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aspects are increasing and there are pressing concerns that sanctions are actually violating basic rights to health. Therefore, sanctions must be carefully selected according to the circumstances. To better tailor this selection – look inside the target state. There is nothing new in this statement, what is new is how to look inside the target states, i.e. which processes to trace and why. The application of the WSR approach to the cases of Russia and Iran offers an idea of how this could be done. But the analysis is by no means exhaustive and complete and should be developed further and enriched by considering other case studies, including inter alia China, Venezuela, Cuba.

Bibliography Allen, S. H. 2008. “The Domestic Political Costs of Economic Sanctions.” Journal of Conflict Resolution 52(6):916–44. Ameli, V. 2020. “Sanctions and Sickness.” New Left Review March-April:50–57. Blanchard, J.-M. F. and N. M. Ripsman. 2008. “A Political Theory of Economic Statecraft.” Foreign Policy Analysis 4(4):371–98. Booth, D. 1985. “Marxism and Development Sociology: Interpreting the Impasse.” World Development 13:761–87. Braudel, F. 1958. “Histoire Et Sciences Sociales : La Longue Durée.” Annales 13(4):725–53. Brooks, R. A. 2002. “Sanctions and Regime Type: What Works, and When?” Security Studies 11(4):1–50. Cafruny, A. and K. Kirkham. 2020. “EU ‘Sovereignty’ in Global Governance: The Case of Sanctions.” Pp. 89–104 in Global Governance in Transformation: Challenges and Opportunities for International Cooperation, edited by A. Pabst and L. Grigoriev. Cham: Springer. Cooper Drury, A. and Y. Li. 2006. “U.S. Economic Sanction Threats Against China: Failing to Leverage Better Human Rights.” Foreign Policy Analysis 2(4):307–24. Cortright, D. and G. A. Lopez. 2000. The Sanctions Decade: Assessing UN Strategies in the 1990s. Colorado: Lynne Rienner Publishers. Cortright, D., G. A. Lopez and L. Gerber. 2002. Sanctions and the Search for Security: Challenges to UN Action. London: Lynne Rienner Publishers. Cox, R. W. 1981. “Social Forces, States and World Orders: Beyond International Relations Theory.” Millennium: Journal of International Studies 10(2):126–55. Cox, R. W. 1986. Production, Power, and World Order. Social Forces in the Making of History. New York: Columbia University Press. Crawford, N. and A. Klotz. 1999. How Sanctions Work : Lessons from South Africa. Basingstoke: Macmillan. Drezner, D. W. 2012. “An Analytically Eclectic Approach to Sanctions and Nonproliferation.” Pp. 154–73 in Sanctions, Statecraft, and Nuclear Proliferation, edited by E. Solingen. Cambridge University Press. Escribà-Folch, A. and J. Wright. 2010. “Dealing With Tyranny: International Sanctions and the Survival of Authoritarian Rulers.” International Studies Quarterly 54(2):335–59. Freedman, L. 2013. Strategy: A History. Oxford: Oxford University Press. Galtung, J. 1967. Trustees of Princeton University On the Effects of International Economic Sanctions: With Examples from the Case of Rhodesia, Author (s) : Johan Galtung Published by : Cambridge University Press Stable https://www.cambridge.org/core/journals/world-politics/article/abs/on-the-effectsof-international-economic-sanctions-with-examples-from-the-case-of-rhodesia/DDDFF52DDBD2 EBA7A16FADAEB2ADBB92 Accessed :” World Politics 19(3):378–416. Gordon, J. 2011. “Smart Snactions Revisited.” Ethics and International Affairs 25(3):315–35. Gramsci, A. 1971. “The Modern Prince” Selections from the Prison Notebooks. London: Lawrence and Wishart Grauvogel, J. and C. von Soest. 2014. “Claims to Legitimacy Count: Why Sanctions Fail to Instigate Democratisation in Authoritarian Regimes.” European Journal of Political Research 53(4):635–53. Human Rights Watch. 2018. “Russia: Government vs. Rights Groups. The Battle Chronicle.” 03.03. Retrieved July 8, 2019 (https://www.hrw.org/russia-government-against-rights-groups-battle-chronicle). Huntington, S. 1968. The Third Wave: Democratization in the Late Twentieth Century. Oklahoma: University of Oklahoma Press. Janis, I. 1982. Groupthink : Psychological Studies of Policy Decisions and Fiascoes. Boston: Houghton Mifflin.

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Ksenia Kirkham, Yifan Jia, and Yeseul Woo Jones, L. 2015. Societies Under Siege: Exploring How International Economic Sanctions (Do Not) Work. Oxford University Press. Kaempfner, W. H. and A. Lowenberg. 1988. “The Theory of International Economic Sanctions: A Public Choice Approach.” American Economic Review 78(3):786–93. Kirkham, K. 2018. “The Notion of Power or What Is Left Out in Robert Gilpin’s ‘Trichotomous Categorisation’: Theoretical and Philosophical Positions in International Political Economy and the Ground for Theoretical Merger.” Concept: Philosophy, Religion, Culture 3(7):58–69. Kirkham, K. 2022. The Political Economy of Sanctions: Resilience and Transformation in Russia and Iran. Internatio. Palgrave Macmillan Cham. Mulder, N. 2022. The Economic Weapon. The Rise of Sanctions as a Tool of Modern War. Yale University Press. Pape, R. A. 1997. “Why Economic Sanctions Do Not Work.” International Security 22(2):90–136. Rodríguez, R. 2020. “U.S. Economic Sanctions on Cuba in the Context of the Pandemic COVID-19 Ethics & International Affairs.” Retrieved March 8, 2023 (https://www.ethicsandinternationalaffairs. org/2020/u-s-economic-sanctions-on-cuba-in-the-context-of-the-pandemic-covid-19/). Ruys, T. and C. Ryngaert. 2020. “Secondary Sanctions: A Weapon Out of Control? The International Legality of, and European Responses to, US Secondary Sanctions.” in British Yearbook of International Law. Oxford University Press. Skinner, Q. 2011. A Genealogy of the State, Lecture Transcript. van der Pijl, K. 2012. “Is the East Still Red? The Contender State and Class Struggles in China.” Globalizations 9(4):503–16. Wilson, W. 1923. Woodrow Wilson’s Case for the League of Nations. NJ: Princeton University Press.

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5 SANCTIONS, DETERRENCE AND THE RECENT CASE OF RUSSIA Wyn Bowen and Matthew Moran

Introduction Sanctions, defined as the restrictive measures imposed by states or groups of states to achieve coercive influence on another state, are now among the most frequently used tools of diplomacy. For policymakers, the appeal of restrictive measures, which can range from asset freezes to arms embargoes, lies in the potential for the sender to exert influence through economic and other disruption, without the need to resort to military force. These measures “between war and words” allow for rapid and highly visible action with clear and often significant costs to the target. Sanctions have the potential to wreak economic havoc on a target state as well as isolating the country internationally. Clearly, efforts to exert influence can take several forms and this is reflected in the various uses of sanctions. The objectives of restrictive measures can range from simply signalling disapproval to the far more ambitious goal of compelling an opponent to change or reverse a course of action already initiated. Little surprise, then, that the threat of sanctions featured prominently in the efforts of Western states to influence President Putin’s thinking as fears of a Russian invasion of Ukraine grew towards the end of 2021. Much of the existing scholarly literature on sanctions and their coercive effects frames discussion in terms of compellence – or coercive diplomacy.1 At stake here is the effort to bring about a change in the target state’s behaviour by compelling it to do something or, more often than not, to stop doing something. For decades now, scholars have debated the compellence value of sanctions with diverging views on whether and to what extent sanctions contribute to desired coercive outcomes. Yet this focus on compellent effects has overshadowed another key form of coercion – deterrence – and its relevance to sanctions debates. While compellence seeks to bring about an active change in behaviour, deterrence aims to prevent an actor from initiating a particular course of action either through fear of unacceptable punishment or denial of objectives. A vast amount of academic research has been devoted to exploring deterrence and what makes this mode of coercion work, but very little of this has been in the sanctions context. Certainly, there is very little empirical evidence informing our understanding of the potential for the threat of sanctions to deter states from engaging in unacceptable behaviour. A review of events leading up to the Russian invasion of Ukraine on 24 February 2022 provides an opportunity to address this imbalance. The threat of severe economic sanctions featured DOI: 10.4324/9781003327448-7

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heavily in Western efforts to deter Russia. While these efforts ultimately failed, much can be learned from the experience. The chapter is organised into two main parts. The first offers a brief review of existing literature on sanctions and coercion. This draws attention to some important work on the question of sanctions and deterrence, and situates this in broader debates, while also highlighting the limited nature of research on this issue. We also illuminate the challenges of using sanctions for deterrence by applying some insights from deterrence theory. The second part of the chapter examines the case study. It provides some context on the lead up to the full Russian invasion of Ukraine that began on 24 February 2022. We explore how sanctions took a prominent place in the broader effort to prevent, or deter, the Russian invasion, even though Western leaders appeared convinced President Vladimir Putin’s mind was already made up to invade. Equipped with this context, we analyse the failure of deterrence. Clearly, deterrence failure cannot be attributed to sanctions-related issues alone – sanctions were part of a broader set of measures and signals, and the Western approach did not unfold in a vacuum. We apply the lens of “deterrence credibility” – a framing commonly used by scholars of deterrence – to help explain the failed effort to deter. However, we also examine Russian motivations and the susceptibility of President Putin to being deterred in this context. The analysis will therefore account for some of the broader factors at play even as we try to draw out the developments of most relevance to the sanctions question. The chapter concludes by reflecting on what can be learned from the recent experience with Russia and what it tells us about the deterrent potential of sanctions more broadly.

Coerce, Constrain and Signal As earlier chapters have demonstrated, the term “sanctions” is a far-reaching one. There is a broad range of restrictive measures that may be contemplated as a sanction, including but not limited to arms embargos; diplomatic and political sanctions; financial sanctions; and sectoral sanctions such as maritime or aviation sanctions. These are given legitimacy through what Nephew describes as the “constellation of laws authorities, and obligations laid out in a piece of legislation, government decree, UN resolution or similar document that restrict or prohibit what is normally permissible conduct and against which performance will be assessed and compliance judged” (Nephew, 2018, p. 9). Sanctions are an important part of international diplomacy, and their use inevitably, “presupposes the sender country’s willingness to interfere in the decision-making process of another sovereign government, but in a measured way that supplements diplomatic reproach without the immediate introduction of military force” (Hufbauer et al., 2009, p. 5). The desire to influence the behaviour of another party is at the heart of the writing on and practice of sanctions. For the most part, this influence has been framed in terms of compellence and the effort to bring about change in the behaviours or policies that the target has already begun to engage in. This was the case in 1989, when Nossal described the nominal purpose of sanctions to be “changing the behaviour of the target” (Nossal, 1989, p. 699). It was also the case in 1997, when Dashti-Gibson et al. identified a key role of sanctions as being “designed to compel the target to make some concrete change in its policies (e.g., South Africa to end apartheid)” (Dashti-Gibson et al., 1997, p. 610). And it remained the case in 2018, when Nephew argued, “Sanctions are intended to create hardship – or to be blunt, ‘pain’ – that is sufficiently onerous that the sanctions target changes its behaviour” (Nephew, 2018, p. 9). In addition to the use of sanctions in seeking to compel changes in behaviour, it is generally held that the threat or imposition of sanctions can also be used to “constrain” or to “signal”. Constrain is meant in the sense of denying a target access to important resources required for it to engage in 60

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behaviour deemed unacceptable by the party or parties imposing sanctions. Through denial of access, constraining sanctions are intended to raise the costs and barriers associated with proscribed activities, ideally resulting in a change of policy by the target (a point of overlap with the objective of compellence). Biersteker et al. note that commodity sanctions are often used in this way – they “target a consequential sector of the economy to deny targets the resources needed” (Biersteker et al., 2016, p. 21). A recent example of sanctions being deployed with a view to constraining a target’s activities can be seen in UK sanctions on Russia. In February 2023, the British government announced a new package of sanctions that would “ban the export of every item Russia has been found using on the battlefield to date, a list covering hundreds of goods, including aircraft parts, radio equipment and electronic components” (Rankin and Borger, 2023). The threat or application of sanctions is also commonly held to serve an important signalling function, both in terms of domestic and international audiences. Sanctions can be used to signal disapproval about the behaviour of a particular actor, often as part of an effort to “politically isolate and ostracize their target within the international community” (Early and Jadoon, 2016, p. 217). More than this, restrictive measures can be used to signal the resolve of the sender to address the target’s offending behaviour. Signalling through the imposition of sanctions can be stronger than simply communicating in words that a particular type of behaviour is undesirable. There is a sizeable body of scholarly literature that looks at various aspects of the constraining and signalling effects of sanctions (Giumelli, 2011; Whang and Kim, 2015). When it comes to the use of sanctions for deterrence purposes, however, there has been relatively little research and insights are limited. Certainly, the deterrence potential of restrictive measures has been recognised by scholars of sanctions. For example, Hufbauer et al. write that, “the lessons of a sanctions episode can […] be intended to deter the leaders of other countries who might be contemplating objectionable policies similar to those of the target – for example, engaged in terrorism, undertaking a nuclear or biological weapons programme, or embarking on a military adventure” (Hufbauer et al., 2009, p. 44). Lindsay makes a similar argument, noting that, “The initiator’s objective may be deterrence to dissuade the target from repeating the disputed action in the future […] The initiator also may use sanctions to deter nations other than the target” (Lindsay, 1986, p. 155). Yet the majority of research on sanctions has been limited to exploring cases where restrictive measures have been imposed (Smith, 1995). Recent studies have “demonstrated that assessments of sanctions effectiveness have neglected the threat of sanctions” (Ang and Peksen, 2007, p. 136). This is problematic and raises the possibility of selection bias. This, in turn, has important implications for our understanding of sanctions. Nooruddin observes that, “senders make a strategic choice as to whether or not they impose a sanction. Therefore, the set of observed sanctions represents a non-random sample of cases, and therefore we are unable to infer the causes of success with much certainty” (Nooruddin, 2002, p. 66). For his part, Drezner argues that the failure to consider cases revolving around the threat of sanctions, “raises the possibility that selection bias has seriously affected empirical studies of economic statecraft. If this is true, then the sanctions literature has grossly underestimated the utility of economic diplomacy” (Drezner, 2003, p. 644). It is worth noting that Drezner is one of the few scholars whose work has explored cases where the threat of sanctions has been the main analytical focus.2 In the following sections, we seek to address the paucity of research in this space by exploring some of the key issues that emerge at the intersection of sanctions and deterrence, and grounding them in the contemporary case of Russia. So how should we approach the issue? One way is to draw on deterrence theory and apply an analytical framework that balances the idea of deterrence credibility against the susceptibility of the target (real or perceived) to being deterred from engaging in the specific behaviour that the sender wants to avoid. This approach offers a straightforward 61

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but structured means of thinking through the various factors that are likely to influence the success or failure of any threat of sanctions. This, in turn, better equips us to understand the value and limitations of thinking about (and potentially using) sanctions for deterrence purposes.

Credibility and Susceptibility In the extensive literature on deterrence, certain core elements have remained a constant feature of debate since the 1950s. One of these is the notion of credibility, which William Kaufmann set out as a requirement of successful deterrence in 1954 (Kaufmann, 1954, p. 7). The presence of credibility does not guarantee the success of coercive threats – as we argue elsewhere, “Even when states take many of the steps that are supposed to establish credibility, coercive efforts can fail” – but a threat without credibility has no coercive weight (Bowen et al., 2020, p. 800). Credibility is thus an essential element of deterrence. Scholars have debated and prioritised various aspects of Kaufmann’s original breakdown of credibility – “capability, cost and intentions” – but for the purposes of this article, we will adopt Ned Lebow’s criteria for evaluating the credibility of deterrence, a widely used framework in deterrence research. Lebow sets out four main criteria: (1) a commitment must be formulated, that is to say a red line or threshold the deterring party does not want the target to cross; (2) this commitment must be communicated to the target; (3) the deterring party must have the capability to back up the commitment if is violated by the target and (4) the deterring party must have the will, or the resolve, to back up that commitment if it is violated (Lebow, 1984). Various questions flow from these criteria, including some that relate specifically to the practicalities of imposing sanctions. These include:

• What is the context surrounding the deterrence effort and what are the most significant factors influencing the situation?

• How clear is the commitment, or the “red line”, being drawn? • Who or what is the focus of the deterrent threat? • How severe should the threat of sanctions be—how much is enough and should the approach be incremental or maximalist?

• What tools are appropriate for the threat? Diplomatic sanctions, travel bans or asset freezes? • Can the threat of sanctions be fulfilled in a timely and decisive manner if needs be? • Does the sender, whether lone actor or alliance, have enough sanctions “weight” and reach to have a significant impact on target interests?

• Related to the previous point, whose “resolve” is at stake – single actor or unified alliance? • What is the track record of the sender, both in terms of deploying and enforcing sanctions? An appreciation of these questions can help the party seeking coercive influence to put forward a credible threat that, all things being equal, has the potential to shape an adversary’s thinking and actions. The problem is, all things are rarely equal and, clearly, much depends on the circumstances of the adversary. The party wishing to coerce must also consider how susceptible the target is to sanctions pressure. The literature on sanctions highlights a number of general factors that are likely to influence the success or failure of sanctions, and several of these relate to susceptibility. For example, research has shown that friends are more likely to respond to coercive diplomacy than adversaries. As Hufbauer et al. note, “the evidence suggests that economic sanctions are most effective when aimed against erstwhile friends and close trading partners” 62

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(Hufbauer et al., 2009, p. 163). This is because these countries have more to lose – diplomatically and economically – and so allies are “more apt to bend on specific issues in deference to the overall relationship” (Hufbauer and Schott, 1985, p. 730). They are also less concerned about the implications of compliance for future conflicts. Moreover, an allied state is less likely to receive support from a “black knight” – a third party state that helps offset sanctions pressure by providing an alternative market or other forms of support. Clearly, the susceptibility of non-allied states is a qualitatively different question because the diplomatic and economic relationship between the sender and the target is much less likely to be as significant for the latter. Sanctions are also more likely to be effective when deployed against a democratic regime rather than an autocracy. It stands to reason that, “Leaders in autocracies […] are both more insulated from potential public pressure to change policy, and have more room to take adaptive measures to offset the deleterious effects of sanctions” (Zarpli, 2022, p. 1). Moreover, there are limits imposed – often forcefully – on the ability of the public to the protest against policies that have triggered sanctions in non-democratic regimes. Yet another broad finding is that restrictive measures are more likely to be effective when deployed against countries facing challenging economic and political circumstances. Hufbauer and Schott are clear on this point: “Crass but true: A strong correlation exists between the political and economic health of the target country and its susceptibility to economic pressure” (Hufbauer and Schott, 1985, p. 730). The logic here is straightforward and intuitive, sanctions (and perhaps inducements) applied in a case where the target is already experiencing economic pain or is politically unstable could help tilt the balance of political decision-making. These findings feature regularly in the literature on sanctions and provide a good starting point for thinking about the susceptibility of a target. Moreover, while these scenarios have mostly been discussed in relation to cases where sanctions have been imposed, their logic can quite easily be extended to cases where sanctions are threatened. At the same time, they are only a starting point; a comprehensive approach to thinking about target susceptibility requires detailed consideration of the various motivations, constraints and assumptions that underpin a target’s behaviour. Attention should also be given to any steps the target has taken to insulate themselves from the effects of sanctions. Key questions here include:

• What are the target’s objectives (general and specific)? • What is the target’s motivation to act in a particular way? • How does the target perceive the credibility of a sanctions threat in terms of its ability to raise • • • • • •

costs beyond the perceived benefits of acting? Can the sender have enough of an impact on the key interests of the recipient to effect deterrence? What is the role of domestic politics in framing the decision choices for the target? How important is it for the target to not lose face? Is there scope for plausible denial that the threat of sanctions worked? What assumptions is the target operating under? What role (if any) is there for assurances and/or inducements?

In the next section, we build on the foregoing analysis to examine how the threat of sanctions was used by Western allies in the effort to deter and dissuade Russia from its full invasion of Ukraine on 24 February 2022. While this effort ultimately failed – and leaders in the US and the UK expected it to fail – examining this important case does illuminate some of the challenges of seeking to use sanctions for deterrence purposes, the importance of understanding the challenger, and factoring in issues of deterrence credibility. 63

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Case Study: Sanctions and the Failure to Deter Russia We seek to do four things with this case study. First, we consider how the US, the UK and the wider Western world sought to deter Russia from launching its full invasion of Ukraine in the weeks and months preceding 24 February 2022, primarily by threatening massive sanctions. Second, we apply Lebow’s credibility framework to shed some light on this failed deterrence effort. Third, we provide further perspective by briefly examining the susceptibility of Putin to being deterred. Fourth, we reflect on the role of sanctions in this case with an eye on broader implications.

How Did the US/UK/West Seek to Deter Putin? In the months prior to 24 February 2022, the US and the UK led the Western effort to try to deter Russia from invading Ukraine. At the heart of this effort was the threat of crippling sanctions. Speaking in Latvia on 1 December 2021, US Secretary of State Antony Blinken indicated that Russian military action would trigger an unprecedented package of restrictive measures: “Should Russia follow the path of confrontation when it comes to Ukraine, we’ve made clear that we will respond resolutely, including with a range of high-impact economic measures that we have refrained from pursuing in the past” (Blinken, 2021). Moreover, President Biden communicated this threat directly to President Putin during a virtual meeting on 7 December 2021. Biden described the meeting as “polite” but that he “made it very clear: If, in fact, he invades Ukraine, there will be severe consequences – severe consequences – and economic consequences like none he’s ever seen or ever have been seen, in terms of being imposed” (Biden, 2021). National Security Advisor (NSA) Jake Sullivan told reporters that, “I will look you in the eye and tell you, as President Biden looked President Putin in the eye and told him today, that things we did not do in 2014 we are prepared to do now” (Psaki and Sullivan, 2021). In the UK, Prime Minister Boris Johnson lent his weight to the effort. After speaking to Putin, Johnson noted in mid-December, “I told President Putin on Monday what I think everybody in the G7 and more widely is agreed, that if Russia were so rash and mad as to engage in an invasion of sovereign territory of Ukraine, then there would be an extremely tough package of economic sanctions, mounted by our allies, mounted by the UK and our friends around the world” (Lynch, 2021). For its part the Council of the European Union, reflecting the shared view of its member states, stated that “Any further aggression against Ukraine will have massive consequences and severe cost in response, including restrictive measures coordinated with partners” (Herszenhorn and Von Der Burchard, 2021). Indeed, Nathalie Tocci noted that this was “a rare instance of post-Brexit harmony” – the EU and the UK worked closely together and with the US, all “actively coordinating on what […] sanctions could entail, with far reaching economic measures that would concentrate on the financial and energy sectors. As is well known, these are the areas where Russia could be hurt most” (Tocci, 2022). Broadly speaking, the threat of massive economic consequences was repeatedly communicated to Moscow in a very direct and public manner. On 7 January 2022, Secretary Blinken sought to emphasise the coherence of the Western approach and the significance of the consequences that an invasion would trigger: And we’ve been clear with Russia about what it will face if it continues on this path, including economic measures that we haven’t used before – massive consequences. That clarity has been powerfully echoed in recent weeks by the G7 – the world’s leading democratic economies – by the European Union, and by NATO. So, we hope Russia makes a different choice. (Blinken, 2022b) 64

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The American intent behind threatening sanctions was clearly deterrent in nature. Indeed, Blinken said as much during a CNN interview on 23 January 2022: “So when it comes to sanctions, the purpose of those sanctions is to deter Russian aggression. All of the things that we’re doing, including building up in a united way with Europe massive consequences for Russia, is designed to factor into President Putin’s calculus and to deter and dissuade them from taking aggressive action”. He further noted that, “If a single additional Russian force goes into Ukraine in an aggressive way, as I said, that would trigger a swift, a severe, and a united response from us and from Europe” (Blinken, 2022a). Similarly, on deterrent intent, Sullivan noted to the press on 11 February 2022 that: The President believes that sanctions are intended to deter. And in order for them to work – to deter, they have to be set up in a way where if Putin moves, then the costs are imposed. We believe that that is the right logic, both on its own merits, but equally importantly, we believe that the most important fundamental for anything that unfolds in this crisis, whether through diplomacy or as a result of military action, is that the West be strong, be united, and be determined to operate with common purpose. (Psaki and Sullivan, 2022) On the record remarks by senior US officials were not explicit about the specific sanctions that would be imposed, although officials from the Biden administration and European governments hinted at the areas likely to be targeted. Following talks with her Russian counterparts in Geneva on 10 January 2022, for example, Deputy Secretary of State Wendy Sherman publicly briefed that, “Those costs will include financial sanctions, and it’s been reported those sanctions will include key financial institutions, export controls that target key industries, enhancement of NATO force posture on allied territory, and increased security assistance to Ukraine” (Sherman, 2022). Around this time, drawing on interviews with various officials, the New York Times reported on the plans for sanctions that were being considered by Washington with its allies. These included “cutting off Russia’s largest financial institutions from global transactions, imposing an embargo on American-made or American-designed technology needed for defence-related and consumer industries” (Sanger and Schmitt, 2022). Technology sanctions targeting the aerospace sector and arms producers would jeopardise an important source of revenue for the Russian government, and undermine Russia’s access to emerging technologies related to artificial intelligence and quantum computing. European officials reportedly said that there had been discussions about the possibility of cutting Russia off from the SWIFT global financial transactions system that links over 1,100 banks across 200 countries. The New York Times also reported that banning “the export of any consumer goods to Russia” was under consideration which would include products containing US-produced or US-designed electronics whether used by American or foreign manufacturers (Sanger and Schmitt, 2022). In the preceding weeks, the Biden administration had conducted a review of the US response to Russia’s annexation of Crimea and its actions in eastern Ukraine in 2014. While the sanctions imposed in 2014 were seen to have damaged the Russian economy, they were viewed as not having imposed sufficient cost, or pain, to convince President Putin to withdraw from Ukraine. The 2014 response was therefore viewed as not having been robust enough and this clearly informed planning in late 2021 and early 2022. According to the New York Times, one official described the planning as focused on a “high-impact, quick-action response that we did not pursue in 2014” (Sanger and Schmitt, 2022). 65

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While sanctions were undoubtedly the main plank of the effort to deter President Putin, there were other parts to the strategic communications coming out of the US and other Western capitals designed to influence decision-making in Moscow. These elements were dissuasive in nature rather than deterrent. As Paul K. Davis notes, citing Merriam-Webster, “The classic meaning of ‘dissuade’ is to convince someone against an action by advice, exhortation or persuasion”. He further notes, “In everyday English, ‘deter’ and ‘dissuade’ may be synonyms, but the distinctions are important in more rigorous discussion …” (Davis, 2014, p. 2). For example, General Mark Milley, Chairman of the Joint Chiefs of Staff, spoke to General Valery Gerasimov, the Russian Chief of Staff, and told him that while Russia could likely defeat the Ukrainian military, a quick victory would, “according to officials familiar with the discussion”, be followed by “a bloody insurgency, similar to the one that led to the Soviet retreat from Afghanistan more than three decades ago” (Sanger and Schmitt, 2022). An unnamed “Senior US official” noted during a White House press briefing on 8 January that, “… we’ve been very clear publicly and privately with the Russians that they will face severe costs if they go down the path of military incursion”. In addition to sanctions, the official said, “They will face increased security assistance to Ukraine to help Ukraine in its ability to defend its own territory” (Anonymous, 2022). The New York Times at this time reported that plans being considered by the US with its allies included “arming insurgents in Ukraine who would conduct what would amount to a guerrilla war against a Russian military occupation, if it comes to that” (Sanger and Schmitt, 2022). A further component of the effort to influence Russia was telling Moscow that it would also confront an “enhanced NATO force posture on Allied territory” (Anonymous, 2022). On this point, Jake Sullivan said on 11 February that the response would include “changes to NATO and American force posture along the eastern flank of NATO” (Corera, 2022). Both assisting Ukraine and NATO force posture changes had been flagged to Putin by Biden in early December. Following their meeting on 7 December, Biden noted that beyond sanctions, “we would probably also be required to reinforce our – our presence in NATO countries to reassure particularly those on the eastern front”, and “provide the defensive capability to the Ukrainians as well” (Psaki and Sullivan, 2021). Prime Minister Johnson also said that he told Putin in mid-December 2021 that, “There would also, of course, be support for Ukraine, there would inevitably be the build-up of NATO forces in the periphery regions …” (Lynch, 2021). A final element of the effort to influence Moscow’s decision-making was the unprecedented declassification of intelligence by the US and the UK to call out Russia’s intentions ahead of the invasion. By publicly releasing such material, the thinking was that President Putin would not be able to justify any aggression as defensive in nature whether the audience was domestic or other governments. As Corera notes, the release of material enabled the calling out of Russian plans to install particular people in a “puppet government in Kyiv”, and plans “to stage pretexts for war, so-called false flags, involving dead bodies whom they would falsely claim had been killed by Ukrainians” (Corera, 2022). The release of such material was championed by the US Director of National Intelligence Avril Haines and NSA Jake Sullivan. In summary, the US led effort to seek to influence Russia not to invade Ukraine was primarily based on the threat of imposing high-impact sanctions. At the time, this effort was specifically described by senior officials in the Biden administration as an effort to deter Moscow. It was accompanied by other messaging that was more dissuasive in nature related to Russia getting caught up in an insurgency if it realised a quick victory, that Ukraine would continue to be provided with assistance, and that NATO force posture enhancements on its eastern flak would also be implemented. But all of this failed of course. We now turn to briefly consider the questions of deterrence credibility and Putin’s susceptibility. 66

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Assessing Credibility Applying Lebow’s credibility framework provides insights into this failure of deterrence and the threat of sanctions within this. To begin with, the commitment, or red line, was clearly communicated to Moscow – both in private and public and on numerous occasions by senior officials from the US and allied countries – that any additional Russian military aggression against Ukraine would prompt the rapid imposition of high-impact sanctions, among other things. However, the exact nature of the sanctions – while reported on by the media from briefings with the US and the European government officials – arguably remained somewhat opaque prior to 24 February 2022. Only three days before the invasion, for example, the EU spokesman Peter Stano said, “no decisions have been made about any new sanctions against Russia […] Our sanctions will be suggested, discussed and adopted only in reaction to further violation or aggression against Ukraine” (Desai, 2022). Tom Keatinge and Jane Ngan point out that a degree of ambiguity on this front may have been maintained with de-escalation in mind, but the lack of specifics also reflected uncertainty among Western allies (Keatinge and Ngan, 2023). In mid-February, for example, an EU official said of sanctions negotiations within the bloc, “We still haven’t reached a deal on what will be the triggers” (Toosi et al., 2022). Within the US, bipartisan negotiations over sanctions legislation also hit obstacles as those involved debated the scope and rollout of any sanctions (Desiderio, 2022). Broadly speaking, the lack of specifics, “combined with the West’s previous anaemic sanctions response to Russian aggression in Ukraine, […] may have led the Kremlin to believe that the West’s talk was not going to lead to the sort of ‘unprecedented’ action that leaders promised” (Keatinge and Ngan, 2023). In terms of capability, there was no doubt that the US and its allies had the capability to fulfil the threat of severe sanctions. The US sanctions machine, in particular, comprised a vast and complex web of legislative provisions that could be applied rapidly with powerful effects. The Russians will have been aware of the damage that the types of threatened sanctions might impose. Equally, once agreement was reached among member states, the EU had the potential to move quickly to impose stringent restrictive measures – a good prior example was the response to the forced landing of Ryanair flight FR4978 by Belarus in May 2021 (Boffey and Roth, 2021). And in the UK, the government tabled legislation that would allow for sweeping new sanctions if Russia invaded Ukraine. Then Foreign Minister Liz Truss claimed that the new legislation would allow the British government to “target more Russian interests that are of direct relevance to the Kremlin” (Heffer, 2022; Wintour, 2022). With regard to resolve, there was no doubt that “Washington, Brussels and other European capitals [would] punish Moscow if it reinvades its neighbour”, and it was inevitable that sanctions would form a key element of any response (Toosi et al., 2022). But this was an effort to “extend deterrence” over Ukraine, a non-treaty bound partner, using the threat of sanctions. Extended deterrence always suffers more from credibility challenges than direct deterrence between antagonists even when a third party is tied through a treaty to the deterring party. Western actors, particularly the US, have a strong track record of deploying stringent sanctions as part of their efforts to exert influence, but linking back to the ambiguity around the threat, there were questions over how far the different parties making up the Western alliance were willing to go – particularly within Europe, where some of the measures under consideration had the potential to cause significant problems. The prospect of cutting Russia off from the SWIFT global banking system was, for example, “something most major European powers had declined to consider until recently, for the fear that Russia might retaliate by attempting to cut off gas and oil flows in the winter, even briefly” (Sanger 67

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and Schmitt, 2022). Energy dependence on Russia was something that featured prominently in debate around a sanctions package, with one pinch point being Germany’s reluctance to see the Nord Stream 2 gas pipeline included in any sanctions package (Puglierin, 2022). We then need to factor in that the US ruled out direct military involvement to assist Ukraine. President Biden did this on several occasions. On 8 December 2021, for example, in response to a media question on whether putting boots on the ground was being ruled out, he said, “Yes”, adding, “That is not on the table”. He further stated, “We have a moral obligation and a legal obligation to our NATO allies, if they were to attack under Article Five. It’s a sacred obligation”. With regard to Ukraine he said “the idea the United States is going to unilaterally use force to confront Russia from invading Ukraine is not on – in the cards right now” (Biden, 2021). Ruling out military involvement was, understandably, intended to help avoid the potential for escalation with a nuclear armed Russia. While the direct military lever was ruled out, however, indirect involvement was kept on the table, specifically around assisting Ukraine if invaded and changing NATO’s eastern deployment posture. Clearly the US and its allies were treading a fine line, balancing the need to present a credible threat with at least the potential to influence Putin’s thinking against the desire to avoid escalation and direct confrontation with Russia. The outcome was a largely credible threat, but one devised under important constraints that Moscow was very likely aware of.

Assessing the Susceptibility of Putin to Deterrence in This Case The credibility of the threat established; we now turn to the second part of our analytical framework: President Putin’s susceptibility to the threat. Clearly, we are looking at the decision-making process and underpinning drivers from the outside in, and it is difficult in open sources to gain a direct understanding of Putin’s decision calculus in the run up to 24 February 2022. This said a retrospective consideration of some of the likely assumptions he was operating under during the period in question provides important insights into why he may not have been deterrable at all. The starting point here is the potent mix of a longstanding imperial nationalist worldview, a desire to bring Western-leaning Ukraine to heel and “maintain primacy in the former Soviet Republics on Russia’s periphery”, and an approach to governance that manufactures external threats as a means of enhancing domestic political support (Greene and Robertson, 2022).3 On Putin’s view of Ukraine, CIA Director William Burns, testifying before a House Permanent Select Committee on Intelligence soon after the invasion was launched, stated his belief that the Russian President was “determined to dominate and control Ukraine” and described Putin as having been “stewing in a combustible combination of grievance and ambition for many years” (Burns, 2022, p. 18). This provides some broader context to the invasion, but Putin also appears to have been operating under a number of flawed assumptions regarding military action in Ukraine and the susceptibility of Russia to any Western punishment. First, “the evidence suggests that Putin had planned on an operation that would be a rerun of his annexation of the Crimean Peninsula in 2014. This was a largely bloodless fait accompli that generated little blowback of concern from the Kremlin’s perspective” (Dylan et al., 2022). But his calculations proved wrong on all fronts. In 2014, General Victor Muzhenko, Chief of the General Staff of the Ukrainian Armed Forces, spoke of “an army literally in ruins, Russian generals at the head of [Ukraine’s] armed forces and security agencies, total demoralization [in the armed forces]” (Akimenko, 2018). But the army that Russian forces encountered in 2022 was radically different. After 2014, “Ukrainian forces, with Western assistance, had undertaken energetic reforms and planned their defences carefully. They were also highly motivated, unlike many of their Russian counterparts, who were unsure why they were 68

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there” (Freedman, 2022, p. 20). So rather than the quick defeat of an inferior adversary, “incapable of resisting Russian might”, Putin’s forces were quickly drawn into an intractable conflict that exposed weaknesses and ineffectiveness at all levels of the Russian military (Freedman, 2022, p. 20). In short, Putin underestimated the Ukrainian armed forces’ ability to repel, innovate and complicate Russian military operations and, as the initial plan to quickly subjugate Ukraine unravelled, it became clear that Moscow had overestimated the Russian military’s ability to successfully prosecute a multi-front campaign of a type that it does not train and exercise for. Second, Putin underestimated the extent to which Western states would unite in opposition to the invasion and provide support to Ukraine. To Moscow, “the West appeared divided and unsettled after Donald Trump’s presidency, an impression that was confirmed by the botched US withdrawal from Afghanistan in August 2021” (Freedman, 2022, p. 20). Viewed through this lens, it was far from certain that the US and its allies would be willing to intervene overseas to protect non-treaty bound partners. The US had increased its financial aid to Ukraine after 2014 and this support was expanded to advice, training and, ultimately, military equipment. In 2017, Washington “provided the first set of Javelin anti-tank missiles to Ukraine” (Collins, 2022). Yet Moscow calculated that the US and its allies, unwilling to risk direct confrontation with Russia, would go no further on this front. This aligned with the rhetoric coming from Washington and European capitals. Instead, the response was likely to focus sanctions, the approach the West had adopted in response to the annexation of Crimea. Then, with regard to sanctions, the view in the Kremlin was probably that Russia would be able to weather the storm. As described earlier in the chapter, the threats of “unprecedented” restrictive measures were ambiguous and framed by concerns of self-harm, particularly in light of European reliance on Russian energy. Moscow had also learned from past experience of sanctions and, from 2014 onwards, took steps to “reduce its reliance on the global financial system” (Seddon and Ivanova, 2022). Measures such as increased foreign currency reserves, accumulation of surplus oil and gas revenue in a National Wealth Fund, reduced dependency on foreign investment, and a unit within the Finance Ministry dedicated to countering sanctions, were all designed to reduce Russia’s vulnerability to sanctions. This “Fortress Russia” approach, combined with the belief that Western pressure could be offset through increased engagement with other markets, such as China, led finance minister Anton Siluanov to remark in January 2022, “Obviously, it’s unpleasant, but it’s do-able. I think our financial institutions can handle it [if] these risks emerge” (Akimenko, 2018). These likely assumptions were all flawed. With regard to military support for Ukraine, the Western response took Russia by surprise. United from the outset, support for Ukraine continued to gain momentum and Western states were soon providing unprecedented levels of support, both non-lethal and lethal – in some cases reversing long-standing policy positions. A House of Commons report described the situation succinctly: Since Russia’s military operations against Ukraine began on 24 February 2022, bilateral military assistance has been stepped up, with many allies for the first time supplying lethal weapons to Ukraine. For some countries such as Germany, and historically neutral countries such as Sweden, this has represented a significant reversal of their previous defence policies which ruled out providing offensive weapons. […] The European Union is also providing non-lethal and lethal arms through its European Peace Facility (EPF). This is the first time the bloc has, in its history, approved the supply of lethal weapons to a third country. As the conflict in Ukraine has evolved, so has the types of weaponry being provided [emphasis added]. (Mills, 2023, p. 4) 69

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The significance of this change in EU policy on the provision of lethal arms cannot be overstated and it is doubtful the move would have been foreseen in Moscow. Capturing the gravity of the situation, EU High Representative for Foreign Affairs and Security Policy Josep Borrell, writing three days after the invasion, said: “With this war on Ukraine, the world will never be the same again. It is now, more than ever, the time for societies and alliances to come together to build our future on trust, justice and freedom. It is the moment to stand up and to speak out. Might does not make right. Never did. Never will” (Borrell, 2022). Turning to sanctions, Moscow overestimated its resilience to sanctions and underestimated the risks posed by restrictive measures. Putin clearly did not anticipate the European stomach for imposing the breadth and depth of sanctions that followed the invasion. Indeed, Russian Foreign Minister Sergey Lavrov is on record as saying that the scale of the sanctions imposed on Russia after the invasion had taken Moscow by surprise (Jack, 2022). The long-term impact on the Russian economy looks set to be deep-seated and long lasting. As of 14 April 2023, the European Council estimated that Russia’s gross domestic product dropped by 2.1% in 2022 and may drop by 2.5% in 2023. Moreover, “Russia’s oil revenues dropped by over a quarter in January 2023 (compared to January 2022)” and by 40% in February 2023. Three hundred billion dollars’ worth of Russian Central Bank reserves have been blocked with “70% of assets of the Russian banking system are under sanctions” (Anonymous, 2023). Beyond the impact on the economy, restrictive measures have directly impacted Russia’s ability to wage war by constraining “Russia’s ability to manufacture, sustain and deliver advanced weapons and technology to the battlefield in Ukraine” (Bergmann et al., 2023, p. 1).

Broader Implications The US and the UK clearly did not have great hopes that deterrence would succeed and senior officials in Washington and London publicly stated that they thought Russia would invade. On 20 January 2022, President Biden told the press that he thought Russia would do so (Harding et al., 2023). Similarly, on 13 February 2022, UK Defence Secretary Ben Wallace said that it was “highly likely” Russia would invade (Gallagher, 2022). Despite this pessimism, we contend that the prewar effort to deter Moscow through the threat of high-impact sanctions, combined with efforts to call out Russian intentions, was essential to the subsequent shifting of gears once the invasion was launched. Specifically, it paved the way and created the conditions for the robust and coherent imposition of unprecedented sanctions across a range of actors. An observation here is that whenever the use of sanctions is contemplated for deterrence purposes this should include thinking through the failure to deter, and how pre-failure posturing and statements will affect downstream efforts to punish and to compel if the red line is crossed. The calling out of Russia’s intentions was an essential part of this. As Corera notes, while this release of information did not stop Russia invading, officials believe doing so “meant the reaction across the West was swifter and more unified than it might otherwise have been”. Specifically, it “made it much easier for other countries to rally round tougher measures than if there had been a confused and disputed picture of who was the real aggressor” (Corera, 2022). This case also demonstrates the importance of considering how deterrence based on threatening high-impact sanctions fits with other elements of an overall approach designed to convince a challenger not to cross a red line. Notably, while the terms “deterrence” and “dissuasion” appear very similar, and are often used interchangeably, they are not the same and many aspects of the Western effort to influence decision-making in Moscow could be labelled dissuasive rather than deterrent, including the declassification of intelligence and its public release; US military talk about Russia 70

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likely facing a quagmire in Ukraine after an invasion; the strengthening of NATO on its eastern flank and so on. Writing in 1960, Glenn Snyder defined deterrence more broadly than it tends to be today and included both negative and positive elements: “In an even broader sense, however, deterrence is a function of the total cost-gain expectations of the party to be deterred, and these may be affected by factors other than the apparent capability and intention of the deterrer to apply punishments or confer rewards”.4 Snyder’s conception of deterrence appears to include aspects of dissuasion. At the least, the distinction here merits further study in this case and more broadly. Another lesson can be drawn from the manner in which the threat of sanctions was articulated. Prior to 24 February 2022, Russia was threatened with major economic sanctions but while some types of restrictions were explicitly mentioned, others were not. For example, the freezing of Russia’s Central Bank reserves was not threatened prior to the invasion, at least not in public. This raises the question of whether the lack of specifics on likely sanctions before the invasion was about maintaining ambiguity, or whether allied resolve was simply not strong enough pre-invasion to be able to threaten specifics? The US and the UK demonstrated significant resolve prior to 24 February but this was not uniform across European allies in the EU and NATO. There are important questions here about how to signal the threat of sanctions as part of deterrence in the future, even if the specific context will always set the conditions for what is possible politically at any given point in time. It is also useful to reflect on the response of the Western private sector after the invasion as this could play into future deterrence efforts. The response in 2022 was remarkable, with many Western companies either operating in and/or trading with Russia going far beyond what Western sanctions required them to do. For example, McDonalds’ full withdrawal from Russia will cost the company something on the order of USD 1 billion. The moral outrage of such companies and their apparent willingness to pull the plug in similar circumstances is a factor that needs to be considered by Western governments when seeking to deter future malign state behaviour. The lack of control of the private sector means that consideration needs to be given to the risk that private sector escalation might outstrip that of governments, which may pose a challenge for escalation control. While sanctions did not prevent Russia’s full invasion, it is possible that the massive sanctions that have since been imposed could have a secondary effect down the line by influencing others who might contemplate similar actions, or even Russia again at some point. While the threat of sanctions did not work to deter this time, that is not to say they never will. As noted earlier in the chapter, this possibility is a well-established point in the existing literature on sanctions. Yet it is worth flagging again here given the unprecedented scope and scale of the sanctions against Russia. The invasion of Ukraine set in motion several waves of sanctions that, over time, will have catastrophic consequences for Russia’s economy and significant constraining effects on the country’s military expansion and modernisation. As these damaging effects become clearer and are quantified (to the extent possible), the demonstration effect of sanctions will only gain force. Finally, the use of sanctions against Russia highlights important longer term risks here for the US and its allies as well. The Fortress Russia concept mentioned earlier is not something that is happening in isolation; a similar pattern is unfolding in states such as China and Iran as well (Nephew, 2018). Moreover, these states are taking steps to share lessons and devise concerted means of offsetting the damaging effects of Western sanctions. The effort to build alternatives to the SWIFT payment system, for example, is a multi-state attempt to undermine the dominance of the US dollar as the currency of global trade that is gaining momentum (Eichengreen, 2022). States like China are also beginning to deploy their own forms of (largely economic) coercion against Western interests. Taken together, all of these developments can be seen as an effort to 71

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break Western dominance in sanctions and their use. This, in turn, has important implications for how Western powers think about and practice coercive diplomacy to uphold a rules-based international order that is facing existential pressures.

Conclusion This chapter began by providing a brief review of existing literature on sanctions and influence. It drew attention to the paucity of work at the intersection of sanctions and deterrence, where only a handful of scholars have focused their attention. Building on this, we illuminated some of the challenges of using sanctions for deterrence purposes by applying insights from deterrence theory. These challenges were then illustrated and explored through a case study of Western efforts to prevent Russia’s full invasion of Ukraine on 24 February 2022 through an approach based on deterrence and dissuasion. To do this, we applied an analytical framework that balanced the idea of deterrence credibility against the susceptibility of the target (real or perceived) to being deterred. Through this approach, we accounted for some broader factors at play, at the same time as drawing out the developments of most relevance to the sanctions question. We argued that a combination of contextual factors, including Putin’s ill-informed assumptions regarding the likely course of the conflict and Russia’s increased sanctions resilience and, meant that sanctions had little chance of deterring Russian aggression, despite being credible and likely to inflict considerable economic damage. At the same time, we argued that threatening sanctions was a necessary and important move on the part of Western allies for at the least three reasons: signalling effects, galvanising effects and the need to recalibrate longer term interdependencies with Russia.

Notes 1 Scholars have debated the distinction between compellence and coercive diplomacy in the literature on coercion. Some, for example, understand coercive diplomacy as a variant of compellence that involves threats or limited applications of military force (see Art and Cronin, 2003). Others, such as Alexander George, view coercive diplomacy a form of compellence that is more reactive in nature, as opposed to more aggressive forms of coercion intended to secure new gains for the coercer (see George et al., 1971). For the purpose of this discussion of sanctions, our understanding aligns more with the latter and we use the terms compellence and coercive diplomacy interchangeably in this context. 2 Another noteworthy study, focused on the nuclear non-proliferation context, is Miller, 2014. 3 See Greene and Roberson, 2022 and German and Kuhrt, 2023. A useful overview of Putin’s worldview is Bugayova, 2019. 4 The Hague Centre for Strategic Studies published an insightful paper on “strategic (dis)suasion” in 2020 that delves deeply into the concept of dissuasion. See De Spieleleire et al., 2020.

Bibliography Akimenko, V. (2018). Ukraine’s Toughest Fight: The Challenge of Military Reform. Carnegie Endowment for International Peace. [online] 22 February. Available at: https://carnegieendowment.org/2018/02/22/ ukraine-s-toughest-fight-challenge-of-military-reform-pub-75609 Ang, A.U-Jin and Peksen, D. (2007). When Do Economic Sanctions Work? Asymmetric Perceptions, Issue Salience, and Outcomes. Political Research Quarterly, 60(1), pp. 135–145. Anonymous. (2022). Background Press Call by a Senior Administration Official on Russia, Via Teleconference. 8 January, The White House, Washington, D.C. Available at: https://www.whitehouse.gov/briefing-room/ press-briefings/2022/01/08/background-press-call-by-a-senior-administration-official-on-russia/ Anonymous. (2023). Infographic – Impact of Sanctions on the Russian Economy. European Council. [online] 14 April 2023. Available at: https://www.consilium.europa.eu/en/infographics/impact-sanctionsrussian-economy/

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Sanctions, Deterrence and the Recent Case of Russia Art, R. J. and Cronin, P. M., eds. (2003). The United States and Coercive Diplomacy. Washington, D.C.: United States Institute of Peace Press. Bergmann, M., Snegovaya, M., Dolbaia, T., Fenton, N. and Bendett, S. (2023). Out of Stock? Assessing the Impact of Sanctions on Russia’s Defense Industry. Center for Strategic and International Studies. [online] April. Available at: https://csis-website-prod.s3.amazonaws.com/s3fs-public/2023-04/230414_ Bergmann_Out_Stock.pdf?VersionId=6jfHCP0c13bbmh9bw4Yy2wbpjNnfeJi8 Biden, J. (2021). Remarks by President Biden Before Marine One Departure. 8 December, Washington, D.C. Available at: https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/12/08/remarks-bypresident-biden-before-marine-one-departure-10/ Biersteker, T., Tourinho, M. and Eckert, S. (2016). Thinking About United Nations Targeted Sanctions. In: Biersteker, T., Tourinho, M. and Eckert, S., eds. Targeted Sanctions, The Impacts and Effectiveness of United Nations Action. Cambridge: Cambridge University Press, pp. 11–37. Blinken, A. J. (2021). Remarks by Secretary of State Antony J. Blinken, Press Availability at the NATO Ministerial. 1 December, Riga, Latvia. Available at: https://www.state.gov/secretary-antony-j-blinkenat-a-press-availability-at-the-nato-ministerial/ Blinken, A. J. (2022a). Interview With Secretary of State Antony J. Blinken With Dana Bash of CNN’s State of the Union. [online] 23 January. Available at: https://www.state.gov/secretary-antony-j-blinkenwith-dana-bash-of-cnn-state-of-the-union-2/ Blinken, A. J. (2022b). Remarks by Antony J. Blinken, Secretary of State, at a Press Availability. 7 January, Washington, D.C. Available at: https://www.state.gov/secretary-antony-j-blinken-at-a-pressavailability-11/ Boffey, D. and Roth, A. (2021). EU Imposes New Economic Sanctions on Belarus Over ‘Hijacked’ Flight. The Guardian. [online] 25 May. Available at: https://www.theguardian.com/world/2021/may/24/belarus-puton-notice-of-sanctions-over-hijack-of-ryanair-flight Borrell, J. (2022). It is a Matter of Life and Death. So the EU Will Provide Weapons for Ukraine’s Armed Forces. The Guardian. [online] 27 February. Available at: https://www.theguardian.com/commentisfree/2022/ feb/27/eu-will-provide-weapons-for-ukraine-josep-borrell Bowen, W., Knopf, J. W. and Moran, M. (2020). The Obama Administration and Syrian Chemical Weapons: Deterrence, Compellence, and the Limits of the ‘Resolve Plus Bombs’ Formula. Security Studies, 29(5), pp. 797–831. Bugayova, N. (2019). How We Got Here With Russia: The Kremlin’s Worldview. The Institute for the Study of War. [online] March. Available at: https://www.understandingwar.org/sites/default/files/ISW%20 Report_The%20Kremlin%27s%20Worldview_March%202019.pdf Burns, W. (2022). Hearing on Annual Worldwide Threats. Permanent Select Committee on Intelligence, US House of Representatives. [online] 8 March. Available at: https://docs.house.gov/meetings/IG/ IG00/20220308/114469/HHRG-117-IG00-Transcript-20220308.pdf Collins, L. (2022). In 2014, the ‘Decrepit’ Ukrainian Army Hit the Refresh Button. Eight Years Later, It’s Paying Off. The Conversation. [online] 8 March. Available at: https://theconversation.com/ in-2014-the-decrepit-ukrainian-army-hit-the-refresh-button-eight-years-later-its-paying-off-177881 Corera, G. (2022). Ukraine: Inside the Spies’ Attempts to Stop the War. BBC News. [online] 9 April. Available at: https://www.bbc.co.uk/news/world-europe-61044063 Dashti-Gibson, J., Davis, P. and Radcliffe, B. (1997). On the Determinants of the Success of Economic Sanctions: An Empirical Analysis. American Journal of Political Science, 41(2), pp. 608–618. Davis, P. K. (2014). Toward Theory for Dissuasion (or Deterrence) by Denial: Using Simple Cognitive Models of the Adversary to Inform Strategy. RAND, Working Paper NSRD WR-1027. [online] January 2014. Available at: https://www.rand.org/pubs/working_papers/WR1027.html De Spieleleire, S., Holynska, K., Batoh, Y. and Sweijs, T. (2020). Reimagining Deterrence: Towards Strategic (Dis)Suasion Design. The Hague Centre for Strategic Studies. [online] March. Available at: https://hcss. nl/report/reimagining-deterrence-towards-strategic-dis-suasion-design/ Desai, P. (2022). Aluminium Shortages to Deter Blanket Sanctions on Rusal – Analysts. Reuters. [online] 21 February. Available at: https://www.reuters.com/business/energy/aluminium-shortages-deter-blanketsanctions-rusal-analysts-2022-02-21/#:~:text=LONDON%2C%20Feb%2021%20(Reuters),and%20 damage%20manufacturing%2C%20analysts%20say Desiderio, A. (2022). Senate Negotiators at an ‘Impasse’ on Russia Sanctions Bill. Politico. [online] 10 February. Available at: https://www.politico.com/news/2022/02/10/congress-at-an-impasse-over-how-to-deterrussian-invasion-of-ukraine-00007871

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Wyn Bowen and Matthew Moran Drezner, D. W. (2003). The Hidden Hand of Economic Coercion. International Organization, 57(3), pp. 643–659. Dylan, H., Gioe, D. V. and Grossfeld, E. (2022). The Autocrat’s Intelligence Paradox: Vladimir Putin’s (Mis) Management of Russian Strategic Assessment in the Ukraine War. The British Journal of Politics and International Relations. [online first]. Available at: https://doi.org/10.1177/13691481221146113 Early, B. R. and Jadoon, A. (2016). Do Sanctions Always Stigmatize? The Effects of Economic Sanctions on Foreign Aid. International Interactions, 42(2), pp. 217–243. Eichengreen, B. (2022) Sanctions, SWIFT, and China’s Cross-Border Interbank Payments System. The Marshall Papers, Center for Strategic and International Studies (CSIS), May 2022. Available at: https:// www.jstor.org/stable/pdf/resrep41418.pdf Freedman, L. (2022). Why War Fails: Russia’s Invasion of Ukraine and the Limits of Military Power. Foreign Affairs, 101(4), pp. 10–23. Gallagher, S. (2022). Russia-Ukraine Crisis: Whiff of Munich in the Air, Says Ben Wallace. BBC News. [online] 13 February. Available at: https://www.bbc.co.uk/news/uk-60366088 George, A. L., Hall, D. K. and Simons, W. E. (1971). The Limits of Coercive Diplomacy: Laos, Cuba, Vietnam. Boston: Little, Brown and Company. German, T. and Kuhrt, N. (2023). Will Russia’s Global Influence Continue to Decline? King’s College London. [online] 21 February. Available at: https://www.kcl.ac.uk/will-russias-global-influence-continue-to-decline Giumelli, F. (2011). Coercing, Constraining and Signalling: Explaining UN and EU Sanctions After the Cold War. Colchester: ECPR Press. Greene, S. A. and Robertson, G. B. (2022). Putin’s Rule Depends on Creating Foreign Enemies – and Domestic ‘Traitors’. The Washington Post. [online] 24 February. Available at: https://www.washingtonpost.com/ outlook/2022/02/24/putin-ukraine-invasion-domestic-support-strategy/ Harding, L., Roth, A. and Borger, J. (2023). Joe Biden Thinks Russia Will Attack Ukraine – but Will Face a ‘Stiff Price’. The Guardian. [online] 20 January. Available at: https://www.theguardian.com/world/2022/ jan/19/russia-could-act-against-ukraine-at-any-moment-says-us Heffer, G. (2022). UN Security Council to Discuss Ukraine Crisis as Putin’s Oligarchs Told They Will Have ‘Nowhere to Hide’. Sky News. [online] 31 January. Available at: https://news.sky.com/story/putinsoligarchs-will-have-nowhere-to-hide-with-widened-sanctions-if-russia-invades-ukraine-as-uk-rulesnothing-out-12528608 Herszenhorn, D. M. and Von Der Burchard, H. (2021). EU Leaders Threaten Russia With Sanctions Over Ukraine. Politico. [online] 16 December. Available at: https://www.politico.eu/article/ european-council-summit-russia-ukraine-conflict-brussels-luhansk-donetsk/ Hufbauer, G. C. and Schott, J. J. (1985). Economic Sanctions and U. S. Foreign Policy. PS, 18(4), pp. 727–735. Hufbauer, G. C., Schott, J. J., Elliott, K. and Oegg, B. (2009). Economic Sanctions Reconsidered. 3rd ed. Washington, D.C.: Peterson Institute for International Economics. Jack, V. (2022). Sergey Lavrov Admits Russia was Surprised by Scale of Western Sanctions. Politico. [online] 23 March. Available at: https://www.politico.eu/article/lavrov-admits-no-one-could-have-predictedscale-of-western-sanctions/ Kaufmann, W. W. (1954). The Requirements of Deterrence. Memorandum 7, Center of International Studies, Princeton University, 15 November. Keatinge, T. and Ngan, J. (2023). Walking the Talk: Threats and Ambiguity in Western Sanctions on Russia. RUSI Commentary. [online] 3 February. Available at: https://rusi.org/explore-our-research/publications/ commentary/walking-talk-threats-and-ambiguity-western-sanctions-russia Lebow, R. N. (1984). Between Peace and War: The Nature of International Crisis. Baltimore: Johns Hopkins University Press. Lindsay, J. M. (1986). Trade Sanctions as Policy Instruments: A Re-Examination. International Studies Quarterly, 30(2), pp. 153–173. Lynch, D. (2021). Boris Johnson: Russian War With Ukraine Would Be ‘Catastrophic for the World’. The Independent. [online] 15 December. Available at: https://www.independent.co.uk/news/uk/boris-johnsonukraine-bernard-jenkin-prime-minister-mps-b1976852.html Miller, N. L. (2014). The Secret Success of Nonproliferation Sanctions. International Organization, 68(4), pp. 913–944. Mills, C. (2023). Military Assistance to Ukraine Since the Russian Invasion. Research Briefing. House of Commons Library. [online] 30 March. Accessed 2 April 2 2023. https://researchbriefings.files.parliament.uk/ documents/CBP-9477/CBP-9477.pdf

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Sanctions, Deterrence and the Recent Case of Russia Nephew, R. (2018). The Art of Sanctions: A View from the Field. New York: Columbia University Press. Nooruddin, I. (2002). Modeling Selection Bias in Studies of Sanctions Efficacy. International Interactions, 28(1), pp. 59–75. Nossal, K. R. (1989). Knowing When to Fold: Western Sanctions Against the USSR, 1980–1983. International Journal, 44(3), pp. 698–724. Psaki, J. and Sullivan, J. (2021). Press Briefing. 7 December, The White House, Washington, D.C. Available at: https://www.whitehouse.gov/briefing-room/press-briefings/2021/12/07/press-briefing-by-presssecretary-jen-psaki-and-national-security-advisor-jake-sullivan-december-7-2021/ Psaki, J. and Sullivan, J. (2022). Press Briefing. 11 February, The White House, Washington, D.C. Available at: https://www.whitehouse.gov/briefing-room/press-briefings/2022/02/11/press-briefing-by-presssecretary-jen-psaki-and-national-security-advisor-jake-sullivan-february-11-2022/ Puglierin, J. (2022). Sanctions in the Pipeline: Germany’s Troubles Over Russia and Nord Stream 2. European Council on Foreign Relations. [online] 19 January. Available at: https://ecfr.eu/article/ sanctions-in-the-pipeline-germanys-troubles-over-russia-and-nord-stream-2/ Rankin, J. and Borger, J. (2023). Polish Leopard Tanks Arrive in Ukraine as West Piles New Sanctions on Russia. The Guardian. [online] 24 February. Available at: https://www.theguardian.com/world/2023/ feb/24/ukraine-polish-tanks-arrive-new-sanctions-russia Sanger, D. E. and Schmitt, E. (2022). U.S. Details Costs of a Russian Invasion of Ukraine. The New York Times. [online] 8 January. Available at: https://www.nytimes.com/2022/01/08/us/politics/us-sanctionsrussia-ukraine.html Seddon, M. and Ivanova, P. (2022). Moscow’s Sanction-Proofing Efforts Weaken Western Threats. Financial Times. [online] 18 January. Available at: https://www.ft.com/content/a2eaba73-cec8-4a0f-b9917de558bb0ee1 Sherman, W. (2022). Briefing With Deputy Secretary Sherman on the US-Russia Strategic Stability Dialogue. 10 January, US Mission to International Organizations in Vienna. Available at: https://geneva.usmission. gov/2022/01/10/briefing-with-deputy-secretary-sherman-on-the-ssd/ Smith, A. (1995). The Success and Use of Economic Sanctions. International Interactions, 21(3), pp. 229–245. Tocci, N. (2022). Europe Is Ready to Pay the Cost of Russia Sanctions. Politico. [online] 2 February. Available at: https://www.politico.eu/article/europe-energy-russia-ukraine-crisis-eu-gas-prices/ Toosi, N., Disiderio, A. and Barigazzi, J. (2022). A ‘Swift’ and ‘Unified Sanctions Slam on Russia? Not Exactly. Politico. [online] 15 February. Available at: https://www.politico.com/news/2022/02/15/ sanctions-slam-on-russia-not-swift-united-00009199 Whang, T. and Kim, H. J. (2015). International Signaling and Economic Sanctions. International Interactions, 41(3), pp. 427–452. Wintour, P. (2022). UK Tables Sweeping New Sanctions to Dissuade Russian Invasion. The Guardian. [online] 10 February. Available at: https://www.theguardian.com/politics/2022/feb/10/foreign-office-missesits-own-russian-sanctions-deadline Zarpli, O. (2022). When Do Imposed Sanctions Work? The Role of Target Regime Type. Journal of Conflict Resolution. [online first]. Available at: https://doi.org/10.1177/00220027221139809

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SECTION II

Political Economy of Sanctions

6 INTERNATIONAL SANCTIONS ON OIL Why Some Target States are More Capable of Avoiding Them Adnan Vatansever Introduction About a year after Russia’s decision to invade Ukraine in February 2022, the Russian oil sector has proven to be highly resilient to sanctions. A series of “smart” sanctions along with continuous expectations for further damaging measures have barely affected the sector’s output and exports. This appears in contrast with other oil-exporting states that have been target of oil sanctions in the recent past. Both Iran and Venezuela, when faced with a set of smart sanctions on their oil industries, have witnessed a rapid and drastic decline in their oil production and exports. The puzzling contrast calls for an explanation: why some oil-exporting countries are more capable in developing a successful response to neutralise sanctions than others? This chapter puts Russia’s experience with oil sanction since 2022 into a comparative perspective. It offers a new conceptual understanding of the effectiveness of sanctions. First, it defines what constitutes effectiveness and identifies the key parameters to measure it. Then, it examines three sets of factors that are endogenous to targeted oil-rich states which determine their ability to neutralise sanctions. The chapter introduces the concept of “sanction rents” as one of the explanatory factors about what helps target states withstand sanctions. The research reveals that understanding endogenous factors can be critical in studying the effectiveness of “smart” sanctions. This has significant implications for designing “smart” sanctions, underlying the need for persistent efforts to adjust them in accordance with the political and economic setting of target states.

Defining Effectiveness of Oil Sanctions The effectiveness of sanctions has emerged as a critical area within a growing literature on sanctions. Understandably, how one defines effectiveness determines whether sanctions have been deemed successful. Thus, it’s important to be clear about what is meant by effectiveness and to present some parameters about measuring it. It’s possible to suggest two key aspects of effectiveness. First, there is an important distinction to be made between the “intermediary goals” and the “end goals” of sanctions as a tool of economic statecraft. This chapter refers to intermediary goals of sanctions to define their effectiveness. Intermediary goals are about causing damage to a well-specified target. By contrast, end DOI: 10.4324/9781003327448-9

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goals are about achieving generally broader political and economic objectives. While end goals could be more specific, such as regime change, preventing nuclear proliferation or stopping a war, they generally refer to coercing a target state to take a certain action, constrain its options to act and to signal that its conduct is not tolerated (Brzoska, 2015). If intermediary goals are achieved, this can help, though not guarantee reaching the end goals. Failing to achieve the end goals does not preclude that sanctions work as intended, meaning they can still be highly effective. A target state may maintain its conduct while still suffering the consequences of sanctions. Second, when determining the effectiveness of sanctions, the timeframe is of essence. The timeframe matters twofold. The effectiveness of sanctions needs to be judged through the timeframe prescribed in their design. Some sanctions aim to have an immediate effect, others aim to cause damage only in the longer run. In the latter case, it would be premature to judge the effectiveness of sanctions if sufficient time has not elapsed. Timeframe is also significant as a unit of analysis irrespective of the intended design of sanctions. Target states try to adapt to sanctions over time and find new means to circumvent them. Thus, sanctions may look highly effective shortly after they are launched, especially if there is an element of surprise. However, once the target develops the means to neutralise them, their effectiveness may gradually wane. Three parameters appear central to measure the effectiveness of oil sanctions. Typically, oil sanctions aim to disrupt the ability of the target state to export its oil. Depending on the design of sanctions, a key measurable objective would be a gradual or fast-paced, involuntary drop in oil exports. The amount of oil production is another main parameter. While dwindling exports are likely to curb oil production, targeting the oil production process itself would typically necessitate additional set of measures. Sanctions that appear to disrupt oil exports, if not accompanied by measures targeting oil production, may soon turn ineffective if the target state finds the means to circumvent various restrictions on trade. The third parameter relates to the price paid for the target state’s oil. If the sanctions necessitate the target state to sell its oil at a discount, the size of the discount (as percentage of a benchmark oil) can be a significant measure about the effectiveness of these sanctions. All parameters, and thus, the effectiveness of sanctions, may vary over time. Hence, ensuring effectiveness will hinge on sender states’ ability to persistently adapt sanctions as target states strive to circumvent them.

Research Framework As the chapter explores why some oil-exporting countries are more capable to develop a response that makes sanctions less effective, it specifically focuses on country cases involving targeted oil sanctions during the past two decades. The underlying assumption is that such states will undertake policies and actions that aim to weaken the effectiveness of sanctions. Their conduct will aim to prevent a decline in oil exports and production, while minimising the size of the oil discount. This study suggests that there are at least three key sets of factors that shape a target state’s response, ultimately playing a fundamental role in determining the effectiveness of oil sanctions. One set of factors relates to the dynamics of the target state’s oil industry. Another one relates to the target state’s broader macroeconomic context, particularly prior to the onset of oil sanctions. And a third one focuses on the target state’s capabilities to circumvent sanctions through generating “sanction rents”. A key point here is that all these factors are largely endogenous to the target states. Namely, target states have substantial ability to shape these factors. This chapter also recognises the significance of statecraft in designing sanctions along the state the of oil markets that accompany these sanctions. Nonetheless, it considers these factors as primarily exogenous to target states; hence, they are not the focus of this research. 80

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As sanctions may vary in terms of the timeframe of their intended impact, the chapter distinguishes between “long-term” and “near-term” sanctions. Restrictions by sender states on investing in exploration and development of the oil industry of target states constitute a key example for “long-term” sanctions. “Near-term” sanctions, which is the focus of this paper, refer to sanctions that are set to have an immediate or near-term (up to two years) effect, even if they remain valid for a longer duration. Accordingly, Russia faced “long-term” sanctions on its oil sector after its annexation of Crimea in 2014. These sanctions aimed to magnify the challenges of Russia’s oil industry only in the longer run; hence, their impact on Russian oil production and exports remained minimal. In a similar manner, Iran and Venezuela have had even a longer history of “long-term” sanctions. Yet, all the three countries have gone through periods of “near-term” sanctions as well, when the attention of sender states has shifted on causing an immediate damage to their oil sectors. This chapter, while focusing on Russia, examines all the three cases in comparative perspective. In order to assess the effectiveness of sanctions, and conversely, for understanding the extent of success of target states in neutralising these sanctions, the paper analyses data on oil production, exports and price discounts following the onset of “near-term” sanctions. The timeframe examined is up to two years following the announcement of “near-term” sanctions in the case of Venezuela and Iran, and one year for Russia as its case is still unfolding at the time of writing this chapter.

Effectiveness of Oil Sanctions on Russia, Iran and Venezuela Russia presents the newest case for studying “near-term” oil sanctions, while the cases of Iran and Venezuela offer additional insights. The effectiveness of these sanctions, based on the three parameters noted earlier, has varied significantly across the three countries, though it is possible to note some similarities as well. A broadening group of countries responded quickly to Russia’s invasion of Ukraine through an increasingly comprehensive series of sanctions. Within the first year of Russia’s invasion, the European Union announced nine sets of sanctions, known as “packages”, many of which contained measures designated to affect the Russian oil industry in the “near term” (Council of the EU, 2023). Other countries also joined the EU with similar measures. The portfolio of sanctions included instant or phased ban on Russian seaborne crude oil and petroleum product imports, and restrictions on Russia’s ability to use insurance, shipping and other services critical to maintain oil trade. In an innovative approach, the EU’s eighth sanction package introduced a “price cap” on Russian oil, aimed at reducing the government’s oil revenues. In collaboration with G7 countries, it came into effect in December 2022, setting the price at 60 USD as the upper limit for third countries willing to purchase Russian crude oil (Official Journal of the EU, 2022). Nonetheless, the effectiveness of these sanctions has been mixed. According to Deputy Prime Minister Alexander Novak, Russia recorded 2 percent growth in its crude oil production in 2022 (Government.ru, 2023). While the oil sector logged an 8.5 percent drop in April 2022 amid proliferating sanctions on the Russian economy, its production recovered swiftly during the following months, exceeding many expectations (Ria Novosti, 2023). Novak’s statement also noted a 7 percent annual increase in crude oil exports (Government.ru, 2023). Reportedly, in 2022, the Russian oil sector witnessed the most drilling in a decade (Bloomberg, 2023). Data on Russian oil exports have become less reliable as a growing portion of oil has shifted to shadow routes where the origin of oil remains unclear. Also, the most punitive sanctions have only recently come into effect; hence, their full impact is yet to be witnessed. Yet, monthly data for oil loaded from Russian ports indicate that a ban on Russian seaborne oil imports in Europe and the “price cap” had only a temporary effect. Oil exports dropped by 9 percent in December, but rebounded by 29 percent 81

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in January, reaching 3.68 mbd – 21 percent above the level in January 2022, the month before the onset of the war in Ukraine. By contrast, petroleum product exports in January 2023 remained largely unchanged compared to the previous month and the same month in 2022, as the “price cap” was not yet in affect for this segment of the oil sector (Petrologistics Blog, 2023). Available data on the price of Russia’s Urals blend crude oil indicate that sanctions have been highly effective in generating a significant discount. Even the mere expectations about upcoming packages of sanctions had cut the price of Russian oil during the spring of 2022. The spread between the price of Russia’s Urals blend and the benchmark Brent started to narrow towards the summer (Chizhevskii, 2023). However, the discount reached a new peak following the onset of the price cap mechanism: in December, Russia’s Urals blend was garnering 35–40 USD less than benchmark Brent crude oil. This spread used to be around ten times smaller prior to Russia’s invasion of Ukraine. In January 2023, a month after the introduction of the price cap, Urals was trading about 48 percent below Brent (Stognei, 2023a). Yet, the actual size of the discount for Russian oil may well be significantly smaller. Industry insiders have noted that agencies reporting oil prices have not adapted their methodologies to a new reality whereby a significant portion of Russian oil is shipped through channels they could not observe (Vakulenko, 2023). Furthermore, the size of the discount may be exaggerated also because many participants in the Russian oil value chain have a strong interest in reporting a discount. Quoting lower prices can help Russian oil companies pay lower taxes, while this practice can also enhance the bargaining power of buyers of “discounted” Russian oil when dealing with other suppliers (The Economist, 2023). Examining the case of Venezuela reveals that sanctions have had a noticeably higher degree of effectiveness. While Venezuela has been under various sanctions imposed by the US since the early 2000s, a shift towards sectoral sanctions that target the oil industry occurred more recently (Rendon and Price, 2019). The Trump Administration made it clear as early as in August 2017 that the oil sector was set to become a major target by blocking Venezuela’s national oil company (NOC) PdVSA from US financial markets. The main move, however, came in January 2019 when PdVSA’s properties subject to US jurisdiction were blocked, and US persons were prohibited from engaging in transactions with the company. During the following months, the US shifted to secondary sanctions, targeting companies of third countries engaged in shipping Venezuelan oil (Seelke, 2022). The impact of sanctions on Venezuelan oil has been robust. Even during the build-up to the 2019 sanctions, expectations for incoming new measures against the Nicolás Maduro regime led to a 25.8 percent drop in oil production in 2018. Oil production dropped further by 32.9 percent and 43.9 percent in 2019 and 2020, respectively (OPEC, 2023). Partly affected by the global pandemic and the resulting lower oil prices, Venezuela’s oil production in 2020 reached its lowest level ever reported by OPEC since its establishment in 1960. Oil and petroleum product exports recorded a similar trajectory: they dropped 37 percent and 41 percent in 2019 and 2020, respectively. Venezuela’s exports in 2020 were merely 556 thousand barrels a day, compared to the 2.26 mbd exported on average during the five years (2013–2017) preceding the sanctions. Additionally, sanctions forced PdVSA to sell its oil at a considerable discount, which size varied depending on the company’s ability to reduce its oil inventories (Paraga and Cohen, 2020). Among the three countries described in this chapter, Iran has had the longest history of facing oil sanctions. While successive US administrations have targeted Iran’s oil industry, it was only in 2012 when the Obama administration turned to “near-term” sanctions aiming to curtail Iran’s ability to trade with oil. In June 2012, the US government imposed a ban on international banks from completing oil transactions with Iran. A month later, the EU imposed its own ban on Iranian 82

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oil exports (US Department of State, 2023). The US/EU (the West) sanctions on Iran were relaxed in the aftermath of the Joint Comprehensive Plan of Action (the “nuclear deal”) in July 2015. However, sanctions were reimposed in 2018 under the Trump Administration when the US opted to withdraw from the deal. During these two separate episodes, the West’s sanctions had a significant impact on the Iranian oil industry. During the first episode, its oil production dropped by 4.4 percent and 12.8 percent in 2013 and 2014, respectively. The decline in its crude oil and petroleum product exports was even more dramatic: they went down by 37.1 percent in 2013, and further 1.9 percent in 2014 (OPEC, 2023). Oil production and exports recovered following the “nuclear deal” in 2015. Once sanctions were back in 2018, however, a similar pattern followed: oil production decreased by 33.2 percent in 2019 and by a further 15.8 percent in 2020. Iran’s oil output, standing at 1.99 mbd in 2020 was the lowest level reached since 1981. Once again, the decline in exported oil volumes (including petroleum products) was more profound: exports went down by 55.9 percent and further 26.8 percent in 2019 and 2020, respectively. In 2020, Iran’s total oil exports were down to merely 685 thousand barrels a day. By comparison, Iran exported on average 2.68 mbd during the five years preceding the onset of sanctions in 2012 (OPEC, 2023). During both episodes, Iran’s oil export transactions frequently drew attention for the significant discounts they involved. What is common for all the three cases examined here is that oil sanctions triggered significant discounts for the target states’ oil in international markets. However, unlike Venezuela and Iran, Russia did not go through a major contraction in its oil production and exports. On the contrary, these two indicators went up. It is possible that it might be too early to judge these indicators, and they may start exhibiting some downward trend in response to the new sanction tools, such as the price cap on oil and petroleum products – the latter went into force only in February 2023. However, additional explanations are possible. The next section presents several factors that may determine the effectiveness of “near-term” oil sanctions.

Target States’ Response to Oil Sanctions: Endogenous Factors Determining Their Effectiveness Factors Specific to the Oil Sector of Target States There are substantial differences between the oil industries of Russia, Iran and Venezuela. The Russian oil sector has proven to be more resilient to “near-term” sanctions, whereas the oil industries of Venezuela and Iran have been beset with difficulties, impairing their capabilities to maintain production and exports under sanctions. Russia’s oil sector continuously defied markets expectations long before the onset of the war in Ukraine. According to the government’s periodically revised official energy strategy reports, Russian oil production should have peaked long time ago (Vatansever, 2021, p. 232). The “long-term” oil sanctions launched in 2014 have delayed some large investment projects, and yet Russia’s oil production has continued its upward trajectory. Since the late 1990s, the Russian oil sector has been setting one record after another. What has helped the Russian oil sector in going through numerous geological and market challenges for over two decades has also helped it weather the recent storm of “near-term” sanctions. Unlike many oil-exporting countries, where a national oil company (NOC) dominates the entire oil sector, Putin’s Russia has maintained a moderately competitive market structure. The sector has been controlled by multiple vertically integrated oil companies (VICs), including privately owned. Through diverse investment strategies, these VICs have surmounted many geological challenges 83

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at home. And thanks to their wide and often distinct networks in the global oil value chain, they have been in a better position to adapt to sanctions targeting their oil exports compared to Iran’s NIOC and Venezuela’s PdVSA, which have borne alone the burden of operating under sanctions. Unlike a typical NOC, Russia’s oil VICs have had a degree of financial autonomy that has generally precluded the government raiding their accounts for cash. Furthermore, Russia’s oil VICs have benefited from a tax regime that has been geared to be highly sensitive to reported oil prices (Vatansever, 2020). Thus, selling oil at a significant discount due to sanctions has put the burden primarily on the government budget while oil companies’ tax bill has been adjusted downwards. Importantly, faced with “near-term” sanctions in 2022, the Russian government did not launch a major revision of the oil tax regime to shift the balance in its favour. Only minor adjustments were made to collect additional taxes from oil majors’ downstream operations during 2022 (Nefte Compass, 2022). While the Russian government has debated revising the methodology to estimate the taxable oil prices in the context of discounted Russian oil, it has been noticeably slow in taking an action (Reuters, 2023). A few additional factors have helped the Russian oil companies. By the time Russia invaded Ukraine, the Russian oil industry had already been well integrated into the global oil markets. While reliant on foreign technology, particularly for investing in more difficult new generation fields, the Russian oil industry depended less on foreign capital in order to thrive. Thus, when international oil majors announced their plans to exit Russia in 2022, they did not have an impact on Russian oil production. Importantly, the Russian government abstained from nationalising these companies’ assets, keeping the door open to foreign partners. Also, the Russian oil companies have developed an extensive in-house oil services industry for decades. This industry retained much of the personnel and expertise following the departure of key international oil service providers in 2022 (Bloomberg, 2023). Finally, Russia’s large share (about 11 percent) in global oil markets has been significant as it affected how the West designed its “near-term” sanctions. Concerns about prompting a spike in global oil prices have guided the US and the EU governments in enacting legislation on Russian oil. Thus, unlike in the case of Venezuela and Iran, where cuts in oil exports have been openly among the immediate goals of sanctions, in Russia’s case, the intended objectives have remained, at best, vague. In fact, one could suggest that the price cap mechanism on Russian oil was the creative product of some hesitation among sender states about the desirable outcomes of the sanctions. Setting the cap itself involved protracted negotiations on the optimal price level that would keep oil markets supplied while reducing Russian government revenues (Lowder, 2022). The outstanding contrast between Russia on the one hand, and Venezuela and Iran on the other hand, can help explain why the latter witnessed a major drop in oil production and exports in the aftermath of “near-term” sanctions. In both countries, “near-term” sanctions were launched in the context of struggling oil industries. Throughout its post-revolution history, Iran’s oil production never recovered to the levels reached in the 1970s. Likewise, in Venezuela, oil production peaked in mid-2000s and failed to recover. Both countries’ NOCs have faced a host of problems which have been only magnified in the context of oil sanctions. For PdVSA, industry insiders have claimed that even sanction relief would not suffice to significantly improve its production and export outlook. A recent history of PdVSA’s default to creditors, the government’s expropriation of foreigners’ oil assets, severe maintenance issues relating to the country’s oil infrastructure and brain drain of expertise have all contributed to the downward spiral of the Venezuelan oil sector (Palacios and Monaldi, 2022). Rampant corruption has raised PdVSA’s operating costs (Halff et al., 2017), while the peculiar quality of its oil (extra heavy) has limited the pool of available refineries willing to buy it, further contributing to the oil sector’s predicament (Verrastro and 84

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Stanley, 2018). Also, in both countries, the NOCs have been overburdened with the task of providing extensive oil subsidies for the public (Rivlin, 2006).

The Economic Context of the Target State Apart from its own distinctive features, the Russian oil industry has also operated in an economic context that has been more conducive to thrive under sanctions compared to the oil sectors in Venezuela and Iran. One area where Russia’s VICs have had an advantage is the government’s fiscal policies for the broader economy. It is the Russian government fiscal approach preceding the sanctions that has broadened the fiscal space amid sanctions, allowing oil companies to operate without facing unexpected new bills. Two key indicators are noteworthy. The first one is the fiscal breakeven price of oil, the price that allows a country dependent on oil exports to balance its budget. Russia shifted to fiscal restraint soon after its annexation of Crimea and dwindling oil prices, maintaining this approach until its invasion of Ukraine. Its average breakeven price during the two years preceding the pandemic was as low as about 52 USD/barrel. It went up during the pandemic to 76 USD/barrel, but it was quickly brought down to 69 USD/barrel in 2021, allowing to run a modest budget surplus. For years, Russia ranked as one of the most fiscally conservative oil exporters. By contrast, Iran and Venezuela were consistently ranked as the most exposed to an oil price collapse for over a decade. In 2021, the breakeven price stood at 286 USD/barrel for Iran and 426 USD/barrel for Venezuela (Griffin, 2021). The size of “rainy day” reserves, particularly the portion that is accessible to the target state under sanctions is another important indicator. All the three oil-rich countries have established special “oil funds” designated to accumulate oil revenues to be at the disposal of the government when oil prices collapse or when they face an unforeseen major economic challenge. They have also maintained additional reserves in their central banks. Russia’s “rainy day” reserves appear distinctive in terms of their size and the government’s dedicated efforts prior to the war in Ukraine to hedge against potential restrictions on their use. A week before Russia invaded Ukraine, Russia’s reserve stood at 643.2 billion USD (Hannon, 2022). The West targeted these reserves trough financial sanctions but failed to entirely block access partly because the Russian government had devoted significant efforts to diversify its currency holdings (Shagina, 2022). This helped Russia maintain access to a significant portion of its reserves. Russia’s comparatively better economic context has made it possible to forego the first year of sanctions without resorting to punitive new taxes on the oil sector. Instead, the government has managed to plug its emerging budget deficit by resorting to its “oil fund” known as the National Wealth Fund: Between June 1, 2022 and January 1, 2023, savings in the fund were reduced from 12.476 trillion rubles (198 billion USD) to 10.434 trillion rubles (148 billion USD) (RF Ministry of Finance, 2023). Additionally, the government resorted to one time windfall tax on Gazprom’s record profits at the end of 2022, collecting 416 billion rubles (6.9 billion USD), while sparing the oil industry (Bloomberg, 2022). By comparison, sanctions have only amplified deep structural economic problems in Iran and Venezuela where the oil-based economies have been fundamentally mismanaged through populist policies, leaving little fiscal room for manoeuvring. Beyond the fiscal context, Russian oil companies have also benefited from a comparatively more effective monetary approach of the government. Russian decision-makers resorted to capital controls to stem the devaluation of the ruble in the immediate aftermath of Russia’s invasion of Ukraine. However, the floating exchange rate regime was maintained in principle, and the value of the ruble was quickly stabilised. Russia avoided the enormous devaluation (and the ensuing 85

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hyperinflation) Venezuela and Iran went through when they were targeted with “near-term” oil sanctions. The monetary policies of the latter two countries were further complicated due to the presence of multiple exchange rates. Their NOCs could have benefited significantly from devaluation, which typically lowers operating costs. However, they have had to operate through an artificially overvalued official exchange rate. Beyond the negative impact on their balances, the presence of multiple rates has fostered corruption and rent-seeking. For instance, PdVSA was at the centre of a scheme that allowed elite and public officials to embezzle over 1.2 billion USD through exploiting the presence of multiple currency regimes (Saudelli, 2019). Overall, Russia’s comparatively better economic context may partly explain the endurance of its sector during the first year of “near-term” sanctions. Yet, the sustainability of this outcome can soon come under question. Unlike Iran and Venezuela, apart from facing sanctions, Russia has started a costly war. Surging military and social expenses have brought deficit back to the federal budget (Stognei, 2023b). Thus, it would be important to watch whether and how Russia balances its expenses without harming the performance of its oil industry in the short term. While the government’s fiscal space may tighten as the war rages on, it still has some options at its disposal, such as devaluing the ruble and sacrificing long-term investments in the oil sector through changes in the oil tax regime.

Capability to Circumvent Sanctions by Turning Them into a Source of Rents at Home and Abroad Target nations have been able to minimise the effectiveness of “near-term” oil sanctions by turning these sanctions into a source of rents, which incentivise key actors at home and abroad to evade them. The process of generating these “sanction rents” has involved crafting mechanisms and building relationships that facilitate evasion of sanctions. Unlike in the case of the two factors examined earlier, this is an area where an accurate comparison across the three countries is methodologically more problematic. Thus, the objective here is to theorise on the significance of this factor, rather than measure its impact. Sanctions can create opportunities for rent-seeking in numerous ways. If one considers the long value chain between producing the oil and bringing it to the shores of another country, sanctions bring the possibility of introducing new players (winners) in the field. And when sanctions generate a discount for the target state’s oil, who gains the margin is an intricate game with many possible outcomes in the typically non-transparent market of sanctioned oil. The leadership of the target state emerges with a substantial leverage at its disposal to reward select players, domestic and foreign. The size of the “sanction rents” is not straightforward when it comes to calculating. The amount of the oil discount as percentage of a benchmark price would constitute a key measure: the larger the discount the larger the “sanction rent”. This discount can be acquired by both foreign and domestic players involved in the value chain of the sanctioned oil. However, the entire value chain generates more rents than the size of the discount – it involves a variety of paid services such as shipping, insurance and trading. Thus, if a new player is introduced into the value chain, it can acquire part of the discount caused by sanctions, but also the fees that are paid for those services irrespective of sanctions. Such fees may often involve earning above typical market prices. Thus, comprehending the conditions that enhance or limit a target state’s capabilities to generate “sanction rents” can be crucial for understanding the likely effectiveness of sanctions. The three case studies in this chapter point to four significant conditions: the target state’s domestic political context, its foreign policy approach, the size of its oil industry and the state of the global 86

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oil markets. A leadership is more likely to acquire leverage in generating “sanction rents” if they operate in the context of non-democratic states with weak accountability. Such a context enables a leadership to treat the business of sanctioned oil as a source of reward or punishment for a select few. Thus, all three countries examined in this chapter have authoritarian settings, whereby their respective leaders have had extensive powers to reshape their oil value chain and guide the flow of oil rents under a sanction regime. In Iran’s case, for instance, the leadership has developed a network to evade sanctions benefiting specifically key members of the Islamic Revolutionary Guard, prompting additional sanctions by the US on this network (US Department of State Media Note, 2022). A target state’s foreign policies have also been crucial in developing capability to turn sanctions into rents. Cultivating relations with two types of countries has been particularly significant. One type refers to other states that are targets of oil sanctions. Such states have been instrumental for developing channels to evade sanctions. Thus, Iran and Venezuela have mutually helped to evade oil sanctions, while Iran’s “shadow” fleet of oil tankers has been significant in moving Russian’s sanctioned oil (Cook and Sheppard, 2023). With Russia emerging as a target of oil sanctions, this solidarity among sanctioned states has become increasingly more relevant to understanding the effectiveness of sanctions. Reportedly, the size of the “shadow fleet” used to move oil under sanctions has been on the rise in the recent decade. With Russian oil coming under “near-term” sanctions in 2022, its size has swollen to over 600 tankers (Hunter, 2023). Cultivating relations with third countries that have not joined the sanctions has been not less significant. In all the three countries, oil sanctions have been preceded by a history of confrontation with the West, necessitating building ties with third countries, China and India in particular. Offering a portion of the oil rents through discounted oil has been essential in bringing these “third countries” into the value chain of sanctioned oil. Russia’s experience highlights that it has been possible to swiftly divert oil to a “third” country, as illustrated by the dramatic surge in its oil exports to India during 2022 (Hindustan Times, 2023). Yet, the speed of this shift has been possible largely because it was built on Putin’s longstanding efforts to develop relations with India, along Rosneft’s direct involvement in the Indian oil market as an investor in one of its largest refineries since 2016 (Indian Express, 2016). The size of the oil industry also matters as it can determine a target state’s capacity to generate “sanction rents”. Thus, Russia, with its much larger oil industry than Venezuela and Iran, possesses a greater potential to generate “sanction rents”. This potential is also magnified by the fact that Russia has an extensive, in fact oversized, refining sector which serves a substantial role in global market for petroleum products. The amount of “sanction rents” would be different for crude oil and distinct types of petroleum products as prices and fees vary. As Russian refineries are predominantly under the control of VICs, this has brought some flexibility to the sanctioned oil sector in adjusting the amount of the “sanction rent”. The government, meanwhile, maintains a lever through its tax regime in guiding how this rent is allocated between the crude oil and petroleum product exports. The state of the global oil markets, which is largely, though not entirely, exogenous to target states, can be significant in determining the size of the “sanction rent”. Accordingly, in the context of high oil prices (tight oil markets), the target state does not have to give a larger discount (as percentage of the benchmark price), even though it can afford to do so. Conversely, low oil prices in the global market can be particularly difficult to manage for target states. Under a well-supplied oil market (and low oil prices), it is financially harder to forego sizable “sanction rents”. But the target state is also likely to face greater pressure to cut prices as there is less competition over its sanctioned oil. Thus, the ability of the target state to maintain a thriving oil sector will depend on 87

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its capacity to generate a significant amount of “sanction rents” throughout the oil value chain. This capacity is shaped by global oil markets, though it will also depend on how motivated a leadership is to generate these rents. There is a very limited understanding of how prices for sanctioned oil are formed. Even less is known about how “sanction rents” are distributed along the entire value chain of sanctioned oil. “Sanction rents” are prone to be opaque. Thus, in Russia’s case, Russian oil companies are the likely beneficiaries of at least a portion of the “sanction rents”. They can operate through affiliated shipping companies, inflating the costs and reporting a sizable discount to comply with sanctions on paper (Vakulenko, 2023). Meanwhile, the Russian government involuntarily or deliberately let its oil companies capture some of the “sanction rents” by not revisiting its tax regime during the first year of sanctions.

Conclusion Russia has become the latest example of an oil-rich country that has emerged at the centre of oil sanctions. Its oil industry has continued to thrive, even recording a significant growth in production and exports during the first year of sanctions. While Russia’s experience is in contrast to other targets of oil sanctions, such as Iran and Venezuela, one area where sanctions have been commonly effective is their propensity to generate a significant price discount for target states’ oil. This chapter suggests that in order to understand the effectiveness of oil sanctions, it is critical to consider a variety of factors endogenous to oil-exporting states. How such states run their oil industries and the broader macroeconomy can determine the effectiveness of these sanctions. This chapter also highlights the importance of looking into the target states’ ability to generate “sanction rents”. It suggests that this capability can be a determining factor in the oil-rich states’ enduring efforts to yield sanctions ineffective. Further research could enrich our understanding of who precisely acquires these “sanction rents”. This would necessitate an improved grasp of price formation in global oil markets particularly with respect to sanctioned oil. A further area that calls for a better understanding is what motivates leaders of oil-rich states to engage in “sanction rents”, and what mechanisms and pathways they adopt to guide this distribution process at home but also abroad. Overall, further research recognising key factors endogenous to target oil-rich states could help design more effective sanctions.

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7 FINANCIAL BLACKLISTING AND THE RETURN TOWARD INDISCRIMINATE SANCTIONS Joy Gordon

The League of Nations envisioned the “embargo” as a tool to prevent aggression, that would be bloodless, yet more powerful than military force. Indeed, one of the League’s critics, John Foster Dulles, argued that it would fail because an embargo would be so catastrophic and inhumane that no one would ever dare to actually use it, and thus, no one would ever fear that it might be used against them. In practice, of course, while blockades and sieges in warfare continued to be devastating, the use of economic measures as a tool of global governance proved to be rather underwhelming. The League’s embargo against Mussolini did not deter him from invading Ethiopia. And unsurprisingly, while the UN Charter incorporated the use of economic sanctions in Chapter VII, it was accompanied by the option of military force as well. The use of sanctions during the Cold War presented little cause for concern in regard to humanitarian impact. If the West sanctioned a country, it could turn to the Eastern bloc for trade, and vice versa. Within the UN Security Council (UNSC), the mutual veto threats among the permanent members meant that Chapter VII measures would rarely be imposed for the first forty years of the Council’s existence. Whether as foreign policy or as global governance, sanctions were never comprehensive; there was no situation where the entire international community participated in the comprehensive sanctioning of a country. Consequently, until 1990, sanctions were never devastating. While there was a good deal that was written about sanctions in this period, it largely concerned issues such as effectiveness, and how to keep alliances of sanctioners from deteriorating. There was little discussion of the humanitarian impact (although opponents of the sanctions against South Africa often claimed to be concerned with the effects of the sanctions on Black South Africans). The UNSC sanctions imposed on Iraq in 1990 changed this. They were comprehensive in two regards: they engaged the responsibility of every member state of the United Nations; and they blocked virtually all imports, exports, and financial transfers. Imposed in August 1990, the sanctions were not immediately devastating. Iraq’s infrastructure was in good condition, food rationing was implemented, and measures were taken to increase domestic agriculture and industrial production. However, the massive bombing campaign of early 1991 reduced Iraq to what UN officials described as “near apocalyptic,” a “pre-industrial condition” in which water treatment plants, electrical generating facilities, telecommunications equipment, bridges, dams, and major DOI: 10.4324/9781003327448-10

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roads were largely reduced to rubble (Ahtisaari, 1991). The sanctions then prevented the repair or rebuilding of Iraq’s infrastructure for over a decade. During this period, the broader thinking about economic sanctions underwent a radical shift, as not only political scientists but also ethicists, legal scholars, and epidemiologists began writing about sanctions. Now, however, sanctions were being framed not only as a tool of governance or foreign policy, but as a measure that was in itself a violation of human rights. The UN itself had deep ruptures, as agencies such as UNICEF and WHO were bitterly critical of the Security Council, some of whose members insisted on maintaining sanctions against Iraq as rigorously as possible, despite the human cost. Even with the advent of the Oil for Food Program, the Council consistently blocked the export of goods and equipment to repair Iraq’s infrastructure; and this above all was what ensured that the very high human cost would continue, including widespread malnutrition, epidemics of cholera and typhoid, and the near collapse of health care and education. The most prominent response to this was the emergence of targeted “smart” sanctions. These were understood to narrowly target wrongdoers, and related goods, particularly weapons. These measures included arms embargoes, travel restrictions, targeted commodity bans, and asset freezes. The expectation was that smart sanctions would both obviate the need for concern about humanitarian impact, since they would affect only the wrongdoer, or goods such as weapons; and at the same time, it was expected that these measures would have more success in forcing compliance by political, military, and economic elites, since they would be directly impacted. However, in this regard, targeted sanctions have generally not proven to be much more successful than their less “smart” predecessors. In addition, in many cases they have proven to be indiscriminate and disproportionate. And they gave rise to an entirely new set of problems.

Asset Freezes and Due Process Asset freezes have often been viewed as the quintessential form of “smart” sanctions. It seems that no targeting could be more narrow than a single person; and seizing or freezing that person’s bank account seems very far from the kinds of measures that affect a country or a population. At the same time, we would expect these measures to be highly effective; surely no dictator would want to lose access to his wealth, and he would then be motivated to comply with the demands that he stop engaging in aggression or human rights violations. As plausible as this all sounds, the reality has turned out to be quite different. Asset freezes, along with other targeted measures, were taken up by the UNSC with enthusiasm in the late 1990s and early 2000s, in the wake of virulent criticism of the Council’s sanctions against Iraq and their distressing impact on the Iraqi population. The UNSC sanctions regime that has received the greatest attention in this regard was established by Resolution 1267, concerning Osama bin Laden and the Taliban. The resolution gained sudden significance in the aftermath of the attacks by bin Laden and Al-Qaeda in September 2001. In the days following the attacks, the US added hundreds of names to the list of those targeted by the resolution, and faced little opposition in doing so. But while the occasion may have warranted quick action, it was clear from that point on that adding names to the blacklist of a Chapter VII sanctions measure was a process that would be both arbitrary and highly politicized. In addition, while the reasons given for listing someone may have sounded serious and urgent—terrorism being the obvious example—what was often missing was compelling evidence demonstrating the legitimacy of the accusation. Names were added in a plainly political process: one country would propose adding certain names, and other countries would need to agree, or at least not veto those names, in the same way that resolutions were adopted. As with other political negotiations, a certain amount of horse-trading took place 92

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as well; Russia might agree to names proposed by the US, as long as the US did not object when Russia sought to include its enemies or political opponents. But the arbitrariness was not limited to the designation of who would be listed. What was also clear from the outset was the profound lack of due process. One of the most prominent challenges in this regard was brought by Yassin Abdullah Kadi, a Saudi businessman. Kadi was listed immediately after 9/11, and under the terms of Resolution 1267, all member states of the United Nations were instructed to freeze all of Kadi’s assets. Kadi sought relief from national courts and elsewhere, in a series of cases that continued for over a decade. Where Kadi was investigated for his putative ties to Al-Qaeda in national inquiries, he was exonerated. However, the Security Council process did not provide a venue for Kadi to see the evidence against him, to challenge its validity, or to present evidence to the contrary. Kadi’s case made its way through the European courts, which ultimately invalidated the EU measures enforcing the Council’s measures against him. (European Commission, 2013) The Security Council reluctantly made some concessions regarding its process, eventually establishing the office of an ombudsperson to review appeals from those listed. But the process of listing, and the financial and personal restrictions on individuals based on vague accusations and questionable evidence, continued for years. The stunning lack of even basic due process was roundly criticized by Bardo Fassbender and other leading legal scholars (Fassbender, 2006). And while the Council ultimately established an ombudsperson to consider appeals in the 1267 sanctions regime, none of the Security Council’s other sanctions regimes provide even that option, when those who are listed seek relief or seek to challenge the basis of their listing. The questionable process by which persons or companies are placed on financial blacklists means that it is not certain that the ostensible purpose of the sanctions is even met. If the intention is to deprive terrorist of funds, but the individual is listed without credible evidence of any actual ties to terrorism, then the sanctions may accomplish nothing in relation to their stated purpose. At the same, the experience of being listed may be catastrophic for an individual and their family, or for a business that provides income or jobs to dozens or hundreds of people. The personal and economic security of the individual is compromised, as well as that of all those who depend on the individual for their income or their livelihood. The arbitrary and opaque character of the listing means that there is no clarity about how the person or individual may disprove the allegations, or in any other fashion be freed of the burdens of the sanctions, which may continue for years on end. At the same time, the risk of these listings creates a sense of precarity for many others as well, since the criteria for selecting who will actually be listed are not publicly known or implemented with consistency. Yet in discussing “smart sanctions,” there is still the sense that the impact of each listing is limited to a single person, or a company. There is the sense that even if the process by which individuals come to be the target of asset freezes is problematic, the magnitude of the harm is still quite limited in scope. In this view, these listings bear no resemblance to the kind of sanctions seen in the context of Iraq, for example, and consequently it seems that the objections that were raised against those sanctions regimes would not apply. The most significant of these objections drew on the principles of discrimination and proportionality, taken from Just War doctrine. The sanctions against Iraq were surely indiscriminate, in that an entire population was affected. Indeed, it might be said that those sanctions were counter-discriminate: those who were harmed first, and worst, were vulnerable populations, such as infants and young children, the elderly, the sick, and the poor; while those who were least affected were the military, the political elite, and the economic elite, all of whom were in a position to garner more than their share of shrinking resources, and profit from the black market as well. Likewise, if the intention was to prevent the Iraqi government from, among other things, committing human rights violations against the Kurds or others, then 93

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the sanctions themselves would arguably be disproportionate, since they resulted in such profound hardship for much of the Iraqi population as a whole. In this context, financial listings seem attractive; they seem to be, by their nature, incapable of being either indiscriminate or disproportionate. But that has not at all proven to be the case. On the contrary, asset freezes and similar financial sanctions often, in effect, operate to target whole sectors, or in some cases, seek to paralyze or bankrupt the state. That has been particularly true of financial blacklistings done by the United States. In addition, the listing of Specially Designated Nationals (SDNs) may effectively be extraterritorial, subjecting foreign nationals to penalties for doing business with an entity sanctioned by the US. The consequences of this are quite extensive. Once a party is listed on the SDN List it is cut off from a large portion of international business and banking transactions, international travel and subject to a worldwide asset freeze. Consequently these designations can have a truly devastating impact on individuals and business organizations. Thus by designating parties on the SDN List, the U.S. extends its influence over foreign parties who have no contacts with the U.S. for simply having engaged in activity that is contrary to U.S. policy goals. (McVey, 2019, p. 7)

Blacklisting and Sectoral Impact The Case of Cuba The US sanctions against Cuba operate on two levels. Many aspects explicitly target whole sectors of the economy. For example, the Helms–Burton and Torricelli laws explicitly target all shipping of imports and exports, the biotech industry in general, and Cuba’s major exports, such as sugar and nickel. However, the use of ostensibly targeted listings accomplishes much the same result in regard to other key aspects of the economy. The tourism industry is one such case. In the early 1990s, Cuba rebuilt its tourism industry, engaging in joint ventures with partners from Europe, Latin America, and elsewhere. The tourism industry generated annual revenues between $2.5 billion and $3 billion in 2015–2019, before plummeting as Cuba’s borders were closed during the COVID pandemic (Barrera Rodríguez et al., 2023, p. 9). Tourism is not only a source of revenue but also a means by which Cuba interacts with millions of foreign nationals, building bridges, and positive relations. The sanctions prohibit US tourists from visiting Cuba, which significantly reduces tourism. Nonetheless, Cuba has generally received significant numbers of tourists from Canada, Europe, and elsewhere. While the US cannot directly prohibit foreign nationals from visiting Cuba, the US can create risks for them, and for investors in the tourism industry, through listings. Currently, of Cuba’s seven major hotel chains, five have been blacklisted by the US: Cubazul was blacklisted in 2021, Cubanacán in 2007, Habaguanex in 2017, and Gaviota, Hoteles E and Gran Caribe in 2020. These are the largest companies in Cuba’s hotel sector, and they collectively generate over 90% of the revenues in the tourism industry (Barrera Rodríguez et al., 2023, p. 9). Anyone who stays at these hotels is at risk of running afoul of OFAC, creating significant risks for tourists, business travelers, or others visiting Cuba, who also have ties to the US. It also jeopardizes the investments made by the hotel chain or Cuba’s other partners, since it makes it much less likely they will be able to recoup their investment. Thus, while the blacklist contains individual corporate entities, in fact, the nature and breadth of the listings—targeting most of Cuba’s hotel chains, and also those that generate 94

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the greatest revenue in the sector—function as measures that impact a major part of Cuba’s economy as a whole. In addition, the US’ Cuba Prohibited Accommodations List (CPA) extends the impact on the hospitality industry to private homes that rent out rooms or apartments. Thousands of Cuban families throughout the island offer these services, which provide critical income to not only the immediate family but also often the entire extended family as well. In justifying this list, the State Department maintained that, while these listings were registered as private homes, they are owned or controlled by the Cuban government or the Community Party (Barrera Rodríguez et al., 2023, p. 9). However, as Cuban scholars have noted, it is difficult for individual travelers looking for a place to stay to discern whether a room for rent does or does not have ties with a member of the government or the party (Barrera Rodríguez et al., 2023, p. 9). While an individual may not be aware of these listings, organizations such as Airbnb certainly are; and they are wary of the severe legal penalties they may face if they even inadvertently list rooms or apartments that are on the US’ CPA blacklist. Airbnb and similar companies often respond by a policy of “overcompliance”—that is, they choose to withdraw altogether from the market, or offer severely reduced services, rather than even risk the possibility of prosecution by the US government. Thus, the “targeted” listings of the CPA affect the hospitality sector broadly; but additionally, they specifically undermine revenue to hundreds or thousands of families for whom renting rooms out to foreigners is the primary source of their financial security. There are other measures that operate similarly—individual SDN listings that impact a key sector of the economy, causing direct, severe economic disruption to broad swaths of the population. This is true of the US listing of Fincimex, the Cuban financial agency that served as the hub for remittances sent from abroad. There are some two million Cubans who live abroad, and many send remittances to their families. As the economic hardship in Cuba worsens, these remittances are increasingly necessary for the economic survival of much of the population. In 2020, the US blacklisted Fincimex. The impact was enormous, as money transfer organizations were forced to cease operations there. The most notable case was Western Union. For over twenty years, Western Union has provided transfer services for Cubans abroad to send remittances to their family members. It was also by far the most significant provider of these services. The company has over 400 offices throughout the country, and transferred between $900 million and $1.5 billion annually. One commentator noted, “The problem is not the closure of Western Union, but that Western Union is practically the only U.S.-to-Cuba provider of remittance payments” (Associated Press, 2020). The Cuban and US governments eventually arrived at an agreement in early 2023, whereby Cuba would designate a different agency to handle remittances. But in the meantime, for two and a half years, thousands of families lost access to a critical source of financial support. Thus, once again, the individual listing of one entity compromised a major sector of the Cuban economy. In doing so, it affected tens of thousands of families who would have been the direct beneficiaries of financial transfers from abroad.

The Case of Iran In the case of the US sanctions against Iran, there are several measures that are clearly intended to compromise entire sectors of Iran’s economy, such as access to fuel, access to foreign investment, international trade, and the ability to engage with the international banking system. In 2010, Congress passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) (United States Government, 2010), which amended the Iran Sanctions Act, targeting the sale of gasoline and equipment for the production of gasoline. Foreign companies were 95

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prohibited from selling Iran more than $1 million of gasoline to Iran (or more than $5 million in a year). Iran was particularly vulnerable in this regard, since it imported about 40% of the gasoline necessary to meet its needs (Baltimore, 2007). CISADA substantially expanded the scope of the sanctions against foreign companies engaging in certain kinds of trade, investment, or financial transactions with Iran, denying them access to US markets and the US financial system. CISADA was also unprecedented in that it authorized the US Treasury Department to force US banks to terminate their relationships with correspondent banks abroad if those foreign banks “engaged in significant transactions with designated Iranian banks, or with Iranian government bodies,” specifically including the Iranian Revolutionary Guard Corps (IRGC) (United States Government Accountability Office, 2013, p. 10). In effect, it forces international banks to choose whether they want to do business with Iran or with the US; if they do any business with the IRGC, they will effectively be barred from the US banking system. But while the IRGC seems like a legitimate target of sanctions—it is a unit of the military—it is also deeply intertwined with Iran’s civilian infrastructure. The parameters of the IRGC are loosely defined. After the Iran–Iraq war, it had a central role in rebuilding Iran’s infrastructure, and began to emerge as a major player in the Iranian economy, including civil engineering projects, telecommunications, and the oil industry. Estimates of the IRGC’s role in the Iranian economy vary. One expert commented that “A conservative estimate would be to say that the IRGC now controls at least half of government owned companies, through its increasing control in the Tehran Stock Exchange” (Gewirtz, 2010). A researcher with the Rand Corporation reported that “The IRGC controls investment firms, construction and infrastructure companies, engineering firms, an auto manufacturing company, and even LASIK eye surgery offices” (Gewirtz, 2010). Among the IRGC companies that have a major role in the civilian infrastructure is “a firm called Khatam al-Anbia. It is the Islamic Republic’s largest contractor in industrial and development projects—Iran’s version of General Electric and the US Army Corps of Engineers combined. 25,000 engineers and staff work for the firm” (Gewirtz, 2010). Thus, while it seems that the IRGC is a proper target of sanctions, in that is a unit of the military, in fact its role in Iran extends well beyond that. It is an entity that is critical to Iran’s infrastructure, affecting the daily lives of Iranians in countless ways—from using a telephone, to riding a bus. The SDN listings, while seeming to consist of single entities, provide another avenue to cripple broad sectors of Iran’s economy. In 2018, the US government designated the Islamic Republic of Iran Shipping Lines (IRISL) as an SDN, and later added additional restrictions. IRISL transports all types of cargo. The fleet consists of 150 vessels, including 32 bulk carrier ships, 30 container ships, and 22 general cargo vessels. IRISL is the “biggest player in Iran’s transportation sector,” accounting for about 20% of transportation in all Iranian major ports (Financial Tribune, 2022). Indeed, it is one of the largest shipping companies in the world (Alphaliner, 2023). While the US rationale for sanctioning IRISL is that it has provided shipping for some military cargoes, it is also the case that IRISL ships millions of tons of goods as part of Iran’s general commercial trade. Thus, although the rationale may be related to Iran’s military and nuclear program, designating IRISL impacts Iran’s transportation sector as a whole, its exports in general, and its imports of millions of tons of goods for the civilian population. While the listing of IRISL broadly impacts Iran’s trade and its transportation infrastructure, those who are compelled to abide by the US measures extend well beyond US nationals. In general, a country is entitled to assert jurisdiction over its own territory, its own nationals, and acts that involve its nationals or its territory. Under the standards of international law, a country generally may not assert authority over the acts of foreign nationals, interacting with other foreign nationals, in a foreign place. For a government to control these acts and actors is considered 96

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“extraterritorial”—that is, acting outside the bounds of its legitimate authority. Under this principle, the US cannot legitimately seek to govern the commercial relations between Iran and companies or governments of third countries. However, the listing of IRISL as an SDN entails precisely this: [O]nce a party is listed on the SDN List it is cut off from a large portion of international business and banking transactions, international travel and subject to a worldwide asset freeze. Consequently these designations can have a truly devastating impact on individuals and business organizations. Thus by designating parties on the SDN List, the U.S. extends its influence over foreign parties who have no contacts with the U.S. for simply having engaged in activity that is contrary to U.S. policy goals. (McVey, 2019, p. 7) Thus, SDNs may not be at all narrow in their design or their impact. We can see this in two regards. First, if the SDN is a major player in the economy or infrastructure, the consequences of being listed will extend far beyond the single company that is targeted, often through ripple effects throughout entire sectors of the economy. Second, where US sanctions create penalties or risks for non-US persons, the scope of the impact extends well beyond the costs that would be incurred from the loss of US markets. Even if the measures are extraterritorial, in contravention of international law, any foreign national who interacts with the US market will be reluctant to risk losing that access.

The Case of Venezuela We see the same practices with regard to US sanctions against Venezuela. There are essential state institutions that are blacklisted by OFAC, and this has had a massive impact on Venezuela’s economy. In 2019, the Treasury Department listed Petróleos de Venezuela, S.A. (PdVSA), Venezuela’s national oil company, as an SDN. This includes not only PdVSA itself but also every entity in which PdVSA holds an interest of 50% or more; and it includes not only those entities where PdVSA directly holds this interest but also indirectly as well (although there are some exceptions, notably for US-based CITGO). Venezuela has the world’s largest proven oil reserves, and PdVSA is one of the world’s major oil exporters. PdVSA is critical to the Venezuelan economy: oil constitutes about 95% of Venezuela’s exports, and about one-quarter of the country’s GDP. As with many other SDN listings, the Treasury Department regulations regarding PdVSA not only prohibit trade with US persons or companies but also intervene in the Venezuelan company’s trade with third countries. As the shipping insurance company Skuld notes, “The designation does not on the face of it have extraterritorial effect, but non-US persons may be affected in a number of ways.” The Treasury Department is imposing sanctions on “any person” “(apparently including non-US persons) determined to have ‘… materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of … any person whose property and interests in property are blocked pursuant to this order.’” As Skuld notes on its website, the Treasury Department’s position is that non-US companies that transport PdVSA cargo to the US are bound by US sanctions; non-US companies that make or receive PdVSA related payments in US dollars are bound by US sanctions, even in relation to cargo which they are not transporting to the US; and non-US ships carrying petroleum products from Venezuela to Cuba face a clear risk of being sanctioned (Skuld, 2022). Thus, the sanctions on PdVSA not only target the 97

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company itself, and prohibit US nationals from dealing with it, but are also extraterritorial, greatly expanding the scope of the sanctions, and undermining PdVSA’s access to global markets, and to logistics, such as shipping. Skuld notes that this was the explicit intent of the US government: A State Department Briefing on 29 March 2019 discloses efforts to persuade foreign oil traders not to buy Venezuelan oil with a warning that “you should not be buying oil from this regime … we have a wide broad net with sanctions … be careful not to get caught in that net by activities you may think don’t come into it but actually are caught by it. (Skuld, 2022) The impact of the listing of PdVSA was enormous. Economist Francisco Rodríguez notes: The preponderance of evidence indicates that sanctions and other statecraft measures … have had a strong and significant negative effect on the Venezuelan economy. These actions have made a sizable contribution to declining oil production, exacerbating the country’s fiscal crisis, and contributing to one of the largest documented peacetime economic contractions in modern history. (Rodríguez, 2022, p. 2) Unsurprisingly, given the dependence of the Venezuelan economy on oil exports, the country’s GDP contracted by almost 75% between 2012 and 2000. According to Rodríguez, “Measured in terms of real per capita income, between 2012 and 2020 living standards fell by 71.8 percent” (Rodríguez, 2022, p. 3). In 2019, the Treasury Department blacklisted the Banco Central de Venezuela and its director, Iliana Josefa Ruzza Terán, as SDNs (United States Government, 2015). The listing of Venezuela’s central bank and other key financial institutions likewise had severe consequences for the country’s economy as a whole. The rationale was that “‘Treasury is designating the Central Bank of Venezuela to prevent it from being used as a tool of the illegitimate Maduro regime, which continues to plunder Venezuelan assets and exploit government institutions to enrich corrupt insiders,’ said Treasury Secretary Steven T. Mnuchin. ‘The United States is committed to helping the Venezuelan people’” (United States Treasury Department, 2019). But the impact on the Venezuelan population was severe and indiscriminate. The Center for a New American Security notes: Sanctioning a country’s central bank adds another layer of difficulty in clearing foreign transactions, reinforcing the Trump administration’s goal of financially isolating Caracas from the rest of the world. The broad range of existing U.S. economic sanctions, along with concerns that sanctions could be further expanded to cover additional activity with Venezuela, has directly limited the ability of certain entities to engage with the country. This has resulted in widespread over-compliance from international financial institutions, banks, and aid organizations dealing with Venezuela, which has further isolated the country from the rest of the world. (Bartlett and Ophel, 2021) Blacklisting the Central Bank of Venezuela cut off its access to US currency and undermined its ability to conduct international transactions. It prevented Venezuela from functioning normally as a modern economy, and compromised the government’s ability to deal with the runaway inflation: 98

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“Venezuela’s central bank has begun using piles of cash rather than electronic transfer to sell foreign exchange to local banks, according to five finance sector sources, a sign of how the nation’s economy has become increasingly primitive amid a hyperinflationary meltdown” (Pons and Armas, 2019).

Conclusion We are accustomed to hearing about the precision that financial sanctions provide. In some cases that may be true. But in other cases, sanctions that “narrowly” target a specific commodity, such as oil, or “narrowly” target a government or body, such as the military, in fact undermine major sources of revenue for the country as whole, compromising its GDP. We see this in the case of Venezuela’s national oil company, Petróleos de Venezuela, S.A., as well as in the listing of Cuba’s hotel chains, compromising tourism, a major source of the country’s revenues. A “narrowly” targeted sanctions measure may also undermine major parts of the country’s infrastructure, as in the case of Iran’s IRGC, impacting telecommunications and construction, or Iran’s IRISL, affecting the country’s transportation sector, and in turn, imports and exports. While it seems that the listing of individual persons or companies would only affect individual wrongdoers, or entities that are contributing to military aggression, in fact those individuals may be critical to the functioning of the entire economy. We see this in the listing of Venezuela’s Central Bank, and Cuba’s Fincimex. Perhaps we need to reconsider the myth of “smart sanctions,” and look more closely at the reality of how these measures actually operate. If we do, we will find that, regardless of the rhetoric about “concern for the people of” the targeted country, there is little sign that there is actually any such concern at all.

Bibliography Ahtisaari, M. (1991). “Report of the United Nations Mission: To Assess Humanitarian Needs in Iraq, March 10–16, 1991.” Alphaliner. (2023). “TOP 100/25 Mar 2023.” [online]. Available at: https://alphaliner.axsmarine.com/ PublicTop100/ (Accessed: 23 March 2023). Anthony, I. (2016). “Financial Sanctions,” in SIPRI Yearbook 2016: Armaments, Disarmaments and International Security (New York: Oxford University Press). Associated Press. (2020). “Because of Trump Sanctions, Western Union Remittances Come to an End in Cuba.” Baltimore, C. (2007). “Iran Vulnerable on Oil Product Imports—US DOE.” Reuters. Barrera Rodríguez, S., D. López, & I. Bartuste. (2023). “Blacklisting: US targeted sanctions and their implications for Cuba’s economy (1994–2020).” Manuscript in process. Bartlett, J., & M. Ophel. (2021). “Sanctions by the Numbers: Spotlight on Venezuela,” Center for a New American Security, June 22, 2021 [online]. Available at: https://www.cnas.org/publications/reports/ sanctions-by-the-numbers-3 (Accessed: 26 March 2023). European Commission and Others v Yassin Abdullah Kadi, Judgment of the Court (Grand Chamber). (2013). Joined Cases C-584/10 P, C-593/10 P and C-595/10 P (18 July 2013). Fassbender, B. (2006). “Targeted Sanctions and Due Process.” Humboldt University, Berlin. Financial Tribune. (2022). “IRISL Cargo Shipment Hit Record High of 27m Tons in Fiscal 2021-22.” Gewirtz, J. (2010). “Revolutionary Guard has Tight Grip on Iran’s Economy,” CNBC. December 8, 2010. [online]. Available at: https://www.cnbc.com/id/40570657 (Accessed: 23 March 2023). McVey, T. (2019). “U.S. Sanctions Laws: Dangers Ahead For Foreign Companies.” Washington, D.C.: Williams Mullen. Pons, C., & M. Armas. (2019). “Hemmed in by Sanctions, Venezuela Central Bank Moves Forex Operations to Cash.” Reuters.

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Joy Gordon Rodríguez, F. (2022). “Sanctions, Economic Statecraft, and Venezuela’s Oil Crisis.” Goshen, In: Fourth Freedom Forum. Skuld. (2022). INSIGHT: Venezuela Sanctions [online]. Available at website—as of https://www.skuld.com/ topics/legal/sanctions/venezuela/insight-venezuela-sanctions/ (As of: November 17, 2022). United States Government Accountability Office. (2013). “Iran: U.S. and International Sanctions Have Adversely Affected the Iranian Economy.” United States Government. (2010). “Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010,” Pub. L. No. 111–195. United States Government. (2015). Executive Order 13692. United States Government. (2018). Executive Order 13850. United States Government. (2019). Executive Order 13857. United States Treasury Department. (2019). “Treasury Sanctions Central Bank of Venezuela and Director of the Central Bank of Venezuela.”

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8 THE TERMINATION OF INTERNATIONAL SANCTIONS Actors, Processes and Consequences Hana Attia, Julia Grauvogel, and Christian von Soest

Introduction In line with the sharp rise in the use of sanctions in the post-Cold War era, their termination has become a widespread phenomenon within international politics. Of the nearly 400 sanctions cases that were in place in 1990 or imposed thereafter, nearly three-quarters had been lifted by 2018 (Attia and Grauvogel, 2022). Yet, the ending of sanctions has only attracted limited scholarly and public attention, as almost all existing research has focused on threatened and imposed measures instead. In consequence, we need to learn more about the political processes involved in ending sanctions. This is particularly the case for sanctions that have been terminated despite target resistance to senders’ demands. An emerging strand of the literature is only just beginning to analyse the nature and political repercussions of the termination of international sanctions (Dorussen and Mo, 2001; Krustev and Morgan, 2011; Attia and Grauvogel, 2022). Existing research that looked at the ending of restrictive measures mostly treated sanctions termination as a binary outcome, thus simply investigating whether the imposed measures ended or not. This approach lumps together two contrasting types of sanctions termination. Senders regularly lift sanctions when targets comply with their demands. Yet, only approximately half of imposed sanctions end with some degree of target acquiescence, indicating that sanctions senders regularly do not achieve their political goals. In these cases, sanctioning entities must decide whether they uphold their unsuccessful pressure or terminate it despite target resistance. Only recently have scholars started to distinguish between these two different ways of sanctions ending. They have found that the determinants of sanctions termination from target compliance fundamentally differ compared to for sender capitulation (Attia, Grauvogel and von Soest, 2020). We lack systematic knowledge on the political repercussions of these two types of sanctions termination. Moreover, we still do not know whether different sanctioning entities have contrasting approaches to the ending of external pressure. The main global sanctions senders, namely the European Union, United Nations and United States, apply sanctions in their own distinct ways (Brzoska, 2015). Similarly, regional organizations (ROs) also differ in their imposition of restrictive measures on their member states. Yet, analyses have thus far focused on the particularities of RO sanctions (Hellquist, 2015) or only compared them to UN measures (Charron and Portela, 2016). In a nutshell, sanctioning entities pursue varying foreign policy goals and design restrictive DOI: 10.4324/9781003327448-11

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measures differently. Such differences should affect the process of terminating sanctions – that is, whether senders lift sanctions gradually and whether they are prepared to end sanctions pressure even in cases where the target resists their political demands. New data allows us now to comparatively study the determinants of sanctions termination for all these senders in the entire post-Cold War era, when both the imposition and the termination of sanctions have become ubiquitous phenomena within foreign policy-making. To capture the commonalities and differences between the main sanctions senders, namely the EU, the UN, the US and ROs, we use the International Sanctions Termination (IST) dataset (Attia and Grauvogel, 2022), which contains more recent and comprehensive information on the timing and nature of sanctions removal than other existing datasets. We use this data to provide new insights into how these main global senders terminate sanctions, a key foreign policy tool in the twenty-first century. The chapter proceeds as follows: We first conceptualize the protracted process of sanctions termination and then conduct an in-depth comparison of the imposition and termination patterns of EU, UN, US and RO sanctions. We examine the commonalities and differences between these sanctions senders and assess how often targeted governments either give in to or resist their demands. Finally, we chart avenues for future research – including on the question of how sanctions affect political contestation even after these measures have ended.

Conceptualizing the Termination of Sanctions Scholars have acknowledged that the issue of termination is an important but under-researched part of the sanctioning process (Early and Cilizoglu, 2020, p. 449). Yet, to fully understand when, how and with which consequences sanctions are lifted, one needs to disentangle the process of sanctions termination. This involves accounting for its gradual nature, the often-contrasting decisions by various senders to lift sanctions, the different ways in which these measures can end (by target acquiescence or sender capitulation), as well as both the material and signalling repercussions of lifting them. For a long time, scholars treated the termination of sanctions as a binary decision, thus simply seeking to determine whether they were lifted or not. This static understanding fails to recognize that sanctions are often not lifted all at once and that the process can involve the decision to pursue gradual sanctions relief.1 In contrast to this earlier work that modelled sanctions as either being implemented or lifted all at once (e.g. Cox and Drury, 2006; Wood, 2008), more recent research has highlighted that sanctioning is a gradual process and that individual cases can be broken down into a series of different episodes (Eriksson, 2011; Biersteker et al., 2018). The use of targeted sanctions has enabled senders to incrementally add to or remove individuals and companies from so-called blacklists (Biersteker, Eckert and Tourinho, 2016). As a result, senders can gradually lift such measures to signal that sanctions are not just an end in themselves but rather a mean to establish policy change and incentivize targets to pursue compliance. During this process, not all senders necessarily act simultaneously. For example, ROs in Africa often take action as ‘pioneers’ regarding sanctions subsequently imposed by other actors (Charron and Portela, 2015, p. 1385). Similarly, the Economic Community of West African States (ECOWAS) has acquired the reputation of reacting to conflicts – also by imposing sanctions – in advance of the UN doing so (Striebinger, 2012). There are also instances of African RO sanctions being imposed over unconstitutional changes of government where the UN was not active at all (Charron, 2013). At the same time, the sanctions implemented by African ROs rarely go beyond the measures adopted by the UN (Brzoska, 2015). However, not only regional actors and the UN differ in how quickly they resort to sanctions and how long they keep them in place. For example, 102

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the US was previously less willing than the EU to lift sanctions despite incomplete goal attainment in cases such as the pressure imposed on Zimbabwe (Grebe, 2010). In a nutshell, the various senders differ in how quickly they impose sanctions – which also bears important implications for when they decide to terminate these measures. In addition to such divergent timing, there are also different types of sanctions termination. Earlier work tended to lump together different paths towards the ending of sanctions. Yet, sanctions can end after the target acquiesces to the senders’ demands or when the latter capitulates and lifts sanctions despite them not having achieved the desired policy outcome. These outcomes are not mirror images of one another and are affected by different factors. Krustev and Morgan (2011) were the first to systematically differentiate between sender and target capitulation in their study on ending economic coercion. Building upon this work, Attia, Grauvogel and von Soest (2020) show that the determinants of these two types of sanctions termination fundamentally differ. Their analysis finds that the sanctioned country experiencing poor economic health and high political volatility make target compliance significantly more likely, whereas political alignment between the sender and the target as well as leadership changes in the sender country all increase the probability that the sender capitulates despite a lack of target compliance. Finally, the termination of sanctions can also be differentiated into its material and signalling repercussions. Imposing sanctions deprives the target of economic benefits – but it also sends a highly visible political signal of international condemnation and disapproval (Giumelli, 2011). Likewise, ending sanctions offers the target the opportunity to restore both its economic ties and its reputation. Thus, on the one hand, imports from former targets on average quickly return to presanctions levels within two years after sanctions relief (Kohl, 2021). On the other hand, sanctions termination also ends ‘symbolic […] distance taking from the target’s wrongdoings’ (Hellquist, 2018, p. 399).

When and How Do the EU, the UN, the US and ROs Lift Sanctions? Today, sanctions are a popular foreign policy tool that for some key international players have developed into the preferred way to respond to international crises and questions of peace and security. The frequency of their use attests to the popularity of these measures. In the post-Cold War era alone, the EU, the UN, the US and ROs have altogether imposed 366 sanctions cases against 112 different countries worldwide – or entities and individuals associated with these targeted states (Attia and Grauvogel, 2022). Sanctions senders differ in their use of these restrictive measures, both when it comes to imposing them and to their eventually ending. The US applies sanctions far more frequently than any other country or international organization does. Between 1990 and 2018 alone, the US imposed 219 sanctions cases. Meanwhile, the EU imposed 79, the UN 31 and ROs 37 sanctions cases within the same period. To disentangle sanctions termination, we draw on the novel IST dataset that captures all EU, UN, US and RO sanctions between 1990 and 2018 (Attia and Grauvogel, 2022). Using the IST dataset has the following advantages: To start with, it is the first sanctions dataset to account for all ROs as autonomous sanctions senders instead of merely capturing whether there was RO involvement in a UN or Western sanctions case. Second, the IST dataset contains sender-specific information on key variables such as sanctions’ timing and outcome – which can significantly vary across cases. In other words, it captures the start and end dates, goals and outcomes for each individual sender–target dyad. Lastly, the IST dataset includes new variables that should theoretically 103

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influence sanctions termination – most notably, sanctions design features – as well as a dichotomous variable capturing whether sanctions were removed gradually or not. We define sanctions as coercive economic measures imposed by a sender against a targeted government, entity or individual for a variety of goals such as supporting democracy and human rights, addressing an armed conflict, stopping the proliferation and use of nuclear weapons or weapons of mass destruction, countering terrorism and drug trafficking, or simply responding to other breaches of international law (Morgan, Bapat and Krustev, 2009; Weber and Schneider, 2020). A sanctions case starts when the sender imposes its first measures on the target in pursuit of a specific political demand and ends when the former removes all previously imposed measures over the same issue (Hufbauer et al., 2007). There are two pathways to sanctions termination. First, sanctions can end by target acquiescence when the target (partially or fully) ceases to engage in the objectionable behaviour over which sanctions were initially imposed and agree to the sender’s demands. Second, sanctions can end by sender capitulation when the sender terminates such measures despite the target’s failure to acquiesce to their demands (Attia and Grauvogel, 2022). Sanctions senders pursue different foreign policy goals with these restrictive measures – which may also influence their willingness to lift them, as senders were shown to rather maintain sanctions that were imposed over highly salient issues (Ang and Peksen, 2007). The top goal for the US is the promotion of human rights and punishing foreign governments for atrocities committed against civilians (see Figure 8.1). In contrast, the EU and ROs impose sanctions for the promotion of democracy – for instance, in the attempt to promote free and fair elections – more than they do for any other goal, while most UN sanctions are imposed in response to armed conflict. These goals are not mutually exclusive, as more than one-third of the sanction cases observed were

Figure 8.1  Senders’ Sanctions Agenda. Notes: Figure depicts the goals for all imposed sanctions cases. The abbreviations stand for the following issues: AC, armed conflict; CB, conventional breach; CT, counterterrorism; DM, democracy; HR, human rights; DT, drug trafficking; NP, proliferation of nuclear weapons; WM, proliferation of weapons of mass destruction. Source: Own elaboration.

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imposed against the same target to address multiple issues simultaneously. Sanctions over the proliferation of nuclear weapons, weapons of mass destruction or counterterrorism are imposed by the US, and to a lesser extent by the EU and the UN. However, they have never been pursued by ROs. This indicates that sanctions senders’ agendas differ, with them putting varying degrees of emphasis on addressing particular issues.

Differences in the Termination and Duration of Sanctions Looking at the share of terminated sanctions, it becomes clear that while some senders are eager to grant sanctions relief, others are less inclined to do so. Some 73 per cent of the sanctions imposed by the EU, the UN, the US and ROs in the post-Cold War era had been terminated by the end of 2018. ROs account for the highest number of terminated sanctions (95 per cent), whereas the US has the highest number of ongoing cases (31 per cent) – which is also a reflection of US overreliance on sanctions as a foreign policy tool (Eckert, 2008). For instance, US sanctions imposed on Cuba have been in place for more than 60 years, on Iran for more than 40 years. In contrast, sanctions imposed by ROs – such as the ones implemented by ECOWAS against Togo in 2005 or the African Union’s punitive measures against Mali in 2012 – were soon lifted after coup leaders stepped down and/or transitional governments were formed. In that sense, just like with the swiftness of imposing the measures – done to punish unconstitutional changes of government – the termination process for the very same measures is also clear and straightforward here. Senders’ varying inclination to end sanctions indicates that these measures’ duration is also likely to differ. A few studies have looked into the varying duration of sanctions and found that less centralized political systems as well as leadership turnovers in sender and target states lead to shorter sanctions spells (Bolks and Al-Sowayel, 2000; Dorussen and Mo, 2001; McGillivray and Stam, 2004). Yet, these works have not accounted for differences between senders. Comparing terminated sanctions cases, we find that the average duration of terminated sanctions is approximately three and a half years (43 months) – but the variation herein is substantial. The shortest sanctions case lasted only three days, when the EU (and the US) suspended aid to Russia in response to the failed coup d’état of August 1991. In contrast, the US terminated sanctions against Yemen only after more than 21 years (254 months) had passed. The measures were first imposed in May 1991, in response to Yemen’s support for Iraq at the UN following the latter’s invasion of Kuwait. We find that sanctions senders lift 31 per cent of their measures within the first year already. A large number of RO sanctions are short-lived (see Figure 8.2). In contrast, the UN tends to maintain the longest sanctions (lasting an average of 62 months), followed by the EU (46 months), the US (44 months) and ROs (23 months), respectively. UN sanctions last longest as they are often imposed to address severe issues, such as ending armed conflict – a goal far more difficult to attain. Moreover, UN sanctions-termination decisions need to pass a UN Security Council vote. Similarly, EU members often have varying interests; unanimous agreement can be harder to obtain here in comparison to sanctions-termination decisions by unilateral actors (Portela, 2012). The short duration of RO sanctions against their member states can be explained by the nature of their goals: Many of their coup- and election-related sanctions, such as the AU’s against Côte d’Ivoire in 2010, tend to be short-lived (see also, Hellquist, 2014). In these cases, a road map for the restoration, for example, through elections, of the constitutional order – something that is usually agreed upon quickly – suffices for these sanctions to be removed (Witt, 2019). Regional actors are thus not only quicker when it comes to the imposition (Charron, 2013) but also to the removal of such restrictive measures. Our data shows that only the sanctions ECOWAS imposed on Sierra Leone in 1997 remained in place longer than those of their Western counterparts and the UN. 105

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Figure 8.2  Sanctions Duration by Sender. Note: Figure displays the duration of terminated sanctions cases and excludes ongoing ones. Source: Own elaboration.

The Varying Design of Sanctions Just like with other foreign policy tools, sanctions can be designed in different ways. How sanctions are initially designed carries implications for their eventual termination. For example, Attia and Grauvogel (2022) show that the inclusion of clear termination requirements significantly decreases the average duration of sanctions. The inclusion of clear requirements sends a strong signal to the target, informing them of the action(s) needed for sanctions relief to ensue. It also signals that the sender is credibly committed to providing such relief and that sanctions do not necessarily unequivocally define their bilateral relations. Like with the duration of sanctions, their design varies by sender, too. We direct our attention to the following four design features, as they likely affect how quickly sanctions end: First, we check for the inclusion of sunset clauses that set an expiry date to the imposed measures. Second, we examine whether review provisions that obligate the sender to regularly monitor and evaluate the imposed measures during an ongoing case are included or not. Third, we review the language in sanctions-imposition documents to check whether they stipulate to the target clear termination requirements. Finally, we compare institutional investments by senders, that is, whether they set up task forces and committees dedicated to the evaluation of the ongoing sanctions case. Such investments in the sanctions’ infrastructure can lead to a lock-in effect – namely, the longer duration of sanctions. According to Bonetti’s sunk-cost argument (Bonetti, 1994), senders are less willing to lift measures prior to achieving policy change if they have substantially invested in the institutional set-up of the sanctions. In respect to these issues, we compare all imposed sanctions cases and find that the UN is the most ‘responsible’ sender. Some 90 per cent of UN sanctions clearly stipulate termination requirements2 to the target, 77 per cent of them (also) include review provisions while 39 per cent include expiry dates. Moreover, the UN (94 per cent) and ROs (32 per cent) show significantly higher institutional investments in sanctions regimes compared to the US and the EU, for who setting up specific task forces or committees is contrariwise a rarity. The UN and ROs invest in such oversight bodies to keep track of the imposed measures’ progress and to assess simultaneously both their continued political usefulness and adverse consequences. Most UN member states do not have either the capacity or expertise to make informed sanctions-related designations, a task that is delegated to experts sitting on a related UN task force or committee. In contrast to the UN, the US 106

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scores last in the inclusion of clear termination requirements, having imposed the highest number of ambiguous sanctions cases where concrete policy demands are lacking and the behaviour that the target must change is not clearly spelled out in the imposition documents (30 per cent). Moreover, the US only included expiry dates in 9 per cent of cases.

Examining Processes of Sanctions Termination The process towards lifting sanctions looks different for each sender. While some favour a gradual approach, others tend to lift all such measures at once. We find that the UN and the US are more prone to gradually lifting sanctions as targets move towards compliance. Some 50 per cent of the terminated UN sanctions and 49 per cent of the terminated US ones were lifted step by step. This was evident in the case of UN sanctions against Iran that were gradually lifted as the Joint Comprehensive Plan of Action made progress on reining in the country’s nuclear programme. Similarly, in the case of US sanctions against Zimbabwe, designated individuals and entities were gradually removed from the sanctions list over time. In contrast, EU (31 per cent) and RO (9 per cent) sanctions cases witnessed the reduced occurrence of gradual termination over the years. For the latter, this was driven by the fact that ROs usually apply very limited restrictions against erring member states – making the gradual removal of different measures less likely. Senders’ willingness to lift sanctions despite them not having achieved their original goals fundamentally varies. In that regard, the US has the highest share of sanctions terminated despite not achieving the desired outcome (see Figure 8.3). Some 26 per cent of the terminated US sanctions

Figure 8.3  Sanctions Outcome by Sender. Note: Figure depicts the outcomes of terminated sanctions cases and excludes ongoing ones. Source: Own elaboration.

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are lifted by sender capitulation. Such termination decisions are usually taken by the president. (Decisions to lift sanctions can be subject to domestic debate. For instance, the Countering America’s Adversaries Through Sanctions Act [CAATSA] was passed by Congress in 2017 to constrain the president’s ability to lift specific sanctions against Iran, North Korea and Russia.) One example is when President Bill Clinton lifted his executive order imposing sanctions on China only eight months after its initial imposition. In 1994, he admitted that the sanctions had simply failed their purpose and so proceeded to lift them (Hatipoglu, 2014). Similarly, President Ronald Reagan announced that the US grain embargo against the Soviet Union was ‘silly’ and swiftly repealed it upon assuming office in 1981 (Holt, 1981). In contrast, 5 EU, 1 RO and no UN terminated sanctions cases ended by sender capitulation. Sanctions terminated by those senders managed to achieve at least partial target acquiescence prior to sanctions relief. As discussed, target acquiescence and resistance represent two potential pathways to sanctions termination. To understand the target’s response to sanctions, it is crucial to look at its economic and political characteristics. The target’s willingness to acquiesce or its ability to resist the sender’s demands depends on the severity of the economic and political pressure ensuing, as well as on the target’s susceptibility to this external pressure. It is well established in the literature by now that economically strong targets have more leeway and resources to resist sanctions (Hufbauer et al., 2007; Attia, Grauvogel and von Soest, 2020), whereas targets with a weak economy tend to succumb to sanctioners’ demands. While this economic-cost logic is intuitive, we also know that targets facing comprehensive sanctions – meaning ones that inflict severe economic costs – can resist these sanctions regardless. Under certain conditions – including strong regime claims to legitimacy (Grauvogel and von Soest, 2014) – sanctions create political opportunities in the targeted country that authoritarian leaders can use as a convenient scapegoat for societal ills and as a way to rally the public around the government (Galtung, 1967; Mazaheri, 2010). Furthermore, sanctions might strengthen incumbents’ position vis-àvis distributing scarce resources to certain segments of the population and to elites (Niblock, 2001). We also know that countries that receive third-state support are able to circumvent the cost of sanctions and resist sanctioners’ demands (Early, 2015). Soviet and Chinese trade and economic assistance to Cuba serves as an illustrative example here, as it enabled the Fidel Castro regime to resist US sanctions – especially in the early years. Similarly, the target’s political vulnerability also shapes their either acquiescence to or resistance of sanctions. Democracies are more vulnerable to sanctions as they are accountable to the broader public (Allen, 2005). Thus, they are more prone to being destabilized by such coercive measures than non-democracies are (Marinov, 2005; Allen, 2008). More generally, political volatility makes target compliance more likely (Attia et al., 2020). A particularly salient aspect here is a change of leadership in the target. Research has shown that new leaders acquiesce to sanctions more readily (McGillivray and Stam, 2004) as they are not bound by the previous government’s public statements and policy commitments. A new government has greater leeway to change the objectionable behaviour without signalling weakness domestically (Dorussen and Mo, 2001; Attia et al., 2020).

Conclusion With the increasing use of sanctions as a key foreign policy tool since the end of the Cold War, their termination has also become a common feature of international politics. This chapter used new data from the IST dataset to provide insight into the hitherto largely overlooked topic of sanctions termination and its implications. Our particular focus was on: (a) commonalities and 108

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differences between the main global sanctions senders, shedding light on when and how the EU, the UN, the US and ROs end these coercive measures; and (b) the behaviour of targeted governments, particularly the question of under what conditions they either give in to or resist senders’ demands, respectively. Most notably, we first differentiated sanctions termination following target compliance from termination as a result of sender capitulation. Sanctions senders regularly terminate unsuccessful measures in cases where targeted governments did not fulfil the political demands tied to economic and diplomatic pressure. In this area, the differences between the sanctioning entities are substantial: Not only does the US impose sanctions most often, it also terminates one-quarter of cases despite the target not fulfilling its political demands. For the EU, the UN and ROs, the number of sanctions cases terminated despite a lack of success is significantly lower. Furthermore, processes of sanctions termination also differ: The UN and the US are most prone to ending sanctions gradually, whereas ROs are more likely to lift all such measures at once. Next, we also highlighted differences in the design of sanctions across senders: The UN stipulates the clearest termination requirements, specifying what the target needs to do to have the sanctions lifted – which tends to reduce the latter’s duration. The UN also has the highest share of sanctions cases that include review provisions and expiry dates. Lastly, sanctioning entities’ specificities and goals shape the design, duration and termination process of sanctions. For example, RO sanctions against erring member states – frequently imposed to fight democratic deficiencies and unconstitutional changes of government – entail comparatively short-lived measures. In a second step, we outlined how target characteristics also strongly influence the process of sanctions termination. Building upon prior work on sanctions’ ‘microfoundations’ (Kirshner, 1997), we discussed how the target’s economic and political vulnerability determine whether sanctions end through acquiescence or not. Authoritarian and economically strong targets, we noted, are better able to withstand sanctions pressure and resist senders’ demands. This economic and political strength of the (former) target should also fundamentally influence its political stability after sanctions termination. The political consequences of sanctions termination in previously targeted countries – and, more specifically, the likelihood that the government will be severely challenged by domestic opposition in the aftermath of sanctions – constitute an important avenue for further research. We assume that target responses in conjunction with sanctions’ material costs affect the political repercussions of sanctions’ termination: Regimes that succumb to costly sanctions should quickly gain from resumed trade and financial flows after the lifting of restrictions (Kohl, 2021). Seen from this perspective, conceding to restrictions bringing high economic costs could actually enhance political stability, as trade and financial gains may offset the target government’s signalling of weakness in complying with external demands. More systematic research on the consequences of sanctions termination would help to provide further information on both the economic impact hereof and on the domestic political costs of target compliance. Further assessing the processes and consequences of sanctions termination represents a promising endeavour for future research on the political economy of sanctions.

Notes 1 In this chapter, we use the terms ‘sanctions termination’, ‘sanctions relief’ and ‘lifting of sanctions’ interchangeably. 2 Sanctions cases are classified as clear if the sender refers to a well-defined offending target behaviour that must change for sanctions to be lifted. In contrast, a case is coded as ambiguous if the sender refers to broad target policy areas that require revision for sanctions to be lifted.

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9 VIOLENCE AT A DISTANCE Correcting International Law’s Short-Sighted Vision of Economic Coercion Alexandra Hofer

Introduction Woodrow Wilson’s description of sanctions as “something more tremendous than war” is often quoted (Mulder 2022: 1–2; Gordon 1999: 123). He is frequently cited for stating: 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 of the nation boycotted, but it brings a pressure upon that nation which, in my judgment, no modern nation could resist. (Mulder 2022: 1–2; Gordon 1999: 123) Fast forward one hundred years later and sanctions are firmly established in the literature as an alternative to war (Baldwin 2020; Wallensteen and Staibano 2005; Lopez and Cortright 1995). Though sanctions may be an ‘alternative to war’, this does not mean they are harmless or less violent. Whether or not you accept this may depend on how you define violence. Violence is the infliction of pain or harm with the intention to injure, damage or destroy. It is usually conceived of as physical or interpersonal, yet it has various dimensions. The Violence Prevention Alliance defines violence as: “the intentional use of physical force or power, threatened or actual, against oneself, another person, or against a group or community, that either results in or has a high likelihood of resulting in injury, death, psychological harm, maldevelopment, or deprivation” (WHO, Definition and Typology of Violence). They include ‘economic violence’ as a form of ‘collective violence’, which is “committed by larger groups of individuals and can be subdivided into social, political and economic violence” (ibid.). Economic violence is the deprivation of economic resources, denying access to what is needed to meet basic necessities. When such violence is collectively embedded in a society and maintained by social structures and power relations, then it is known as ‘structural violence’. Economic or sectoral sanctions (which are directed against a sector of a state’s economy) can be understood as structural economic violence between states because they are maintained by hierarchical inter-state relations and lead to widespread deprivation among the targeted state’s civilian population, leading to a decrease in standards of living and socio-economic well-being. International law restricts violence to its physical, material, and interpersonal expression; violence is the use of force or the infliction of physical harm 112

DOI: 10.4324/9781003327448-12

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upon individuals. Within this conceptualization, sanctions fall beyond the scope of the prohibition to use force, enshrined under Article 2(4) UN Charter, as well as of the customary principle of non-intervention. This principle, one of the core components of public international law, contains two constitutive elements: (i) coercive intervention in (ii) the state’s domaine réservé. For an act to be considered a breach of the principle of non-intervention it must constitute an act of forcible coercion in “matters in which each State is permitted, by the principle of State sovereignty, to decide freely” (ICJ Reports 1986: para. 108). This interpretation essentially stems from the International Court of Justice’s (ICJ) 1986 merits judgment on Military and Paramilitary Activities in and against Nicaragua between Nicaragua and the USA, wherein the Court set the tone for how international law approaches coercion. If the Court found that coercion would be obvious in the case of an intervention involving the use force, it did not apply the same logic to an economic embargo, where it found that such policies do not amount to coercion (ICJ Reports 1986: paras 205 and 245). This reasoning – which has largely influenced how coercion is understood in international law – suggests that economic measures are not coercive enough to amount to a breach of the principle of non-intervention. Coercion is limited to forcible acts. To put it differently: inter-state violence under international law is understood as physical. As argued below, such a narrow definition “obscures the lethality of economic violence and its life-denying composition akin to social death” (Ireland 2022: 42). The consequence is that non-forcible acts based on economic or political power are largely unregulated, giving sanction senders free rein. This chapter first reviews international law’s lacking regulation of sanctions, and then argues these measures are a form of economic and structural violence. While sanctions are unregulated in international law, if we understand them as a form of inter-state violence, albeit at a distance, then the absence of a regulatory framework can be understood as a gap that needs to be filled, or perhaps the very utility of sanctions needs to be called into question. The overall aim of this contribution is to broaden our understanding of violence in international law, for if we aspire “to limit the use of violence in the world, then it is important to not ignore any of the other aspects” (Manzi 2014).

International Law’s Sanctions Gap International law, which is prohibitive in nature (Schmitt 2013: 51), does not regulate the adoption of sanctions. As one article notes: “It is generally accepted, no doubt correctly, that a rule of customary international law against economic sanctions does not exist” (Akande et al. 2021: 501). With the exception of countermeasures, there is no limit to the amount of pain a sanctioner may impose on the target (Hofer 2020). Unless a sanction breaches an international obligation the sender owes a target, then they would be lawful (in which case they are ‘acts of retorsion’). Even when the sanction is illegal, this is generally because it violates an obligation the sender imposes upon the target, not because of the damage that is inflicted. However, there is room to argue that sanctions that impose excessive harm, or have a devastating impact on a country’s population, are unlawful. Following his official visit to Venezuela, UN High Commissioner for Human Rights Volker Türk noted: “While the roots of Venezuela’s economic crisis predate the imposition of economic sanctions (…) it is clear that the sectorial sanctions imposed since August 2017 have exacerbated the economic crisis and hindered human rights” (OHCHR 2023). Literature in international law has argued that sanctions may not deprive a population of its own means of subsistence or threaten starvation (Joyner 2017; Kondoch 2001). There are indications that the International Court of 113

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Justice accepts that sanctioners should provide for humanitarian exceptions so as to not adversely affect the civilian population (ICJ Reports 2018). This could mean that the sanctions against Venezuela would be unlawful. Nonetheless, there can be a number of legal obstacles to overcome. One main issue is generally whether the sanctions are the cause of the deteriorating living standards, particularly when sanctions have been adopted in the context of an armed conflict or an economic, political crisis (Prezas 2021). There is also the matter of whether the sender has extraterritorial human rights obligations in the targeted country (ibid.). Furthermore, according to Akande, Akhavan and Bjorge, the sanctions are not unlawful because their goal is not to starve the population nor to destroy the country but to respond to human rights violations or achieve regime change (Akande et al. 2021: 508). They reach this conclusion because they quote Brownlie (1979), who finds there is a “duty [in international law] not to use economic coercion for the purpose of destroying or dismembering a State” (emphasis added). It is rather difficult to follow this reasoning. For one thing, the purpose of sanctions is often multifaceted and difficult to identify (Jones and Portela 2022); sanctioners are not always consistent and transparent. One could hardly expect a sanctioner to openly state it is pursuing destructive purposes, but that does not mean the sanctions would not be destructive. Sanctions practitioner Richard Nephew has tellingly written: “sanctions are ultimately intended to cause pain and change policy” (Nephew 2019: 12). He adds: denying some of that pain may make for better public relations for a sanctions program, but it also undermines the contention that sanctions work and may even interfere with their effectiveness on a practical level if the sanctioner adjusts the regime to address a humanitarian problem and, in doing so, reduces the very pain the sanctions are intended to create. (ibid.) Thus, sanctions can have harmful effects “at the street level” (ibid.), even if that is not the sanctioner’s stated objective and sometimes that is what they are intended for. Although sanction senders are slow to react to the harmful effects of their policies, there are indications that they acknowledge sanctions should not be a “blunt instrument” and not “have negative consequences for civilians” (UN News 2022a) – this would indeed make for bad press. They would thus not openly admit that they want to cause ‘popular’ pain for economic gain. It is thus easy for the sanctioner to avoid any responsibility by carefully framing what their objectives are. When it comes to Venezuela, John Bolton’s, former US national security advisor, memoire make it clear that the objective of the sanctions was to provoke regime change (Bolton 2020; CNN 2022). The rather crude logic was that harsh sanctions were necessary to make the situation in Venezuela so intolerable that the people would rise up against Maduro. Though the goal is regime change, this would be achieved through the imposition of mass deprivation. In any event, if we do take the sanctioner’s word for the stated objective, then the argument can be made that sanctions must be proportionate to the goal pursued. To quote Farrall (2007: 42): the coercive consequences of the application of the sanctions, which may be felt by civilian populations, third states or individuals, remain in proportion to the harm caused by the target against which sanctions are imposed and are consistent with the objectives for which sanctions are employed. Though proportionality could impose limits on the adoption of sanctions, the challenge is that the principle is indeterminate and difficult to assess (Hofer 2020). It could nonetheless be said that sanctions that are socially and economically crippling would be disproportionate (ILC 2001: 114

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132, paras 6–7). Thus, sanctions that (purportedly) aim to respond to human rights abuses (such as those against Venezuela) but that cause serious harm to the general population’s well-being, would be disproportionate. Political science literature invokes the ‘just war theory’ to argue that sanctions should respect the basic principles of international humanitarian law: proportionality, necessity and distinction (Early and Schulzke 2019; Gordon 1999). From a legal perspective, this is not always convincing because international humanitarian law is primarily applicable in the context of an armed conflict. It used to be that sanctions were a form of warfare. They were commonly called ‘economic warfare’, implying “an intense, coercive disturbance of the economy of an adversary state, aimed at diminishing its power” (Førland 1993: 151) and which was traditionally understood as an act of war. Today, however, the term is devoid of meaning, at least as far as international law is concerned (Lowe and Tzanakopoulos 2013: para. 1) as a line has been drawn between economic measures and measures involving the use of force (Chachko and Benton Heath 2022: 135; Mulder 2022). That said it is not unusual for states to condemn economic coercion as economic warfare. Iranian President Rouhani reportedly compared the aftermath of the ‘unprecedented’ US sanctions against his country to the circumstances of the Iraq–Iran war in the 1980s and has referred to the measures as economic warfare (The Guardian 2019; Middle East Monitor 2021). Former Russian president Dimitri Medvedev has claimed that the 2022 sanctions against Russia could justify action in self-defence, thereby suggesting that the measures constitute an armed attack (Yahoo Finance 2022). However, under current international law, economic sanctions fall beyond the scope of Article 2(4) UN Charter, which prohibits the use of force in international relations. The provision reads: All Members [of the United Nations] shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any State, or in any other manner inconsistent with the Purposes of the United Nations. In the Nicaragua judgment, the ICJ proposed to focus on the operation’s ‘scale’ and ‘effects’ (ICJ Reports 1986: para. 195). Drawing from this, Rule 11 of the Tallinn Manual on the International Law Applicable to Cyber Warfare, which was written by a group of experts, proposes that: “A cyber operation constitutes a use of force when its scale and effects are comparable to noncyber operations rising to the level of a use of force” (Schmitt 2013: 45). The experts provide a non-exhaustive list of criteria that can inform whether a cyber operation constitutes a use of force. Amongst these, “[s]everity is self-evidently the most significant factor in the analysis” (ibid.: 48). The Tallinn Manual also reads that: consequences involving physical harm to individuals or property will in and of themselves qualify the act as a use of force. (…) A cyber operation, like any operation, resulting in damage, destruction, injury, or death is highly likely to be considered a use of force. (ibid.: 48) The proposed criteria include, inter alia, the operation’s immediacy, directness (meaning causation between the cyber operation and the alleged destruction), and measurability of effects. There is no reason why these criteria, which are intended to apply to cyberattacks, could not be applied to sanctions. The idea is then to compare the aftermath of an operation involving the use of force with the consequences of sanctions. If the former is comparable to the latter, then a reasonable argument could be made that sanctions are a form of force, and hence violence. And indeed, 115

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the Tallinn Manual seems to acknowledge that crippling a state’s economy may constitute a use of force, even though economic coercion is (presumably) permissible (ibid.: 52). Although sanctions may pursue coercive objectives (in the sense that policy makers adopting them may seek to change behaviour), from the perspective of international law, such forms of coercion are not unlawful. The main reason for this is the ICJ’s reasoning in Nicaragua vs. USA, which has been mentioned above. In that judgment, the Court found that: The element of coercion [in the principle of non-intervention], which defines, and indeed forms the very essence of, prohibited intervention, is particularly obvious in the case of an intervention which uses force, either in the direct form of military action, or in the indirect form of support for subversive or terrorist armed activities within another State. (ICJ Reports 1986: para 205) This essentially means that coercion is restricted to forcible violence. The bench did not articulate why it reached this conclusion, it simply stated: “At this point, the Court has merely to say that it is unable to regard such action on the economic plane as is here complained of as a breach of the customary-law principle of non-intervention” (ibid.: para. 245). The present author cannot help but suspect that the ICJ may have issued a ‘Solomonic judgment’, in the sense that it sought to split the issues evenly between the parties (Grossman 2018). As the US was found responsible for numerous breaches against Nicaragua, the bench may have considered ‘splitting the baby in half’ and giving the US a win on the question of economic coercion. That said, the sanctions were found to be in breach of the US–Nicaragua Treaty of Amity. As Grossman warns, the danger with Solomonic judgments is that they “may result in unsound legal reasoning, and they do not assist those normatively addressed to better comply with the law” (Grossman 2018: 45). The Court’s finding that a full trade embargo does not constitute a form of coercion has greatly restricted how international law approaches sanctions normatively; states are essentially considered to have free reign. Today, it is commonly stated that sanctions do not fall within the scope of the principle of non-intervention (Akande et al. 2021: 499–500; Hofer 2017). That said Article 19 of the Charter of the Organization of American States prohibits the “use of coercive measures of an economic or political character in order to force the sovereign will of another State and obtain from it advantages of any kind”. However, the prohibition has not been exported to the rest of world. As I argue elsewhere, though a large portion of states frequently condemn economic coercion it is difficult to argue (from a positivist approach to the law), that this practice is forbidden (Hofer 2017). As argued in the next section, if we understand that sanctions can amount to violence, albeit not physical or interpersonal but economic and structural, then this is ample reason to consider that they could amount to coercion, even a use of force.

Sanctions as Violence Economic violence entails causing harm to an individual’s, or a group’s, economic well-being. It is commonly identified as a form of violence against women, often where a woman is denied access to economic resources and independence by her partner because the latter seeks to exert control. In such circumstances, economic violence is inter-personal and is considered deliberate. Yet, such harm can also be understood as systemic and as a by-product of power relations. Ireland (2022: 43) explains economic violence as a “socially constituted power arrangement as well as an embodied material violence that has effects that result in injury, death, trauma, psychological 116

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harm, maldevelopment, deprivation, and […] criminalization”. It “inflict[s] economic and material dispossession, displacement, deprivation, terror, suffering, pain, and often death on those who are largely powerless to have recourse against it” (ibid.: 42). Importantly, per her understanding, economic violence can result from state policies even if this is not deliberate. In this manner, it is akin to structural violence, emerges from social relations and arrangements that manage how “individuals and groups interact within a social system” (Ryker-Bauer and Farmer 2016: 47). If policies lead to “rampant economic inequality, social exclusion, and persistent poverty” then they are structurally violent (Sánchez 2006: 179). This is because they “[result] in avoidable deaths, illness, and injury; and they reproduce violence by marginalizing people and communities, constraining their capabilities and agency, assaulting their dignity, and sustaining inequalities” (emphasis added, Ryker-Bauer and Farmer 2016: 47). The fact that these outcomes are avoidable is central to structural violence, which was first introduced by Johan Galtung, who is well known in the sanctions literature for the “naïve sanctions theory” (Galtung 1967). He explains the avoidance of violence as a reduction of potential; for example, an individual who is barred from receiving available treatment or whose needs are not met after a natural calamity. It can stem from an unequal distribution of resources: “if people are starving when this is objectively avoidable, then violence is committed” (Galtung 1969: 171). Furthermore, Galtung defines violence as influence, and as an example cites an individual being punished for wrong-doing because it prevents “human beings […] from realizing their potentialities” (ibid.: 170). The normalization of unequal power relations leads to structural violence (Ryker-Bauer and Farmer 2016: 55); the basic premise behind such violence is inequality, mainly in how power is distributed (Galtung 1969: 175). Both economic and structural violence focus on poverty, how it originates, how it is sustained, and the harms it causes. Both are also linked to social and economic human rights. Sanctions often entail the interruption of transactions between states, be that trade of a specific good (such as oil, gas, fertilizers, etc.) or banning of financial exchanges (if the assets of a Central Bank are frozen, or payments are prohibited). It is logical that if a state’s ability to earn foreign currency is actively reduced or that its main source of income is obstructed that this would have repercussions on imports, including on necessities (Nephew 2019: 12). Thus, if sanctions lead to food insecurity or deprive a population from receiving essential goods, such as medical treatment, thereby decreasing overall health and well-being and eventually leading to death or illness, then these tools can be understood as a form of structural violence. Such violence can also be economic when it is directed against a state’s economy and reduces it economic livelihood and development (Gordon 2016a). Moreover, they can also be understood as a form of structural violence within state relations. According to Galtung, stratification is “indispensable for the understanding of structural violence” (Galtung 1969: 175). As I have argued (Hofer 2022), due to their punitive nature, sanctions are interactional tools that create a hierarchy between the sanctioner and the sanctioned (this is not to say that the latter accepts this position). They are a manifestation of the de facto inequality between states. Sanctioners can impose costs thanks to their advantageous economic and financial position. For instance, the US is in an especially strategic position because it can ‘weaponize’ the US dollar and pressure compliance with its sanctions, even in the case of actors that are not under its jurisdiction, such measures are commonly known as secondary or extraterritorial sanctions. During the inter-war period, sanctions were supposed to serve a deterrent function and prevent war (Mulder 2022). The idea was that nations would be so fearful of the ‘economic weapon’ that they would not engage in warfare. In the 1960s, sanctions were intended to work by imposing hardship on a country’s society, leading to popular unrest which would eventually convince those 117

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in power to make political concessions, and potentially even cause regime change. This is the socalled ‘naïve theory’, which has been largely discredited (Galtung 1967). Today, despite the countless publications and discussions on sanctions’ purposes and their utility, the rationale of coercive sanctions, which aim to change behaviour, remains the same: the imposition of costs, through economic and financial restrictions, will lead to concessions and compliance. The underlying logic is that economic pain brings political gain. As sanctions are supposed to be targeted, the challenge remains: how to impose pain efficiently, in a manner that will achieve policy objectives while avoiding disproportionate harm on third parties. Indeed, following the awareness of how destructive sanctions can be, policy-makers made a conscious decision that economic sanctions should not harm the population of a country but only target those who are directly responsible for the policy the sanctioner wishes to influence. Sanctions should either target individuals or groups directly through travel bans or asset freezes, or they should be directed against a specific economic or financial sector. They can also prohibit trade with a certain type of good (such as energy, technology, etc.). The transition to targeted sanctions has done little to alleviate the harm that arises from these coercive measures. The sanctions regimes that have been mentioned throughout this chapter are ‘targeted’ in the sense that they are directed against specific sectors of the states’ economy. However, they are frequently designed to impose the maximum amount of pain on the state and their impact is bringing us back to the period of comprehensive sanctions. The previous section pointed to the dire consequences of the US sanctions against Venezuela. Joy Gordon commented that the US and EU sanctions against Russia, adopted in response to its aggression against Ukraine, demonstrate the sanctioners “willingness to abandon the expectation that [they] will not impose the kind of broad, devastating damage to the civilian population that we saw in the 1990s” as “their scope is similarly vast and indiscriminate” (Gordon 2022). The sanctions against Syria are equally illustrative of the ‘re-comprehensivization’ of sanctions (Moret 2022: 179). Since 2011, Syria has been sanctioned by the United Nations, the EU, the US, the League of Arab States, Canada, Australia, Japan, Norway, Switzerland, and Türkiye, in response to President Assad’s repression of the Syrian population, following the popular unrest that broke out in 2011 and which steadily escalated to a civil war. Some of the most severe restrictions imposed by the EU and the US are on energy and oil sectors as well as on the financial and banking sectors. In 2019, the US upped the ante when it adopted the ‘Caesar Syria Civilian Protection Act’, which came into effect in June 2020. It expanded the US’ sanctions reach, giving it the power to sanction third parties that engage in economic activity with Syria. These sanctions were described as “crippling” by the Trump administration and were meant to “send a clear signal that no foreign business should enter into business with or otherwise enrich such a regime” (US Department of State 2020). All the measures imposed are intended to support the people suffering from the brutality of the Syrian regime. There are widescale reports that the Syrian government is responsible for serious human rights and international humanitarian law violations, including torture (Human Rights Council 2021; Human Rights Watch 2021). However, there are also reports that the unilateral sanctions have led to, or at the very least contributed to, widespread deprivation. “Structural violence is silent, Galtung (1969: 173) writes, it does not show – it is essentially static, it is the tranquil waters. […] structural violence may be seen as about as natural as the air around us”. Data and reports on sanctions’ impacts are important; they are required to make the invisible visible. It is extremely difficult to distinguish between the impact of the sanctions and that of the war, yet in 2012 it was already reported that the sanctions were exacerbating an already dire socio-economic situation (Moret 2014). A report published by the Danish Institute for International Studies in 2012 found that the restrictions were having impacts beyond the Syrian state 118

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and government, notably by contributing to inflation, decreasing employment, causing a decline in wages, the fall in purchasing power, the rise of the black market, deteriorating infrastructure and social services, etc. (Lyme 2012). The sanctions on the banking sector block transactions to and from Syria and make it very difficult for the imports of certain goods to reach the country, which is further strained by the restrictions on shipping and exportations to Syria. This increases transportation costs, and thus overall prices. Foreign businesses are reluctant to engage with Syria as they fear falling foul of the sanctions and receiving an extremely high fine, otherwise known as ‘de-risking’, overcompliance, or sanctions ‘chilling effect’ (Gordon 2016b; Moret 2022). Sanctions thus have a ripple effect. In 2014, Erica Moret noted how the EU’s sanctions against Syria “[represent] de facto comprehensive measures widely associated with negative humanitarian impacts” (Moret 2014: 120). These issues have persisted. The UN Special Rapporteur on Unilateral Coercive Measures and their Impact on Human Rights, Alena Douhan, reported that the sanctions are obstructing Syria’s economic recovery, which is further complicated by the aftermath of COVID-19 and economic crisis in Lebanon (UN News 2022b). Per her report, 90% of the Syrian people live below the poverty line and the Syrian government does not have access to the resources it needs to rebuild and development infrastructure that is critical to the population’s basic needs (to provide, inter alia, water, electricity, heat, transportation, housing, and education). Inflation has increased the costs of foodstuff and the country has difficulty importing the goods it needs for agriculture (such as fertilizers, seeds, pesticides, but also technology), adversely affecting Syrian’s diet and health. Writing for the World Peace Foundation, Mohammad Kanfash (2021; 2022) draws attention to food insecurity in Syria, which is aftermath of the conflict but further sustained by the sanctions’ accumulative effect even if they do not directly target the food or agricultural sectors. Sanctions have also had negative consequences on remittances, which has harmful impacts on the more vulnerable sections of the population and their ability to spend on essentials (Moret 2021). It is also reported that sanction complicate the delivery of humanitarian aid to Syria. The Human Rights Council (2021: 10, para. 42) noted that “in some areas, the impact of unilateral sanctions has further weakened the ability of humanitarian actors to deliver assistance, owing to increased prices and the reduction in the availability of crucial items in local markets and overcompliance”. Sanctions senders, notably the UN Security Council, the EU and the USA, are known to adopt humanitarian exceptions to avoid these negative consequences. However, when various sanctions senders are involved as is the case in Syria, “licencing exemptions and exceptions are frequently insufficient to ensure continued supplies of essential goods to heavily sanctioned countries” (Moret 2022: 180). It follows that, although sanctions may not be the sole cause for the hardships experienced by the Syrian people, far from assisting them, they are making it more difficult for the country to recover and rebuild, maintaining the population in a state of impoverishment. Sanctioners are consequently inflicting economic and structural violence upon Syria.

Reconceptualizing Sanctions in International Law By drawing attention to the violence that so-called ‘targeted’ sectoral sanctions cause not only to the target but also to civilian populations, this chapter has aspired to demonstrate the absurdity of the limited interpretation of violence in international law. It is true that international lawyers can easily have recourse to formalism: we do not invent the rules, states do and as of yet states have not created rules limiting the adoption of sanctions (and I myself have treated sanctions in this manner, in Hofer 2017). As Antonios Tzanakopoulos (2015: 633) somewhat provocatively stated: “Do you want there to be a fundamental right of States to be free from economic coercion? Splendid! Go 119

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out there and make one”. The shift from targeted to comprehensive sanctions demonstrates that change can also come from advocacy and from not turning a blind when harm is caused. Lang (2008: 78) acknowledges that there is a strong resistance to claim that sanctions are designed to cause harm, perhaps because sanctions are justified as an alternative to war. Whereas we are not unaware of the damage that can be caused by sanctions, we seem unable to come to terms with it. Proponents of stringent sanctions either deny their harms or shift the blame to foreign leaders who violate their population’s human rights. And yet, practitioners and policy-makers in countries who adopt sanctions have no qualms stating these tools constitute the infliction of harm. The measures implemented against Russia, and their justification in political discourse, are another compelling example. When the UK adopted sanctions against Russia in 2022, a British government website explained: “Working with allies, we will cripple Russia’s economic development in both the short and long term” (UK Gov 2022). The EU has explained that its sanctions against Russia are intended to “cripple the Kremlin’s ability to finance the war” and “diminish it economic base” (European Commission). Crippling a country’s economy, or diminishing its economic base, will beyond doubt have effects on the street level. When Ned Price, the US State Department spokesperson, was asked whether the US would consider loosening the sanctions against Syria – which were reportedly partly responsible for blocking the delivery of humanitarian aid following the 7.8 earthquake in eastern Turkey and northern Syria in February 2023 (AP News 2023) – he responded: “it would be quite ironic, if not even counterproductive, for us to reach out to a government that has brutalized its people” (Larison 2023). The absurdity of this statement is clear: “This position promises more collective punishment of the Syrian people for the crimes of their government by citing the government’s crimes as the reason not to reduce the unjust punishment” (ibid.). The suffering of people who are brutalized by their government is not alleviated by brutal sanctions.

Conclusion Whereas sanctions were formally a tool of warfare, they are currently construed as a form of justice in the inter-state system – especially amongst Western states and scholars. As the discussion in this chapter has made clear, economic sanctions are hardly a solution to international issues and inflict economic and structural violence. How did we get here and why do we remain committed to this reasoning? Based on my own experiences and exchanges with colleagues, I think that we need sanctions as a form of punishment; the wrongdoer needs to be sanctioned for its criminal behaviour. When one criticizes sanctions, the response tends to be: “But we cannot do nothing, what else do you propose?” Punishment appears to be deeply engrained in our psyche. When faced with injustice, who does not feel anger and the need to restore balance? In international politics, sanctions appear to be the most appropriate, and often the only, policy tool available. They are adopted for the greater good. Framing sanctions in this way masks the realities that occur on the ground and the suffering of those that sanctions allegedly aim to protect, the civilian population. The urge to punish is testimony to our humanity, but we must take care that this impulse does not cause us to become inhumane. When it comes to sanctions, more often than not, what ends up happening is that the tool we use to carry out justice leads to further injustice. Dismissing this, as Ned Price does in the aforementioned statement, is inhumane. Denying the harm that is caused is no doubt a means to cope with cognitive dissonance (Verdebout 2021: 270ff). After all, if sanctions are a means to restore justice and assist suffering populations, then how can we reconcile this with the fact that they cause further injustice and suffering? Acknowledging our own responsibility in the suffering of others would blur the 120

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lines between the sanctioner, who is fighting for international justice, and the sanctioned, who is breaching international norms. This is undoubtedly an uncomfortable and confrontational realization.

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Alexandra Hofer ILC. (2001), Draft Articles on Responsibility of States for Internationally Wrongful Acts With Commentaries in Yearbook of the International Law Commission Vol II, Part II. Ireland, H.M. (2022) ““She’s Been Doing Everything Right”: Mothers of Color and Economic Violence,” Women, Gender, and Families of Color, 10(1), pp. 41–70. Jones, L. and Portela, C. (2022) “Evaluating the Success of International Sanctions: A New Research Agenda,” Revista CIDOB d’Afers Internacionals, 125(125), pp. 39–60. Joyner, D. (2017) “UN Counter-Proliferation Sanctions and International Law” in Herik, L. van den (ed) Research Handbook on Un Sanctions and International Law, Cheltenham, UK: Edward Elgar Publishing, pp. 105–124. Kanfash, M. (2021) “Starvation in Syria: A Political Marketplace Analysis” World Peace Foundation, Occasional Paper n. 31. Kanfash, M. (2022) “Sanctions and Food Insecurity in Syria” World Peace Foundation. https://sites.tufts.edu/ reinventingpeace/2022/07/06/sanctions-and-food-insecurity-in-syria/ Kondoch, B. (2001) “The Limits of Economic Sanctions Under International Law: The Case of Iraq,” Journal of International Peacekeeping, 1(1), pp. 267–294. Lang, A.F. (2008) Punishment, Justice and International Relations: Ethics and Order After the Cold War. London: Routledge. Larison, D. (8 February 2023) “Lifting Sanctions on Syria After Devastating Earthquake,” Responsible Statecraft. https://responsiblestatecraft.org/2023/02/08/lifting-sanctions-on-syria-after-devastating-earthquake/ Lopez, G.A. and Cortright, D. (1995) “The Sanctions Era: An Alternative to Military Intervention,” The Fletcher Forum of World Affairs, 19(2), pp. 65–85. Lowe, V. and Tzanakopoulos, A. (2013) “Economic Warfare” in Wolfrum, R. (ed) Max Planck Encyclopedia of Public International Law, online edition. Lyme, R.F. (2012) “Sanctioning Assad’s Syria: Mapping the Economic, Socioeconomic and Political Repercussions of the International Sanctions Imposed on Syria Sinice March 2011,” DIIS Report. Manzi, Y. (2014) “Performative Violence: Conceptual and Strategic Implications,” E-IR. https://www.e-ir. info/2014/02/28/performative-violence-conceptual-and-strategic-implications/ Middle East Monitor. (2021, 30 June) “Rouhani Accuses US of Waging Economic War on Iran.” https://www. middleeastmonitor.com/20210630-rouhani-accuses-us-of-waging-economic-war-on-iran/ Moret, E. (2014) “Humanitarian Impacts of Economic Sanctions on Iran and Syria,” European Security, 24(1), pp. 120–140. Moret, E. (2021) “A Lifeline Under Threat? Syrian Household Remittances in Light of Sanctions, Financial Sector De-Risking, COVID-19, and Regional Developments,” Economic and Social Commission for Western Asia. https://nafs.unescwa.org/sites/default/files/2023-02/A%20Lifeline-under-Threat-EN-Web. pdf Moret, E. (2022) “More Civilian Pain Than Political Gain (Again?): The Demise of Targeted Sanctions and Associated Humanitarian Impacts” in Charron, A. and Portela, C. (eds) Multilateral Sanctions Revisited: Lessons Learned from Margaret Doxey, Kingston, Ontario: McGill Queen’s University Press, pp. 177–192. Mulder, N. (2022) The Economic Weapon: the Rise of Sanctions as a Tool of Modern War. New Haven: Yale University Press, pp. 1–2. Nephew, R. (2019) The Art of Sanctions: A View from the Field. New York: Columbia University Press. OHCHR. (2023) “UN High Commissioner for Human Rights Volker Türk Concludes Official Mission to Venezuela.” https://www.ohchr.org/en/statements/2023/01/un-high-commissioner-human-rightsvolker-turk-concludes-official-mission Prezas, I. (2021) “From Targeted Sanctions to Affected Populations: Exploring Accountability for the Negative Impact of Comprehensive Unilateral Sanctions on Human Rights” in Beaucillon, C. (ed.) Research Handbook on Unilateral and Extraterritorial Sanctions, Cheltenham, UK: Edward Elgar Publishing, pp. 385–404. Ryker-Bauer, B. and Farmer, P. (2016) “Structural Violence, Poverty, and Social Suffering” in Brady, D. and Burton, L.M. (eds) The Oxford Handbook of the Social Science of Poverty, Oxford: Oxford University Press, pp. 47–75. Sánchez, M. (2006) “Insecurity and Violence as a New Power Relation in Latin America,” The Annals of the American Academy of Political and Social Science, 606, pp. 178–195. Schmitt, M.N. and NATO Cooperative Cyber Defence Centre of Excellence. (2013) Tallinn Manual on the International Law Applicable to Cyber Warfare: Prepared by the International Group of Experts at the

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Violence at a Distance Invitation of the NATO Cooperative Cyber Defence Centre of Excellence. New York: Cambridge University Press. The Guardian. (2019, May 12) “Iran’s Rouhani Warns of Greater Hardship Than War Years of 1980s.” https:// www.theguardian.com/world/2019/may/12/irans-rouhani-warns-of-greater-hardship-than-war-yearsof-1980s Tzanakopoulos, A. (2015) “The Right to Be Free From Economic Coercion,” Cambridge International Law Journal, 4(3), pp. 616–633. UK Gov. (28 February 2022) “UK Statement on Further Economic Sanctions Targeted at the Central Bank of the Russian Federation.” https://www.gov.uk/government/news/uk-statement-on-furthereconomic-sanctions-targeted-at-the-central-bank-of-the-russian-federation UN News. (2022a) “Security Council Sanctions: From Blunt Instrument to Vital Tool.” https://news.un.org/ en/story/2022/02/1111422 UN News. (2022b) “Lift ‘Suffocating’ Unilateral Sanctions Against Syrians, Urges UN Human Rights Expert.” https://news.un.org/en/story/2022/11/1130427 US Department of State. (17 June 2020) Office of the Spokesperson, “Caesar Syria Civilian Protection Act: Fact Sheet.” https://2017-2021.state.gov/caesar-syria-civilian-protection-act/index.html Verdebout, A. (2021) Rewriting Histories of the Use of Force: The Narrative of ‘Indifference’. Cambridge, United Kingdom: Cambridge University Press. Wallensteen, P. and Staibano, C. (2005) International Sanctions: Between Words and Wars in the Global System. London: Frank Cass. WHO, Definition and Typology of Violence, The Violence Prevention Alliance Approach. https://www.who. int/groups/violence-prevention-alliance/approach Yahoo Finance. (2022) “Medvedev Says Western Sanctions Against Russia may be Grounds for War.” https:// finance.yahoo.com/news/medvedev-says-western-sanctions-against-193847204.html

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10 SANCTIONS WHEN SANCTIONS FAIL Decoupling and US Policy towards China Zeno Leoni, Mariam Qureshi, and Sandra Watson Parcels

Introduction The think tank Chatham House asserted that “[s]ome consider the world to have entered a period of deglobalisation, citing recent events such as Brexit, Trumpism, the Ukraine war, problems with supply chains, the global energy crisis and the past decade’s decline in foreign direct investment” (Kornprobst and Wallace 2021). Authors of that report questioned the “deglobalisation” thesis; yet, also thanks to the aforementioned events and phenomena, the idea of decoupling has become more relevant in policy discussions; and it now is a reality in US foreign policy towards China. Although decoupling is a challenging goal, the Biden administration has taken some clear steps towards limiting the influence of the Chinese economy within the West, by promoting upgraded alliances and seeking to strengthen international standards over sensitive technologies. This policy is an evolution of Donald Trump’s approach towards Beijing. On June 18, 2020, Trump fired a tweet invoking a “complete decoupling from China” (Wingrove 2020). In previous months, likewise, thanks to the confrontational approach adopted by Trump, the concept of decoupling – usually unknown outside of economic circles – had already entered the public domain; meanwhile, the Covid-19 pandemic aggravated pre-existing issues in the US-China relationship, pushing this into a negative spiral. When the republican president left the White House in January 2021, many believed that he would have brought away with him some of the idiosyncrasies seen in US policy since the start of his mandate, such as the trade war and identity politics. This did not certainly happen to decoupling at a time when China, it seems now clear, has no interest in liberalising its domestic economy in the way the US would like. On the contrary, with the start of Xi Jinping’s third mandate and commitment to a “dual circulation” economic strategy, China might be even more inward-looking rather than open to global capitalism (Cainey and Prange 2023). This could help some western countries finding a better balance between economic and security-interests in their relationship with China, but it will also have important economic costs – a dynamic not different from the rise of energy cost in Europe since the start of the war in Ukraine. The argument of this chapter is threefold. First, the option and the choice for decoupling derives from the geoeconomic condition of weaponised interdependence between the states that characterises the contemporary world order. Decoupling implies a situation when one party opts for ending its relationship with another party, once it no longer can influence or coerce it. Second, it is noted 124

DOI: 10.4324/9781003327448-13

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that the current US decoupling from China is the latest development of a process of geoeconomic engineering that has evolved since the first Obama administration’s objective to compel China to reform. Third, decoupling is not just a topical concept in the public debate; it has now become ingrained in US policy towards China. What matters more is not only whether decoupling is possible or impossible, effective or ineffective, but rather the reason why the United States is pursuing this. The origins of such policy must be looked for in Washington’s dissatisfaction with the institutions of the Liberal International Order (LIO), which appear increasingly incapable of preserving US national interests in a fierce economic and geopolitical competition with China. In particular, opposition to China’s economic nationalism reflects the US intent to preserve global dominance in the technological sphere. In fact, since the Obama administration, US governments have repeated that technological dominance is key to the US economic and geopolitical world leadership. This chapter is divided into four sections. The first section provides a definition of decoupling and positive decoupling. The second one illustrates US-China economic and technological interdependence. The third and fourth sections zoom on approaches to the decoupling policy of the Obama, Trump, and Biden administrations. Finally, the last section puts forward the hypothesis that the world order might be headed towards an “Iron Curtain 2.0”; this might have significant implications for the assessments of the effectiveness of sanctions.

Decoupling as an Indirect Sanction: A Definition In recent history, some sanctions have been successful in changing the behaviour of a target state, but there is no consensus over their overall effectiveness. It has been argued that sectorial sanctions on trade and finance are successful in approximately 40% of the cases, while targeted sanctions in only 20% of the time (Morgan et al. 2014, 545). It is worth noting that the effectiveness of sanctions (especially against a large economy) increases with the growth in several sender states. Also, sanctions seem to be more successful when directed at democratic and allied states, rather than at autocracies, or geoeconomic competitors and hostile states (Peksen 2019). Historically, sanctions on great powers rarely have a meaningful impact and are, therefore, rarely imposed. For instance, while comprehensive economic sanctions against Russia after the country’s invasion of Ukraine might have painfully shaken some domestic constituencies, they nevertheless have not stopped the Kremlin’s military and economic counter-attacks. The backlash of Russia’s counter-sanctions on European industries were rising gas prices that spurred massive inflationary pressure across many industries. Similarly, when the Trump administration imposed trade tariffs against China, Beijing responded with counter-sanctions. When a hegemonic sender state has a command of the global economy and controls an international network of allies and institutions, sanctions can inflict a great deal of pain on a target state. However, once this command is eroded, sanctions might have a limited effect or even become counter-productive. Indeed, the US-led Liberal International Order – a network of international regimes funded after the end of World War II and based on rule of law and free-market principles – remains a Janusfaced one, characterised by the Economy-Security Conundrum (E-SC). It is structured around the intersection of an International System of States whose sovereignty is territorially defined, and a network of flows of capital, goods, people, ideas – and diseases, among other threats – which is (to an extent) a-spatial or transnational (Leoni 2022a, 315–317; Leoni 2022b). This condition makes “weaponised interdependence” both a relevant lens and concern for great powers; states that are unable to shape networks in a favourable manner “may attempt to isolate themselves,” or, to put it in a less dramatic manner, to decrease their depth of engagement in a relationship or in the 125

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international order (Farrell et al. 2021, 50). Beyond the academic debate, in real and current policy events this concept has been best captured by the strategy of decoupling. There is no formal definition of decoupling from a geopolitical point of view. In a recent report on technological decoupling, Jon Bateman defined it “in its strongest form, … [as] a total technological divorce between the United States and China” and “in its weaker form, … a marginal reduction of technological interdependence” (Bateman 2022, 123). From the political economy of sanctions perspective, decoupling cannot be equalised with the concept of sanctions per se, while decoupling is a much broader notion that encapsulates (but is not limited to) sanctions. Nevertheless, decoupling strategy and sanctions policies evolve in the same direction and have the same strategic objective. In the current debate, the concept of “positive decoupling” has been employed to make the point that the Five Eyes (FVEY) could decouple by developing national industrial and infrastructure strategies to promote market conditions conducive to the expansion of next-generation industries (the “Future 9”), or even to “reshore” those sectors which have been eroded by China. The “positive” in “positive decoupling” means that there is no direct negative action taken against an opposing state (Rogers et al. 2020, 22). Furthermore, contrary to sanctions, the state pursuing positive decoupling does not just want to trouble its rival, but above all, it aims at decreasing dependency on its rival. Positive decoupling also has a more marked future projection compared to direct sanctions; therefore, success will have to be measured in the long-term, and it involves a coalition-building and industrial planning effort in a way that traditional sanctions do not (Rogers et al. 2020, 36).

From US-China Economic and Technological Interdependence to Geoeconomic Rivalry The end of the Cold War – with the defeat of the Soviet Union – brought many in the west to believe that it was ‘the end of history’. From a grand strategic perspective, this was interpreted by the United States as the right time to move from “a doctrine of containment … [to] … a strategy of enlargement” (Lake 1993, 5). Regarding United States’ policy towards the PRC, this strategy translated into the Clinton administration’s effort to back Beijing’s application to the World Trade Organization (Leoni 2023, 42). Clinton stated in front of the US Congress that “if you believe in a future of greater openness and freedom for the people of China … If you believe in a future of greater prosperity for the American people, you certainly should be for this agreement” (Clinton 2000). However, as The Economist noted ten years later, Clinton’s promises were a disappointment for liberals; Clinton and the international community hoped that the economic interdependence facilitated by Beijing’s entry into the WTO would have encouraged Beijing to privatise its economy and democratise the country (The Economist 2011). Ultimately, Clinton’s policy of engagement led to a relationship characterised by strong yet problematic interdependence, an aspect of post-Cold War US foreign economic policy towards China which was often criticised by Donald Trump during his presidency. The United States and China are considered each other’s largest trading partners; the United States receives about 19 percent of China’s exports and China receives 8 percent of US exports (Nye 2020, 10). Although their bilateral trade values decreased because of sanctions and tariffs imposed by the Trump administration, falling from $737.1 billion in 2018 to $615.2 billion in 2020, these national economies remain highly interdependent (Office of the United States Trade Representative 2022). However, when measuring trade interdependence between two states, simple bilateral trade data is unreliable due to discrepancies in its values (Mouritz 2021, 35). A more 126

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plausible measurement is the ratio of bilateral trade volume – the sum of all exports and imports between two states – against the GDP of a country. For example, as per 2016 statistical data, the trade volume between United States and China was 3.21 percent of the US GDP and 2.43 percent of China’s GDP, the highest ratio for both states signifying a “high level of economic dependency” (Mouritz 2021, 39). Joseph Nye maintained that “coercive power rests in asymmetrical vulnerability” and that such “interdependence can be manipulated as a source of power” through sanctions or tariffs (Nye 2020, 8). He added that using coercive power by adopting restrictive measures may provide an edge in the short term; but it may have unintended consequences in the long term (ibid., 11). For example, while China may seem more vulnerable to aggressive US economic policies of sanctions and tariffs, the United States would not be able to rapidly find alternatives to most goods it imports from China, which remain critical for US industries and consumers. This is especially true, for the time being, about rare earth and pharmaceutical ingredients, areas in which the United States is very dependent on China. China accounts for about 30 percent of the total global manufacturing capacity and is backed by a complex network of global supply chains upon which western economies depend (Rogers et al. 2020, 5). Currently, the United States is a net importer of essential goods for most critical and strategic industries – artificial intelligence, autonomous robotics, nano and quantum technology, cryptography, semiconductors, and network and data communications – that are considered essential for future strategic control and dominance. As such, the United States heavily relies on China for the import of machinery, engines, medical apparatus, electrical equipment, microchips, and lithium-ion batteries (Mouritz 2021, 100). In 2021, of the $506.4 billion in the US imports from China, the top commodity sectors were Machinery and Mechanical Appliances, accounting for about 47.7% of total US imports from China (Office of the Technology Evaluation 2021). China also accounts for 80 percent of the global production of magnesium and magnesium compounds central to energy, transport, and next-generation industries, making the United States strategically dependent on Chinese imports (Rogers et al. 2020, 6). This is crucial given how, as of 2020, the United States’ overall percentage dependence on China for goods concerning a critical industry stands at 27.8 percent (Rogers et al. 2020, 24). This shows that while in the short term, a US decoupling from China would inflict financial pain, in the long term, it should lower the reliance on the Chinese economy. Beyond the United States’ strategic dependence, China’s adherence to restrictive policies in foreign direct investments (FDI), intellectual property theft, and most notably its Anti-Monopoly Law (AML) favouring industrial policy over competition law and state-owned domestic companies over foreign ones is seen by the United States as unfair competition against western liberal values (U.S. Chamber of Commerce, 2021). It can be argued that China’s AML emanated from a “gradual evolution of domestic economic and regulatory policy, rather than as a result of pressure or conditionality from international development or funding bodies” (Svetiev and Wang 2016, 187). Furthermore, by giving implementation control to ministerial authorities dominated by the centralised government, it has been argued that China has used the AML to promote protectionist policies such as price fixing and does not wholly meet the international antitrust standards (Svetiev and Wang 2016, 218). Proving most alarming to the United States is China’s “Made in China 2025” (MIC) blueprint to establish itself as a manufacturing leader and excel in strategic industries of next-generation technologies, transportation, and energy. This framework is based on a state-controlled model rather than a market-oriented one, and it is seen as a challenge to the Washington Consensus model (Leoni 2021, 72–77). It has been argued, “the methods outlined in the MIC 2025 policy documents and the policies under its umbrella aim at the core of one aspect of US structural power in the global economy” (Malkin 2020, 538–539). China’s continuous progress 127

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in AI, quantum, satellite and communication technologies in addition toits growing influence in global supply chains and the global economy have increased US concerns about China’s rise (Lau 2020, 5). As the US attempts to contain Chinese dominance and to protect the erosion of its influence across the Liberal International Order, over the last decade it has embarked on a series of policies that have sought to persuade China to reform its political-economic model. However, failure to achieve any meaningful result prompted adjustments along the way from the Obama to the Trump administrations and from the Trump to the Biden administrations.

Obama and Trump’s Policy of Decoupling From China Following years of neoliberalism-driven US policy towards China, President Obama’s “pivot to Asia” signalled a shift from cooperative to “cautious” engagement (Watanabe 2013, 15–16). One of the pillars of this policy was the Trans-Pacific Partnership (TPP). Outside the immediate aim to lower trade barriers to increase the export of US goods and engage with the region, the TPP as a “mega-regional” agreement offered an avenue to reassert western standards for global trade and shun the alternative state-controlled development with lax transparency and concerns over intellectual property theft as pursued by China. To this end, the TPP not only extended “greater international protection to investments, patents and copyrights of major US corporations,” but also granted data the same legal protection as goods, as per international trade law, in an effort to maintain the Internet as a global space (Cassidy 2015). Furthermore, under the TPP corporations would have been able to challenge governments in international arbitration instead of the country’s home judicial system, breaking the control of nationalist governments (Schott et al. 2012, 34–5). By using the TPP as a system to promote transparency, fair competition and trade practices, the United States directly countered China’s MIC plan based on state-controlled development. However, the TPP was never ratified by Congress and was later scrapped by President Trump on his first day at the White House. Nonetheless, while the TPP was an articulated framework, it was questionable whether it could have enforced its provisions and ensured respect by the government of the People’s Republic of China. As in the transition from Obama to Trump China continued to defy promises of reforms, Trump adopted a more confrontational stance informed by his nationalist worldview, which led to the bilateral approach of trade tariffs and other sanctions. The policy “proposed a 25 percent tariff on certain products of China” and effectively started a trade war with reciprocal tariffs and sanctions. The United States aimed to sabotage China’s MIC plan by specifically targeting machinery, electronics, and the IT sector (Lanteigne 2020, 3; Zhang 2018, 55). It viewed the incorporation of Chinese manufactured and owned technology into its cyberspace as a national security concern, which could potentially increase its vulnerability and risk to espionage, sabotage, subversion, and theft, amidst the obvious threat of an extending global influence of China in strategic technologies (Wei 2019). The Congress also passed the Secure and Trusted Communications Networks Act, which banned leading Chinese 5G telecommunications companies like ZTE and Huawei (Wei 2019). Such measures highlighted how a Sino-US decoupling of some sort was no longer unimaginable, especially as Trump’s policies prompted a hard-line response from China too – for example, by imposing retaliatory tariffs (Wei 2019, 539). In the latest stage of the Trump administration, the focus of this offensive expanded from economic to other realms. The Secure Campus Act of 2021, restricted admissions to Chinese students applying for STEM fields sanctioned individuals involved in human rights violations in the Xinjiang Province and the Hong Kong (HK) protests, denied licenses to Chinese companies to protect US intellectual property, barred Chinese companies from issuing stocks in the US investors from 128

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purchasing or investing in Chinese military companies (Guo 2022, 552). But the global pandemic acted as a general wake-up call on economic dependence on China and more broadly on global supply chains which originate in China. This made the case for a multilateral approach against Chinese state-led capitalism more compelling, and Biden as a democratic president was in a better position compared to Trump to capitalise on this.

Biden’s Strategy of “Positive Decoupling” In reality, the Biden administration did not scrap Trump’s policies in the same way that Trump did with Obama. Biden, indeed, never cancelled the trade tariffs imposed by his predecessor; furthermore, it was confirmed that policy towards China is a priority for the United States, because it remains “the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it” (NSS 2022, 23). Nonetheless, with the Biden administration, there has been a realisation that China could not possibly be taken on with a bilateral approach by any country, including a great power like the United States (ibid. 7, 37). Therefore, at a time of global decline of US hegemony, the Biden administration so far has sought to manage such decline by ‘updating’ and strengthening Washington, D.C.’s alliances (Biden et al. 2022). Considering this, Biden’s foreign policy strategy of decoupling from China represents an attempt at creating a “LIO 2.0; that is, a stricter layer of rules which is seeking to protect next-generation industries and profitable investments from the Chinese state-led capitalism by using standards that Beijing does not want to comply with.” In other words, this is an operation of creating a “new sphere of influence” centred around the principle of preventing China from accessing parts of the global economy and preventing its involvement in industries, including next-generation technology critical to the national security of the West. In fact, in a May 2022 speech Secretary of State Antony Blinken stated that the Biden administration’s approach towards China will be one of “invest, align, compete” (U.S. Department of State 2022). Secretary Blinken added that the relationship with China will be “competitive when it should be, collaborative when it can be, and adversarial when it must be,” indicating a willingness to work with China in areas that do not involve risk to national security (U.S. Department of State 2022). This policy has been implemented internally through two acts, such as the US Innovation and Competition Act of 2021, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and the Science Act of 2022. In terms of foreign policy, however, positive decoupling has been pursued through the Build Back Better World (B3W) then rebranded Partnership for Global Infrastructure and Investment (PGII) and the Indo-Pacific Economic Framework for Prosperity (IPEF). The US Innovation and Competition Act is described as “a bill of preparedness” against China’s great power status and threat to the global order (Bernardini 2022). It seeks to promote US scientific research in next-generation technology, especially in cybersecurity and semiconductors, rebalancing supply chains, increasing domestic manufacturing and investments and partnerships with allied states. The CHIPS and Science Act, instead, is designed to enhance US innovation, competition, and security by boosting semiconductor R&D and manufacturing (The White House 2022). Funding in the bill includes $200 billion for R&D, $52.7 billion for semiconductor manufacturing, $24 billion in tax credits for chip production, and $3 billion for the promotion of next-generation technology, such as quantum computing, AI, clean energy and nanotechnology. Furthermore, the US Department of Defence received $2.5 billion to fund microelectronics research, production, and training, and to coordinate with allies and partners on semiconductor supply chain security; meanwhile, $1.5 billion was granted to the Utilizing Strategic Allied Telecommunications Act of 2020 (Badlam et al. 2022, 2, 5, 6). 129

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Decoupling, meanwhile, is being implemented in foreign policy with the PGII, the US-led alternative to China’s Belt and Road Initiative (BRI), whose aim is to provide projects to “close the infrastructure gap in developing countries, strengthen the global economy and supply chains, and advance U.S. national security” (The White House 2022). Funding includes $200 billion over the next five years and, alongside G7 partners, development banks and institutions, $600 billion by 2027, which will be allotted to global infrastructure investments. While also the BRI has been facing challenges in recent months, the GPII will aim at gathering funds also from the private sector and different countries. IPEF instead is an economic framework designed to prevent China’s influence in the Indo-Pacific by strengthening ties through the support of technological innovation and the global economy (Price 2022). IPEF quickly found the support of Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. The initiatives of the Biden administration have taken decoupling to a more sophisticated and effective level, especially the PGII and IPEF. Indeed, for the very first time this has been pursued as a multinational effort, a move which will increase the chances of a strategy of decoupling to succeed. However, this approach risks to encounter two limits, especially compared to China-led frameworks such as the BRI – against which US-frameworks indirectly compete. On the one hand, being a framework with so many member countries the PGII requires a greater level of coordination to reach an agreed political and economic posture. On the other hand, relying – also – on private investments it means that there is no guarantee that the project will meet the required sum, or that it will not be influenced by interests that may not be aligned to the long-term project of the Biden administration. With regard to IPEF, instead, from a US foreign policy point of view this was a welcome step to the extent it brought the United States back into the Indo-Pacific region from a geoeconomic point of view and has sought to repair to exit from the CPTTP. However, IPEF is not a Free Trade Agreement (FTA) and it seeks to create an area of shared standards as opposed to one of free trade. This means that it will not grant access to the US market, which is what Asian countries really desired, at a time when there appears to be limited appetite within the US Congress for an FTA – indeed, IPEF does not require congressional approval (Kendall 2022). US Trade Representative Katherine Tai stated that negotiators and Congress must work together to realise IPEF’s full benefits (Office of the United States Trade Representative 2022). At this point, the possibilities of seeing the launch of a new FTA or for the United States to rejoin the CPTPP are very low; and should the next president be a more conservative one, like Trump or another republican candidate, it will be quite some time before the United States will be able to enter a new FTA.

Towards an Iron Curtain 2.0? What It Means for the Study of Sanctions In recent years there has been a developing debate reflecting on whether the relationship between the United States and China resembles the Cold War (Westad 2019). While this question promises to keep political scientists and historians busy for some time, it is worth reflecting on where decoupling is leading the Liberal International Order, and what it means for the study of sanctions. This question is relevant because not only the United States is pursuing decoupling from China, but also the latter is pursuing decoupling from the United States. At a time of deep interdependence as the one described in this chapter, the return to what Churchill called Iron Curtain remains a speculation. That said, if both states intend to decouple from one another, we might look at the possibility of an Iron Curtain 2.0 which would separate the two economies in sensitive and strategic industries; meanwhile, in many other industrial areas the relationship might continue to look 130

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like “business as usual”. The war in Ukraine that started on February 24, 2022, has certainly made an Iron Curtain 2.0 more likely. Indeed, the drama of the war has had two consequences so far. On the one hand, it puts pressure on countries for taking a side, and it is clear that China’s choice was not to side with the West. On the other hand, the drama of war allowed the Biden administration to exert greater leverage on allies. Indeed, while pushing through Western diplomatic circles an anti-China narrative seemed more difficult at the time of the G7 in Cornwall in 2021, China’s positioning vis-à-vis the war has given the United States greater diplomatic leverage. For instance, China has entered the Summer 2022 the NATO agenda, described as a “challenge” to the “interests, security, and values” of the alliance – an act that might draw Russia and China to the extent that their enemy might become the same (NATO 2022). What does all this mean for the study of sanctions? If an Iron Curtain 2.0 arises, this might signal the limits of traditional sanctions as a legal mechanism. Indeed, the ultimate objective of any sanction is not one of isolating the target state, but it is exactly the opposite: going beyond non-alignment – or even isolationism – by triggering change to domestic structures or foreign policy practices of that country. The new Iron Curtain instead, would confirm that there still is a substantial part of the international community that cannot be influenced through economic means, and that would rather remain out outside of the liberal order. Ultimately, this confirms that the LIO was never a global order, as theses such as that of the “end of history” and hyperglobalist discourses in the 1990s implied; furthermore, such challenges require Western policy-makers to rethink the purpose and use of sanctions, especially as they face the immediate challenge of the War in Ukraine and the more long-term challenge of China’s rise.

Conclusion At a time of growing uncertainty about the future of the Liberal International Order and globalisation, this chapter reflected on the foreign policy of decoupling from China of the most powerful state in the world, the United States. It did so by unpacking the concept of decoupling, which was defined as a last resort, a loosely described indirect sanction that is used after traditional sanctions have proved ineffective. Following that, the chapter demonstrated that from the Obama to the Biden administration the United States has stepped up efforts to enforce free-market rigour onto the Chinese economy. Obama sought to constrain the economic power of China by launching the Trans-Pacific Partnership; Trump, being a nationalist, adopted a more bilateral approach and engaged China through targeted tariffs. As at each point – in the transition from Obama to Trump and from Trump to Biden – US policy failed to change China’s behaviour, it became evident that a shift in the US approach is necessary; this has led the Biden administration to work on a more consistent, articulated and ambitious policy of decoupling – compared to that of his predecessors. Finally, the authors reflected on whether US-China relations and more broadly the LIO are at a crossroads. A process of re-alignment accelerated by the war in Ukraine is underway, with the potential of leading to an Iron Curtain 2.0 – which will be more porous that the Iron Curtain emerged during the Cold War, but it will still demark competing spheres of influence. The Biden administration with its policy of decoupling has been committed to involving allies in this endeavour, which was represented as an “upgrade” of US alliances. If one adds to this that in the broader policy community in Washington, D.C. there is a consensus on rebalancing the relationship with China and that the Biden administration has maintained trade tariffs imposed by President Trump, decoupling will likely become a long-term policy. This compels subject matter experts in the study of sanctions to watch closely the operationalisation of decoupling and its effectiveness to infer fresh academic insights from this policy. 131

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Sanctions When Sanctions Fail Office of the Technology Evaluation. (2021) U.S. Trade with China U.S. Chamber of Commerce. Available at: https://www.bis.doc.gov/index.php/country-papers/2971-2021-statistical-analysis-of-u-s-tradewith-china/file (Accessed: January 14, 2023). Office of The United States Trade Representative (2022) Remarks by Ambassador Katherine Tai at the Indo-Pacific Economic Framework Ministerial Welcome Event, Office of The United States Trade Representative. Available at: https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2022/ september/remarks-ambassador-katherine-tai-indo-pacific-economic-framework-ministerial-welcomeevent (Accessed: January 14, 2023). Peksen, D. (2019) ‘When Do Economic Sanctions Work Best?,’ Center for a New American Security (en-US). Available at: https://www.cnas.org/publications/commentary/when-do-economic-sanctions-work-best (Accessed: November 16, 2022). Price, D. (2022) ‘The Debate Papers: Is The Indo-Pacific Economic Framework Glass Half Full Or Glass Half Empty?,’ United States Studies Centre. Available at: https://www.ussc.edu.au/analysis/is-the-indo-pacificeconomic-framework-glass-half-full-or-glass-half-empty (Accessed: October 28, 2022). Rogers, J. et al. (2020) Breaking the China Supply Chain: How the ‘Five Eyes’ Can Decouple from Strategic Dependency, DICA. The Henry Jackson Society. Available at: https://www.dica.org.au/wp-content/ uploads/2020/05/Breaking-the-China-Chain.pdf (Accessed: September 18, 2022). Schott, J.J., Kotschwar, B. and Muir, J. (2012) Understanding the Trans-Pacific Partnership. Washington, DC: Peterson Institute for International Economics. Svetiev, Y. and Wang, L. (2016) ‘Competition law enforcement in China: Between technocracy and industrial policy,’ Law and Contemporary Problems, 79 (4), pp. 187–222. The Economist (2011) ‘No change,’ The Economist, 10 December. https://www.economist.com/asia/2011/12/10/ no-change U.S. Chamber of Commerce (2021) Understanding U.S.-China Decoupling: Macro Trends and Industry Impacts. United States: U.S. Chamber of Commerce China Center. Watanabe, T. (2013) ‘US engagement policy toward China: Realism, liberalism, and pragmatism,’ Journal of Contemporary East Asia Studies, 2(2), pp. 3–24. Wei, L. (2019) ‘Towards economic decoupling? Mapping Chinese discourse on the China-US trade war,’ The Chinese Journal of International Politics, pp. 519–556. Westad, O.A. (2019) ‘The sources of Chinese conduct: Are Washington and Beijing fighting a new cold war?,’ Foreign Affairs. 98(5): 86–95. Wingrove, J. (2020) Trump Says ‘Complete Decoupling’ From China Remains an Option. Bloomberg. June 18. https://www.bloomberg.com/news/articles/2020-06-18/trump-says-complete-decoupling-fromchina-remains-an-option Zhang, Y. (2018) ‘The US-China trade war,’ Indian Journal of Asian Affairs, 31(1/2), pp. 53–74.

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11 UNILATERAL SANCTIONS AS SUSTAINABLE DEVELOPMENT DECELERATORS Vira Ameli

Introduction Upon the turn of the century, at the United Nation’s General Assembly, state representatives signed an important international agreement, resolutely committing to development as an alienable ‘right’ in a ‘Millennium Declaration’(United Nations, 2000). The ensuing 2015 Millennium Development Goals (MDGs) and the subsequent 2030 Sustainable Development Goals (SDGs) were novel in two respects: first, the recognition that poverty and under-development are embedded dually within the global and national policy environments; and second, the launch of a detailed framework with trackable and measurable goals to assess progress systematically and accountably across the globe. While meeting the targets falls within the responsibility and sovereignty of national governments through domestic policymaking, international partnerships for financial and technical assistance are simultaneously forged to accelerate progress through evidence-based actions, partnerships, and policy measures (United Nations Development Group, 2017). Yet, the interaction of national and international forces can decelerate development when a country is facing war, isolated within the global community, or targeted by sanctions. As an external force that interacts with the domestic context in producing humanitarian outcomes, sanctions can decelerate, halt, and reverse sustainable development, thereby excluding ordinary citizens of sanctioned states from their right to development. Since the end of the Cold War, sanctions have become an essential instrument of international politics to address national security and human rights threats without military interventions. Article 41 of the UN charter grants the United Nations Security Council (UNSC) the power to impose sanctions, with reporting mechanisms to protect against civilian harm that could be induced by sanctions (Fourth Freedom Forum, 2021). However, the contemporary shift towards unilateral sanction regimes, imposed by one country (primarily the United States) or regional organisations (such as the European Union and the Arab League), has produced humanitarian harms due to the absence of monitoring and reporting that are present when UNSC imposes sanctions. Importantly, an epistemic caveat of examining the humanitarian toll of sanctions is the impossibility of disentangling the harms produced by sanctions from those caused by domestic mismanagement of resources and misdirection of policies (Rodríguez, 2022). Thereby, rather than trying to unscramble the foreign from the domestic to identify sanctions or domestic policies as singular drivers of 134

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under-development and poverty, the compounded effects that are manufactured by sanctions can be examined and contextualised. In other words, we need to contend with the existence of multiple decelerative mechanisms that are triggered by unilateral sanctions within specific domestic contexts to produce a range of adverse development outcomes. This chapter uses the seventeen SDGs, as displayed in Table 11.1, to map how the mechanisms manufactured by sanctions act as decelerators, in contrast to accelerators, which are defined as actions, policies, and partnerships that benefit the simultaneous advancement of multiple SDGs (UNDP 2023). Investigating the decelerative impact of unilateral sanctions on SDGs has twofold value: first, to inform sanctions policy; and second, to shape development agendas. The focus here is narrowed on the contexts of Iran, Syria, and Venezuela, for two overarching reasons. First, the Table 11.1  Sustainable Development Goals Goal

Title

Description

1 2

No poverty Zero Hunger

3 4

Good health and wellbeing Quality education

5 6

Gender equality Clean water and sanitation

7

Affordable and clean energy Decent work and economic growth

End poverty in all its forms everywhere End hunger, achieve food security and improved nutrition and promote sustainable agriculture Ensure healthy lives and promote wellbeing for all at all ages Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all Achieve gender equality and empower all women and girls Ensure availability and sustainable management of water and sanitation for all Ensure access to affordable, reliable, sustainable, and modern energy for all Promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation Reduce inequality within and among countries

8 9

13 14

Industry, innovation, and infrastructure Reduce inequality within and among countries Sustainable cities and communities Responsible consumption and production Climate action Life below water

15

Life on land

16

Peace, justice, and strong institutions

17

Partnership for the goals

10 11 12

Make cities and human settlements inclusive, safe, resilient, and sustainable Ensure sustainable consumption and production patterns Take urgent action to combat climate change and its impacts Conserve and sustainably use the oceans, seas, and marine resources for sustainable development Protect, restore, and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable, and inclusive institutions at all levels. Strengthen the means of implementation and revitalise the global partnership for sustainable development

Source: Sustainable Development Goals (UN SDG)

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central banks and entire financial sectors of all three countries are targeted by unilateral sanctions, obstructing the main lifelines of all three economies, without UNSC authorisation and humanitarian monitoring mechanisms. Second, all three countries have experienced reversal of development that is at least partially attributable to the imposition of unilateral sanctions. Contemporary regimes of unilateral sanctions induce exogenous economic shocks that weaken institutional capacities and impair existing infrastructure for basic services, thereby pushing people into poverty and precarity. In contrast to contexts in which SDGs track development goals to lift people out of poverty, this chapter uses the capacity of SDGs to track and measure the extent of deceleration and reversal of development. To shed light, a brief overview of the evolutions of sanction regimes is first presented, before dwelling more specifically on how the contemporary era of unilateral sanctions engender decelerative mechanisms that change the context and outcomes of attaining SDGs. Importantly, rather than solely using compiled data from the SDG dashboard, broader dimensions of reverse development from in-depth reports produced by non-governmental organisations and individuals on country contexts will be used to complement what the SDG dashboard fails to reveal (UNSDG).

Evolution of Sanctions Regimes For much of the 1990s and 2000s sanctions regimes were comprehensive and predominantly applied by the United Nations. Despite genuine concerns for civilian protection from harm, a series of humanitarian crises began to emerge across country settings. Comprehensive sanctions against Iraq (1990–2003) and former Yugoslav states of Serbia and Montenegro (1992–2001) led to a rise of formerly under-control infections and excess mortality and hospital deaths from routine and established treatments of cancer and other surgeries (Garfield, Devin & Fausey, 1995). The US embargo against Cuba (1958 – present) and UN and US sanctions against Haiti (1991–1994) engendered barriers to securing food and basic items, causing difficulties in childrearing and a sharp rise in malnutrition (Gibbons & Garfield, 1999). Reports of excess child mortality by various UN bodies and papers published in the Lancet initially claimed the death of 500 thousand children in Iraq (Garfield, 1999; Gordon, 2010)––a figure that was later refuted (and reduced to 298 thousand), but a trend in child mortality that was reported across contexts (Eriksson, 2011; Gordon, 2010). Therefore, the populations of countries targeted comprehensively by sanctions not only lost the right to development, but also encountered reversal of previously made development gains. In response, a debate emerged on means to prevent adverse impacts of sanctions and the ‘humanitarianism’ of absolute measures. Comprehensive sanctions became widely associated with dire humanitarian consequences, inflicting ‘collective punishment and suffering’, and acting as a ‘deadly weapon’ against vulnerable segments of the population (Hufbauer et al., 2007; Gottemoeller, 2011). Subsequently, refinements were made to the next current of UN sanctions, which were designed to be targeted––against decision-makers or certain goods––to specifically prevent or end conflicts and other mass atrocities. Clear reporting and monitoring mechanisms via the UNSC to protect against humanitarian harms were also implemented. Yet, more recently, an important shift has occurred in the imposition of sanctions. While the UNSC has been unable to reach the necessary consensus to impose further sanction regimes since 2017, the scale and scope of sanctions imposed unilaterally by the United States and the European Union have expanded. Importantly, these new sanction regimes lack the key accountability mechanisms to protect against the consequences of earlier comprehensive UN sanctions (Fourth Freedom Forum, 2021). A more wide-ranging approach is also used, ostensibly targeted, but inducing comprehensive effects in their application against major sectors and lifelines of national 136

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economies. Such sectoral sanctions are sometimes called ‘selective sanctions’ (Moret, 2015). In contrast to freezing assets of individuals or preventing the movement of certain goods, sanctions on the energy or financial sectors are examples of selective or sectoral sanctions that induce comprehensive economic effects by cutting the major lifelines of economies. Energy sector sanctions often cut the main source of national income, while financial sanctions block transactions for trade, often indiscriminately. Indeed, studies from the 1990s and early 2000s reveal that sanctions with the most severe humanitarian impacts are financial sanctions, especially in cases where the designation of central banks obstructs humanitarian trade (Eriksson, 2011). Moreover, the United States and European Union wield much of their power through economic dominance and influence. When applying unilateral sanctions, or secondary sanctions that are considered illegal by international law, private and public enterprises are coerced to comply with sanctions. Even when exempted for humanitarian purposes, public and private enterprises often choose ‘overcompliance’ with US’s primary and secondary sanctions to avoid the risk of punishment for violating the rules of US’s Office of Foreign Assets Control (OFAC) and maintain economic relations with American enterprises (Rodríguez, 2022). Over the past decade, ordinary citizens of Iran, Syria, and Venezuela have successively been exposed to the growing might of the contemporary era of unilateral sanction regimes, including designation of central banks. Iran has faced sanctions for over three decades. The first sanctions were imposed against Iran’s democratically elected government that nationalised the Iranian petroleum industry in 1951. Following the 1979 revolution, starting with a ban on the sale of arms and dual-use technology in 1984, the sanctions expanded gradually to the present level. Yet, apart from the UNSC multilateral sanctions that lasted from 2006 until the 2015 Joint Comprehensive Plan of Action (JCPOA) agreement, Iran has been primarily a target of unilateral sanctions that use an ostensibly targeted approach to produce comprehensive effects. Following the US’s withdrawal from the JCPOA, the scope of US’s primary and secondary unilateral sanctions against Iran was further expanded. Overall, between 2012 and 2022, a decade in which the scope of sanctions against Iran became increasingly comprehensive, the economy contracted by 45 percent, according to the World Bank, despite having several years of growth. Current sanctions encompass all major sectors of Iran’s economy, including construction, mining, manufacturing, and textile, in addition to the oil and financial sectors. Syria experienced narrow targeted sanctions before the United States and European Union imposed unilateral sanctions against its financial and energy sectors in 2011. Prior to 2011, the United States and Syria remained trading partners. Despite new restrictions that were added in 2004 (as part of the US Syria Accountability Act), business activities between the two countries included the US import of Syrian oil and American investment in Syria. After a decade of conflict that was intertwined with economic blockades and sanctions, Syria’s GDP fell from 252.5 billion to less than 12.6 billion USD, according to the World Bank. In 2020, under the Trump administration’s implementation of the CEASER (Caesar Syria Civilian Protection) Act, a new wave of secondary sanctions further restricted third-country trade with Syria, severely limiting external revenues, and specifically blocking aid for reconstruction measures, only allowing a limited scope of activity for ‘early recovery’ (The Carter Center, 2020). In effect, a sanctions regime that was designed for ‘protecting civilians’ went into effect amid the COVID-19 pandemic, exponentiating the harms inflicted on a nation beset by a post-conflict humanitarian crisis during a global pandemic. The Venezuelan economy was targeted with unilateral sanctions by the United States and European Union when the country was living through existing economic crisis that was attributable to the petroleum price plunge of 2014–2016. The 2017 sanctions prohibited the Venezuelan government from accessing US financial markets, preventing the national oil company PDVSA 137

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from restructuring its debt during an economic recession. Following the August 2017 sanctions, oil production crashed, falling at more than three times the rate of the previous twenty months as the loss of credit meant the inability to cover operations to maintain production. The January 2019 oil sector sanctions cut off Venezuela from its largest oil market, the United States, which had bought 35.6 percent of Venezuela’s oil exports in 2018, or about 586,000 barrels per day on average. Further, in April of 2019, the Central Bank of Venezuela was designated, thereby wiping out the government’s access to overseas assets and transactions. In addition, the ownership and protection of frozen foreign assets were transferred to the opposition government, recognised by the United States and its allies. Later in 2020, secondary sanctions removed access to international oil markets. In less than a decade, the Venezuelan economy underwent the largest contraction in Latin American history and the sixth largest in the world, shrunk by 74.3 percent in eight years (Rodríguez, 2022).

Resource Dependency, Economic Growth, and Sustainable Development In considering the three contexts of Iran, Syria, and Venezuela, an important factor that influences the scale of economic contraction is the extent of oil-dependency of the economy and trade-ties with the United States––prior to the imposition of sanctions. For example, Venezuela was experiencing an economic shock, driven by oil price plunge of 2014–2016, prior to the imposition of sanctions (Bouckaert, 2016). In the wake of primary unilateral sanctions, US imports of Venezuelan oil fell to zero, gradually rebounding to a fraction of their 2018 average. Upon imposition of secondary sanctions, Venezuela’s external revenue was reduced by 99 percent (Douhan, 2021). Thereby, Venezuela’s economic collapse of the past decade was shaped by strict dependency on petroleum revenue. In Syria, sanctions induced economic pain from reduced oil revenues, but another significant factor was the loss of non-oil trade and investment ties with the United States, which existed in full force until 2011. The reduction in US-Syria trade, from over $900 million in 2010 to under $60 million per year since 2012 was a dramatic blow to the Syrian economy. To the contrary, given the US trade embargo on Iran that has been in place since 1987, the Iranian economy did not rely on US trade and investments, prior to sanctions, and had gained significant resilience and self-sufficiency in the domestic production of food and essential medicines. Another key feature of Iran’s economy is a large retail and service industry that accounts for more than 50 percent of GDP. Indeed, since 2011, oil and gas have never accounted for more than one-third of GDP, while domestic manufacturing and agriculture have continuously expanded, reducing resource-dependency on petroleum (Batmanghelidj, 2022). While GDP contributes significantly to development, it is important to acknowledge the increasingly accepted argument that worthwhile development cannot be reduced to economic growth and that it is possible to enhance human development without continuous GDP growth (Drydyk & Keleher, 2018). In other words, it is not growth itself that matters, what matters is how national income is distributed and to what extent it is invested in basic infrastructure and public services. By prioritising human and sustainable development, a more critical outlook is cast on the contribution of GDP growth to sustainable development, with some scholars suggesting that a per capita income of 10 thousand dollars is sufficient to achieve human development, and that inequality can rise when per capita income exceeds 15 thousand dollars, contributing to reduced wellbeing and happiness levels, in addition to endangering ecological sustainability (Hickel, 2018b, 2020b; O’Neill et al., 2018). In the context of sanctioned states, per capita income levels before and after sanctions are strikingly reduced. For example, according to World Bank data, Syria’s per capita income was over 11 thousand dollars in 2010 and was reduced to around 500 dollars in 2020 (Figure 11.1). After adjustments made for the cost of living and inflation by the Penn World Table (Figure 11.2), 138

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Figure 11.1  Syria GDP Per Capita, 1960–2020. Source: World Bank.

Figure 11.2  Real GDP Per Capita, 1960–2019. Source: Our World in Data, and Feenstra et al. (2015), Penn World Table (2021, https://ourworldindata.org/grapher/ gdp-per-capita-penn-world-table?tab=chart&yScale=log&country=IRN~VEN). Note: This data are expressed in international dollar at 2017 prices. This data are adjusted for inflation and for differences in the cost of living between countries.

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Venezuelans’ high per capita income of over 20 thousand dollars was reduced to less than 500 dollars after eight years of economic contraction, and Iranians’ per capita income of close to 20 thousand dollars was reduced to just over 13 thousand dollars (Feenstra et al., 2015). Yet, it would be impossible to understand the scale and scope of poverty and precarity that has been manufactured by sanctions through such figures alone. Exploring contextual and mechanistic interactions that sanctions engender when shaping outcomes of sustainable development can help us understand the complexities of the relationship between the external and internal factors that can shape how national income is not only produced but also distributed. Therefore, beyond the impact on GDP, unilateral sanctions, lacking authorisation and monitoring by UNSC, are conceptualised here to decelerate development in a globalised context through three key mechanisms: first, by manufacturing added inflationary pressures; second, by reducing capacity for foreign exchange; and third, through the overcompliance of private and public entities with sanctions. In what follows, these three development decelerators are discussed in relation to SDGs.

Manufactured Inflation Pressures A dominant mechanism that decelerates development and pushes people into poverty in sanctioned states is manufactured inflation that is compounded over existing inflation pressures. While chronic inflation is a dominant feature of many economies, thus impossible to isolate sanctions as its sole driver, Batmanghelidj has conceptualised the macroeconomic impact of sanctions in such economies as an ‘inflation weapon’ that heightens baseline inflation rates (Batmanghelidj, 2022). This mechanism works when government revenues are slashed by sanctions and the resulting budget deficits are financed through expansionary monetary policies of printing money that can skyrocket inflation. Soaring costs of living diminish the economic and health security of ordinary citizens faster than those of the powerful elite. For the ordinary citizen, wages cannot keep up with basic costs in real terms and savings are quickly decimated. For the powerful elite, inflation can generate higher incomes while they can use their political influence to redirect national resources towards their needs. As an SDG decelerator, inflation links the macroeconomics of sanctions to poverty (Goal 1), hunger (Goal 2), decimated public health and education services (Goals 3 and 4), pronounced gender and income inequality (Goals 5 and 10), and unsustainable cities and communities (Goal 11). It is important to keep in mind that the scale of poverty relies on the thresholds that define who counts as ‘poor’. In the case of Iran, absolute poverty targets as measured by SDGs fail to reveal the scale and scope of poverty. By SDG standards, Iran is reported to have achieved the lower poverty targets ($1.90 per day at 2011 ppp), but this income level is far from living securely and with dignity. At the upper SDG income target ($3.20 per day at 2011 ppp), 3 percent of Iranians are living in poverty, while the national threshold reveals a tenfold higher ratio. The Iranian government defines poverty as living below a nutritionally and socially appropriate threshold of income or expenditure, indicating that an increasing proportion of people are pushed into poverty every year (Salehi-Isfahani, 2020). Previously, Iran halved poverty, as measured by the contextually relevant national threshold set by the government, from over 20 percent in 2000 to less than 10 percent in 2010. By 2015 MDG standard, Iran’s gains in reducing poverty were far beyond the set goalposts, eliminating (instead of halving) poverty by the international poverty line standard of $1.25 per day (2008 ppp), five years ahead of schedule. Yet, in less than a decade of experiencing sanctions-induced inflation, much of the gains made in the 2000s are reversed. Currently, close to 30 percent of people are reported to live below the national poverty threshold. A middle class that was expanding is now continuously shrinking, encountering precarity and insecurity, with an 140

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annual inflation rate that, according to the World Bank, stood at 40 percent this year. According to Salehi, since 2011, about 8 million individuals have descended from the middle class into the lower middle-class strata, while living in poverty has increased by more than 4 million people (Salehi-Isfahani, 2020). In Venezuela, severe hyperinflation has pushed far more people into poverty. While inflation was on the rise due to the economic shock from the 2014 to 2016 petroleum price plunge, the country was pushed into hyperinflation (defined classically by a monthly inflation of 50 percent that reaches 13 thousand percent annually) following the imposition of 2017 sanctions that blocked access to US financial market, removing the possibility of restructuring debt and recovering from the economic recession. Annual consumer price inflation for the first half of 2017, just before imposition of sanctions, was reportedly between 758 percent and 1,350 percent. Following the August 2017 sanctions, oil production crashed, in turn contributing to loss of national income that was financed through printing money, skyrocketing inflation to over 1 million percent by 2018. While the initial recession of 2014–2016 increased poverty from over 12 to over 26 percent, the 2017 sanctions pushed an additional 35 percent of Venezuelans into poverty. Following the second and third waves of 2019 sanctions 50–80 percent of Venezuelans were living in poverty by the lower and upper limits of SDG targets (Figure 11.3). Beyond SDG thresholds, leading national universities provided a more dismal poverty estimate of 94 percent based on more contextually relevant national definitions of poverty in 2021 (Rodríguez, 2022). The rise of poverty when public services dwindle produce more precarious conditions. In post conflict settings, mounting sanctions and loss of government revenue severely limit public spending for reconstructing infrastructure or maintaining existing services. Promoting good health and wellbeing (Goal 3), quality education (Goal 4), and sustainable cities and communities (Goal 11) require basic infrastructure that if disrupted can reverse gains made against vulnerability. In Syria, 97 percent of the population are living below the poverty line, in a deteriorating economy with mounting food insecurity and growing inflation that reached 140 percent in 2020. Syria does not

Figure 11.3  Venezuela’s Poverty Headcount at $3.20 Per Day. Source: Sustainable Development Goals Dashboard.

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report on the poverty targets of SDGs, and after a decade of war, the impact of sanctions on the loss of resources and revenues can hardly be disentangled from those incurred through conflict. Yet, a decade of conflict has destroyed infrastructure for service delivery and displaced over 13 million Syrians. Over 6.5 million are internally displaced, while high inflations rates continue to push Syrians into further poverty, by eroding their incomes and savings. UNICEF reports that only 65 percent of hospitals and 56 percent of public health centres remain functional, while 50 percent of healthcare workers are estimated to have fled the country. At least 2.4 million children were out of school in 2021, while 35 percent of households reported no employed household member (UNICEF, 2022). Without conflict, loss of national income alone triggered Venezuela’s public services to collapse given that 75 percent of the government’s budget relies on petroleum revenue. An annual survey of living conditions estimated a 31 percent increase in general mortality from 2017 to 2018, suggesting that in one year alone 40 thousand lives were lost to Venezuela’s hyperinflation crisis, a large loss of civilian life even in contexts of armed conflict (Weisbrot & Sachs, 2019). Food insecurity (Goal 2), strained health and education systems (Goals 3 and 4), in addition to power outages and electricity crises threatened sustainability of life in Venezuelan cities and communities (Goal 11). In Iran, where services have not been cut, government spending on health has dwindled or remained stagnant when it should have increased (Goal 17). In an inflationary context, privatised services are becoming increasingly unaffordable for the average citizen and, to keep up with inflation, doctors charge increasingly higher amounts, despite government-set caps for services and insurance not covering the extra charges (Goal 3). The cycle of removing price subsidies on the one hand and attempting to compensate by increasing wages, social protection, and cash transfers on the other hand, while failing to compensate for the deficits, is distressing households. Such deterioration of quality of life is often not quantifiable, but evidence shows that transitions into poverty adversely affect collective wellbeing, particularly distressing vulnerable populations (Ameli et al., 2021). The impacts of sanctions-induced pressures on households are often felt in gendered dimensions (Goal 5). According to Shahrokni, who has qualitatively examined the impact of sanctions at the household level, life is said to feel like ‘continuous crisis’ in Iranian households, the impacts of which are felt more strongly by women, especially within the ‘invisible domain of reproductive household labour’ (Shahrokni, 2021). Indeed, the impact of sanctions on the participation of women in the formal economy is gauged by SDG targets (Goal 5), indicating that periods of economic sanctions correspond with a 4 percent decline in Iran (from 2018 reimposition of sanctions following JCPOA) and more than 10 percent decline in Venezuela (from 2017 onwards) of female to male participation share in the formal economy (Figure 11.4), despite the over 99 percent share of female participation in higher education in both countries. This is despite employment (Goal 8) remaining stable in both Iran (unemployment ~11 percent) and Venezuela (unemployment ~6 percent), thereby creating conditions of ‘in-work poverty’ that is characterised by the deterioration of real wages relative to cost of living (Batmanghelidj, 2022). Consequently, precarious short-term contracts are on the rise (Salehi-Isfahani, 2020), which according to Shahrokni’s findings, exponentially strain women when care work and housework are carried alongside dwindling incomes and precarious employment (SDG 5).

Diminished Capacity for Foreign Exchange Beyond inflation, unilateral sanctions manufacture shortages by reducing foreign exchange capacity needed for humanitarian trade and imports. When the primary source of foreign exchange 142

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Figure 11.4  Female to Male Labour Force Participation Rate. Source: Sustainable Development Goals Dashboard.

revenue is oil exports, sanctioning the oil sector will diminish external revenue and access to hard currency needed for importing food and medicine. Financial sanctions and designation of a country’s central bank blocks access to foreign reserves that can be used for humanitarian trade. Further, the rapid devaluation of national currencies, which are often driven by demand in an uncertain economy and investment market, adds additional inflationary pressures on import costs. Depending on the scale of import-dependency and self-sufficiency, shortages can arise and affect the availability and affordability of food, medicine, essential equipment, and industrial spare parts. Hunger and malnutrition (Goal 2) skyrocket, while the sustainability of health and education systems (Goals 3 and 4) electricity generation, water access, and transportation systems is threatened (Goals 6 and 11). With inflation on the rise, essential goods and services become dually less affordable and less available (Goals 1 and 2), especially for ordinary citizens who lack privileged access to national resources. Hunger has become a dominant feature of Syrian households, with 3.7 million children under the age of five living with hunger and close to three in four households reporting food as their number one priority need (UNICEF, 2022). Syria does not report on undernourishment to SDGs, but UNICEF reports that 41 percent of average household expenditure of Syrians goes to food, while the financial capacity to afford other goods and services, such as potable water, fuel, electricity, and education for children, are severely diminished (Goals 3, 4, 11). A rapid rise in malnutrition is also seen in Venezuela, where the SDGs show that in less than a decade undernourishment has increased tenfold (Figure 11.5). A major concern with looking at SDG numbers is the lack of capacity to detect short-term bouts of hunger that are often triggered by sanctions-induced shortages and disrupted supply chains. Rising undernourishment, following the imposition of 2018 sanctions in Iran, which caused disrupted supply chains and reduced government spending on food subsidies, is not adequately captured by SDG targets (Figure 11.5). Yet, the SDG threshold only counts those reported to be hungry for more than twelve months, without any apparent scientific justification that reduced caloric intake is harmful only after twelve months. Moreover, the UN’s SDG target defines hunger as caloric intake below the ‘energy requirements for minimum activity levels’––or 143

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Figure 11.5  Prevalence of Undernourishment. Source: Sustainable Development Goals Dashboard.

a sedentary lifestyle––but as Hickel notes, people living in poverty tend to have more physically demanding lifestyles and thus require more calories than the amount suited for a sedentary lifestyle (Hickel, 2018a). In the face of disrupted supply chains, diminished availability of hard currency in Iran for humanitarian trade was exacerbated as exemptions for imports were applied to humanitarian items in addition to luxury and consumer goods. Dollars seeped out of the country, spent on luxuries and consumer goods only affordable for the wealthy and powerful elite, while the capacity for humanitarian trade was reduced, making food and medicine more expensive for the ordinary citizens. According to the chief architect of sanctions in the Obama administration, Richard Nephew: ‘Hard currency streamed out of the country while luxuries streamed in, and stories began to emerge from Iran of intensified income inequality and inflation. This was a choice, a decision made on the basis of helping to drive up the pressure on the Iranian government from internal sources’ (Nephew, 2018). Indeed, a deliberate strategy to fuel income inequality (Goal 10) and accordingly Iran’s Gini-index began to rise in 2013. Moreover, the capacity for importing technologies needed for environmental protection has also been diminished (Goal 11). A recent assessment by UN experts found that sanctions are critically contributing to air pollution challenges (United Nations, 2022b). In Tehran, reportedly 4,000 premature deaths and in Iran 40,000 annual deaths are caused by environmental conditions resulting from high emission of old cars used extendedly despite being less efficient in burning fuel as sanctions make it impossible for Iran to import needed technologies and equipment that can reduce vehicle emissions.

Overcompliance of Private and Public Entities Contemporary sanction regimes imposed by the United States and European Union wield much power in decelerating the development of sanctioned states through dominance and influence in a globalised economic system. Without accountability mechanisms and oversight by the UNSC, ‘overcompliance’ of private and public enterprises with US and EU sanctions is pernicious. Despite legal exemptions that are meant to safeguard against food and medicine shortages, many 144

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enterprises avoid the risk of trade with sanctioned states, even for aid and humanitarian purposes. Further, finance and shipment channels are obstructed as banks and shipping companies are weary of dealing with sanctioned states. In addition to imports hampered, supply chains are disrupted, jeopardising domestic manufacturing and agriculture, impacting food security and poverty (Goals 1 and 2). Overcompliance of banks, shipping, and other enterprises were especially problematic during the pandemic when COVID-related trade was met with obstructions. In Syria, numerous hurdles have been reported on aid delivery and recovery efforts following a decade of conflict and a recent earthquake that has damaged public service infrastructure (Goals 3 and 4). Moreover, overcompliance severs economic and social relations, such as links between academic and nongovernmental entities, which are often instrumental for reaching SDGs through innovation and global collaborations (Goals 9 and 17). While foreign enterprises are aware that humanitarian trade is technically exempt from sanctions, they are simultaneously fearful of maintaining business activities with sanctioned states. During the COVID-19 global pandemic, the purchase of every COVID-related item, including vaccines, were met with restrictions as banks and companies chose overcompliance with OFAC rules over conducting humanitarian trade with sanctioned states. Iran experienced an early wave of coronavirus and couldn’t secure access to protective gear and equipment in time to flatten the curve of infections (Ameli, 2020). Given sanctions on textile, even imports for mask production were met with barriers. The country had to ramp up domestic production on all fronts and remarkably, it was not until Iran’s FDA approved the first domestically produced vaccine (in June 2021) that the Biden administration removed OFAC-imposed barriers on COVID-related trade, including vaccines for all sanctioned states (Ameli & Yaffe, 2021). The timing of events appeared to reflect the deeper battle over development: Iran’s strive to achieve self-reliance in the face of sanctions, and the United States’ strategic gains in upsetting Iran’s autonomy, sometimes by imposing and sometimes by removing sanctions to maintain reliance on imports. Venezuela experienced delays in securing access to vaccines because of overcompliance of a Swiss bank with US sanctions, even though the United States has no jurisdiction over Swiss banks and Switzerland has not imposed sanctions against Venezuela (Rodríguez, 2022). Many organisations face an uncertain context in relation to compliance with US and EU sanctions, a concern that has been raised repeatedly by international organisations actively engaged in the humanitarian crises (Hemsley & Achilles, 2019; Azar, 2020). In Syria, it is difficult for humanitarian actors, many of whom lack the legal capacities to navigate compliance exigencies, to structure their humanitarian engagements and secure the financial channels needed for transactions. Many of the industries are often intertwined with the government of Syria, thereby many actors would rather not engage with anything Syria-related. Following the Caesar Act, mounting complexities of secondary sanctions are prompting organisations to self-restrict their activities and avoid the strict liabilities imposed on violators who engage with the Syrian government. Many reports by international organisations have called for listening to the calls of Syrian people for restoration of basic infrastructure and services to rehabilitate their livelihoods sustainably (Hemsley & Achilles, 2019). However, donor unwillingness in reconstruction efforts, which are viewed to be helping the government of Syria in reconstruction, is thwarting early recovery that is costeffective, sustainable, and dignified, instead focusing on patch-work emergency responses that are low-impact and short-term (Azar, 2020). The result is that the resilience of communities is continuously undermined as they are pushed further into dependency. These include programming that provides access to basic services through NGO and private service deliveries rather than existing infrastructure that, if restored, could enable people to access water sustainably, produce food, 145

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and regain access to livelihood and economic opportunities. In the current response to the postearthquake crisis, after a first wave of denials on the role of sanctions in hampering aid-delivery to Syria, a concession was made to lift the requirement to provide OFAC with proof of humanitarian exemption prior to transacting, and only be accountable to provide necessary documentations in the future. While this strategy lifts the burden to prove exemptions from sanctions before sending aid, it will not assuage the fear of violating sanctions on engaging with the government of Syria to enhance aid delivery. Importantly, much of what prompts overcompliance is fear of reputational rather than legal repercussions. Part of the broader efforts to change public opinion in ways that would reduce the access of sanctioned states to resources has been conceptualised as ‘economic toxification’ by Rodríguez (Rodríguez, 2022). Such measures increase the reputational cost of engaging with sanctioned governments, but also limit interactions and exchanges between ordinary citizens of sanctioned countries and the rest of the world. For example, international collaborations on all fronts are hampered as even universities can be a victim of overcompliance and academics can be excluded from scientific collaborations and publications in major journals, jeopardising scientific output, innovation, and partnerships (Goals 9 and 17). By stigmatising entire nations, a justification is constructed for leaving citizens of sanctioned states behind in the strive to reach SDGs.

Outlook and Future Directions There is a paucity of academic research conceptualising how contemporary unilateral sanctions that are not authorised or monitored by UNSC decelerate reaching UN’s SDGs. This chapter has demonstrated that, over the past decade, unilateral sanctions have evolved to produce pernicious conditions that yield much human suffering and can reverse development. Rather than attempting to isolate sanction regimes or domestic policies in their contribution to under-development and poverty, it is important to examine the decelerating mechanisms that sanctions produce within the contexts of domestic policies and globalised economies. The UN’s current SDG framework pays attention to the balance of three dimensions in economic, social, and environmental development, with an emphasis on ‘leaving no one behind’. The existing SDG framework is a comprehensive roadmap to assess overall development circumstances. Yet, much suffering from poverty, hunger, precarity, and under-development remains undetected through the current SDG thresholds and datasets. For the three country settings of Iran, Syria, and Venezuela, discussed in this chapter, sanctions have caused substantial reversals of development, pushing people into precarious conditions, the trajectories of which are often not captured through SDG metrics. This chapter has used detailed country-specific reports produced by non-governmental entities to complement SDG data in providing a more critical overview of the context of development in the chosen country settings and highlighting the contribution of decelerator mechanisms induced by unilateral sanctions, which by being outside the UNSC framework, jeopardise human security over state security. The mechanisms and outcomes of sanctions-induced decelerative and reversive development discussed here can be used as a steppingstone for further empirical research. Further findings on the impact of sanctions ought to inform and shape the debate on what constitutes legitimate and illegitimate targets of sanctions, which in turn can dually inform sanctions policies and shape sustainable development agendas. While sanctions are often presented as a ‘humane’ alternative to war, evidence demonstrates that, when applied in the current unilateral framework, sanctions still produce significant humanitarian costs and must be monitored through more accountability mechanisms.

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SECTION III

Target States Voices from the Sanctioned States

12 DO SANCTIONS REALLY WORK? THE CASE OF CONTEMPORARY WESTERN SANCTIONS AGAINST RUSSIA Ivan Timofeev Introduction The Russian military campaign against Ukraine consequently aggravated a severe crisis in RussiaWest relations, leading to large-scale economic sanctions vis-à-vis Moscow. Russia is no stranger to Western sanctions; however, the ones of 2022 have had only a few past precedents in terms of number of targeted persons, affected sectors of the economy, and list of restricted goods and services. The U.S. and its allies have already used various types of restrictive measures, including blocking financial and sectoral sanctions, export controls, bans on Russian import, transportation and visa bans, and investment prohibitions. The level of coordination in the anti-Russia sanctions between the U.S., EU, and other Western allies is much higher than it had been before. As the Russian economy takes its losses, sanctions have had little to no impact on Moscow’s position towards Ukraine. Such dynamics raise questions regarding the efficiency of Western sanctions. Can they really affect Russian foreign policy, and if not, what is the rationale for further sanction escalation? What is the impact of sanctions on the Russian economy? How can Russia control the damage brought by sanctions, and undermine sanction efficiency? How should non-Western states, which have not joined the West’s sanction regime, approach their relationship with Russia? One of mainstream interpretation of sanction efficiency implies the ability of initiators to change the external or internal policies of target-states. This well-known finding from late twentieth century research postulated that only one-third of sanctions managed to achieve moderate or comprehensive results in changing target behavior [Hufbauer et al 1990]. Further research challenged this result by examining the number of cases that were truly considered examples of effective sanctions [Pape 1997]. Consequent findings demonstrated the damage a target state can have on the economy if sanctions are supported by international institutions; they act as a significant factor for initiator success [Bapat et al 2013]. However, other work has revealed that even heavy blows may not lead to target concessions if the target state is a political competitor of an initiator, while moderate sanctions against allied states may lead to such concessions [Drezner 1999]. Assessing sanction efficiency became even more complicated with the rise of targeted sanctions in the early twenty first century; these sanctions focus on a particular person or organization, rather than an entire country [Drezner 2015]. It is harder to assess the behavioral change of thousands of

DOI: 10.4324/9781003327448-16

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designated persons in comparison with a singular state. That is not to say that states are no longer involved with targeted sanctions, especially when a target-state’s political elite, and or major national assets and enterprises are the ones being targeted. In general, the ability of sanctions to coerce a target-state to change policies in favor of an initiator’s expectations remains a backbone criterion of sanction efficiency. Coercion goes hand to hand with signaling [Giumelli 2016]. Restrictions may be symbolic in terms of damage done to a target; however, they may bolster an initiator’s diplomatic position and threaten escalation if a target ignores incoming political demands. Still, the ultimate goal of signaling is to change the behavior of a target at the conflict’s early stage and avoid collateral economic damage. At the end, signaling is a part of coercion and the efficiency of signaling sanctions relates to the degree of a target’s political willingness to change its course. However, behavioral change is not the only purpose of sanctions. Initiators may seek to constrain target technological, military, or economic capabilities. The damage to a target itself may be a success for the initiator even if a target does not change its political course. After all, a targetstate or actor may acquire necessary material resources to fuel its policies, but sanctions make it more expensive and time-consuming. The analysis of sanction efficiency in terms of damage done to a target’s material capabilities is another mainstream approach, reflected either explicitly or implicitly in several writings [Kim 2014, Neuenkirch and Neumeier 2015, Nephew 2018]. Another interpretation of efficiency is viewed through the impact sanctions have on international business, which deals with target states or designated persons. Sanctions often fail to shape the behavior of targeted governments, nevertheless they may be much more effective in altering businesses. Companies and corporations may fear the threat of enforcement actions and secondary sanctions, which may cause severe financial and reputational damage. Such concerns may arise when a company has markets in the initiator states or is involved in international financial transactions that are connected to initiator-state banks. U.S. enforcement actions are particularly painful due to America’s dominance in international finance and supply chains [Early and Preble 2018]. That is why companies under U.S. investigation often prefer to cooperate and further comply to U.S. legal demands [Timofeev 2019]. Particularly, the financial sector turned out to be the most vulnerable in terms of enforcement consequences [Timofeev 2020] and has done a lot in recent years to control the risk of violations [Caiazza et al. 2018, Gabbi et al. 2011]. All in all, the threat of secondary sanctions and its enforcement may make foreign business abstain from dealing with a target-state and designated persons. Business tends to modify its behavior in favor of initiator demands. This may happen even in non-Western states, which formally criticized U.S. sanctions and abstain from joining them. Regardless of the political position of the home government, business may fear losing Western markets or dollar transactions mechanisms, and thus may limit its operations with a target state. Sanction implementation is a zero-sum game, where the effectiveness for an initiator is inversely proportional to the ability of a target to use restrictions of its own, adjust to incoming threats, find alternative markets, generate new revenues, and develop ties with “black knights”. The latter are the countries or actors, which provide markets and supply goods to a target, or soften the impact of restrictions in any other way. The efficiency of an initiator’s measures to coerce and constrain targets may be counter-balanced by the efficiency of a target’s adaptation mechanisms and counter sanction policies. While scholars have well highlighted the policies of initiators, the policies of targets are much less covered by literature. When it comes to Russia, sanctions effectiveness is controversial. This chapter postulates, that Western sanctions failed to affect Russian policy towards Ukraine and hence, turned inefficient in terms of shifting target behavior. The same can be said for the numerous Western signals of 152

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possible sanctions prior to February 2022. Conversely, constraining the impact of sanctions is much more salient, taking into account the damage they have brought to Russian economy. The clout of sanctions on foreign business dealings with Russia is even more dramatic, considering the wide-spread Russian market corporate boycotts by Western companies, as well as the cautious approach taken by non-Western transnational corporations when making deals with Russia. Sanctions are not the only foreign policy tool used against Russia; the U.S., EU, and others have combined it with extensive military aid sent to Ukraine, as well as comprehensive military build-up within the NATO framework. At the same time, the Russian government has been taking measures to blur the impact of sanctions, while businesses are feverishly establishing new ties with other markets beyond Western financial and supply chain networks. Despite the economic damage and the many constraints brought by sanctions, Russia may still adapt to its new realities. Such adaptation may further decrease the West’s chances to affect Moscow’s political course even to a greater extant.

The Balance of Sanctions and Countersanctions Prior to 2022 Russia faced its first round of sanctions in December 2012, when the U.S. Congress passed the Magnitsky Act [U.S. Congress 2012]. This new legislation purported financial blocking sanctions and visa bans in relation to Russian persons connected to human rights violations and corruption. The implementation of the Act was limited mostly to those connected to death of Russian lawyer Sergei Magnitsky, who was under the arrest at that time, and it hardly harmed the Russian economy [Gilligan 2016]. Nevertheless, it complicated U.S.–Russia relations and provoked retaliatory measures from Moscow. The Russian Federation Council passed its own piece of legislation and established procedures to sanction U.S. persons related to human rights violations. In its later version, it coined the notion of “foreign agents” and indicated enforcement measures against Russian persons who were receiving foreign funds for political activities at home [Russian Federation 2012]. This quick reaction demonstrated that sanctions failed to make Moscow share the U.S vision of human rights. Moreover, the Kremlin interpreted these seeds of sanctions as U.S manipulation and interference into domestic affairs [Putin 2012]. The crisis in and around Ukraine in 2014 generated much more comprehensive sanctions. The U.S. designated dozens of Russian persons, supposedly connected to the quick seizure of the Crimean region and further uprisals in Donetsk and Luhansk regions. Washington launched sectoral sanctions against Russian financial, energy and defense sectors. These sanctions implied bans on long-term credits for a limited list of persons, evident in the Sectoral Sanctions Identifications List. Other bans related to the supply of finance, goods, and services; from oil production in the Russian Arctic, as well as shell oil projects. Russia faced export control on defense items and a limited number of dual-use products. Trade prohibitions on Crimea augmented the list of restrictions. The EU imposed similar measures. Countries such as Australia, Japan, Switzerland, and a number of others either introduced their own financial and sectoral bans or joined the EU. Russia reacted by prohibiting food imports to sanction initiators [Timofeev 2022a]. The use of sanctions against Russia in 2014 overlapped with the slump of oil prices at the international markets. From 2014 to 2016, Russia faced USD 170 billion direct loses due to sanctions [Gurvich and Prilepskiy 2016]. The impact of export controls over Russia’s oil sector was limited at that time [Mitrova et al. 2018]. From 2014 to 2015, Western trade loses with Russia amounted to USD 62.94 billon [Hinz 2016: 13]. Nevertheless, their macro impact was tolerable for decision-makers at both sides, considering that none of them compromised their political course. 153

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A new wave of sanctions against Russia emerged as a response to alleged cyber-attacks against the U.S. electoral infrastructure, and Russia’s supposed interference in the 2016 elections. In 2017, the U.S. Congress passed the Countering American Adversaries through Sanctions Act (CAATSA). It codified into public law the Presidential Executive Orders on Crimea and Donbass, as well as those concerning cyber-security and constrained the U.S. President in terms of sanctions revocation without additional procedures in Congress. CAATSA also codified cyber sanctions, provided legal mechanisms to impose secondary sanctions against Russian arms consumers and imposed several other novelties [U.S. Congress 2017]. Consequently, the EU introduced its own cyber and human rights mechanisms and designated a few Russian persons. The poisoning of former Russian Intelligence officer Sergei Skripal and his daughter in the U.K. further escalated new sanctions against Moscow due to the reported use of an internationally prohibited nerve agent. Despite Russia’s denial of its involvement, the U.S. implemented the 1991 legislation and imposed limited sanctions against primary market non-ruble Russian sovereign bonds and minor export control sanctions, complemented by new blocking sanctions against Russian officials and state institutions supposedly connected to the incident. The EU introduced its own new legal framework for implementing sanctions against weapons of mass destruction use, and sanctions were imposed on a few Russian governmental servants. In macro-terms, these sanctions turned symbolic. Similar symbolic restrictions addressed the incident with Russian opposition leader Alexei Navalny, who was allegedly poisoned by a similar nerve agent in Russia [Timofeev 2021a]. Although both cases caused significant political complications and mutual diplomat expulsion, the sanctions themselves remained rather moderate even in comparison with the 2014 sanction package. By 2019, the overall impact of Western economic restrictions remained modest. It cost Russia around 0.2% annual GDP growth and could hardly be a major factor for economic performance in comparison with oil prices, infrastructure development, and fiscal policy [International Monetary Fund 2019]. More importantly, the measures brought by the U.S. and EU were kept at different speeds of sanction pressure. Washington used more diverse instruments and covered more individuals, while the EU was taking a more cautious approach, seemingly due to greater economic interdependence with Russia [Timofeev 2021b]. Prior to 2022, Washington and Brussels had had disagreements over the Nord-Stream-2 (NS-2) international pipeline project that would deliver gas from Russia to the EU via the Baltic Sea. Congress introduced two acts and authorized sanctions against those involved with NS-2, while the EU did not oppose the project and even moderately criticized Americans. Meanwhile, the U.K. emerged as a new sanction initiator after Brexit. London created its own sanction mechanisms against Russia; they were then similar to the EU’s measures and remained rather moderate [Timofeev 2022b]. Despite the controlled damage sanctions brought to the economy, they stimulated the Russian government to deal with the issue forthright. The mentioned food embargo, visa bans, and proportional expulsion of Western diplomats coexisted with legislation improvements and institutional redesign to use counter sanctions. In 2018, Russia first tested asset freezing and export control measures against Ukraine, though at that time these measures had not been used against the West. The Bank of Russia and the Ministry of Finance launched an internal financial system of transactions and communication, including the “Mir” payment system, and rapid financial transactions. These measures sought to soften the effects of Russia’s possible withdrawal from foreign payment systems, such as Visa or Master Card. Recalling Iran’s past experience in being expelled from SWIFT, Moscow created its own financial communication system – one comparably much smaller than SWIFT, but capable to function as a doomsday option. Russian financial authorities as well as banks took steps to reduce dollar transactions in national trade. However, “de-dollarization” was cautiously avoided any collateral damage to businesses. The share of the ruble and other 154

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currencies’ trade increased with the Eurasian Economic Union, but remained salient with other jurisdictions. On the legal front, the Federation Council passed a bill to authorize Russian persons under sanctions to transfer their arbitration disputes with foreign companies to Russian arbitration courts. For instance, Russian conservative TV Channel “Tsargrad” used this legal framework to challenge Google Corporation in 2020, which had previously deleted its YouTube content due to U.S. sanctions. “Tsargrad” prevailed in the proceedings and successfully recovered RUB 1 billion from “Google” [Timofeev 2021c]. By and large, Western sanctions did alter Russian’s political course. However, rather than forcing compliance to initiator demands, Russia simply adapted to existing and future sanctions, bringing the opposite results. Though sanctions caused damage, Moscow nonetheless managed to control it; Russia remained integrated in the global financial system and economy. Still, this integration provided the U.S. and its allies leverage to threaten sanction escalation, and keep Russia vulnerable to new restrictions.

The 2022 Sanctions The military crisis of 2022 was hardly made from scratch. Over the last few years, the situation in Donbass has been increasingly tense, while Russia concentrated troops around the Ukrainian border. The U.S., U.K., and EU have repeatedly and explicitly signaled “sanctions from hell” if Russia were to pursue a military offence. Washington inked in possible economic restrictions in numerous Congressional bills, as well as statements from the President his administration officials. Moscow has voiced its principal concerns related to the overall security situation in Europe, NATO enlargement, and Ukraine’s de facto involvement in the Euro-Atlantic security sphere. Russian officials stressed the nationalistic radicalization of Ukraine, growing number of civilian victims in Donbass, and the threat Ukraine poses to Russian speaking Ukrainian citizens. These concerns had been generally rebuffed by Ukraine and the West, with a particular emphasis of Moscow’s direct responsibility for the crisis in and around Ukraine [Timofeev 2022c]. Historians will inevitably debate the drivers and causes of the military clash, while politicians on both sides will be playing a mutual blame-game. However, it is clear that the threat of sanction imposition, combined with a diplomatic marathon and military demonstrations failed to prevent further escalation. When Moscow commenced a full-scale military operation against Ukraine, the West’s reaction was immediate, including sanction implementation. Unlike previously, the level of coordination between Washington, London, Brussels, and others appeared to be much higher. New measures included blocking sanctions against major Russian banks, including the Bank of Russia and the National Wealth Found, prohibitions on Russian sovereign bond dealings, restrictions on new investments to Russia, limitations on Russian cash inflow and deposit accounts for Russian citizens. Financial blocking sanctions covered more than 1500 of Russian private and state-owned companies, media and official institutions, officials, businessmen, as well as public figures and their families [U.S. Department of Treasury 2022]. This figure must be much bigger taking into account the “50% rule”, which covers subsidiaries and assets of already blocked persons. A number of other entities faced sectoral sanctions, including those in infrastructure, telecom, and other sectors. Western state authorities froze more than USD 300 billion of Russian reserves, not to mention the massive blocked persons’ asset freeze. Export control has increased dramatically; initiators prohibited supplying a wide range of high-tech goods including lasers, sensors, electronics, navigation devices, etc. These lists consequently covered numerous industrial goods including machines, engines, equipment for the energy sector, etc. A luxury goods supply ban complemented these measures. The U.S. export control of high-tech goods covered those produced in even third 155

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countries that use U.S. technology or those that contain U.S. components. Key sanction initiators denied the supply of various services to Russia, including accounting consultancy. Import control was dramatic as well; the U.S. banned Russian oil and other fossil fuel on its market. Step by step, the EU prohibited Russian coal, steel, oil, and oil products. The U.K., Canada, and other Western initiators did the same. Russian gold, food, wood, and a number of other products appeared on stop-lists. Transportation sanctions denied Russian vessels and aircraft to enter initiator ports, airports, and aerospace. The EU prohibited road access for Russian owned transport. The G7 even banned Russian seaborn oil and oil product transportation if the price of the contract to purchase these products exceeded the cap defined by the member-states [Timofeev 2022a]. Western businesses in Russia appeared to have demonstrated overwhelming compliance to sanctions, aggravated by corporate boycotts that went beyond formal restrictions. There are few cases, if any, in recent history when corporate boycotts turned so massive as they did in Russia. Recent U.S. data indicated more than 1000 ventures left Russia. The ones from the U.S., U.K., Germany, Switzerland, France, Netherlands, Finland, Sweden, Poland, and Ireland constitute the majority. However, the same sources indicate that dozens of foreign companies are still operating in Russia [Sonnenfeld et al. 2022]. According to another study, out of the 119 German companies that were in Russia, 23 companies left, 37 reduced most operations, 20 maintained merely basic operations, 17 froze new investments, while 22 continued normal performance in the areas not covered by sanctions [Belov and Kotov 2022: 41]. At the same time, Russian sanction compliance clearly increased. An illustrative case is the Russian “Mir” payment system; on September 15 the U.S. blocked Vladimir Komlev, Chief Executive of National System of Payment Cards (NSPC), which operates “Mir”. Neither NSPC, nor “Mir” itself faced blocking sanctions. However, the U.S. Treasury highlighted in its Frequently Asked Questions menu, that those foreign persons who use “Mir” to evade the Russian blocked persons may face U.S. blocking sanctions themselves. This statement caused banks from several countries, including those friendly with Russia (such as Turkey, Armenia, Kazakhstan, Uzbekistan, and others), to immediately suspend the use of the “Mir” payment system [Chernyishova 2022a]. In the short run, sanctions caused visible damage to the Russian economy, though it turned out less than expected. From March to June 2022, Russian authorities and experts manifested alarming assessments of GDP loses at around 6–10% in 2022 [Vinogradova and Degotkova 2022], while in September the expectations shifted to 2–3% in 2022 and then down to 1% in 2023. The Bank of Russia and the Ministry of Finance managed to calm down the panic in financial and currency markets in February and March. Inflation grew but remained within a tolerable 12–13%. Industrial production lost 4.5%, though some sectors suffered much more. For instance, automobile production faced a 50% slump. Other machinery building sectors went through 10–17% shrinks, while chemistry production fell 9–10% [Russian Government 2022a]. Oil exports demonstrated 7% growth in 2022 [Novak 2023] that is it increased to 248 million tons in 2022 from the 232 million tons in 2021. However, it may shrink to 216 million tons in 2023 and remain at 223 million tons in 2024 and 2025. While oil may find buyers in Asia, oil product export redirection may counter bigger problems. Experts expect a decline of oil product exports to 119 million tons in 2022 compared to the 144 million tons in it had in 2021. Further decline is expected in 2021 (to 114 million tons) and in 2024 (to 108 million tons). Supplies of pipe-line gas will be a challenge due to the EU’s extensive efforts to replace Russian gas, as well as the recent sabotage related to the Nord-Stream pipeline. Compared to the 2021, natural gas exports in 2022 will fall from 204 billion cubic meters to 136 billion and may consequently continue to fall to 130 billion in 2023, and 128 billion in 2024 [Vnesheconombank Institute 2022]. Due to pipeline infrastructure constraints, it is much harder to redirect supplies of gas to Asian 156

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markets than it is with oil. Unemployment rates may fluctuate relatively around a solid 7–8.2%, but incomes may reduce or stagnate, while technological bans may lead to labor market simplification in the short and mid-term [Tueva 2022]. The loss of human capital is another problem; in first six months of 2022 there has been a net flow of only 96,737 individuals compared to last year’s first six-month net flow of 114,2015 [Rosstat 2022: 370]. The outflow of high-skill IT professionals is particularly concerning for the government. In general, sanctions failed to cause the immediate collapse of the Russian economy and financial system. Nonetheless, the losses are significant. Possible fluctuations of commodity markets may affect economic recovery, while collateral damage may have qualitative rather than quantitative implications. On the other hand, Western assessments indicate more comprehensive damage. A recent report highlights some official statistical indicators of Russian economy that are harder access. It emphasizes the risks connected to the loss of the European energy market, import collapse, poor domestic production capacity, foreign direct investment outflow, as well as structural economic weaknesses. The authors conclude that Russia’s economic oblivion is inevitable if sanction pressure remains consolidated [Sonnenfeld et al. 2022]. The U.S. government’s sanction impact factsheet indicates a 70% decline in electronics supplied to Russia, and underlines the particular damage of this cut for the Russian military industry [U.S. Department of Treasury 2022]. Another approach is more cautious: the Russian economy creates sound conditions for a prolonged resistance due to low public debt, high savings, restrained spending policies, reserve accumulation, relatively high commodity prices, and the delayed effects of current Western restrictions [Langhammer 2022]. In the long run, various “black knights” may bolster Russian resilience. Compared to 2021, Russia’s trade with China skyrocketed up 33% [Tkachev 2022b]. There is an exponential demand from Russian corporate and private clients for using CNY/RMB [Ruzleva 2022]. It is premature to state that the Chinese currency has fully replaced the U.S. Dollar and Euro, however, the Yan is likely to become the best option for Russian trade, considering the level of diversification of Chinese markets and China’s industrial capacity. At the same time, Chinese businesses fear secondary sanctions and their enforcement. UnionPay – the Chinese payment system – has reportedly limited its cooperation with Russian partners that have been blocked by the U.S. [Chernyishova 2022b], yet other problems between Russian transactions with Chinese banks were evident even before 2022 [Bazhanov and Zakharov 2018]. The Russian pivot to China provides new opportunities for the nation, but the transition may be long and painful due to the threat of secondary sanctions, its infrastructure, and overall uncertainty; Moscow itself fears its excessive dependence on China [Zuenko 2022]. Towering Sino-American rivalry may fuel a Russia–China partnership, however, the economy may not go hand to hand with politics. Trade between India and Russia is even more impressive. In the first half of 2022, the number of trade exceeded the corresponding figures for 2021 and 2020 by 2.7 times and 3.2 times, respectively. Russian oil exports grew most notably, while imports from India were reduced. Still, the volume of Russia’s trade with India is more than 10 times less than the one with China (USD 12 billion compared to China’s 153 billion), which provides the Russia–India trade with a low-base effect [Sapozhnikov and Edovina 2022]. Moscow and Delhi have both been showing interest in supporting mutual trade by negotiating direct ruble-rupee transactions [Tairov 2022], though the results are of such discussions still remain unclear. Like the Chinese, Indian businesses remain rather cautious with Russia, though experts had contemplated possible ways to deal with sanctions before 2022 [Bhandari et al. 2018]. Turkey is another important partner for Russia. 2022’s trade turnover has high chances to double from that of 2021 and reach USD 80 billion [Baynazarov 2022]. Turkey may turn into an 157

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important “parallel import” bridge to Russia, as well as become its oil supply hub to other markets. At the same time, political relations between Moscow and Ankara may fluctuate due to Turkey’s NATO membership and its extensive cooperation with Ukraine. Such fluctuations may affect economic sustainability. Being both under heavy sanctions, Iran seems to be Russia’s natural ally. Tehran has been facing extensive restrictions since the outbreak of revolution of 1979. Major Iranian public and private ventures in financial, energy and industrial sectors counter U.S. blocking sanctions. They have seemingly nothing to fear in terms of secondary sanctions or their enforcement. Recent publications voiced interest in increasing trade turnover from USD 4 billion in 2021 to 40 billion. Prior to February 2022, agricultural commodities prevailed in a trade balance. In recent months, industrial imports from Iran to Russia demonstrated a 30% increase, including the import of goods under Western export controls. In exchange for car parts and fuel turbines, Russia may find a market for its steel in Iran. Both countries have also expressed their readiness to accelerate the development of the North-South Transport Corridor (INSTC). Still, a recent report from the Tehran Chamber of Commerce calls for a balanced and cautious approach with Russia; secondary sanctions remain to be problematic for Iranian businesses, despite existing U.S. restrictions against Iran [Tkachev 2022a]. In short, major “black knights” may compensate Russian losses in Western markets, however, a durable financial transaction system is still in question. The same can be said about the deficit of critical high-tech and industrial imports. The Russian government has implemented numerous urgent measures to adapt to sanctions or to inflict counter damage to the initiators. One such novelties was the concept of unfriendly states. It emerged in 2021 as a response to the new wave of Western sanctions. At that time, it covered the U.S. and Czech Republic, and implied limits for diplomatic institutions of the mentioned states in Russia to hire Russian staff. Consequently, such restrictions encompassed Greece, Denmark, Slovakia, Slovenia, and Croatia. In March 2022, the government introduced another list of unfriendly states. Now, the list includes 47 states, all of which introduced sanctions against Russia. The government has inked in several conditions for financial and trade operations with people and entities who belong to unfriendly states. These restrictions include credit liability operations of Russian residents to unfriendly state persons (and vice versa), limitations to move currency away from Russia, permission for Russian enterprises in strategic areas to deny information sharing with persons from unfriendly states, ban real estate transactions, greenlight Russian entities to register aircraft belonging to leaders from unfriendly states, pay leasing fees in Russian rubles, ensure and maintain aircraft in Russia. Besides that, they identify the Russian ruble as the transaction currency of gas exports to these states. Russian residents were obliged to sell 80% of their foreign currency revenues. The Russian President empowered the government to compose lists of sanctioned persons, and to prohibit financial transactions with them; Russia has fully adopted a sanctions mechanism similar to Western blocking sanctions. In light of the massive Western company withdrawal from Russia, as well as export sanctions on various critical goods and services, the government permitted “parallel imports” of such goods and services from third countries, if they had been legally imported by these countries [Egorov et al. 2022]. The overall purpose of these Russian measures was to diminish currency outflow from Russia, protect Russian persons and entities from discrimination due to foreign sanctions, restrict the participation of unfriendly states in Russia’s capital market and critical enterprises, maintain ruble stability, and ensure the maintenance of critical equipment in civil aviation and other industries. The Russian retaliation measures appeared to be quite limited. The Ministry of Foreign Affairs invoked visa bans related to hundreds of citizens from initiator states, allegedly connected to hostile polices against Russia, including 1271 U.S. persons [Russian Ministry of Foreign Affairs 2022]. However, these individuals do not face the 158

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blocking financial sanctions that the U.S. and other initiators have imposed on their Russian counterparts. Currently, the Russian list of blocked persons is limited to 74 military companies and 32 enterprises from other sectors [Russian Government 2022b]. The Russian government apparently runs a counter sanctions policy under the assumption that new restrictions from the West are inevitable, while the existing ones will last for years and decades. The Iranian case is instructive for Russia in many respects; it shows that an even less capable power may survive under sanctions for more than 40 years, while Western obligations to revoke them may be easily reconsidered, as the U.S. demonstrated with its unilateral withdrawal from the “Iranian Nuclear” deal. Russia is under no illusion that the prospects of sanction revocation in the near future is just as possible as normalizing the situation in Ukraine. In other words, the prospect of sanction reduction could hardly be a motivation for the Russian side to change its political course. At the same time, limited retaliation restrictions from Russia against the West have even less chances to change the policies of the initiators. Like Russia, the West is adopting to the new energy and commodity market realities. Neither side is likely to compromise its political line. *** In terms of quantity and quality of sanctions imposed, the case of Western sanctions against Russia before and particularly after February 2022 have few precedents since the end of Cold War. Paradoxically, this case is rather standard in terms of previously studied sanctions. The failure of the initiators to force a target to meet their political demands is more historically normal than deviant. The fact that Russia is a great power with a large economy and a wide range of capabilities of its own amplifies such a normality. The ability of the contemporary sanctions toolkit to cause enormous harm to a target is also a nothing new; Russia fits the trend here as well. Literature predicting the behavior of businesses under the threat of sanctions proves also correct in view of the Russian case. Moreover, massive corporate boycotts and compliance to the U.S. and other initiators’ norms turned to be even more notable in comparison with those previously exposed by scholars. The Russian, European, Indian, Chinese, Turkish, and other companies used to be important partners for Tehran, yet when the U.S. commenced sanction enforcement and its secondary sanctions policy, businesses increased their compliance to the U.S. Russia is now facing a similar challenge. Though trade with non-Western partners is skyrocketing, it is still unclear if globalized businesses in these countries would be eager to evade sanctions and provide Russia with items that originated in the West and are now under its control. The Russian government’s proactive policy to adopt to sanctions follows a normal strategy of a great power that is in conflict with its opponents. At the same time, many questions remain. Considering Russia’s higher level of globalization prior to sanction imposition than that of Iran or North Korea, what are the limits of Russia’s economic durability? Will Russia be able to reestablish its own industries and under what conditions would China and other powers evade sanctions to help Russia? Would towering competition with the U.S. stimulate China to be a more assertive “black knight” for Russia? How stable will the Western sanction coalition be in light of the damage the initiators face themselves? Would the Russian case provoke a decline of trust to the U.S. dollar as a major payment instrument considering its political use? Is the Chinese Yan or another currency a viable alternative? Last but not least, would sanctions or counter sanctions stop the use of military force in Ukraine? Would they contain others from using it in future conflicts? Alternatively, can sanctions further aggravate the situation and perhaps fuel other conflicts in other parts of the world? All these questions will be under the spotlight of future research, while the Russian case will be a food for thought for sanctions scholars in the foreseeable future. 159

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Bibliography Bapat, N.A., Heinrich, T., Kobayashi, Y., Morgan, C. (2013) ‘Determinants of Sanctions Effectiveness: Sensitivity Analysis Using New Data’, International Interactions 39: 79–98. Baynazarov, E. (2022) ‘Russians Have No Problem with ‘Mir’ in Turkey. An Interview with Alexei Egarmin’, Izvestiya, September 6, available at: https://iz.ru/1389618/elnar-bainazarov/problem-s-raschetom-kartoimir-v-turtcii-u-rossiian-net (accessed November 12, 2022) [In Russian]. Bazhanov, P. and Zakharov, A. (2018) ‘Why Do Chinese Banks Comply the U.S. Sanctions against Russa?’ Forbes, November 15, available at: https://www.forbes.ru/finansy-i-investicii/369239-pochemu-kitayskie-banki-soblyudayut-sankcii-ssha-protiv-rossiyan?ysclid=lampawaano133026082 (accessed November 12, 2022) [In Russian]. Belov, V. and Kotov, A. (2022) ‘Germany’s Anti-Russia Sanctions Policy: Intermediate Results and Countermeasures’, Analytical Papers of the Institute of Europe RAS 27 (IV): 37–42 [In Russian]. Bhandari, A., Giri, Ch., Kulkarni, K. and Kupriyanov, A. (2018) ‘Russia-India Cooperation against the Background of Sanctions: Adverse Effects and New Opportunities’, Russian International Affairs Council Policy Brief, November 15, available at: https://russiancouncil.ru/en/activity/policybriefs/russia-indiacooperation-against-the-background-of-sanctions-adverse-effects-new-opportunities/ (accessed November 12, 2022). Caiazza, S., Cotugno, M. Fiordelisi, F. and Stefanelli, V. (2018) ‘The Spillover Effect of Enforcement Actions on Bank Risk-Taking’, Journal of Banking and Finance 91: 146–159. Chernyishova, E. (2022a) ‘MIR-Cards are Close to Halt Abroad. What are the Alternatives?’, RBC, September 29, available at: https://www.rbc.ru/finances/29/09/2022/633410dc9a7947084cd3d875 (accessed November 12, 2022) [In Russian]. Chernyishova, E. (2022b) ‘UnionPay Has Limited the Use of Foreign Released Cards in Russia’ RBC, September 2, available at: https://www.rbc.ru/finances/02/09/2022/6310b9ae9a7947521855a280 (accessed November 12, 2022) [In Russian]. Drezner, D. (1999). The Sanctions Paradox: Economic Statecraft and International Relations, New York: Cambridge University Press. Drezner, D. (2015) ‘Targeted Sanctions in a World of Global Finance’, International Interactions 41: 755–764. Early, B. and Preble, K. (2018) ‘Enforcing Economic Sanctions: Analyzing How OFAC Punishes Violators of U.S. Sanctions’, available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3306653 (accessed October 12, 2022). Egorov, Puginskiy, Afanasyev and Partners Law Firm (2022) Guide to Legal Norms in Response to Foreign Restrictive Measures, Moscow, September. [In Russian]. Gabbi, G., Tanzi, P.M., Nadotti, L. (2011) ‘Firms Size and Compliance Costs Asymmetries in the Investment Services’, Journal of Financial Regulation and Compliance 19 (1): 58–74. Gilligan E. (2016) ‘Smart Sanctions Against Russia: Human Rights, Magnitsky and the Ukrainian Crisis’, Demokratizatia: The Journal of Post-Soviet Democratization 24 (2): 257–277. Giumelli, F. (2016). ‘The Purposes of Targeted Sanctions’ in T. Beirsteker; S. Eckert; & M. Tourihno (eds). Targeted Sanctions. The Impacts and Effectiveness of United Nations Action, New York: Cambridge University Press: 38–60. Gurvich, E, Prilepskiy, I. (2016) ‘The Impact of Financial Sanctions on Russian Economy’, Economic Issues 1: 5–35. [In Russian]. Hinz, J. (2017) ‘The Cost of Sanctions: Estimating Lost Trade with Gravity’, Kiel Working Paper. No 2093, November. Hufbauer, G., Shott, J., Elliott, K. (1990) Economic Sanctions Reconsidered: History and Current Policy. 2nd Edition, Washington DC: Peterson Institute for International Economics. International Monetary Fund (2019) ‘Russian Federation: Staff Report’, June 25, available at: https://www. imf.org/en/Publications/CR/Issues/2019/08/01/Russian-Federation-2019-Article-IV-Consultation-PressRelease-Staff-Report-48549 (accessed November 12, 2022). Kim, H. (2014) ‘Stifled Growth and Added Suffering. Tensions Inherent in Sanctions Policies against North Korea’, Critical Asian Studies 46 (1): 91–112. Langhammer, R. (2022) ‘Russia is Financially Prepared for Longer War – Even in Case of an Oil Embargo’, Statement of May 4, available at: https://www.ifw-kiel.de/publications/media-information/2022/russia-is-financially-prepared-for-longer-war-even-in-case-of-an-oil-embargo/ (accessed November 12, 2022).

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Do Sanctions Really Work? Mitrova, T., Grushevenko, E. and Malov, A. (2018) Prospects for Russian Oil Production: Life under Sanctions. Moscow: Moscow School of Management «Skolkovo». Nephew, R. (2018) The Art of Sanctions. A View from the Field, New York: Columbia University Press. Neuenkirch, M. and Neumeier, F. (2015) ‘The Impact of UN and US Economic Sanctions on GDP Growth’, European Journal of Political Economy 40: 110–125. Novak, A. (2023) Statement of January 16, 2023, available at: http://government.ru/news/47544/ [In Russian]. Pape, R.A. (1997) ‘Why Economic Sanctions Do Not Work’, International Security 22 (2): 90–136. Putin, V. (2012) Press-Conference of December 20, available at: https://regnum.ru/news/1606928.html [In Russian]. Rosstat (Federal Service for State Statistics) (2022) ‘Socio-Economic Situation in Russia. January-June 2022’, available at: https://rosstat.gov.ru/storage/mediabank/osn-07-2022.pdf (accessed November 12, 2022) [In Russian]. Russian Federation (2012) Federal Law 272-FZ of December 28, 2012, available at: http://www.consultant. ru/document/cons_doc_LAW_139994/ (accessed October 12, 2022) [In Russian]. Russian Government (2022a) ‘Governmental Committee on Russian Economy Sustainability under Sanctions Session’, August 29, available at: http://government.ru/news/46371/ (accessed November 12, 2022) [In Russian]. Russian Government (2022b) Regulation № 851 of May 11, available at: http://publication.pravo.gov.ru/ Document/View/0001202205110017?ysclid=lawqd8o51856824357 (accessed November 17, 2022) [In Russian]. Russian Ministry of Foreign Affairs (2022) ‘The List of U.S. Citizens under Personal Sanctions’, November 11, available at: https://www.mid.ru/ru/maps/us/1814243/ (accessed November 17, 2022) [In Russian]. Ruzleva, E. (2022) ‘Russian Banks Report Accelerated Demand of Chinese Yan: Who and How Buys Chinese Currency?’ Forbes, October 29, available at: https://www.forbes.ru/investicii/480428-spros-nauan-v-rossijskih-bankah-vyros-v-razy-kto-i-kak-ego-pokupaet?ysclid=lamoygwa64750642076 (accessed November 12, 2022) [In Russian]. Sapozhnikov, O. and Edovina, T. (2022) ‘Russian Oil Has Contributed to India’s Imports’, Kommersant, September 9, available at: https://www.kommersant.ru/doc/5559573?ysclid=lamrw3xgwg974656006 (accessed November 12, 2022) [In Russian]. Sonnefeld, J. (2022) ‘Yale CELI List of Companies Leaving and Staying in Russia’, Yale School of Management, November 25, available at: https://www.yalerussianbusinessretreat.com/ (accessed November 12, 2022). Sonnenfeld, J., Tian, S., Sokolowski, F., Wyrebkowski, M. and Kasparowicz, M. (2022) ‘Business Retreats and Sanctions Are Crippling the Russian Economy’, Yale School of Management, August, available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4167193 (accessed November 12, 2022). Tairov, R. (2022) ‘Russia Has Proposed India an Alternative to SWIFT to Run Ruble-Rupee Transactions’, Forbes, March 30, available at: https://www.forbes.ru/finansy/460809-rossia-predlozila-indii-al-ternativuswift-dla-platezej-v-rublah-i-rupiah?ysclid=lamsaev897501032376 (accessed November 12, 2022) [In Russian]. Timofeev, I. (2019) ‘Rethinking Sanctions Efficiency. Evidence from 205 Cases of the U.S. Government Enforcement Actions against Business’. Russia in Global Affairs 17 (3): 86–108. Timofeev, I. (2020) ‘Sanctions for Sanctions Violation: U.S. Department of Treasury Enforcement Actions against the Financial Sector’, Polis. Political Studies 6: 73–90. Timofeev, I. (2021a) ‘Unilateral and Extraterritorial Sanctions Policy: The Russian Dimension’ in Ch. Beaucillon (ed). Research Handbook on Unilateral and Extraterritorial Sanctions, London: Edward Elgar Publishing: 90–109. Timofeev, I. (2021b) ‘Policy of Sanctions in Russia-EU Relations’ in T. Romanova; & M. David (eds.). The Routledge Handbook of EU-Russia Relations. Structures, Actors, Issues. London: Routledge: 248–259. Timofeev, I. (2021c) Meeting the Challenge of Economic Sanctions: Russian Legislative and Institutional Perspective. Financial Journal 13 (4): 8–23. Timofeev, I. (2022a) ‘Sanctions on Russia: A New Chapter’, Russia in Global Affairs 20 (4): 103–119. Timofeev, I. (2022b) ‘Britain’s Sanctions Policy: Institutional Design and Targeting Russia’, Herald of the Russian Academy of Sciences 92: 504–511. Timofeev, I. (2022c) ‘Ukraine: Three Scenarios after the Answer from Washington’, Valdai Discussion Club Expert Opinion, January 31, 2022. Available at: https://valdaiclub.com/a/highlights/ukraine-threescenarios/ (accessed November 12, 2022)

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Ivan Timofeev Tkachev, I. (2022a) ‘Iranian Business Has Proposed Four Scenarios to Deal with Russia. It Does Not Strive to Face Western Secondary Sanctions’, RBC, November 17, available at: https://www.rbc.ru/economics/ 17/11/2022/6374c6db9a79474f554a6605?ysclid=lawpz3104r680757872 (accessed November 17, 2022) [In Russian]. Tkachev, I. (2022b) ‘Russia-China Trade Has Shattered Annual Record in Advance’, RBC, November 7, available at: https://www.rbc.ru/economics/07/11/2022/6368c0209a7947cd28bf0605 (accessed November 12, 2022) [In Russian]. Tueva (2022) ‘We Will Face Gradual Loose of Modern Skills. An Interview with V. Gimpelson’, Kommersant, June 12, available at: https://www.kommersant.ru/doc/5405587 (accessed November 12, 2022) [In Russian]. U.S. Congress (2012) Public Law 112-208 of December 14, 2012, available at: https://www.congress.gov/ bill/112th-congress/house-bill/6156/text (accessed October 12, 2022). U.S. Congress (2017) Public Law 115-44 of August 17, 2017, available at: https://home.treasury.gov/policyissues/financial-sanctions/sanctions-programs-and-country-information/ukraine-russia-related-sanctions (accessed November 12 2022). U.S. Department of Treasury (2022) ‘Treasury-Commerce-State Alert: Impact of Sanctions and Export Controls on Russia’s Military-Industrial Complex’, October 14, available at: https://home.treasury.gov/ system/files/126/20221014_russia_alert.pdf Vinogradova, E. and Degotkova, I. (2022) ‘First Central Bank Survey under Tough Sanctions. What are the Expectations for Russian Economy?’, RBC, March 10, available at: https://www.rbc.ru/economics/10/03/ 2022/622a1c289a7947821fa7a5e2 [In Russian]. Vnesheconombank Institute (2022) ‘Russian Economy under Sanctions: Current Situation and Forecast’, November, available at: http://inveb-docs.ru/attachments/article/955/%D0%BF%D1%80%D0%BE%D0% B3%D0%BD%D0%BE%D0%B7_11_2022~.pdf (accessed November 12, 2022) [In Russian]. Zuenko, I. (2022) ‘New Crisis Brings New Opportunities for Chinese Business and Russia’, Russian International Affairs Council, April 5, available at: https://russiancouncil.ru/en/analytics-and-comments/ analytics/new-crisis-brings-new-opportunities-for-chinese-business-and-russia/ (accessed November 12, 2022).

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13 THE US SANCTIONS AND THE CHINESE POLITICAL ECONOMY Zhun Xu and Lingyi Wei

Introduction The Chinese are not unfamiliar with hostility and sanctions from the US and the West. After all, after its founding in 1949, the people’s republic went through decades of blockade and containment against the socialist camp and even more so against China. The isolation became worse when China split with the socialist camp due to serious political disagreements with the Soviet Union around 1960. Thus, Maoist China particularly emphasized the importance of self-reliance among others in economic affairs. The Sino-US relationship, however, quickly recovered after the Maoist radical era and the two countries started their collaboration on multiple fronts during the 1980s. There was a political/ military factor as China and the US worked together against the Soviet Union. But a more lasting cause for the collaboration was arguably economic. The US capital started outsourcing in the neoliberal era and the US-led global capital was keen on restructuring the global economy to better exploit the cheap labor in the global south. The then fast-growing Chinese economy and the vast profit potential in China seemed to provide a long-term basis for a mutually beneficial relationship between the two countries. A good example of this is the rather swift lifting of US sanctions in the aftermath of the 1989 political turmoil in China. Clearly, the benefits of business interests associated with China prevailed despite other considerations. Throughout much of the neoliberal era, China and the US have developed a close working relationship and China overall is an avid follower of the US. Hundreds of thousands of Chinese students went for higher education or job opportunities in the US, the Chinese cadres often chose to train in the leading US universities, and the leadership in both countries seemed to have formed a reliable personal relationship as well. Even with the US bombing of the Chinese embassy in Belgrade among other aggressions, the mainstream media carefully focused more on the mutualbenefit narrative, and the pro-US sentiment was widespread among the social public. For example, a Pew survey in 2010 found that 58 percent of Chinese had positive views of the US and 68 percent considered the Sino-US relationship as one of cooperation while only 8 percent considered it hostile (Pew Research Center, 2010, p. 55). Under this context, it is not an exaggeration to suggest that Chinese society was in total shock by the news of a new round of US sanctions against China around 2016. Unlike the previous DOI: 10.4324/9781003327448-17

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sanctions, China was not going through a revolution and taking over imperialist assets, nor was there any major political turmoil or social repression. The US first targeted some leading private Chinese companies such as ZTE and Huawei, and then carried out more sanctions against leading Chinese research institutes and universities, and eventually, the sanctions extended to products of the Xinjiang Uygur Autonomous Region (XUAR) among other things. Regardless of the US official justifications for all these actions, the scale and intensity of such measures against China suggest that the US has shifted its fundamental strategy regarding China and the long collaborative relationship between the two countries might have come to an end (Xu and Lin, 2022). And it is not just the Chinese companies in China that are at risk, as the students and scholars with Chinese backgrounds or connections are also targeted. US politicians have accused Chinese students as spies and introduced bills to limit the visas for Chinese graduate students in STEM (US Senator Cotton website, 2021). On a probably unprecedented scale, major US research institutions and universities have been investigating their employees’ relationship with China. By 2020, this has resulted in at least dozens of scientists resigning from the National Institutes of Health alone, and criminal charges against some prominent researchers, including Charles Lieber at Harvard and Gang Chen at MIT (Mervis, 2020). All these unexpected pieces of news were widely read and discussed among Chinese readers. The return of the US sanctions, and the explicit targeting of China and the Chinese people by the US authorities, marked a watershed moment in the neoliberal era. At this potentially important turning point, it is of great interest to examine how the US sanctions have affected the Chinese political economy, especially how different social and political camps have perceived and reacted to such changes in the relationship between China and the US (and the entire West to a certain extent). The current situation is very different from the Cold War containment, as the two countries remain highly dependent on each other economically, and the decades of collaboration between the US and Chinese business elites have forged ties that cannot be easily broken. The liberals in China, who have benefited from neoliberalism and the close Sino-US relationship, wanted to preserve the status quo as much as possible. At the same time, the close Sino-US collaboration came at the expense of both working classes at home. The leftist voices in China, therefore, tend to be much more critical of the US-led neoliberal order in general, and more explicitly anti-imperialist against the US sanctions. And the nationalist camp was able to gain some popularity for a while during the US aggressions, although they usually do not challenge the official government narratives. Finally, the Chinese government has its traditional low-key way of handling international affairs, although the diplomats were also affected by the “wolf-warrior” type sentiments in recent years. Interestingly, even though the Chinese government is highly critical of US sanctions, it still attempts to uphold US-centered globalization and restore the pre-sanction US-China collaborations.

The New Wave of Sanctions The US government and media have produced different talking points about China taking unfair advantage of the US and/or violating certain norms and rules in recent years. The real concern, however, has to do with the insecurity of the US ruling class with the relatively declining US hegemony and a rising non-Western country under a communist party. As John Bellamy Foster (2021) argues, the aggressions against China by the leading imperial capitalist aim to bind Beijing, together with its allies and the entire periphery of the capitalist system, “to the rules-based international order controlled by the triad, while at the same time keeping the Chinese economy, the motor of world economic growth, going.” For example, according to a study by the China Development 164

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Institute, from January 2017, when the Trump administration took office, to June 2021, when the Biden administration passed the US Innovation and Competition Act of 2021 (USICA), the US Congress, the government, and key think tanks have released 209 bills, policies, and reports concerning science and technology policies toward China (Chen and Lei, 2022). Although technically not part of the sanctions, Trump’s signature trade war should also be viewed as part of the China package initiated by the US ruling class, which continued under the Biden government. Starting with the trade war, the US started to impose waves of punitive measures against China. One of the earliest moves was the Section 301 tariffs. In March 2018, President Trump imposed tariffs on $50 billion worth of Chinese goods, citing intellectual property theft and forced technology transfers (The Office of the United States Trade Representative [USTR], 2018). The tariffs were increased to $200 billion later that year. The US Department of Commerce maintains an Entity List which makes it extremely difficult for the listed companies to access US technology and conduct business with the US companies and all other companies that seek to comply with the US rules. And in May 2019, the US Commerce Department added Huawei and 68 of its affiliates to the Entity List (US Department of Commerce, 2019). In November 2020, President Trump signed an executive order prohibiting US investments in companies that the US government determines are owned or controlled by the Chinese military (The White House, 2021). In the same year, the US also imposed sanctions on various entities in two Chinese regions: Hong Kong and Xinjiang (see below). There are at least three main types of US sanctions against China. The first is regarding the alleged military connections of certain Chinese companies and institutions including some leading universities. Not only the students in those universities lost access to basic computing software such as MATLAB, but they were also more likely to be rejected for visas for graduate study in the US (Wang, 2021). Following the Huawei sanctions, in August 2020, the US Department of Commerce added the China Communications Construction Company among 23 other Chinese companies to its Entity List, as the US government accused them of constructing and militarizing artificial islands in the disputed waters of the South China Sea (US Department of Commerce, 2020; US Embassy in Sri Lanka, 2021). In January 2021, the Trump administration imposed sanctions on six Chinese companies for similar reasons (Shepardson et al., 2021). The second type of sanctions is mostly the so-called secondary sanctions, which target Chinese companies’ business with Iran and other US-sanctioned entities. For example, Huawei fell under this category for its alleged trade with Iran. The US government has long been wary of Huawei due to its ties to the Chinese government and has alleged that the company poses a risk to national security (Berman et al., 2023). In 2020, the US Department of Justice filed criminal charges against Huawei, alleging that the company had engaged in a long-running conspiracy to steal trade secrets from US technology companies (US Department of Justice, 2020). The US government has also accused Huawei of violating US sanctions against Iran by selling US-made products to the country in violation of US law. These allegations and concerns have led the US government to take a variety of actions against Huawei, including placing the company on the Entity List, which among others stripped Huawei’s access to some of the essential services in the Android system. The US government has argued that these actions are necessary to protect national security and prevent intellectual property theft and other illegal activities. The third type is concerning alleged human rights violations. The US imposed visa restrictions and sanctions on Chinese officials and businesses, citing repression of Uyghurs and other ethnic minorities in Xinjiang and Beijing’s militarization of its claims in the South China Sea. On July 9, 2020, the US Treasury Department imposed sanctions on four Chinese officials and the Xinjiang Public Security Bureau for their alleged involvement in human rights abuses against Uyghur 165

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Muslims and other ethnic minorities in Xinjiang (US Department of the Treasury, 2020a). The US also sanctioned Hong Kong and mainland Chinese officials deemed responsible for undermining Hong Kong’s autonomy and freedoms (Griffiths, 2021). On August 7, 2020, the Trump administration imposed sanctions on Hong Kong Chief Executive Carrie Lam and ten other officials for their roles in cracking down on anti-government protests in the city (US Department of the Treasury, 2020b).

The Reactions Liberals The Chinese liberals are an important part of Chinese politics, with followers in influential posts in the government, academic and business communities. The liberal wing is not an organized political party or group, and therefore it does not have a set leadership structure. However, there are a number of Chinese intellectuals, activists, and politicians who are often associated with liberal political views. Some prominent representatives of the liberal wing of Chinese politics include: Li Rui (李锐, a former high-level politician), Wu Jinglian (吴敬琏, a leading economist), Qin Hui (秦晖, an influential historian), and Hu Shuli (胡舒立, a famous journalist and the founder and publisher of major media hub Caixin Media). Yanhuang Chunqiu (炎黄春秋), which is also known as “China Through the Ages,” was a publication that was released on a monthly basis in China. It was typically viewed as being politically liberal and supportive of reform efforts. The journal was established in 1991 with the backing of Xiao Ke, a general in the Chinese People’s Liberation Army who was known for his liberal views. The journal stopped publication in 2016. The liberals emerged in the post-Mao era and gained tremendous popularity during the early successes of market transitions in China. The Chinese liberals and the US liberals share some similarities in their advocacy for individual rights and freedoms, but they have significant differences. For example, in terms of economic policy, Chinese liberals tend to be more pro-market and advocate for neoliberal economic policies, while US liberals often advocate for a mixed economy with government regulation and social welfare programs because they believe such government intervention can promote fairness and protect consumers. Another difference can lie in cultural values. US liberals tend to place a high value on diversity and inclusivity, both in terms of ethnicity and culture, as well as sexual orientation, gender identity, and other marginalized groups. However, Chinese liberals do not always emphasize such values. Since the US long provides the intellectuals with resources and a political model for a prosperous society based on liberal democracy, the Chinese liberals tend to be pro-US on various issues. This camp has generally benefited from the US-led globalization and has tried to reconcile the US sanctions and the globalization ideals previously promoted by the US. A common argument, at least in the beginning phase of the sanctions, is that such US aggressions are merely triggered by the incompliance of Chinese companies and institutions. For example, Caijing magazine, a leading liberal business-oriented media, emphasized the Chinese companies’ problems when reporting the ZTE case. In a detailed report, Caijing (2018) documented that the US government notified ZTE about the investigations long before the sanction decisions. The ZTE leadership, as the magazine documented, was divided between those who wanted to follow the directions of the US government and others who thought such collaboration with Iran would dampen the company’s reputation and did not want to work with the US government. And eventually, the more militant faction won and ZTE continued to do business with Iran via a third party. The US eventually confiscated the personal computers of some ZTE staff traveling to the US and found the key evidence of 166

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business with Iran, which then led to severe sanctions. The lessons that Caijing drew from this episode were that Chinese companies like ZTE failed to do their compliance work seriously enough and did not choose to work with the US government in time. The report then gave an example of a Chinese car maker which chose to give up its car deal with Iran to avoid the US sanctions. The liberals and those close to the global capital take the US hegemony as given, even though long-arm jurisdiction and secondary sanctions are all controversial concepts rather than commonly accepted rules. After all, to this camp, the US is the center of global liberal democracy. Following this idea, then the US unilateral decisions, including invasions and sanctions, are naturally considered to be justified and necessary. The correct thing to do, then, is to learn how to comply with the (changing) US attitudes and rules. In this kind of narrative, incompliance and the subsequent sanctions are understood not just as a lack of relevant experiences, but rather as a result of a calculated decision to behave anti-US. In other words, the Chinese companies are the only ones to blame as they (unwisely and) deliberately challenge the US sanction rules.

Nationalists The liberals were already at an interesting juncture before the US sanctions. Despite their long success in dominating large parts of the media and academia in China, their popularity has been in decline in the last decade. The working people were already highly unsatisfied with neoliberalism which is a key component of the Chinese liberals’ platform, and the US aggressions against China only reinforced the working people’s disapproval of the pro-US views. The decline of the liberals has partly contributed to the rise of both the nationalist and leftist camps. These two camps have their distinct views regarding the US sanctions, which we will turn to below. Nationalism has always been a major political force in modern China. It played a significant role in the Chinese revolution, especially the anti-imperialism struggles. While during the Mao era, the government emphasized internationalism and class antagonism, in the post-Mao era, the Chinese leadership switched to promoting nationalism. Nationalist writers in general embrace the market reforms and portray China on the road to national rejuvenation. They have a more critical view of the US and their narratives often depict China and the US in a great game and suggest China will eventually win. Even though nationalism was not as influential as the liberal ideas in the early years of the post-Mao era, they have been on a rise in the last 20 years or so. The nationalists generally perceive the US sanctions as signs of US weaknesses and inability to compete with China fairly. They roundly reject the liberal claim that the US actions are justified and purely for the sake of law and order. At the same time, for years, the nationalists have been boasting about the greatness and strength of the Chinese economic model. Acknowledging that Chinese businesses are not that high on the pecking order and are dependent on US technology could dampen the nationalist arrogance and reduce the appeal of nationalism. Therefore, rather than an anti-imperialist analysis, the nationalists like to portray China as the triumphant party in the game and argue that the US sanctions do not have any lasting impact on China’s ascendancy. For example, regarding the fact that Huawei lost access to the Android system following the sanctions, a typical nationalist piece would emphasize that Huawei is fully prepared and has already developed its own operating system, Harmony (Guan and Li, 2021). This seemingly suggests that Chinese technology and business could actually improve in the face of sanctions. In another report, the author highlights the data from the Federal Communications Commission which shows replacing the communication devices from ZTE and Huawei costs much more than initially expected (Liu 2022). In such analysis, it is common to argue that China is not afraid of US 167

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economic aggressions because of its large market and relatively complete set of industries among others (Yang 2018). At least for a while, some Chinese officials expressed such a triumphalist tone, too. In 2018, the former minister of finance, Lou Jiwei, half-jokingly expressed the view that China can fight back more strongly, for example, by targeting the US exports of soybeans, automobiles, and airplanes (Han, 2018). Zhang Guobao, a former high-level policy maker, wrote that the US sanctions made the Chinese businesses adopt domestically designed chips and computer control machine tools. And this will only hurt the US interests in the long run (Zhang, 2019). It is important to note that the nationalist camp is not the direct opposite of the liberal camp. If the liberals are explicitly pro-US, the nationalist camp is only carefully conditioned anti-US. The nationalists have always tried to keep nationalism within a safe range around the official government line. It is politically risky to push the nationalist line too far, as it can backfire easily. A recent example is US House Speaker Nancy Pelosi’s visit to Taiwan. The nationalist media, such as Observer Net (Guancha.cn) and influential nationalist writers such as Hu Xijin (胡锡进, former editor of Global Times), produced many high-pitch claims and promises regarding the visit, which successfully agitated the general public. But when the Chinese government did not take an expected hardline action against the US delegates, the widespread disappointment significantly weakened the reputation of the nationalist camp. Then the strategically wise option for the nationalist camp, in the face of waves of sanctions, is to condemn the sanctions but with more focus on downplaying the sanctions.

The Left Quite different from the previous two camps, the current Chinese left emerged in contemporary China fairly recently. Many people joined the left in their fight against neoliberal reforms such as privatization and marketization in China. And the Chinese left often connects with the history and legacy of the Chinese revolution and the radical Mao era. Naturally, the leftists have a more critical view of the US and capitalism in general. However, the left also tends to have a more diverse set of opinions on the US sanctions, despite the general anti-imperialist tendencies. The differences among the left reflect their theoretical understanding of China’s position in the world, and is built upon collective memories. To some, the US sanctions simply resemble much of history during pre-revolutionary China when the western powers frequently bullied and invaded China. Thus, the correct response would be mobilizing anti-imperialist support among the Chinese people and calling for a strong response to the US. Although it gained considerable popularity in recent years, this view often lacks class analysis and a more critical understanding of the US-China relationship, which weakens its theoretical thoroughness. A second view in the left camp looks at China as a rising imperialist power. If this is the case, then the US sanctions and other aggressions are but a part of the “inter-imperialist” rivalry, and the left would better stay out of this conflict. The conceptual difficulty of this view is how to explain the clearly lower position of China in global capitalism and the Chinese government’s general lack of willingness to engage in anti-US campaigns. While it’s easy to show that China’s economy has been rapidly growing, this doesn’t necessarily mean that China is becoming an imperialistic power or a threat to American hegemony. So far, the second view is closer to a dogmatic conviction than a theoretically and empirically sound conclusion. Politically, the proponents often try to stay neutral amid US aggressions. Given that it is the US rather than China that wields its bullying sanctions weapons, this type of left “neutral” position sabotage the actual anti-imperialist campaigns on a de facto level. What’s worse, 168

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these leftists also move away from the earlier anti-neoliberalism project in China. Many of them now explicitly endorse privatization and structural reforms. For example, a leading proponent of this view is the website Jiliu (meaning “strong current” in English). In 2017 the website published an article arguing that Chinese state-owned enterprises were the largest monopoly capital in the world and served as the basis for China’s imperialist ambition (Hua, 2017). A natural and highly misleading implication would be that in China privatization could be progressive and antiimperialist. Here these leftists give up the traditional anti-neoliberal arguments and side with the pro-market liberals. The third view among the left presents China as among the semi-peripheral states in the capitalist world system. According to Immanuel Wallerstein, a core country is a highly developed and economically powerful state that dominates and exploits other countries and regions in the world system for its own economic benefit. The term “core” reflects the idea that these countries are at the center of the world economy, while other countries are relegated to more peripheral positions (Wallerstein, 1974). Based on this perspective, China joined the capitalist world system in the 1980s, and gradually rose to semi-periphery status. There is no sign that China has become part of the core (competing with the US and the West), and it is also highly unlikely that the world system will allow such scenarios. According to Minqi Li (2021), a leading Marxist scholar with this view, “[O]n the whole, China continues to have an exploited position in the global capitalist division of labor and transfers more surplus value to the core (historical imperialist countries) than it receives from the periphery.” And on the question of China’s future, “if China were to become a core country in the capitalist world system, the existing core countries would have to give up most of the surplus value they are currently extracting from the periphery. It is inconceivable that the core countries would remain economically and politically stable under such a development.” Although there are few writings on US sanctions directly from this group of leftists, we can list some possible ideas based on Li (2021). The Chinese elites, like in typical semi-peripheral states, hope for a continued rise in the ranks without shaking up the existing hierarchy. The US sanctions against a key semi-peripheral state such as China will (unintentionally) destabilize the world system. In recent years, leftist writings and ideas start to have a much larger audience in China. It remains to be seen which view among the left would eventually prevail in the next few years. In practice, the first view is close to the nationalist camp, the second view is close to the liberals, and the third view is the most critical one of all. So, the result will likely have a visible impact on China’s political balance.

The Mixed Message from the Chinese Government The three camps discussed above are closely related to, but still distinct from Chinese official politics. The Chinese state, particularly the Chinese communist party, has its way of responding to the US sanctions and seems to provide a message with elements from different camps. The postMao leadership has mostly followed a low-key stance on global issues and has in general avoided direct conflict with the West. This has proved to work well since China relied on the US-led trading networks, financial system, and the global order in general. This also means that the Chinese government tends to guard the status quo of global capitalism and wants to preserve the more liberal global economy. Even though in recent years, some Chinese diplomats have experimented with more assertive styles on social media (sometimes called the wolf warriors by the West), the overall tone of the Chinese government has remained the same. 169

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The Chinese government has published several statements and articles in the last few years regarding its position on the US sanctions and hostility against China. In almost all these publications, the Chinese government condemns the US’s arrogant and bullying actions including sanctions, and sharply criticizes the misleading claims and double standards that the US employs. In more militant-sounding writings, the Chinese side would even include signature political language such as “wu wei yan zhi bu yu” (don’t say I didn’t warn you) which was used by Chairman Mao before deciding to intervene in the Korean War (Wu, 2019). However, the main message from the Chinese government is a strong wish for collaboration. In the white paper on the US-China relationship published in 2018, the Chinese government concludes with the argument that economic globalization, not isolation, and protectionism, is the inevitable trend. So, for both the US and China, “cooperation is the only correct option” (The State Council of China, 2018, p. 67). The white paper then lists a few specific areas for future work, which includes China’s plan for more trade and financial openness and liberalization, tariff reduction, as well as protection of intellectual property and foreign business interests in China. In some way, the Chinese government seems to be more interested in defending the US-led neoliberal order than even the US itself. And the Chinese government indeed implemented further market reforms to embrace more foreign financial capital and permitted more than 100 foreign banks, and insurance companies among others in China for the first time in history (Qiu, 2021). Similarly, in a subsequent white paper in 2019, China reiterates some of the previous arguments, and emphasizes that the US sanctions and other economic war measures are not serving the interests of the US itself, since these measures increase production costs and lower the standard of living in the US (The State Council of China, 2019). In the end, the white paper argues that a mutually beneficial deal between the US and China is good for the people in these two countries and the whole world. In a recent commentary in the People’s Daily, the Chinese government reaffirms the “cooperation” message and argues that cooperation is urgently needed given the currently weak global economy (Zhong, 2022). It is interesting to note that the Chinese government’s response reflects a mix of narratives from different camps. On the fundamental level, the Chinese government is arguably aligned with the liberals, emphasizing the importance of globalization and the US-centered global order. In the reactions to the US sanctions, the Chinese government adopts a more nationalist view, downplaying the impact of such aggressions. The official response also occasionally includes some leftist language regarding the US bullying and hegemonic actions. This mix might imply a compromise among different factions within the top leadership, at the same time, it might also be a gesture to speak to the concerns of the different political camps within China. The desire of the Chinese government to uphold the status quo of the world order is probably due to at least two reasons. First, China’s deeply integrated into the global economy. And China occupies the middle position (or, semi-periphery) in the global division of labor, that is, mass production of relatively low-skill commodities. China needs both foreign raw materials including oil for fueling the economy, and high-tech goods such as chips to make its product technically competitive. Thus, China’s economy is particularly vulnerable to sanctions and other disruptions in the global market. Second, China’s top elites seem to believe that time is on China’s side in the great game (Zheng, 2021). If the West is on a long decline while the East is on the rise, then it makes sense for China to continue to keep the old way of business and not start any unnecessary confrontations. Since the Trump era and the renewed US hostility, the Chinese government has attempted to rebuild “cooperation” with the US/West and to reconcile the different domestic political narratives. Such efforts seem to be based on both China’s position in global capitalism and a strategic 170

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understanding of the future of the world. So far, however, neither “cooperation” nor domestic consensus building is quite successful. We will discuss the rhetoric and reality of the Sino-US relationship in the concluding section.

Concluding Remarks Given the intensity of the sanctions against China, and the bipartisan consensus in the US on containing China, it is increasingly unlikely that we will see a return to the better days of global capitalism and the US-China relationship. We may not see any substantial change in the way that global capitalism operates in the next few years, but most observers would probably agree that the tide is turning. The recent diplomacy efforts from both countries such as the meeting of the Chinese and the US leadership during the G20 meeting probably only sought to ensure the tensions would not easily escalate into further conflicts. Are we already at the point of decoupling? Even though we seem to be in an age of sanctions and hostilities, and the US keeps talking about decoupling from China, it is not yet a reality. In a recent opinion piece in the Financial Times, Leo Lewis (2022) notes that although the idea of decoupling has gained traction in the US and EU, it is not going to be a fast transition. And the constraints include the difficulty of mobilizing other countries to hobble the Chinese economy, and the global capital’s resistance to an exit plan from a large, robust and dynamic market like China. To the extent that the US ruling class can reach a consensus on such a major issue (even this is uncertain), it is not entirely clear if the US is willing to embrace all the consequences of decoupling. Keeping the pressure on China without real decoupling still looks like a viable path for the US, but history has repeatedly shown that the ruling classes at a late stage tend to be not very wise. If the US and the West really decouple from China via a series of planning, actions, and sacrifices, it almost certainly means higher costs and serious long-term inflation pressure in the Western world. It might also imply a much lower rate of profit for the global capital. The subsequent chaos, conflicts, and uncertainty following the decoupling would not create a comfortable space for capitalism like the good years of neoliberalism once did. On the Chinese side, how the US sanctions and aggressions will unfold also has a strong impact on the Chinese political economy. The Chinese government has been very carefully walking a fine line to keep the status quo as much as possible, but with the increasing US hostility and more chaotic global capitalism, the space for maneuver might become narrower over time. The appeal of the different political camps ultimately depends on whether China can continue climbing the ladder amid the US sanctions. In a rather unlikely scenario, if China manages to make it to the core of the capitalist world system, then the nationalist camp will have an upper hand. A core country is one that dominates and exploits peripheral countries for its political and economic benefit. To achieve a core status in the world system, China would need to maintain and strengthen its position as a dominant economic power and expand its influence in the global market. This would at least require closing the science and technology gap between China and the West, which seems increasingly difficult given the mounting sanctions among other constraints. Or if China reaches a deal with the US so the existing US-led order is preserved, then it is likely the liberals will resume their influence. However, if the US keeps its pressure, and China fails to improve its position in world capitalism, then the more critical view from the left will have its day. Each of these possibilities will accordingly shape the Chinese political economy in the coming decades and have profound impacts on global capitalism. 171

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14 IRANIAN DISCOURSES AND PRACTICES REGARDING THE US SANCTIONS Rouhani and Raeisi Administrations Heidarali Masoudi Introduction Since the beginning of the Islamic Revolution, the United States has imposed primary and secondary sanctions against Iran for various reasons, including Hostage Crisis in the US embassy in Tehran, the so-called non-compliance with human rights standards, support for terrorism, and the development of missile and nuclear programs. In the process of US increasing sanctions against Iran, Iran, and Libya Sanctions Act (ILSA 1996 or ISA after 2006) can be considered an important turning point, because according to this Act, secondary sanctions were applied against individuals, institutions and foreign companies cooperating with Iran. Since the early 1990s, Iran tried to compensate the lack of relationship with the United States through cooperation with companies and economic institutions of other advanced countries, and in response, the United States tried to block these relations. Another important milestone in the process of US sanctions against Iran was to create consensus among Security Council’s member states against Iran’s nuclear program, which led to the adaption of sanctions resolutions, especially Resolution 1929 in 2010. These sanctions put heavy pressure on Iranian economy because it prohibited all countries from any economic, commercial, industrial, and banking interactions with Iranian individuals, institutions, companies, ships, and oil tankers. Although the international sanctions were lifted with the conclusion of the JCPOA in 2014, the primary sanctions and some secondary sanctions of the United States remained in place under other labels such as human rights issues and support for terrorism. In addition, the Trump administration’s withdrawal from the JCPOA practically reversed all the sanctions that had been lifted according to the deal. This long and permanent process of US sanctions against Iran gives rise to the initial perception that sanctions have become an integral part of the US foreign policy towards Iran, and in the words of Javad Zarif, the former foreign minister of Iran, the United States has become addicted to Iran’s sanctions. Based on this, the main question of this chapter is that how Iran reacts to these sanctions discursively and practically. In other words, the chapter would probe Iranian official discourses and practices in response to US sanctions. For this purpose, first, sanctions as a tool of foreign policy and specifically, in the US foreign policy will be analyzed, and then Iran’s anti-sanction discourses and practices will be investigated. 174

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Sanction as a Tool in Foreign Policy Sanctions are a type of punitive action by governments against each other with the aim of changing behavior or even changing the political system. In the modern era, sanctions have been used by states as an alternative to war in order to secure their national interests. However, there are two main types of sanctions; a military embargo against rivals during a war and economic sanctions which ‘deliberate, government-inspired withdrawal, or threat of withdrawal, of customary trade or financial relations’ (Hufbauer et al. 2007, p. 3). Beyond the unilateral enforcement of sanctions, the emergence of international institutions such as United Nations after the Second World War provided a new context for the application of collective or multilateral sanctions against other countries. Under Article 41 of the UN Charter, Security Council sanctions have taken a number of different forms, in pursuit of a variety of goals. The measures have ranged from comprehensive economic and trade sanctions to more targeted measures such as arms embargoes, travel bans, and financial or commodity restrictions. The Security Council has applied sanctions to support peaceful transitions, deter non-constitutional changes, constrain terrorism, protect human rights, and promote non-proliferation. Based on this, powerful countries, especially the United States, have used Security Council to impose international multilateral sanctions in the last 70 years. In particular, after the Cold War, the United States has established many sanctions regime against different countries on the pretexts of human rights, terrorism, and non-proliferation (Qanbarloo 2017, pp. 79–80). Many analysts investigated different aspects of sanctions. For instances, Kirkham (2022) investigated Iran and Russia’s institutional, material and cultural design and capabilities for combating the US sanctions. Felbermayr et al. (2020) focusing on consequences and effectiveness, examined the evolution of international sanctions during 1955–2016; they found that sanctions have increased in recent decades; European countries are the most sanctioning countries and African countries are the most sanctioned countries in the world; the variety of sanctions has increased; The share of commercial sanctions is decreasing and financial and travel sanctions are increasing; the main focus of sanctions has increasingly turned to issues of human rights and democracy, and finally, the success of sanctions had risen until 1995 and has declined since then. The height of international sanctions in the first decade of the new century was caused by the events of September 11 and its international consequences. Success or failure of sanctions in achieving their goals is also studied in the last decade. The main finding of these studies is that economic sanctions have failed to change the behavior of sanctioned countries (Gause 1999; Haass 1997; Hufbauer et al. 2007; Nurnberger 2003). For example, Hufbauer et al., by examining more than 200 sanctions regime against countries concluded that only about 34% of these sanctions were somewhat successful in achieving their goals. Those sanctions that pursued a limited goal, such as the release of political prisoners, have achieved about 50% success, but sanctions that have pursued other goals, such as changing political system and weakening the military power of countries, have only been 20–30% successful (Hufbauer et al. 2007, pp. 158–159). Effectiveness of unilateral and multilateral sanctions is one of the main topics in the literature on sanctions. For instance, in his research, Bapat and Morgan (2009) has examined the extent to which unilateral and multilateral sanctions have been successful. His finding shows that contrary to the claim that unilateral sanctions are more effective than multilateral one (Drezner 2003, 2018; Hufbauer et al. 2007), multilateral sanctions have a higher success rate than unilateral one. Moreover, multilateral sanctions are most effective when they are applied on a single and specific issue or 175

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when they are applied on multiple issues through an international institutions (Bapat and Morgan 2009, p. 1090). US unilateral sanctions against other countries have not been very successful in the last five decades. For example, only 8 out of 41 unilateral US sanctions against other countries were successful during 1970–1989, and only 2 out of 11 during 1990–2000. This statistic shows the failure of US unilateral sanctions against other countries in the last five decades. In general, it can be said that in recent decades, powerful countries have increasingly used sanctions as a tool of their foreign policy, but the effectiveness of these sanctions is dubious and ambiguous. Sanctions that have been more successful have typically pursued specific and limited goals and have been implemented with the support of multilateral international institutions.

US Sanctions against Iran Relying on its hegemonic power after World War II, the United States has imposed many sanctions against other countries, especially on Iran. The basis for sanctioning Iran was established after the Hostage Crisis in the American Embassy in Tehran in November 1979. In response to this crisis, President Carter issued Executive Orders of 12170, 12205, 12211and 12282 for blocking Iranian Government property and prohibiting certain transactions with Iran during 1979–1981. The US President issued these Executive Orders under US International Emergency Economic Powers Act (1977) and the National Emergency Act (1976) (Casey and Fergusson 2020; Hewitt and Nephew 2019; Weber and Schneider 2020, p. 4). Based on this legal precedent, US Different administrations and Congresses have imposed many different sanctions against Iran in the last four decades. More specifically, sanctions adapted and imposed by four recent Congresses and two recent administrations would be reviewed in the following.

Trump Administration’s Sanctions on Iran In one of his first interviews as a presidential nominee in March 2016, Trump spoke about the necessity of withdrawing from the nuclear deal with Iran, increasing sanctions against Iran, and signing a better deal with Iran (Trump 2017). After entering the White House, he used the most severe economic sanctions against Iran. Before he pulled out the deal, he insisted that nuclear deal with Iran and lifting of the sanctions on Iran was disastrous and horrible. Therefore, he ordered the Ministry of US Department of the Treasury to put the entire IRGC under sanctions for its support of terrorism. Trump also wants other countries to impose sanctions on Iran for its ballistic missile program and support for terrorism (Trump 2017). The Trump administration withdrew from the JCPOA on May 18, 2018 and reinstated unilateral sanctions. On August 6, 2018, the US Treasury restored the unilateral sanctions that were suspended based on the JCPOA. These sanctions include ban on access to dollars and commodities like gold, aluminum, and iron, buying, selling, and supplying aircraft parts, oil exchanges and any purchase of petrochemicals from Iran, any financial exchange between international financial institutions with the Central Bank of Iran or Iranian financial institutions, prohibition of investment in the energy sector, cooperation with Iran in the form of banking service and insurance. In April 2018, the Trump administration entered the IRGC in the list of US foreign terrorist organizations (FTOs). For the first time in modern history, a part of the official military organ of a sovereign state is recognized as a terrorist organization. After the US withdrawal from the JCPOA, the US sanctions machine against Iran was activated again. On March 26, 2019 Brian Hook, the US representative in Iran affairs, announced that the 176

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United States is targeting an Iranian financial network including 25 individuals and companies in Iran, Turkey, and the United Arab Emirates, which help circumvent Iran’s sanctions. Hook also announced the sanction of Iran’s Ministry of Defense for supporting terrorism and logistical support for the IRGC. The main purpose of these sanctions was to weaken Iran’s ability to bypass the sanctions, through intimidating foreign companies and financial institutions to work in Iran. Mike Pompeo, the US Secretary of State warned all companies and economic institutions that they should be subjected to US sanctions on Iran, because more than 60% of Iran’s economy is under the influence of IRGC economic groups and working with them can be assumed as criminal actions. In a more extreme move, Trump issued Executive Order No. 13876 on July 3, 2018 and imposed sanctions on all individuals and affiliated institutions and associates of the Iran’s leadership and his office inside and outside the country. These sanctions deprived Iran of the legitimized interests according to the deal, intensified historical mistrust between Iran and the United States and created serious obstacle for the revival of the deal in the next administration, i.e. Biden administration. In the following section, I will examine the views of the Biden administration regarding Iran sanctions.

Biden Administration’s Sanctions on Iran To evaluate Biden’s personal view on the sanctions against Iran, one should look at his positions as a senior member in the Senate Committee on Foreign Relations in early 2000s. While the tensions with Iran heat up as Iran nuclear crisis started in 2006, Biden had requested a comprehensive calculation of sanction against Iran and its consequences for the American public opinion, Iran’s domestic political groups and international allies of the United States. In 2006, Senator Biden asked from Bush administration that ‘What costs will these sanctions entail for Iran, for us, and for key countries we need on our side? How vulnerable is Iran to a ban on imports of gasoline or exports of crude?’ He is also worried that Europe, Russia and China will not support US sanctions against Iran because the United States has not tested the path of negotiation and diplomacy with Iran (Biden 2006b). In Senator Biden’s opinion, sanctions are one of the tools of American foreign policy in the long-term, but its effectiveness depends on the support of American public opinion, the adherence of America’s allies, its ability to make a gap in the ruling elite of targeted country and clear conditions for the termination of sanctions (Biden 2006a). Biden as Presidential nominee repeatedly spoken about the US readiness to return to the Iran deal. He asserted that ‘if Iran returns to strict compliance with the nuclear deal, the United States would rejoin the agreement as a starting point for follow-on negotiations and lift the sanctions on Iran that Trump imposed’ (Biden 2020b). In contrast, Biden administration missed the opportunity of rejoining the deal and moreover, imposed new sanctions on Iranian and non-Iranian individuals and companies that are related to the so-called Iran’s human rights’ violations, regional activities, development of the ballistic missile and also circumventing sanctions (Biden 2020a). The same position can be seen in Robert Malley’s hearing in the Senate Committee on Foreign Relations. The representative of the United States on Iranian affairs insisted that: We would of course need to lift those sanctions that were imposed in response to Iran’s nuclear threat to achieve a deal. That was the purpose of those sanctions in the first place – to use them as leverage to address Iran’s nuclear threat. The bottom line is that we are 177

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convinced, as are all our European partners that we can both provide limited sanctions relief in exchange for Iran taking important steps to roll back and constrain its nuclear program, and still use the vast reservoir of remaining sanctions and other tools at our disposal to pressure and target its other dangerous activities. (Malley 2022)

US Congress’ Sanctions on Iran The US Congress plays a vital role in imposing sanctions on Iran. This role is manifested in sanctions acts that are adapted by the Congress and the legal powers granted to the US President, enabling him or her to impose sanction based on executive orders. In order to evaluate Iran’s sanction comprehensively, it is necessary to examine the efforts of the last three US Congresses in proposing and adapting sanctions acts against Iran, which will be discussed the following. 114th Congress (2015–2016): The Iran Nuclear Agreement Review Act (INARA) was approved by the US Congress in 2015 to pave the way for an agreement with Iran. According to this law, Congress has a certain period of time to review possible violations of the agreement by Iran which can led to termination of the deal. According to this law, if there are fundamental changes in the text of the JCPOA, the JCPOA must be re-examined by the Congress. Also every 90 days, the US President must report Iran’s complete, verifiable and transparent compliance with the agreement to the Congress. The Trump administration has refused to send this report to Congress since October 2017. Also, according to this law, the US government is obliged to report to the Congress every 180 days about Iran’s compliance with the nuclear agreement and whether Iranian banks have played a role in financing terrorism or advancing Iran’s ballistic missile program or supporting terrorism. The 114th Congress extended the Iran Sanctions Act, which was set to expire in December 2016, to December 2026. This law was approved with 419 votes in favor in the House of Representatives and 99 votes in favor in the US Senate, and it became law without the signature of President Obama. 115th Congress (2017–2018): In 2017, the Countering America’s Adversaries Through Sanctions Act (CAATSA) was approved by the US Congress while the United States was still a member of the JCPOA. According to this law, arms sales to/exports from Iran and all individuals, companies, and institutions involved in Iran’s ballistic missile program are subject to sanctions. Based on this, the US government is obliged to report to the Congress its assessment of the activities of Iranian companies and institutions in the field of ballistic missile program and support for terrorism. This law paved the way for enlisting IRGC to be placed under the SDGT label which was established by Bush Jr.’s Executive Order 13244 in September 11 2001 (Dubowitz 2022, p. 21). 116th Congress (2019–2020): In this Congress, 11 draft of laws related to Iran sanctions were proposed. According to these draft, for instances, the United States would put pressure on Iran’s neighboring countries such as the United Arab Emirates to prevent the violation of US sanctions against Iran, confront Iran’s ballistic missile program and sanction Iran-backed militia groups in the region. In the 116th Congress, some representatives such as Josh Godheimer defend the necessity of publishing periodic reports on the economic corruption of Iranian officials, similar to what is done about Russian oligarchs (US House of Representatives 2019) and some other congressman’s argued that such move would be more symbolic and doomed to fail (US House of Representatives 2019, p. 7). 117th Congress (2021–2022): there exists about 27 draft laws related to Iran sanctions, one of them is draft against Iranian drones which was proposed by 77 representatives in September 2022 and was approved by the US House of Representatives. This draft must be approved by the Senate 178

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to become a law. A number of other drafts have been proposed by influential senators such as Tom Cotton, Ted Cruz, and Bob Menendez in order to prevent the lifting of sanctions against Iran, to protect Israel’s security against Iranian proxy groups and to impose sanctions against senior Iranian officials such as Ayatollah Khamenei and Iranian President Ebrahim Raeisi. After reviewing US efforts to impose cruel sanctions against Iran, the efforts by Iran to combat against these sanctions will discussed in the following. First, Iran’s anti-sanctions discourses will be analyzed in the level of Supreme Leader and level of Rouhani and Raeisi administrations. Second, Iran’s anti-sanctions practices will be investigated.

Iran’s Anti-Sanction Discourses Supreme Leader Ayatollah Khamenei has a dominant power in the process of Iran’s foreign policy decision-making. He has had a relatively stable viewpoint on the US sanctions against Iran which can be analyzed in two categories: first, he argues that sanctions have had positive consequences for Iran generally. It means that sanctions not only have not weakened Iran but also strengthened the Iranian economy, because it necessitates the fixation of deficiencies. For instances, he said the Iranian nation ‘struggled with a complex and unique set of conspiracies, enmity, betrayal, aggression, sanctions, military attacks, propaganda uproar, etc., and victorious and triumphant came out of this historical confrontation (Khamenei 1990). In his views, ‘Sanctions may create pressure, but it will take the Iranian nation one step forward’ (Khamenei 2011. As he pointed out, ‘the revolution passed many obstacles during last three decades … with all types of threats, sanctions, enmities and tricks and the revolution go ahead and conquer the peaks. It continues to aim for a higher peak and to advance with strength’ (Khamenei 2008). Second, Ayatollah Khamenei insists that the main result of sanctions is the intensification of Iranian people’s hatred of the West. In Khamenei’s words, ‘sanction has no effect. Sanctions cannot stop the Iranian nation from moving forward. The only impact of these unilateral and multilateral sanctions on the Iranian nation is that the hatred and enmity against the West deepens in the hearts of our people’ (Khamenei 2012). This rhetorical approach can be also found in the discourses of Iranian Presidents which will be delved into in the following.

Rouhani’s Discourses on US Sanctions (2013–2021) Two critical moments are significant in analyzing Rouhani’s discourses on US sanctions: first, when Iran began negotiating with 5 + 1 countries in 2013, Rouhani saw sanctions as an obstacle to ‘mutual understanding’ between Iran and western countries. He asserted that ‘any restrictions and economic sanctions, instead of helping mutual understanding and security, will intensify the divergences [between Iran and Western countries]’ (Rouhani 2014a). While Iran was negotiating with 5+1 countries in Geneva and Lausanne, Rouhani tried to convince Iran’s negotiating partners that regardless of final result of negotiation, Iran would continue fighting against sanctions and adjusting economic plan to overcome the problems caused by sanctions (Rouhani 2014b). He asserted that his plan for economic recovery was not presupposed the ending of the sanctions (Rouhani 2014c). He pointed out that: While we negotiate with 1+5 countries, we are breaking the sanctions and we are proud and we are saying it loudly and bravely. They [Iran’s enemies] themselves know how we are breaking the sanctions, that’s why we consider sanctions as wrong, cruel and inhuman. I have clearly told the world leaders that your sanctions was wrong, cruel and anti-human 179

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because you also sanction the medicine of our patients and it will remain in history what you have done in this regard. Therefore, we are fighting against the sanctions. (Rouhani 2014b) Second, after Trump administration pulled out of the nuclear deal and resumed unilateral sanctions against Iran, Rouhani’s administration took a moderate position, trying to isolate the United States internationally with the hope that remaining signatures to the JCPOA can live up to their commitments in the absence of an ‘evil in the deal’ as Rouhani said (Rouhani 2018). Rouhani advised Iranian diplomats that ‘we must let this isolated America stay isolated and we must not allow an isolated America to live again’ (Rouhani 2018). Rouhani saw US unilateral sanction as ‘US miscalculation’ to incentivize Iranian people to upraise against the government. He said: ‘America is trying to put pressure on the Iranian nation with a miscalculation to turn the patient and resistant people of Iran into a riotous nation so that they can say that freedom, independence and the Islamic Republic are good, but we are tired of the situation and their goal is to let the people of Iran say that they are tired of their lordship and have once again craved servitude’. (Rouhani 2018) Generally speaking, Rouhani labeled US sanctions as wrong, cruel, and inhuman and interpreted them through two concepts: sanction as US ‘misperception’ regarding the ability of the Iranian government to neutralize sanctions and sanction as the US ‘miscalculation’ regarding the Iranian people’s resistance against sanctions.

Raeisi’s Discourses Raeisi promised in his presidential campaign to lift the sanctions on Iran. This requires the continuation of nuclear negotiation with 4 + 1 countries. But Raeisi’s administration intended to have a different model of negotiation which was called ‘negotiation from the powerful position’. This model of negotiation was based on somehow different discourses on the US sanctions. Raeisi’s discourses on sanctions can be interpreted through two concepts. First, he sees US sanctions as economic terrorism against Iran and crime against humanity. He asserted that ‘sanctions or economic terrorism is another challenge that has become the most important tool of the dominators [USA]’ (Raeisi 2021a). Raeisi also assumed sanctions as war and crime not only against Iran but other nations and even all humanity. He pointed out in his speech in UN General Assembly that ‘sanctions is US tool for war with nations … sanctions, especially medicine sanction, in the era of Covid-19 is a crime against humanity’ (Raeisi 2021b). He asserted that ‘Sanctions are a punishment for seeking justice and independence of the Iranian nation. Sanction is a weapon of mass destruction, and accompanying or remaining silent in front of it is also aiding and abetting oppression’ (Raeisi 2022a). Second, Raeisi believes that US sanction against ‘independent nations’ can be regarded as a starting point for cooperation among them for fighting against sanctions. He insisted this idea in the summit of three regional cooperation organizations. Raeisi asserted in the summit of Shanghai organization that: Sanction or economic terrorism is one of the main obstacle to promote regional integration. The Shanghai Organization needs to design structures and mechanisms to deal with 180

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sanctions collectively. Unilateral sanctions are not against one single country but also as it was obvious in recent years intended to include a larger number of independent members of the organization. It is important and necessary to design mechanisms to deal with unilateral sanctions in the organization. (Raeisi 2021a) Raeisi also tried to convince the members of the Gas Exporting Countries Forum (in addition to Iran, it includes Qatar, Algeria, Bolivia, Egypt, Equatorial Guinea, Libya, Nigeria, Russia, Trinidad and Tobago, and Venezuela) that US sanctions are against common interests of all members. He said that US sanctions ‘endangers the economic interests of the member countries of this forum’ (Raeisi 2022b). Raeisi also said in ECO summit that cruel US sanctions shows that ‘[US] interests are not compatible with the collective interests of our region’ (Raeisi 2021c). Anti-sanction discourses of Rouhani and Raeisi are relatively similar in the way that two presidents pointed to the US sanction as cruel and inhuman practices. However, they differentiated when they interpret the consequences of the sanction in reality. Rouhani interprets US sanctions as an obstacle to sign an agreement between Iran and the United States in the nuclear issue. But Raeisi interprets sanction as an incentive for sanctioned countries to expand their cooperation for combating the sanction.

Iran’s Anti-Sanction Practices Iran anti-sanction practices are more important than anti-sanction discourses. Iran has had different efforts to neutralize and bypass the sanctions imposed by the United States which will be analyzed in the following categories. Expanding relations with China: After the US withdrawal from the nuclear deal, China has become Iran’s main trading partner. China continued buying Iran’s oil despite the US sanctions. The Comprehensive Strategic Partnership between Iran and China was signed in March 2016 at the end of Chinese President Xi to Tehran and it became the basis for 25-year cooperation agreement which was signed in March 2021. This agreement is considered as a roadmap for long-term cooperation between Iran and China. In fact, this agreement, rather than representing a legally binding commitment for Tehran and Beijing, shows the political will of the two countries to cooperate in potential areas in the context of a systemic change in the international system. The main driving for this agreement should be redistribution of international power, change in the hierarchy of prestige and evolution in the rules of international life, which has led to the overlapping of the interests and values of the foreign policy of the two countries and the expansion of their relations in the form of this strategic agreement (Shariatinia 2022). One important aspect of Iran–China relations is Iran’s participation in Belt and Road Initiative (BRI). Iran is located in the path of the China-Central Asia-West Asia economic corridor and is trying to make an effective contribution to this corridor. Hassan Rouhani, the former president of Iran, emphasizes that ‘due to its privileged geographical position, Iran is ready to play an important and leading role in BRI’ and for this reason, Iran welcome ‘China’s investment in the development of Iran’s southern regions and ports’ (Rouhani 2019). Iran’s former foreign minister Zarif also emphasizes that ‘Iran can provide its northern and southern as well as eastern and western corridors to advance the Silk Road program and play a significant role in the sea and land route of this road. Iran wants to be one of the main part of this road to Europe’ (Zarif 2019). Facilitating trade relations with Eurasian Economic Union: The Eurasian Economic Union includes Russia, Kazakhstan, Belarus, Kyrgyzstan, and Armenia. These countries are exporters 181

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of goods such as meat, fertilizer, vegetable and animal oils, industrial goods, intermediates, and all kinds of chemicals. Many of these goods are ones that Iran needs during the sanctions period. Through the conclusion of a preferential trade agreement with the Eurasian Economic Union, Iran tried to secure a part of its import needs from these countries. The advantage of these trade interactions is that there is no need for bank exchange based on dollars and euros, and it is mainly done with common currencies of countries such as Rials and Rubles (Moshfegh 2020). Most of Iran’s commercial trade with Eurasia is done with Russia. In 2021, half of Iran’s one billion dollar export to Eurasia is destined for Russia and most of Iran’s one billion dollar import from Eurasia is from Russia (Khoshkar 2021, p. 204). Iran’s economic target for expanding trade relations with the Eurasian Economic Union is 8 billion dollars. According to the bulletin of the Trade Development Organization, Iran’s trade with the Eurasian Union has grown by an average of 70% in the second half of 2018 (Khoshkar 2021, p. 209). Developing knowledge-based economy: One of the ways to strengthen Iran’s economy in response to sanctions is to develop a knowledge-based economy. Knowledge-based economy reduces the Iranian economy’s reliance on oil revenues and creates new ways to generate wealth. Since the early 2010s, when the international sanctions intensified on Iran, there was a concern that how Iran’s technological development can be influenced by the sanctions and vice versa. Some Iranian scholars reviewed the technological development of China and India while they had been under sanctions during the 1960s to 1990s. They conclude that the successful anti-sanction strategies depend heavily on maturity of the national technological innovation system which can be evaluated through qualitative indicators such as increasing technological, institutional and political capabilities (Miremadi 2011, p. 84). Iran tried to incentivize knowledge-based economy in the last decade and for this purpose, the Iran’s Vice President for Science and Technology has planned to support the commercialization of knowledge-based products, promoting the culture of purchasing and supporting domestic production, meeting technological and laboratory needs of education, research and technology (Dehghani 2022). There are more than 6500 knowledge-based companies in Iran which their share in Iran’s economy have been increasing during 2018–2022 for about 450% and reached to 4% of GDP (Mehr News 2022). Diversifying of Iranian economy: One way to strengthen the economy against sanctions is to diversify the economy. Diversification of economic activities would prevent the economy from depending on a single economic section like oil and gas exportation, which in turn, would make the economy more resistant against the sanctions. It requires gradual diversification of Iran’s export. Iran has promoted sales of petrochemicals and non-hydrocarbon-related products, and these exports have constituted a steadily growing share of Iran’s revenue for more than a decade. Iran’s budget for fiscal year of 2020–2021 assumed almost no oil revenue (Katzman 2022, p. 54). The statistics of the Tehran Chamber of Commerce shows that from April 2022 to January 2023, Iran exported about 43 billion dollars excluding crude oil, which shows an increase of 19% compared to the same period in last year. Of this amount, about 5.7 billion dollars is related to the export of liquefied natural gas (LNG) (Tehran Chamber of Commerce, Industries, Mines & Agriculture, 2022). Other possible way to diversify the economy is the policy of import substitution. Although the policy of import substitution has not been successful in many countries, it can prevent foreign currencies exit the country, empowering employment-generating industries, and as a result, creates more employment in the country (Kiyani et al. 2012, pp. 18–23). A successful experience in import substitution has occurred in home appliance industries in Iran. The strategic goal in this economic section has been to grow the production of household appliances and increase their exports, as well as the ban importation on the goods that are produced inside the country. Industries and household 182

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appliances are among the most employment-generating industries; in such a way that more than 1.3 million people are directly and indirectly employed in this section, and its annual financial turnover has reached six billion dollars. Iran’s household appliances were exported to Iraq, Italy, Afghanistan, North Africa, and Central Asian countries since 2019 (Almasi 2021). Expanding trade with neighbors: There are two views in Iran about the possibility of using the capacities of neighbors to compensate for sanctions against Iran; according to pessimistic view, Iran’s policy of expanding trade relations with its neighbors would have two obstacles: first, risk of economic ties with Iran due to the continuation of US unilateral sanctions. Second, marginalized position of Iran’s neighboring countries in the world economy and their inability to satisfy Iranian economic needs. Some problems like the inability of Iraqi banks to repay its debts to Iran, technical obstacles in trade relations with Turkey and the uncertain future of trade relations with Russia based on national currencies are among the evidences which support this pessimistic approach. In addition, in Iran’s neighboring countries, public corporations play a big role in their economy and as a result, Iran’s political and geopolitical conflicts with its neighbors can have a great impact on Iran’s economic relations with these countries. Therefore, establishing a stable economic relation with these countries would be a difficult task. Moreover, the more important priority for Iran’s neighboring countries is to play a role in global value chains, rather than expanding economic bilateral relations in the region (Iran Chamber of Commerce, Industries, Mines & Agriculture 2021, p. 9). In contrast, the proponents of optimistic view argue in favor of ‘shaping new markets and diversifying economic ties with countries, especially with countries in the region’ and ‘increasing the strength of resistance and reducing the vulnerability of the country’s economy through… developing strategic links and expanding cooperation with the countries of the region and the world, especially the neighbors’ (Khamenei 2014). In addition, they believe that due to the continuation of sanctions against Iran, ‘by expanding foreign economic relations, especially with neighboring countries, we can practically neutralize a significant part of the sanctions’ (Jalili 2017). Regardless of different approaches among Iran’s governing elite, the comparison of Iran’s foreign trade statistics in 2020 and 2021 shows that the share of trade with regional countries has increased relatively in Iran’s total trade. In 2020, the UAE was the second source of imports to Iran, but in 2021, its position was upgraded and became the first source; this showcases improving Iran’s trade relations with its neighbors. Regarding Iran’s export destinations, Iraq, Turkey, Afghanistan, UAE, Pakistan, and India, along with China, were the main export destinations of Iran during 2020–2021, which shows that the majority of Iran’s trading partners are its neighbors. An interesting point here is the increasing share of India in attracting Iran’s exports from 2020 to 2021. Excluding crude oil, Iran’s top export destinations from March to December 2022 are respectively China (11.8 billion dollars), Iraq (8.6 billion dollars), Turkey (6.14 billion dollars), UAE (4.6 billion dollars), and India (1.5 billion dollars). At the same time, Iran’s top exporters are UAE (13.6 billion dollars), China (11.5 billion dollars), Turkey (4.6 billion dollars), India (2.4 billion dollars), and Germany (1.4 billion dollars) (Tehran Chamber of Commerce, Industries, Mines & Agriculture, 2022). These statistics show that among Iran’s six main trading partners, three countries are Iran’s neighboring countries, and it seems that there are still many new capacities for trade relations with them. Cooperation with other sanctioned countries: Some views in Iran believe that unilateral US sanctions against different countries, including Iran, Russia, Venezuela, and China, necessitated the cooperation between these countries to overcome the sanctions. This issue was officially presented to the Iranian parliament for the first time in August 2018, i.e. one year after the US withdrawal from the JCPOA, in the form of a plan by members of parliament to form an international 183

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club comprising the countries which are under US sanctions. In the introduction of this plan, it is stated that ‘given the hostile and unilateral actions of the United States of America in economic sanctions against different countries, the government of the Islamic Republic of Iran is required to prioritize trade relations with these countries and use the economic capacities of these countries.’ In this regard, Saeed Jalili, the representative of the leadership in the Supreme National Security Council and a candidate for the presidential election in 2021, argued that the establishment of the ‘Sanction Club’ is a creative solution to deal with the American sanctions. He said ‘not only Iran but also China, Russia, and a number of other countries have been sanctioned by the United States in recent years. This confrontation can be the basis for cooperation between these countries in order to create economic opportunities’ (Jalili 2021).

Conclusion Relying on its hegemonic power after World War II, the United States has imposed many sanctions against other countries, especially Iran. The long and permanent process of US sanctions against Iran since 1979 shows that sanctions have become an integral part of the US policy towards Iran. In recent years, Trump administration pulled out of the nuclear deal with Iran and restored all the sanctions lifted under the deal. Biden administration imposed new sanctions and continue to enforce previous sanctions despite his campaign promises to rejoin the deal. The US Congress also have had an active role to adapt cruel sanctions on Iran for the last four decades. With a large amount of sanctions in place, it is necessary for Iranian officials to talk and act against the sanctions. Based on these imperative, Iranian officials produced anti-sanction discourses and practices. Ayatollah Khamenei sees sanctions as opportunity for resolving Iran’s weaknesses and deficiencies. He also argues that sanctions may well have contributed to inflaming even more hatred of the United States among Iranians. Former President Rouhani labeled US sanctions as wrong, cruel and inhuman and interpreted them through two concepts of US ‘misperception’ and ‘miscalculation’ regarding the Iran’s ability to overcome the sanctions. In Rouhani’s view, the US misperception and miscalculation can be a key obstacle in finding solution for the problem between Iran and the United States. In a little different discourse, President Raeisi views US sanctions as economic terrorism and crime against Iranians, but he believes that sanctions can be a good starting point for cooperation between all nations that are under US sanctions. However, anti-sanctions practices are more important than discourses which can be analyzed through different ones including expanding relations with China, facilitating trade relations with Eurasian Economic Union, developing knowledge-based economy, diversification of Iranian economy, expanding trade with neighbors, and cooperation with other sanctioned countries.

Bibliography Almasi, Amirhosein (2021). ‘Export is precondition for developing home appliance industry requires’, available at https://yun.ir/9pqh11. Bapat, Navin A.; Morgan, T. Clifton (2009). Multilateral Versus Unilateral Sanctions Reconsidered: A Test Using New Data. International Studies Quarterly, 53, 1075–1094. Biden, Joe (2006a). Hearing Before The Committee On Foreign Relations United States Senate One Hundred Ninth Congress Second Session: A Nuclear Iran: Challenges and Responses [online]. Available from: https://www.govinfo.gov/app/details/CHRG-109shrg30835. Biden, Joe (2006b). Iran’s political/nuclear ambitions And U.S. Policy options A compilation of Statements by witnesses Before the Committee on foreign relations United states senate One hundred ninth congress [online]. Available from: https://www.govinfo.gov/app/details/CPRT-109SPRT27613/context.

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Iranian Discourses and Practices Regarding the US Sanctions Biden, Joe (2020a). There’s a Smarter Way to Be Tough on Iran: Opinion by Joe Biden [online]. USA, CNN. Available from: https://edition.cnn.com/2020/09/13/opinions/smarter-way-to-be-tough-on-iran-joe-biden/ index.html. Biden, Joe (2020b). Opinion | Joe Biden Interview: ‘We’re Going to Fight Like Hell’. The New York Times [online], 2 Dec. Available from: https://www.nytimes.com/2020/12/02/opinion/biden-interviewmcconnell-china-iran.html [Accessed 3 Mar 2021]. Casey, Christopher A.; Fergusson, Ian F. (2020). The International Emergency Economic Powers Act: Origins, Evolution. Washington D.C: Congressional Research Service. Dehghani, Rouhollah (2022). ‘Iran’s Vice President of Science, Technology and Knowledge-Based Economy visited Made in Iran Exhibition; the latest laboratory achievements were presented’, Available at https://en.bmn.ir/news/Vice-President-of-Science%2C-Technology-and-Knowledge%E2%80%93BasedEconomy-visited-Made-in-Iran-Exhibition%3B-The-latest-laboratory-achievements-were-presented. Drezner, Daniel W. (2018). Economic Sanctions in Theory and Practice: How Smart Are They? In: K.M. Greenhill and P. Krause, eds. Coercion: The Power to Hurt in International Politics. New York, NY: Oxford University Press, 251–270. Drezner, Daniel W. (2003). The Hidden Hand of Economic Coercion. International Organization [online], 57 (3), 643–659. Available from: http://www.jstor.org/stable/3594840. Dubowitz, Mark (2022). https://www.foreign.senate.gov/download/testimony05252203 [online]. Available from: https://www.foreign.senate.gov/download/testimony05252203 [Accessed 22 Sep 2022]. Felbermayr, Gabriel et al. (2020). The Global Sanctions Data Base. European Economic Review, 129. Gause, F. Gregory (1999). Getting It Backward on Iraq. Foreign Affairs [online], 78 (3), 54–65. Available from: http://www.jstor.org/stable/20049280. Haass, Richard N. (1997). Sanctioning Madness. Foreign Affairs, 76 (6), 74. Available from: Hewitt, Kate; Nephew, Richard, (2019). How the Iran hostage crisis shaped the US approach to sanctions. Brookings [online], (2019). Available from: https://www.brookings.edu/blog/order-fromchaos/2019/03/12/how-the-iran-hostage-crisis-shaped-the-us-approach-to-sanctions/ [Accessed 27 Sep 2022]. Hufbauer, Gary Clyde, et al. (2007). Economic Sanctions Reconsidered. 3rd ed. Washington, DC: Peterson Institute for International Economics. Iran Chamber of Commerce, Industries, Mines & Agriculture (2021). Statistical Yearbook 2021, available at https://otaghiranonline.ir/UFiles/Docs/2022/12/19/Doc20221219095652429.pdf. Jalili, Saeed (2017). ‘Through expanding economic relations with neighboring countries, Iran can neutralize many sanctions’, available at https://drjalily.com/posts/1241. Jalili, Saeed (2021). ‘Active foreign policy is precondition for promoting domestic economy’, Available at https://drjalily.com/posts/1625. Katzman, Kenneth (2022). Iran Sanctions: Report: RS20871 [online], Congressional Research Service. Available from: https://crsreports.congress.gov/product/details?prodcode=RS20871 [Accessed 8 Dec 2022]. Khamenei, Seyed Ali (1990). Message for the first anniversary of Ayatollah Khomeini’s death, Available at https://farsi.khamenei.ir/message-content?id=2316. Khamenei, Seyed Ali (2008). Speech at the 19th anniversary of Ayatollah Khomeini’s death, available at https://yun.ir/ssmks1. Khamenei, Seyed Ali (2011). Speech at the 23th anniversary of 13 Aban, Available at https://yun.ir/ypsre9. Khamenei, Seyed Ali (2012). Message for the 23th anniversary of Ayatollah Khomeini’s death, Available at https://yun.ir/xtmp1. Khamenei, Seyed Ali (2014). General Policies for Resistant Economy, Available at https://farsi.khamenei.ir/ news-content?id=25370. Khoshkar, AmirAbbasi (2021). Neighborhood Policy and Multilateral Geoeconomic Order Making; The Islamic Republic of Iran and the Eurasian Economic Union. Kirkham, Ksenia, (2022). The Political Economy of Sanctions. Cham: Springer International Publishing AG. Kiyani, Zahra et al. (2012). ‘Resistant economy and its elements’, Iran’s Parliament Research Center, available at https://rc.majlis.ir/fa/report/show/822467.[Accessed 13 Jan 2023]. Malley, Robert (2022). https://www.foreign.senate.gov/download/testimony05252201 [online]. Available from: https://www.foreign.senate.gov/download/testimony05252201 [Accessed 22 Sep 2022]. Mehr News (2022). ‘The contribution of knowledge-based in Iranian economy’, Available at https:// mehrnews.com/xXnCh.

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Heidarali Masoudi Miremadi, Tahereh, (2011). A Framework for Evaluation of Anti-Sanction Strategies: National System of Innovation. Politics and Technology Quarterly, 12 (3), 83–98. Moshfegh, Zahra (2020). ‘Strategies for Cooperation With Eurasian Economic Union in Sanction Era’, Economic Security, Vol. 80, No. 7, pp. 13–22, Available at https://www.noormags.ir/view/fa/ articlepage/1722963. Nurnberger, Ralph (2003). Why Sanctions (almost) Never Work. The International Economy, 17 (4). Qanbarloo, Abdollah, (2017). Theoretical Foundation of Sanctions Against Iran’s Nuclear Program: Comparing Trump and Obama’s Diplomacy. Strategic Studies Quarterly, 21 (80), 75–100. Raeisi, Ebrahim (2021a). Speech at Shanghai Organization, Available at https://president.ir/fa/131302/ printable. Raeisi, Ebrahim (2021b). Speech at 76th UN General Assembly, available at https://www.president.ir/ fa/131474. Raeisi, Ebrahim (2021c). Speech at ECO summit, available at https://president.ir/fa/132949/printable. Raeisi, Ebrahim (2022). Speech at the Sixth Summit of the Heads of State and Government of Member Countries of the Gas Exporting Countries Forum (GECF) https://president.ir/fa/134702/printable. Raeisi, Ebrahim (2022a). Speech at 77th UN General Assembly, available at https://www.president.ir/ fa/139713. Rouhani, Hasan (2014a). Speech at 44th Davos World Economic Forum, available at https://president.ir/ fa/74850/printable. Rouhani, Hasan (2014b). Speech at the Iran’s Ambassadors and Representatives Summit, available at https:// president.ir/fa/74850/printable. Rouhani, Hasan (2014c). Speech at the Meeting of Government senior officials with Supreme Leader, available at https://president.ir/fa/79125/printable. Rouhani, Hasan (2018). Speech at the Iran’s Ambassadors and Representatives Summit, available at https:// president.ir/fa/105358/printable. Rouhani, Hasan (2019). Dialogue with Chinese President Xi in Shanghai Organization Summit, available at https://www.mfa.gov.ir/portal/NewsView/33610. Shariatinia, Mohsen (2022). Systemic Change and Iran-China Strategic Partnership. Contemporary Political Studies Quarterly, 13 (3), 77–92. Tehran Chamber of Commerce, Industries, Mines & Agriculture (2022). ‘Review of Iran’s Trade’, available at https://bndccim.com/?p=12339. Trump, Donald (2017). Remarks by President Trump on Iran Strategy. Available at https://www.whitehouse. gov/the-press-office/2017/10/13/remarks-president-trump-iran-strategy [Accessed 12 Dec 2022]. US House of Representatives (2019). Assessing the Use of Sanctions in Addressing National Security and Foreign Policy Challenges: Hearing Before the Subcommittee on National Security, International Development and Monetary Policy of the Committee on Financial Services, House of Representatives, One Hundred Sixteenth Congress, First Session, May 15, 2019. Washington: U.S. Government Publishing Office. Weber, Patrick M.; Schneider, Gerald (2020). How Many Hands to Make Sanctions Work? Comparing EU and US Sanctioning Efforts. European Economic Review [online], 130, 103595. Available from: https:// www.sciencedirect.com/science/article/pii/S0014292120302257. Zarif, Mohammad Javad (2019). ‘Iran supports BRI’, available at Available online at https://tabnak.ir/003rbH.

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15 THE POLITICAL ECONOMY OF SANCTIONS The Case of Cuba Raúl Rodríguez Rodríguez

Introduction The use of economic sanctions as a foreign policy tool is not new in international relations; however, economic sanctions have become increasingly important as alternatives to war since the end of the Cold War. Economic sanctions may be multilateral, with approval of the United Nations Security Council as mandated by Chapter VII of the United Nations Charter, reflecting the collective will of the members of the U.N. By contrast, unilateral sanctions are non-military restrictive coercive measures imposed by states against others, without or beyond an existing UN sanctions regime (Schmidt: 2022). Unilateral sanctions are adopted based on the foreign policy choices of individual states as a means of projecting power or influence on another state’s behavior. They may pursue a variety of purposes, including punishment of the target state and even regime change. The United States is the world’s most active user of unilateral economic sanctions. The U.S. government’s use of unilateral sanctions as a foreign policy tool has increased 933% in the last two decades (U.S. Department of Treasury: 2021). The U.S. system of unilateral coercive measures on Cuba, with the main objective of regime change, has evolved over the past six decades to be rightfully called a blockade (bloqueo). While the term “blockade” in English implies an actual naval blockade, the Cuban view, the U.S. measures function in a manner that to a great extent achieves the same effect. Thus, “bloqueo” is the term widely used in Cuba to refer to the U.S. unilateral system of coercive measures on Cuba, given their economic, political, and humanitarian effect, and also the extraterritorial implications. Cuban government and society perceive the U.S. sanctions as an act of war, in that a superpower is using its asymmetric strength to impose comprehensive measures with the goal of regime change. Moreover, the intensity of the U.S. system of unilateral coercive sanctions has increased on numerous occasions, as did the scope of their extraterritoriality. Unsurprisingly, the Cuban socioeconomic and political system has suffered greatly, and has had to respond to an extensive chain of consequences. Since the Second World War, the United States has maintained an overwhelming hegemony in the global political economy. This has been grounded in large measure in its dominant role in the world financial system, secured by neoliberalism. The U.S. policy toward Cuba has entailed its exclusion from large sectors of the global markets, including capital markets, as well as access to DOI: 10.4324/9781003327448-19

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global financial institutions. As a result, Cuba has been left almost alone to address a challenge that is common to the Global South, of pursuing an alternative political, social, and economic path for development. This chapter looks at the unilateral system of coercive economic measures imposed by the United States on Cuba for over six decades; at the legitimacy and legality of this system, particularly in regard to Cuba’s sovereignty; and the overall impact of sanctions on the country’s politics, economy, and national security.

U.S. Economic Sanctions on Cuba: Historical Background Immediately after a social and political revolution in January 1959, the new Cuban government took the first steps toward the implementation of a socioeconomic program. The program involved a strong and swift structural transformation that began incorporating new property and class relations. These policies, in turn, limited the possibilities for private capital accumulation. The new Cuban government set the target of achieving economic sovereignty and social justice by both overcoming economic dependence on the United States and pursuing an alternative model of development. Within two years (by the end of 1960), Washington, with the support of some of Cuba’s richest capitalists, had gradually intensified economic sanctions policies, coupled with isolating Havana politically and diplomatically. This was accompanied by military threats and covert actions aimed at overthrowing the Cuban government. From the onset, the U.S. economic sanctions against Cuba have been geostrategic: the Cuban revolution challenged the Monroe doctrine and U.S. hegemony, not only in the Western hemisphere but also in the rest of the Global South. The U.S. responded with aggressive economic measures. In July 1960, the Eisenhower administration cut the Cuban sugar quota from the U.S. market.1 This move had a devastating impact on the economy of a small underdeveloped island, which had been highly dependent on the export of sugar to the United States. Before sanctions were imposed, in 1958, which was the last year of Batista’s government, the United States accounted for 71% of Cuba’s exports and 64% of her imports. Total U.S. direct private investment in Cuba was close to $2 billion, controlling over 30% of the sugar industry, one-third of public utilities, and major shares of the mining and manufacturing sectors. The sales by U.S.-owned companies amounted to over a quarter of Cuba’s GNP (Zimbalist: 1978, p. 51). From day one, the United States used its economic leverage over Cuba as a foreign policy tool for regime change. This objective was documented extensively in U.S. official policy papers. For instance, the oft-quoted Mallory memorandum of April 6, 1960 Mallory, L. (1960), admitted that the new Cuban government had popular support and that “the only foreseeable means of alienating internal support is through disenchantment and disaffection based on economic dissatisfaction and hardship.” It goes on to suggest, “If the above are accepted or cannot be successfully countered, it follows that every possible means should be undertaken promptly to weaken the economic life of Cuba” (Foreign Relations of the United States, 1958–1960, p. 499). In February 1962, President Kennedy signed an executive order, Proclamation 3447, based on the Foreign Assistance Act of 1961 and provisions of the Trading with the Enemy Act of 1917, even though there was no state of war between the two countries. Cuba is still the only country in the world sanctioned under the Trading with the Enemy Act, enacted as a wartime measure.2 Subsequently, the Cuban Assets Control Regulation was created in 1963 (Department of the Treasury), and from then on, sanctions were enforced by the Office of Foreign Assets Control (OFAC). In his book Treasury’s War, Juan Zarate asserts that OFAC then 188

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became the hub for administering sanctions on Cuba, “restrictions [which] were placed on what and who could enter Cuba in an attempt to strangle the Castro regime economically” (Zarate: 2013, p. 24). The U.S. sanctions and geoeconomic confrontation has also had a covert component through operations against Cuba during the 1960s, principally by laying siege to the infrastructure of the Cuban economy through the infiltration of sabotage teams assigned to disrupt Cuban agriculture and industry. In this period, the Central Intelligence Agency planned a “strategy of economic strangulation to weaken and undermine the regime,” to “tighten the economic noose around Castro” in order to create “economic chaos” based on “efforts to destroy the Cuban economy by sabotage, sanctions, and other measures of economic warfare (Perez Jr.: 2016). There are a number of factors and historical legacies that perpetuate Cuba’s economic difficulties. First, Cuba inherited an ineffective economic structure resulting from colonialism and neocolonialism. This was followed by a geopolitical alliance of three decades with the Soviet Union,3 with mixed results in terms of economic performance (Álvarez González and Fernández Mayo: 1992). And third, the United States’ economic sanctions have been profoundly detrimental to Cuba’s overall economic development. Domestically, the presence of the sanctions favored a centrally planned economy, in order to distribute scarce resources. However, there are also significant inefficiencies in such an arrangement. In the 1970s and 1980s, the impact of the U.S. economic sanctions on Cuba’s development was less visible, due to preferential trade and aid from the Soviet Union and the Eastern European bloc. But after the dissolution of the Soviet Union in 1991, Cuba lost 75%–80% of its trade, and Cuba’s economy went into a free fall. Between 1990 and 1994, Cuba’s GDP contracted by one-third (Ritter: 2010), and Cuba faced a severe economic crisis and recession. In the 1990s, the U.S. intensified its sanctions policies against Cuba. The sanctions regime was significantly strengthened by two statutes, passed by the United States Congress – the Torricelli Act of 1992 and the Helms–Burton Act of 1996. These codified the sanctions regime that had developed through regulations and other executive measures, eliminating the discretion of the president to lift or loosen many components of the sanctions regime. To this day, while the U.S. executive branch has discretion regarding the application and enforcement of sanctions, only a vote by the U.S. Congress can revoke these statutes, which are the foundation of the current sanctions regime. Both of these statutes provide that the measures they impose can be terminated only after changes to Cuba’s internal political order. Thus, they run counter to the island’s self-determination and national security. The first of these, the Torricelli Act (also known as the Cuban Democracy Act) was introduced in 1992 by New Jersey Democrat Robert Torricelli (US Congress: 1992). The official purpose of this was to “promote a peaceful transition to democracy in Cuba through the application of appropriate pressures on the Cuban government.” The Torricelli Act marks the beginning of the United States’ efforts to extend the extraterritorial dimension of the sanctions regime. This occurs because the Torricelli Act intervenes in Cuba’s relations with parties in third countries, over which the United States has no legitimate authority. It does so in part by calling for “sanctions on countries that assisted Cuba through grants, loans, concessional sales, export subsidies, or any means more favorable than those on the world market.” In addition, the statute asserted authority over foreign subsidiaries of U.S. companies. Under International Commercial Law, the nationality of a company is generally determined by the place where it is incorporated, not the nationality of its shareholders or parent corporation. Thus, the Torricelli legislation is “extraterritorial,” running counter to well-settled international law. 189

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Torricelli claimed his bill would “wreak havoc on that island” (Franklin: 1984). Before this legislation, Cuba imported $719 million worth of goods annually, 90% of which was food and medicines, from subsidiaries of U.S. companies in third countries. Between 1992 and 1995, after the Torricelli bill came into force, broadly banning such sales, only $0.3 million was approved for sale by U.S. subsidiaries in third countries (Garfield and Santana: 1997). The second statute, the Cuban Liberty and Democratic Solidarity (Libertad) Act was signed into law in 1996. According to the statute, the purpose was to “seek international sanctions against the Castro government in Cuba,” and to promote a democratically elected government (U.S. Congress: 1996). Thus, the statute makes explicit that the U.S. government was seeking to interfere in Cuba’s government structure – specifically, to achieve regime change, in violation of the general norm of non-intervention, and the principle of equal sovereignty enshrined in the United Nation Charter. During this period, in response to its economic crisis, the Cuban state sought to reorganize its engagement with the world economy by introducing economic reforms and diversifying its international economic relations. This included the establishment of relations with a broad array of new trade partners. The Cuban government enacted Decree Law 77 of 1995, the Foreign Investment Act, authorizing foreign investment in all sectors of the Cuban economy, except for health, education, and the armed services. Under this new law, foreign investors could establish joint ventures by partnering with local Cuban companies to conduct business in Cuba (Gaceta Oficial de la República de Cuba: 2020). The Helms–Burton Law of 1996 did much to undermine Cuba’s efforts. Title III of the Helms– Burton Act is one of the most consequential provisions, and it is unique to Cuba. It labels all expropriated and nationalized Cuban property as “stolen goods,” although this runs counter to international law. The Act then decrees that trading with goods manufactured on or by this “stolen property” or investing in a “stolen property” is illegal, regardless of the nationality of the “perpetrator.” Enforcement of Title III was suspended for a long period due to intense opposition from the United States allies, including Canada and the European Union. However, this provision was activated by President Donald Trump on May 2, 2019. The current administration of Joseph Biden, as of December 2022, has not reversed that decision. Consequently, it is possible for U.S. citizens, including Cubans who are naturalized U.S. citizens, as well as companies, to bring civil action for damages before U.S. courts against any person that is doing business with products nationalized during the early days of the Cuban Revolution. This has triggered dozens of lawsuits in the U.S. courts against a mix of U.S., European, and Cuban companies, operating in industries such as mining, sugar, tobacco, advertising, banking, construction, and ranching. This threat of litigation presents a significant impediment to Cuba’s ability to obtain foreign investment, deeply compromising its economic development. In addition, Title III is extraterritorial in that it targets persons and entities beyond the legitimate jurisdiction of the U.S., unsupported by any treaty or agreement with other States. In response, the Cuban National Assembly passed Law 88, or the Law for the Protection of the National Independence and Economy of Cuba, as an antidote to the threat to Cuban sovereignty embodied in the Helms–Burton Act. The Cuban legislation called for seven to fifteen years’ imprisonment for passing information to the United States that could be used to bolster anti-Cuban measures, such as the tightening of the U.S. economic blockade (Gaceta Oficial de la República de Cuba Extraordinaria: 1999). In 2000, one new piece of legislation was added to the sanctions regime: the Trade Sanctions Reform and Export Enhancement Act (TSRA). In principle, TSRA provided for humanitarian exemptions, such as the sale of food. But even food sales were only allowed on terms that are adverse 190

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and costly to Cuba. Cuba may purchase foods from U.S. producers, but only if Cuba pays for these in cash, and pays in advance (U.S. Congress: 2000). Additionally, TSRA reinforces some of the harsh aspects of the sanctions, such as requiring end user verification for the sale of medicines. While U.S. companies are in principle permitted to sell medicines to Cuba, this requirement effectively makes this impossible. Some scholars have noted that there is no other country in the world that has had to endure such a sustained period of economic and political aggression as Cuba at the hands of the United States (Lamrani: 2013, Zaldívar: 2003). As unilateral coercive measures on Cuba have triggered periods of harsh economic and social crises, successive Cuban governments have routinely had to seek ways to mitigate the impact of these measures. In addition, the Cuban government has also had to take extraordinary measures in response to national emergencies, such as when Cuba was battling COVID-19. Even during a global pandemic, the United States offered no sanctions relief. Accordingly, as in classical war situations, when a country is subject to a siege, it closes ranks in an attempt to regain stability through the temporary restriction of certain civil and political rights. Thus, instead of facilitating the improvement of the human rights situation, economic sanctions often result in emergency domestic legislation that aims at safeguarding vital interests. Each component of the sanctions has an objective related to undermining a key sector of the Cuban economy. Notably, the sanctions target each of the areas in which Cuba is positioned to produce goods and services on a par with highly developed countries; medicine and biotechnology stand out in this regard. The Torricelli Act specifically targets the biotechnological sector, prohibiting any export of medical equipment and goods to Cuba that can be used in the production of any biotech product. There is no doubt that the extensive effort and investment in Cuba’s biotech sector and public health system would yield better results if the Cuban state companies in these areas were not systematically denied critical technologies, raw materials, reagents, diagnostic tools, medicines, devices, equipment and the necessary spare parts. For example, the sanctions often entail the outright denial of commercial transactions with U.S. companies in this area (and their foreign subsidiaries), such as for reagents for Cuba’s COVID-19 vaccine candidates. But the sanctions create indirect obstacles as well. This is seen, for example, where the sanctions block a manufacturer from providing Cuba with the updated documentation that is necessary to give continuity to the use of lifesaving drugs in areas such as oncology and pediatrics (Cuba Minrex: 2022). The intricate ever-changing web of statutes, rules, regulations and blacklists constitute a formidable obstacle for the normal diversification of Cuba’s foreign trade and generates a significant chilling effect on potential foreign investors. Barrera Rodriguez and Iturriaga Bartuste found that the system of sanctions was very dynamic during the first two decades of the 21st century. Between January 2001 and June 2020, that is, during the administrations of George W. Bush, Barack Obama, and Donald Trump, new regulations were introduced every year, for a total of 122 (Barrera and Iturriaga: 2020). While many of the regulatory changes during Obama Administration involved loosening some aspects of the sanctions, the changes that took place during the Bush and Trump Administrations overwhelmingly made the sanctions more stringent. The number and frequency of the adverse changes to the sanctions regime, in turn, create a continual state of uncertainty. Potential investors and trade partners have to factor in not only the costs and risks of the existing terms of the sanctions regime, but also consider the likelihood that there will be continual changes, most likely adverse ones. The U.S. blockade has had and continues to have a huge and devastating impact on Cuba’s economic, political, social, and cultural life. In all, Cuba has been under U.S. unilateral economic sanctions for more than half of its existence as an independent nation. The policy is informed by a cynical logic to induce suffering and inflict hardship as a means to deepen Cuban discontent, 191

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whereupon–presumably – Cubans driven by want and motivated by need would rise up to remove a government the United States wishes gone (Perez Jr.: 2022). Moreover, the U.S. system of sanctions, does not include any periodic assessment of its impact on Cuba’s most vulnerable population. It is indiscriminate and disproportionate, making it ethically unjustified almost by any standard (Rodríguez: 2016). Thus, the unilateral coercive measures on Cuba short change human rights concerns (Lopez-Levy and Abrahams: 2010), since these measures affect the whole population of the island.

U.S. Sanctions on Cuba: Embargo, Boycott, or Blockade According to the U.S. government, its policy entails banning bilateral trade and/or investment in Cuba’s economy. In fact, the “embargo” of Cuba is not a bilateral matter, since it has a strong extraterritorial character. The United States sanctions against Cuba have not only blocked its access to U.S. markets but also intervene in Cuba’s trade with third countries, including international financial transactions, foreign investment, and exports and imports, in the context of relations and interactions with the United Nations, NGOs, and individuals from third countries. The U.S. sanctions are something more than an embargo since they extend to imports and exports and the whole Cuban economy. It is more than a boycott, in that the United States attempts to control actions of third-party states. Many lawyers and academics believe that the United States has breached the acceptable standard of conduct between States by engaging in an illegal economic blockade of Cuba employing all the possible forms of sanctions: trade controls, suspension of aid and technical assistance; freezing of financial assets; and most recently, the blacklisting of foreign companies that do business with Cuba (Doxey: 1980). In sum, what the United States government and mainstream media call “the U.S. embargo of Cuba” is a combination of statutes and regulations that have been modified over time, evolving into an intricate ever-changing network of statutes, rules, regulations, and blacklists. These constitute a formidable obstacle for the normal diversification of Cuba’s foreign trade, and create obstacles for Cuban development projects to access the necessary capital to function, create employment, and generate revenues to support health care and education.

U.S. Sanctions on Cuba: Extraterritoriality The U.S. system of unilateral coercive measures against Cuba also contains extra-territorial aspects. Indeed, this dates back to the 1960s, when the U.S. government sought to pressure NATO allies to stop trade deals with Cuba (Morley: 1984). Since then, the United States has enacted several provisions to pressure third countries into adopting U.S. trade policies regarding Cuba, or at least complying with the U.S.’ unilateral measures (Krinsky and Golove: 1993). The U.S. government prohibits importation of goods into the United States that contain even a trace of a Cuban inputs, and third country non-U.S. companies are not allowed to sell to Cuba goods that contain more than 10% U.S. inputs. The U.S. Department of Commerce’s Bureau of Industry and Security’s rule in October 2019 lowered the permissible level of de minimis U.S.-origin content in goods to be exported to Cuba (Federal Register: 2019), creating an even more daunting standard of compliance for third-country nationals. Additionally, foreign banks, which are fully owned by foreign nationals and operate on foreign soil, are proscribed by the U.S. government from maintaining dollar denominated accounts for Cuba or from conducting dollar denominated commercial transactions involving Cuba. All of these measures are consequently extraterritorial. 192

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In addition, the Torricelli Act seeks to deter vessels from third countries from doing business with Cuba. It accomplishes this by prohibiting any vessels that enter “a port or place in Cuba to engage in the trade of goods or services” from loading or unloading “any freight at any place in the United States, except pursuant to a license issued by the Secretary of the Treasury within 180 days after departure from such port or place in Cuba” (US Congress:1992). Many ships that pick up or deliver cargo to Cuba would ordinarily expect to then stop in the United States as well. Because they cannot do so, it is often commercially impossible for them to service Cuba’s cargo needs. In some cases, Cuba must pay double for its freight – covering the shipping costs from, say, Spain to Cuba, then also paying for the ship to return empty. The U.S. extra-territorial impact of the sanctions is deliberate, intentionally limiting economic opportunities for commercial actors from third states, such as European and Canadian business and persons. As Senator Jesse Helms, one of the co-sponsors of the Helms–Burton Act, put it, “it is a matter of saying to other countries, you can trade with us or with Cuba, but you can’t trade with both” (Smith: 2007). Some U.S. measures are not only extraterritorial but are also in effect global. Title I of the Helms–Burton Act requires the U.S. government to use its voting power in international institutions, including the World Trade Organization and the World Bank, to deny access to Cuba. Given how heavily weighted the voting system is, where a nation’s military and economic strength is reflected in its voting strength, voting favors the United States (Gianaris 1990) and it is quite unlikely that it would be outvoted in this situation. But in the unlikely scenario where that might happen, the Helms-Burton Act then provides that the United States will withhold an equal amount from its contributions to those institutions. There are also other measures that are not designated as sanctions proper, but have the same effect, such as listing Cuba as a country that does not cooperate with anti-terrorism efforts, and including Cuba on the list of “State Sponsors of Terrorism.” In the financial sector in particular, this promotes increased scrutiny for U.S.-listed companies if they engage in dealings with Cuba, and they often choose to withdraw from the Cuban market simply to avoid the problems created by this designation. Additionally, the Office of Global Security Risk within the U.S. Government’s Securities and Exchange Commission affects the shipping and insurance sectors globally.

Over-Compliance: The “Chilling Effect” as an Extension of U.S. Sanctions on Cuba For many years, the United States has maintained that it permits humanitarian exemptions and grants special licenses for humanitarian projects. In fact, the U.S. system of sanctions on Cuba often deters authorized transactions by requiring cumbersome, onerous documentation, or certification, causing individuals and companies to expend considerable resources in applying for licenses, or imposing discouraging long delays. In recent years, there has been an added dimension to the extraterritoriality of the U.S. measures in the form of over-compliance. Over-compliance occurs when there is an excessive avoidance of risk associated with inadvertent violations. A bank or a business engages in over-compliance, for example, when it forgoes even legally permissible trade, because the risk of penalties for even inadvertent violations is so high that it makes more sense, commercially, to withdraw altogether from the market. For example, as the U.S. Treasury Department issues regulations and blacklists Cuban entities and individuals, banks do not receive sufficient, and sufficiently clear, guidance as to their due diligence requirements. In some cases, it is impossible for them to meet the “Know Your Customer” requirement, since they may have no way of knowing who the end user of a 193

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transfer may be. Consequently, the bank may never be sure whether it has met its legal obligations under U.S. regulations (Gordon: 2019). In the face of this uncertainty, banks have increasingly chosen to withdraw altogether from countries perceived as high-risk, even for transactions that are quite legal. Over-compliance also occurs when banks decide to freeze assets that are not explicitly targeted by sanctions, or deny individuals the possibility to open or maintain bank accounts or to engage in transactions, simply because they are nationals of a sanctioned country. Some over-compliance policies of banks prevent states, international organizations, diplomats, and individuals in targeted countries from participation in international cooperation. The policies of over-compliance can result in the cancellation or suspension of membership or voting rights in international organizations. They impede the normal functioning of diplomatic missions, missions of international organizations, and the implementation of humanitarian and development projects. A U.S. organization, Cubatrade.org, reported in October 2022 that an increasing number of financial institutions located in third countries are refusing to process transactions, which include a sender located in the Republic of Cuba or a recipient located in the Republic of Cuba, the main reason being the fear of the cost for an unintentional violation of OFAC regulations (Cubatrade: 2022).

Conclusion The U.S. action against Cuba, while denominated “embargo” in official U.S. publications and U.S. main stream media, can more properly be called an economic blockade: something more than an embargo, in that it is extended to imports and exports, and more than a boycott, in that the United States has attempted to control actions of third-party states in an extraterritorial way. For this reason, the term “economic blockade” is so aptly used, even when it is not an actual naval blockade. Through the use of unilateral coercive sanctions, the U.S. government has punished targeted states like Cuba, without the approval of the U.N. Security Council, while violating Cubans’ right to development. While the United States has done so in the name of human rights promotion, its policies are driven primarily by enhancing U.S. state power in the region and advancing a domestic political agenda. The U.S. economic blockade is not supported by multilateral organizations and runs counter to international law. Consequently, its legitimacy and legality are broadly questioned. And while the legitimacy and justifications are problematic, the scope and structure of those economic sanctions against Cuba are without precedent, due to their longevity, breadth, and multiplicity of impacts. The United States government directly imposes obligations on foreign natural and legal persons through the extraterritorial application of its domestic law and thereby also aims to influence the foreign policy choices of other states and international organizations. The extraterritoriality of U.S. legislation strongly affects the conduct of foreign persons outside the United States. The sanctions are particularly controversial because they attempt to induce foreign persons abroad to forego economic activity in order to advance the foreign policy goals of the U.S. government. In the particular case of Cuba, unilateral coercive measures affect areas of economic strength such as tourism and the export of professional services, and exploit vulnerabilities such as energy dependence and Cuba’s reliance on foreign direct investment. By undermining Cuba’s overall economic performance, unilateral coercive measures further affect the living standards of the Cuban population, who rely mostly on the Cuban state for health care, education, transportation, and subsidized food. This compromises the socioeconomic rights of Cubans. Combined with measures that undermine trade, foreign investment, and imports, these measures have had an impact on Cuba’s economic performance and the living standards of all Cubans, whose access to health care 194

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and education is provided by the state as a long-term commitment and consequently, the deterioration of health and education services brings about a political cost for the Cuban government. Historical evidence shows that the tightening of economic sanctions on Cuba has led to more centralization of allocation of resources as they become scarcer. This creates bureaucratic hurdles that affect the overall efficiency of the economic system and the ability of the Cuban state to respond to the needs of its population. While the U.S. system of unilateral coercive measures seeks to cause such extreme hardship so that it will mobilize the population against the Cuban government, at the same time, it affects the state’s capacity to fulfill its commitments for economic development with social justice for its citizens, the core of the structural socioeconomic and political transformations that started after 1959 with the triumph of the Cuban revolution.

Notes 1 Cuba provided one-third of the U.S. total sugar supply. Dwight D. Eisenhower, Statement by the President upon Signing Bill and Proclamation Relating to the Cuban Sugar Quota. Online by Gerhard Peters and John T. Woolley, the American Presidency Project. https://www.presidency.ucsb.edu/node/235042 2 The U.S. system of unilateral coercive measures is enforced mainly through six statutes: the Trading with the Enemy Act of 1917, the Foreign Assistance Act of 1961, the Cuban Assets Control Regulations of 1963, the Cuban Democracy Act of 1992, the Helms–Burton Act of 1996, and the Trade Sanctions Reform and Export Enhancement Act of 2000. 3 Cuba joined the Council for Mutual Economic Assistance, known as the CMEA or Comecon, in 1972. Other full members in 1989 were the USSR, GDR, Poland, Czechoslovakia, Hungary, Romania, Bulgaria, Mongolia, and Vietnam. In 1989, Cuba exported 63% of its sugar, 73% of its nickel and 95% of its citrus and imports from CMEA countries represented 86% of Cuba’s total imports (Álvarez González and Fernández Mayo: 1992).

Bibliography Álvarez González, E., and Fernández Mayo, M. A. (1992) Dependencia Externa de la Economía Cubana. La Habana: Instituto de Investigaciones Económicas (INIE). Barrera, S., and Iturriaga, M. (2020) Las sanciones de Estados Unidos a Cuba (2001–2020), Política Internacional, Vol. 8, pp. 30–40. Cuba Minrex. (2022) Cuba’s Report on Resolution 75/289 of the United Nations General Assembly Entitled “Necessity of Ending the Economic, Commercial and Financial Blockade Imposed by the United States of America against Cuba”. [online]. Available at: https://cubaminrex.cu/en/cubas-reportresolution-75289-united-nations-general-assembly-entitled-necessity-ending-economic (Accessed: 20 October 2022). Cubatrade.org. (2022) Facing Extinction Like Javan Rhino? Non-U.S. Banks Engaging with U.S. and NonU.S. Entities for Authorized Transactions Involving Cuba Due to Risk of OFAC Penalties. Since 2015, Only Two U.S. Banks. 17 October 2022 [online]. Available at: https://www.cubatrade.org/blog/2022/10/17/ ztijoaz9m3hky8hdnb8n6ilvl0h7ee (Accessed: 20 November 2022). Doxey, M. (1980) Economic Sanctions and International Enforcement, 2nd ed. New York: Oxford University Press. Federal Register. (2019) Restricting Additional Exports and Reexports to Cuba, Federal Register, The Daily Journal of the United States Government. 21 October 2019 [online]. pp. 56117–56121. Available at: https://www.federalregister.gov/documents/2019/10/21/2019-22876/restricting-additional-exports-andreexports-to-cuba (Accessed: 20 October 2022). Foreign Relations of the United States. (1958–1960) Cuba, Volume VI. Franklin, J. (1984) The Politics Behind Clinton’s Cuba Policy. The Baltimore Sun. 30 August 1984 [online]. Available at: https://www.baltimoresun.com/news/bs-xpm-1994-08-30-1994242173-story.html Gaceta Oficial de la República de Cuba. (2020) Ministerio de Justicia, Gaceta Oficial No. 022 Extraordinaria de 7 de Febrero de 2020. [online]. Available at: https://www.gacetaoficial.gob.cu/es/

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Raúl Rodríguez Rodríguez ley-no-118-ley-de-la-inversion-extranjera#:~:text=%2D%20Esta%20Ley%20tiene%20por%20 objeto,sociedad%20socialista%20pr%C3%B3spera%20y%20sostenible (Accessed: 20 October 2022). Gaceta Oficial de la República de Cuba Extraordinaria. (1999) No. 1 de 15 de marzo de 1999, pp. 10–13. [online]. Available at: https://www.fgr.gob.cu/sites/default/files/LEY%20No.%2088%20de%201999. Prot_.independencia%20y%20Econ.de%20Cuba.pdf (Accessed: 20 October 2022). Garfield, R. and Santana, S. (1997) The Impact of the Economic Crisis and the U.S. Embargo on Health in Cuba, American Journal of Public Health, January, Vol. 87, No. 1 pp. 15–20. Gianaris, W. (1990) Weighted Voting in the International Monetary Fund and the World Bank, Fordham International Law Journal, Article 3, Vol. 14, No. 4. Gordon, J. (2019) The Hidden Power of the New Economic Sanctions, Current History, Vol. 118, No. 804, pp. 3–10. Krinsky, M., and Golove, D., eds. (1993) United States Economic Measures against Cuba. Northampton, MA: Aletheia Press. Lamrani, S. (2013) The Economic War Against Cuba: A Historical and Legal Perspective. New York: NYU Press. Lopez-Levy, A., and Abrahams, H. (2010) Anything but Human Rights: U.S. Policy Toward Cuba Under Helm Burton, International Journal of Cuba Studies, Autumn/winter 2010, Vol. 2, No. 3/4, pp. 315–334. Mallory, L. (1960) Memorandum to the Assistant Secretary of State for Inter-American Affairs (Secret). Department of State, Central Files, 737.00/4–660. Secret. Drafted by Mallory. [online]. Available at: https://history.state.gov/historicaldocuments/frus1958-60v06/d499 (Accessed: 14 September 2022). Morley, M. (1984) The United States and the Global Economic Blockade of Cuba: A Study on Political Pressures on American Allies, Canadian Journal of Political Science/Revue Canadienne de Science Politique, Vol. 17, No. 1, pp. 25–48. Perez Jr., L. (2016) The Cost of Covert Operations in Cuba. North American Congress on Latin America, NACLA. 16 December [online]. Available at: https://nacla.org/news/2016/12/16/cost-covert-operationscuba (Accessed: 9 October 2022). Ritter, A. (2010) “Cuba’s Economy During the Special Period, 1990–2010.” 12 October [online]. Available at: https://thecubaneconomy.com/wp-content/uploads/2012/02/Cubas-Economy-during-the-Special-Period1990-2010.-Cuba-Encyclopedia-Essay-October12.docx (Accessed: 9 October 2022). Rodríguez, R. (2016) U.S. Economic Sanctions on Cuba: An International Ethics Perspective, LASA Forum, Spring 2016, Vol. XLVII, No. 2, pp. 16–20. Schmidt, J. (2022) The Legality of Unilateral Extra-Territorial Sanctions Under International Law, Journal of Conflict & Security Law, Vol. 27. No. 1, pp. 53–81. Smith, W. (2007) Waving the Big Stick: The Helms-Burton Affair. North American Congress on Latin America NACLA. 25 September [online]. Available at: https://nacla.org/article/waving-big-stick-helms-burtonaffair (Accessed: 9 October 2022). U.S. Congress.( 1992) “Cuban Democary Act”. Congress.gov. “H.R.5323 – 102nd Congress (1991–1992): Cuban Democracy Act of 1992.” 1 October 1992. [online]. Available at: https://www.congress.gov/ bill/102nd-congress/house-bill/5323 (Accessed: 3 July 2023). US Congress. (1996) Congress.gov. “H.R.927 – 104th Congress (1995–1996): Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996.” 12 March 1996. [online]. Available at: https://www.congress. gov/bill/104th-congress/house-bill/927 (Accessed: 3 July 2023) U.S. Congress. (2000) “Trade Sanctions Reform and Export Enhancement,” US Code Chapter 79. [online]. Available at: https://uscode.house.gov/view.xhtml?path=/prelim@title22/chapter79&edition=prelim (Accessed: 7 October 2022). U.S. Department of Treasury. (2021) The Treasury 2021 Sanctions Review, 18 October 2021 [online]. Available at: http://home.treasury.gov (Accessed: 9 October 2022). Zaldívar, A. (2003). Bloqueo, El asedio más prolongado de la historia, La Habana: Editorial Capitán San Luis. Zarate, J. (2013) Treasury’s War: The Unleashing of a New Era of Financial Warfare. New York: Public Affairs, a Member of the Perseus Books Group. Zimbalist, A. (1978) The Prospects for U.S.-Cuba Trade, Challenge, Vol. 20, No. 6 Jan/Feb, Taylor & Francis, Ltd, pp. 51–54.

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16 THE UNINTENDED CONSEQUENCES ON AFRICAN UNION SANCTIONS OF MEMBER STATES Myths and Realities Francis Boateng Frimpong Introduction Sanctions have been a popular tool of economic statecraft. Sanctions on sub-Saharan African countries are imposed by different states, such as the United States (US), and international bodies, such as the United Nations (UN), and the European Union (EU) as well as regional bodies such as the African Union (AU), the Economic Community of West African States (ECOWAS), the Southern Africa Development Community (SADC), and the East African Community (EAC). Although sanctions are thought to be more humane than military intervention, they seldom achieve their desired goals but adversely affect human rights, health, and basic living conditions. This chapter argues that most sanctions in Africa fail to achieve the main goals for which they were imposed and that it is the ordinary citizens and not targeted state officials who suffer the most. Furthermore, sanctions in Africa have resulted in weak economic growth, rising inflation due to a shortage of basic goods, reduction in trade (exports and imports), and increased unemployment. The rising extreme poverty in Africa in conjunction with the pressure on economic resources initiated by sanctions magnifies the woes of ordinary Africans. Africa is the most sanctioned continent, with the EU and the AU issuing the majority of these sanctions. The Democratic Republic of Congo, the Central African Republic (CAR), Libya, Zimbabwe, and Guinea have all been sanctioned by the EU. Almost all of the sanctions imposed by the AU are directed at its own members (Afriyie and Jian, 2018; Hellquist, 2021). However, little attention has been paid to the confluence of these sanction regimes and the continent’s rising poverty and other humanitarian crises. This chapter examines the unintended consequences of sanctions in targeted countries, with a focus on sanctions imposed by the AU and other African regional bodies such as ECOWAS, SADC, and the EAC. The chapter goes beyond the political perspectives of sanctions to discuss the humanitarian crises that have accompanied them. The goal is not to assess AU’s Peace and Security Council (PSC) sanctions records, but rather to examine the humanitarian costs of sanctions. The chapter contains a collection of AU’s PSC sanction episodes since 2002 and an examination of humanitarian crises in selected countries. This period was chosen because, prior to 2001, the Organisation of African Unity (OAU)/AU rarely sanctioned its members, preferring to support them against external/western interference in domestic affairs. DOI: 10.4324/9781003327448-20

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Many sanctions studies have shown that the goal of sanctions against a target state is to cause as much economic damage as possible in order to force/coerce the target country to comply or change policies in accordance with the sender states (Bergeijk, 1989; Elliott et al., 2008; Kaempfer and Lowenberg, 2000; Nathan, 2017). The effectiveness of sanctions has been documented by many, including Afriyie and Jian (2018), Bergeijk (1989), Charron (2013), Hufbauer and Oegg (2007), Morgan et al. (2009), and Vines (2012), with the general conclusion that economic sanctions are of limited relevance if used to pressure target states to change policy in favour of the sender. Indeed, Dizaji and Van Bergeijk (2013), Neuenkirch and Neumeier (2016), and Peksen and Son (2015) have investigated how these sanction episodes affect the target countries’ GDP, infant mortality, government consumption, trade, poverty, exchange rates, and employment. This chapter advances this argument by examining the impact of AU sanctions on humanitarian situations in Africa. This is critical because fulfilling UN Sustainable Development Goals, which the majority of African nations are currently falling short of, will suffer severely if sanctions interrupt economic progress, deepen income disparity, and increase poverty. In many poor countries, according to Alvaredo and Gasparini (2015), poverty and inequality are worse than they were thirty years ago. Most of these rising poverty rates are in the states that have been sanctioned.

Sanctions Procedures at the AU The AU has 55 member states on the continent, and its constitution gives it the authority to sanction members who violate agreed-upon laws, such as failure to make financial contributions, an unconstitutional change of government, and failure to comply with decisions and policies. Members of the AU benefit from access to growing internal markets and domestic demand, access to African financial markets, and the African Continental Free Trade Area (AfCFTA), which help stimulate growth and prosperity. Before the formation of the AU in July 2002, the OAU, founded in 1963, was the continent’s main regulatory body. Since the colonial invasion of Africa and the experience of living under the perpetual dilemma of external interference, the OAU was born out of opposition to colonial oppression and the celebration of self-determination (Hellquist, 2015). As a result, the OAU was preoccupied with member-state security against external actors. With the exception of anti-apartheid sanctions, the use of sanctions against member states was unthinkable (Ibid.). Apartheid South Africa, on the other hand, was not a true member of the OAU because it lacked the organisation’s requirement of being an independent and sovereign nation. The organisation did not intervene in the unconstitutional overthrow of governments on the grounds that it does not interfere in the domestic affairs of member states. This non-interference policy was based upon the principles of international law in the first decades after World War II. Following the transition from the OAU to the AU, the regulatory body’s structure and operations were transformed. Unlike its predecessor, peace and security on the continent became the primary goal, rather than decolonisation and liberation from foreign dominance and settlers’ political power. In terms of dealing with crises on the continent, the AU has become more interventionist. The Lomé Declaration empowers the PSC to punish member states that change their government in an unconstitutional manner. The AU has sanctioned more of its members than any other regional organisation since 2002. By November 2022, 15 member countries had been sanctioned 23 times. According to Hellquist (2021), AU’s active intervention exemplifies the shift in African regionalism from sovereignty preservation to active involvement in issues previously defined as internal affairs/matters. Article 23 (1) of the AU Constitutive Act authorises the Union to sanction member states for failure to pay their budgetary contributions. The AU has recently strengthened its sanctions 198

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regimes to encourage members to make their budgetary contributions on time. The new sanction directive specifies the short- and long-term measures that defaulting members will face for delaying their payment. Punishments are classified into three categories: cautionary, intermediate, and comprehensive. Members who fail to pay 50% of their assessed contribution within six months face a cautionary sanction and will be barred from participating in AU meetings. Member states that are in arrears for a year will be deprived of serving on a bureau of any organ of the union, as well as from being appointed as staff members, consultants, volunteers, and interns at the AU. Members who are in default for more than two years face cautionary and intermediate sanctions, as well as a suspension from participating in union meetings (African Union, 2022). Although these sanctions may have consequences for member states, the humanitarian costs for members are minimal. Article 30 of the AU Constitutive Act prohibits unconstitutional change of government or refusal of an incumbent government to hand over power after a free and fair election, and thus any government that comes to power through a coup or other unconstitutional means will be barred from participating in the union’s activities (African Union, 2022). The AU is not the only regional organisation that responds to unconstitutional changes in government. Other regional organisations, such as ECOWAS, SADC, and the EAC, as well as non-regional actors such as the US, the UK, the EU, and the UN, impose sanctions that frequently coexist with the AU. This chapter focuses on Article 30 violations because the punishments have humanitarian consequences. Suspension of membership is the most common form of AU sanctions, and it includes the closure of members’ land and air borders with the sanctioned state, the suspension of nonessential financial transactions, which limits the target’s access to regional financial markets, the freezing of state assets held in other AU central and commercial banks, trade restrictions, and the inability to participate in any AU decision-making bodies. Table 16.1 presents AU sanction episodes between 2003 and 2022. Table 16.1 shows which member states have received sanctions for violating Article 30 of the AU Constitutive Act. It is important to acknowledge that in some cases, regional bodies such as ECOWAS impose sanctions on members before the AU. The CAR was the first member state to breach Article 30 when the military took power in March 2003. The AU PSC suggested suspending CAR after the coup but did not implement it (Nathan, 2017). Many member states have been sanctioned since then for unconstitutional changes in government. It is now widely expected that the AU’s PSC will intervene with sanctions following coups within member states. In his response to conflicts in Africa, Charron (2013) observes that the AU practices what it preaches by imposing sanctions on member states that have undergone an unconstitutional change of government via a coup. However, Bankole Adeoye, the head of the AU’s PSC, has condemned the recent 2021–2022 waves of coups on the continent, which has resulted in an unprecedented number of member states being suspended from the Union. Burkina Faso joined the long list of suspended member states less than two weeks before the 35th AU Summit (February 6, 2022) in Addis Ababa, Ethiopia. Guinea, Mali, and Sudan have all been suspended in less than a year. This is unprecedented because four member states have never been suspended in a single calendar year in the Union’s history (African Union, 2022). However, critics contend that PSC should be more proactive in preventing punches. Others prefer that the Union escort coup leaders out of power rather than sanctioning them, as sanctions have unintended consequences for ordinary civilians (Hufbauer and Jung, 2021; Oechslin, 2014). For instance, Mali experienced an unconstitutional government change in August 2020, followed by Guinea in September 2021 and Burkina Faso in January 2022. Burkina Faso experienced another coup on September 30, 2022, to depose the military leader who ceased power in January – the 199

Francis Boateng Frimpong Table 16.1  African Union Sanction Cases 2003–2022 Sanction date Member state

Region

From

To

Burkina Faso

West Africa

September 2015

Burundi Central African Republic

Central Africa Central Africa

Comoros Côte d'Ivoire Egypt Guinea

East Africa West Africa North Africa West Africa

Libya Madagascar Mali

North Africa East Africa West Africa

Mauritania

North Africa

Niger Guinea-Bissau

West Africa West Africa

Sudan

East Africa

Togo

West Africa

September 2015 January 2022 September 2022 October 2015 March 2003 March 2013 October 2007 December 2010 July 2013 December 2008 September 2021 August 2011 March 2009 March 2012 August 2020 August 2005 August 2008 August 2009 March 2009 April 2012 June 2019 October 2021 February 2005

Ongoing June 2020 June 2005 April 2016 March 2008 April 2011 June 2014 December 2010 Ongoing October 2011 January 2014 October 2012 Ongoing April 2007 June 2009 March 2011 June 2014 September 2019 Ongoing May 2005

Source: Own elaboration.

country’s second coup in nine months. Even though the new military chief promised to honour the previous leader’s (Paul-Henri Sandaogo Damiba) pledge to return to civilian government/rule within two years, ECOWAS strengthened its sanction on the country. It is important to note that AU’s automatic sanction regime for unconstitutional change of government has not necessarily put an end to coups or silenced the gun on the continent. Nathan (2017) argues that between 2000 and 2014, all coups ended democratically, either through a presidential election (93%) or, in the case of Sao Tomé and Principe, through the reinstatement of the ousted president. Seventy-one percent of coups ended within two years, with the average crisis lasting 20.4 months. However, in most cases, some of the coup members remained in power as constitutional governments.

Economic Effects of Sanctions This section investigates the overall effects of sanctions on economic growth and prosperity The literature pays little attention to the economic cost of sanctions and whether the estimated costs are concentrated/limited on the proposed targets. Ahn and Ludema (2020) argue that there is a wealth of literature on the impact of sanctions on the politics of the targeted state, with the economic impact only seen as an explanatory variable. This chapter highlights the detrimental effects of sanctions on the general population in five key areas. 200

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Figure 16.1  Annual Percentage Growth Rate of GDP per Capita. Source: Own elaboration with data from the World Bank and OECD (2022).

First, sanctions have an impact on economic growth as measured by GDP, and according to an IMF (2015) study, they reduce a country’s GDP by about 1% to 1.5% of GDP due to reduced investment and consumption in the targeted country. In a related study published in 2015, the World Bank found that sanctions had a detrimental effect on a nation’s capacity to attract the capital required to foster growth and development. A diminishing GDP has an impact on firms and workers, which can result in pay freezes, job losses, and a decline in state tax receipts. The GDP per capita of a nation is another key metric of its economic health. Figure 16.1 shows the annual percentage growth rate of GDP per capita, which represents the share of a country’s output per person of the population. Rising GDP per capita benefits a nation as a whole as this could lead to more tax revenues that will stimulate government spending on public services such as education and health. This can lead to improved standard of living and rising life expectancy and literacy rates which contributes to greater knowledge and understanding of civic and political issues of a country. As shown in Figure 16.1, the annual percentage growth rates of GDP per capita in the selected countries have been abysmal for the 20 years under review. The figures indicate that periods of sanction have led to worsening GDP per capita in most cases. For instance, Burkina Faso’s first sanction was in September 2015 and the nation’s annual GDP per capita only increased by 0.9% from the previous year’s 1.2%. Likewise, CAR’s annual growth of GDP per capita fell from 1.4% in 2002 to –7.3% in 2003 and also in 2013 the rate fell to –36.6% following AU’s sanction. The trend is almost the same for all sanctioned states under review. Mali and Sudan’s GDP per capita growth reduced after the countries were sanctioned by the AU. Shrinking GDP and GDP per capita affect every citizen of a nation especially those on the low-income threshold. It leads to rising unemployment, falling tax revenues and hence declining government expenditure on essential services with severe consequences for the future generation. Mwainyekule and Frimpong (2020) argue that declining GDP per capita will increase the incidence of poverty in Africa where most of the population is employed in the informal sector. According to the World Bank (2022), estimates for sub-Saharan Africa reveal that the number of people living in poverty has increased from 420 million in 2018 to 424 million in 2019, despite a continued decline 201

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in the headcount rate of poverty from 38.9 to 38.3 between 2018 and 2019. The vast majority of these poor individuals are in sanctioned states struggling with lives and livelihoods. Second, although economic sanctions do not involve the destruction of infrastructure and human capital as in the case of armed conflicts (Afesorgbor and Mahadevan, 2016), they nevertheless have similar effects on the welfare of the populace in the target economy (Allen and Lektzian, 2013). For instance, Kaempfer and Lowenberg (2007) and Van Wyk (2018) emphasise that sanctions are unfair since they frequently cause hardship to innocent citizens as well as businesses that would otherwise be allowed to conduct worldwide business. Hufbauer and Oegg (2007) and Charron and Portela (2015), on the other hand, estimated that economic sanctions in the form of reduced foreign aid could result in a welfare loss equal to the value of the aid. As a result, some people are directly worse off than the leaders of the target countries. Petrescu (2016) observed in his study that development aid per capita decreases every year after the imposition of sanctions. Moreover, politicians in sender states acknowledge the unfavourable externalities of human suffering caused by sanctions. Madeleine Albright, the former US Secretary of State, suggests that even though the UN or the US sanctions do not intend to cause hardship for innocent people, particularly children and infants, good intentions do not always translate into good outcomes (Albright, 2000). The negative impacts of sanctions in terms of the humanitarian problems and collective punishment they cause are impossible to overstate. Sanctions affect the most vulnerable and defenceless members of societies, threatening their very survival. For instance, a study by Petrescu (2016), who examined child-level data from 69 countries around the world, showed that sanction exposure leads to lower infant weight and a higher risk of death before a child reaches the age of three. These findings support the unintended consequences of sanctions on the most vulnerable citizens in a targeted country. Albright (2000) comments that she has always been concerned as a policymaker that sanctions, like force, might be an ineffective tool but the outcomes can intensify the suffering of the target states. Third, sanctions aggravate different forms of inequalities in Africa, including health inequalities. Health disparities between and within nations can be measured using infant mortality. Reducing infant mortality is Millennium Development Goal number 4, and undernutrition has historically been the leading contributor to child mortality (Food and Agriculture Organisation, 2022). Despite a global decline in neonatal deaths from 5 million in 1990 to 2.4 million in 2020, a more than 50% decrease, the average decline for the selected countries is only 38%. This means that a child’s chances of survival are heavily influenced by the country of birth. Sub-Saharan Africa’s infant mortality rate in 2020 was 27 (25–32) deaths per 1000 live births, accounting for 43% of global newborn deaths (World Health Organisation [WHO], 2022). Figure 16.2 shows that child mortality is gradually decreasing in these selected countries; however, when compared to other low-income countries, the rate is high. CAR infant mortality rates ranged from 108.5 deaths per 1000 births in 2002 to 77.5 deaths per 1000 births in 2019. Although Sudan has the lowest mortality rate among the countries studied, it has recently plateaued. As a result, an infant born in one of these nations has a 10 times greater chance of dying before their first birthday than a child born in a different country. Although internal causes may have played a role in the lack of improvement in the infant mortality rate, sanctions against these nations only serve to exacerbate the problem. The average infant mortality rates for these countries are Burkina Faso (68), CAR (95), Mali (76), and Sudan (50) deaths per 1000 live births for the period under review. Fourth, economic sanctions have an impact on targeted countries’ development aid, loans, financial assets, and trade (imports and exports). Import restrictions affect ordinary citizens, particularly children and vulnerable groups, in a variety of ways in these countries. One way to assess the impact is through health and lack of proper nutrition. Restrictions/cuts on essential 202

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Figure 16.2  Infant Mortality Rate (per 1000 births). Source: Own elaboration with data from the UN Inter-agency Group for Child Mortality Estimation (UNICEF, WHO, World Bank, UN DESA Population Division) (2022).

imports such as food and medicine affect calorie intake, which can lead to malnutrition, making children vulnerable to diseases such as tuberculosis, measles, and infectious diseases. As poor nutrition harms unborn children, Gibbons and Garfield (1999) contend that rising food prices have an influence on pregnant women. Children drinking contaminated water as a result of a lack of materials and substances to clean, it has resulted in the spread of waterborne illnesses such as cholera, typhoid, and worm infections in sanctioned countries such as Burkina Faso, CAR, and Mali. Although drugs and essential foods are frequently exempted from the sanctioned list, there is significant uncertainty and ambiguity about the details, resulting in a decrease in approved drugs and an increase in counterfeit medicine that is ineffective and causes severe side effects (Afriyie and Jian, 2018; Petrescu, 2016). The negative effects on a nation’s healthcare system have far-reaching consequences for citizens. A lack of vaccines resulted in an outbreak of diphtheria, tetanus, and pertussis in CAR and Sudan. Power outages and water shortages have hampered emergency medical services at hospitals. Early death, a rise in maternal mortality, and problems during childbirth are all results of poor health conditions in the sanctioned nations. This points to the fact that sanctions harm the community’s health and general well-being in the target countries. Trade is essential to a country’s development because it fosters economic expansion and gives its population access to rewarding employment opportunities. Rising trade levels may result in higher incomes for families, allowing them to purchase goods and services and thus improve their standard of living. Trade allows for lower consumer prices, which also improves a nation’s capacity to produce the necessary foreign currency for its economy. Figure 16.3 demonstrates how these countries’ total imports and exports as a percentage of GDP have been low. For instance, Sudan’s overall trade contribution to GDP decreased from 26% in 2002 to 4% in 2020. Trade restrictions are imposed on member nations under AU sanction regimes. This lowers the nation’s ability to import necessary items to support its economy, which lowers the standard of living for average citizens. These nations are already struggling with economic recovery after years of civil war and political instability. Further punishments intensify 203

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Figure 16.3  Trade (Sum of Exports and Imports) as a Percentage Share of GDP. Sources: Own elaboration with data from the World Bank and OECD National Account Data (2022).

the suffering of the ordinary citizen who has no power to influence the affairs of the targeted elites. Sanctions affect neighbouring countries as well as regional integration and development. For instance, sanctions on Burundi impacted negatively on the regional oil pipeline with neighbouring countries Kenya, Uganda, and Rwanda as well as the electricity extension project between Burundi and Rwanda. The declining foreign investment and aid flows are all too visible in all sectors of the economy, especially agriculture, which employs many low-income households. Falling export revenues affect foreign exchange (Peksen and Son, 2015). Furthermore, Afesorgbor and Mahadevan (2016) argue that imposing sanctions has a negative impact on income inequality in their study of 68 target states around the world from 1960 to 2008. They argue that financial and trade sanctions have more severe and diverse effects on income inequality and that the longer the sanction period, the more detrimental the impact on the poor. Moreover, Øygarden (2017) examines the effects of sanctions on human rights violations in targeted countries from 1981 to 2005 and concludes that economic sanctions harm physical integrity in sanctioned states. He also argues that sanctions have a negative impact on a subset of civil and political rights and that the scale of the effects is comparable to that of physical integrity rights. These countries are some of the poorest in the world; sanctions are a further punishment to the citizens. Fifth, the general government final consumption expenditure includes all government current expenditures on purchases of goods and services, including employee compensation. An increase in government consumption expenditure stimulates aggregate demand, which expands a country’s growth prospects as well as employment opportunities. The average government consumption expenditures for the selected countries are Burkina Faso (15.5%), CAR (10.4%), Mali (15.6%), and Sudan (14.6%) over the 20 years. Figure 16.4 shows that Sudan government’s final consumption expenditure increased year on year with minor variations, from 8.49% in 2002 to 28.08% in 2019. There is evidence, however, that AU sanctions on Sudan in 2019 caused the government’s final consumption expenditure to fall to 10.95% in 2020. Reduced government consumption spending significantly lowers the standard of living for its citizens, increases inequality and poverty rates, deteriorates public services, and prolongs economic recessions. 204

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Figure 16.4  General Government Final Consumption Expenditure Percentage of GDP. Source: Own elaboration with figures from the World Bank World Development Indicators (2022).

Concluding Remarks: Perpetual Poverty in Africa There is no question that Africa is the world’s poorest continent and that it has been the target of the majority of global sanctions (Frimpong, 2021; Hellquist, 2019). According to Neuenkirch and Neumeier’s (2016) examination of US sanctions between 1982 and 2011, sanctions have a detrimental impact on the poor and result in an average 3.8% increase in the poverty gap, which measures the percentage by which the poor’s mean income falls below a country’s poverty line. Worryingly, they argue that only a few sanctions have been successful, with approximately 65% to 95% of sanction episodes failing to meet their objectives. However, the impact on the poor is significant in both successes and failures. Target countries experience a faster decline in GDP per capita, a drop in international trade, a drop in FDI, and rising inflation, which affect the general public rather than the elites targeted by sanctions. Sanctions raise the risk of further deterioration of the targets’ already fragile economies, resulting in further economic shock and impoverishment. The rising extreme poverty in Africa, combined with the pressure on economic resources caused by sanctions, exacerbates the plight of ordinary Africans. Target states are more likely to reduce public services and social services to lower income groups. The rural–urban divide also increases. With many people living in rural areas in Africa, diverting resources away to the urban centres affect the poor in the hinterlands. According to Lee (2018), sanctions do not change regime behaviour but rather increase inequality at the expense of already impoverished rural dwellers. When target countries rely more on limited natural resources for production and trade, administrative cities, manufacturing hubs, and mining centres attract/gain economic activities at the expense of the hinterlands as scarce resources are reallocated. In his analysis of Zimbabwe’s economy, Nyoni (2019) argues that the country is battling for life due to sanctions. He contends that sanctioned countries suffer from “the devil-may-care” syndrome whereby domestic bad economic policies and outcomes are blamed on sanctions. Obviously, not all socio-economic woes in sanctioned states are due to the imposition of these punishments. However, it gives governments the obvious enemy to blame for the calamities of their economic performance. Nevertheless, the argument in this chapter is that the cost of sanctions is 205

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not solely borne by the targeted individuals and institutions but spills over to the general population, especially the vulnerable. As argued by Neuenkirch and Neumeier (2016), the main culprits of sanctions are the poor in the country. Sanctions on a country weaken the economy’s ability to meet the needs of families with disastrous consequences for the poor. Furthermore, sanctions do not only affect the targeted countries, or governments and companies but also impact neighbouring countries in diverse ways including a reduction in economic activities between them, an influx of refugees and smuggling on the border. The recent hardship in Burkina Faso partly due to the ECOWAS and AU sanctions has led to the influx of refugees in the neighbouring countries, especially in northern Ghana cities that share a border with Burkina Faso. Sanctions senders have defended themselves by claiming that they only target particular people and businesses connected to a regime, not the entire nation. They attribute the poor state of the target economy to mismanagement and corruption (Garfield, 2002; Van Wyk, 2018). Advocates of sanctions, however, fail to acknowledge that the targeted people and businesses are the country’s key economic drivers and that any restrictions on their operations will hurt the entire nation. That is, separating sanctioned parties from the economy is pointless. Sanctions on authoritarian and undemocratic regimes are less effective in the view of Van Wyk (2018) but bring pains to the whole economy. The negative stigma attached to economic sanctions affects FDI flows to the targeted economies. It creates a bad reputation and drives investors away (Afriyie and Jian, 2018). As capital inflows to the country fall, capital flight rises due to damage to the economy, both of which weaken the exchange rate of the currency and impact inflation, economic prosperity, and living standards. The vision of AU is an integrated, prosperous, and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena. The aim of the Union is to promote peace, security, and stability on the continent to help prevent, manage, and settle crises in Africa. Member states that fail to comply with the laws set out by the Union are subject to sanctions. The outcomes of these punishments have been mixed but limited progress has been made to silence the gun on the continent. The unintended consequences of this have been devastating for the vulnerable group of society. This chapter provides strong evidence that sanctions have unanticipated effects on civilian populations, which affect ordinary people more than the leaders of the targeted nation. As a result, senders/AU must be made aware that their actions may have unintended or unfairly harmful consequences. Although most coups that have resulted in sanctions in member states have ended by democratic means, it will be erroneous to assume that sanctions have been successful in forcing coup makers to hand over power to civilian governments. The fact is that in a vast majority of cases, the coup makers/leaders remained in power through presidential elections, either in a free and fair election or otherwise, despite the African Charter on Democracy, Elections and Governance explicitly forbidding it. The AU should therefore be actively involved in investigating the causes of coups on the continent and also escort coup makers out of power. The argument presented in this chapter is that although other internal factors might have contributed to the rising humanitarian crises in these targeted states, the sanctions imposed by the AU and other regional bodies only exacerbate the suffering of ordinary citizens.

Bibliography Afesorgbor, S.K. and Mahadevan, R. (2016) ‘The impact of economic sanctions on income inequality of target states’, World Development, 83, pp. 1–11. Available at: https://doi.org/10.1016/j.worlddev.2016.03.015 African Union. (2022). Available at: https://au.int/. (Accessed on 01/08/2022). Afriyie, F.A. and Jian, J. (2018) ‘An investigation of economic sanctions and its implications for Africa’, Journal of Politics and Law, 11, p. 74.

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The Unintended Consequences on African Union Sanctions Ahn, D.P. and Ludema, R.D. (2020) ‘The sword and the shield: The economics of targeted sanctions’, European Economic Review, 130, p. 103587. Albright, M.K. (2000) ‘Economic sanctions and public health: A view from the Department of State’, Annals of Internal Medicine, 132(2), pp. 155–157. Allen, S.H. and Lektzian, D.J. (2013) ‘Economic sanctions: A blunt instrument?, Journal of Peace Research, 50(1), pp. 121–135. Alvaredo, F. and Gasparini, L. (2015) ‘Recent trends in inequality and poverty in developing countries’, Handbook of Income Distribution, 2, pp. 697–805. Bergeijk, P.A. Van. (1989) ‘Success and failure of economic sanctions’, Kyklos, 42(3), pp. 385–404. Charron, A. (2013) ‘Sanctions and Africa: United Nations and Regional Responses’, in Responding to Conflict in Africa. Springer, pp. 77–98. Charron, A. and Portela, C. (2015) ‘The UN, regional sanctions and Africa’, International Affairs, 91(6), pp. 1369–1385. Dizaji, S.F. and Van Bergeijk, P.A. (2013) ‘Potential early phase success and ultimate failure of economic sanctions: A VAR approach with an application to Iran’, Journal of Peace Research, 50(6), pp. 721–736. Elliott, K., Hufbauer, G. and Oegg, B. (2008) ‘Sanctions. The Concise Encyclopedia of Economics’, Library of Economics and Liberty. Retrieved August 4, p. 2012. Food and Agriculture Organisation. (2022) Millennium Development Goal 4: Reduce child mortality. Available at: https://www.fao.org/sustainable-development-goals/mdg/goal-4/en/. (Accessed 15/10/2022). Frimpong, F.B. (2021) ‘Financialisation and Poverty Alleviation in Ghana: Myths and Realities’, in Financialisation and Poverty Alleviation in Ghana. Leiden, Brill. Garfield, R. (2002) ‘Economic sanctions, humanitarianism, and conflict after the cold war’, Social Justice, 29(89), pp. 94–107. Gibbons, E. and Garfield, R. (1999) ‘The impact of economic sanctions on health and human rights in Haiti, 1991–1994’, American Journal of Public Health, 89(10), pp. 1499–1504. Hellquist, E. (2015) ‘Interpreting sanctions in Africa and Southeast Asia’, International Relations, 29(3), pp. 319–333. Hellquist, E. (2019) ‘Ostracism and the EU’s contradictory approach to sanctions at home and abroad’, Contemporary Politics, 25(4), pp. 393–418. Hellquist, E. (2021) ‘Regional sanctions as peer review: The African Union against Egypt (2013) and Sudan (2019)’, International Political Science Review, 42(4), pp. 451–468. Hufbauer, G.C. and Jung, E. (2021) ‘Economic Sanctions in the Twenty-First Century’, in Research Handbook on Economic Sanctions. Edward Elgar Publishing, pp. 26–43. Hufbauer, G. and Oegg, B. (2007) ‘Economic sanctions for foreign policy purposes: A survey of the twentieth century’, in Kerr, W. A. and Gaisford, J. D. (eds.), Handbook on International Trade Policy, Chapter 47. Edward Elgar Publishing. International Monetary Fund. (2015) External Sector Report: IMF Policy Paper. Available at: https://www. imf.org/external/np/pp/eng/2015/062615.pdf. (Accessed on 10/09/22). Kaempfer, W.H. and Lowenberg, A.D. (2000) ‘A Public Choice Analysis of the Political Economy of International Sanctions’, in Sanctions as Economic Statecraft. Springer, pp. 158–186. Kaempfer, W.H. and Lowenberg, A.D. (2007) ‘The political economy of economic sanctions’, Handbook of Defense Economics, 2, pp. 867–911. Lee, Y.S. (2018) ‘International isolation and regional inequality: Evidence from sanctions on North Korea’, Journal of Urban Economics, 103, pp. 34–51. Morgan, T.C., Bapat, N. and Krustev, V. (2009) ‘The threat and imposition of economic sanctions, 1971–2000’, Conflict Management and Peace Science, 26(1), pp. 92–110. Mwainyekule, L.H. and Frimpong, F.B. (2020) ‘The pandemic and the economy of Africa: Conflicting strategies between Tanzania and Ghana’, Digital Government: Research and Practice, 1(4), pp. 1–8. Nathan, L. (2017) ‘A survey of mediation in African coups’, APN Working Papers, 15. Neuenkirch, M. and Neumeier, F. (2016) ‘The impact of US sanctions on poverty’, Journal of Development Economics, 121, pp. 110–119. Nyoni, T. (2019) ‘The curse is real in Zimbabwe: Economic sanctions must go!’ MPRA. Available at: https:// mpra.ub.uni-muenchen.de/96911/. (Accessed on 24/8/22). Oechslin, M. (2014) ‘Targeting autocrats: Economic sanctions and regime change’, European Journal of Political Economy, 36, pp. 24–40.

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Francis Boateng Frimpong Øygarden, K.F. (2017) The Effect of Sanctions on Human Rights: Assessing the Impact of Economic Sanctions on Human Rights Violations in Targeted Countries. Master’s Thesis. Peksen, D. and Son, B. (2015) ‘Economic coercion and currency crises in target countries’, Journal of Peace Research, 52(4), pp. 448–462. Petrescu, I.M. (2016) ‘The humanitarian impact of economic sanctions’, Europolity: Continuity & Change Eur. Governance, 10, p. 205. UN Inter-agency Group for Child Mortality Estimation (UNICEF, WHO, World Bank, UN DESA Population Division) at www.childmortality.org. (Accessed on 15/09/2022). UNESCO Institute for Statistics (http://uis.unesco.org/). Data as of June 2022. (Accessed on 15/09/2022). Van Wyk, J.-A. (2018) ‘Sanctions and summits: Sanctioned African leaders and EU–Africa summits’, South African Journal of International Affairs, 25(4), pp. 497–515. Vines, A. (2012) ‘The effectiveness of UN and EU sanctions: Lessons for the twenty-first century’, International Affairs, 88(4), pp. 867–877. World Bank. (2022) April 2022 Global Poverty Update. Available at: https://blogs.worldbank.org/opendata/ april-2022-global-poverty-update-world-bank. (Accessed on 05/11/2022). World Development Indicators. (2022) World Bank national accounts data, and OECD National Accounts data files. Available at: https://databank.worldbank.org/source/world-development-indicators. (Accessed 11/08/22). World Health Organisation. (2022) Newborn Mortality: Key Facts. Available at: https://www.who.int/newsroom/fact-sheets/detail/levels-and-trends-in-child-mortality-report-2021#:~:text=Sub%2DSaharan%20 Africa%20had%20the,deaths%20per%201000%20live%20births. (Accessed on 10/10/2022).

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SECTION IV

Third Parties The Impact of Secondary Sanctions

17 IMPLICATIONS OF DRIFTING SANCTION POLICIES BY JAPAN AND KOREA Noboru Miyawaki

Introduction: The “Ambiguous Style” of Sanctions With the intensification of United States unilateral and extraterritorial sanctions against Iran, China, and Russia, coupled with Russia’s and China’s countermeasures, and recent comprehensive sanctions against Russia in response to the country’s aggression toward Ukraine, third parties have been caught in between. Sanctions and counter-sanctions imposed by the states appear in different forms and vary in strength (e.g., in terms of the impact on the target states and third parties). Some sender states, however, mostly pretend to follow the lead of the main sanctions senders (i.e., the U.S.) and their sanctions are mostly cosmetic. Among those states, reluctant to impose harsh sanctions on target states are so called “third parties” – such as Japan and South Korea – the states that are severely affected by sanctions imposed by the leading states. Nevertheless, third parties are pushed to follow the U.S. lead and impose and adopt some sanctions policies. When it comes to sanctions policies, Japan and South Korea are often classified as “inbetween” states: On one side, politically, they need to follow U.S. or G7 goals and take legal actions in response to the breach of international norms; on another, they need to protect their strategic economic interests that are put at risk by massive sanctions campaigns led by U.S. or other G7 members against their main trading partners. For example, the U.S. unilateral sanctions against Myanmar (Burma) in 1990s, the U.S. sanctions against China in 1989, new sanctions adopted by Trump and later Biden administration against Chinese high-tech industries since 2017, and the sanctions against Russia since 2014 were not met with enthusiasm by the political and economic leaders in Japan and South Korea. For Tokyo and Seoul, Western extraterritorial sanction against Japan’s and South Korean’s strategically important trading partners are seen as overly restrictive, too prolonged, with little institutional oversight and the absence of the mechanism of sanctions termination. Therefore, although Japan and South Korea followed the U.S. lead to join the sanctions campaigns against target states, they did it very carefully by adopting much weaker sanctions policies, as was the case with Japan’s sanctions against Russia from 2014 to February 2022. However, Russia’s invasion of Ukraine in 2022 marked a shift in sanction policies in Japan and South Korea. In contrast to Japan’s “light” sanction against Russia after Russia’s annexation of Crimea in 2014, Japan strongly criticized Russian aggression in 2022. In 2014, Japan imposed DOI: 10.4324/9781003327448-22

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only light sanctions against Russia; for example, about only 50 Russians were targeted in an officials’ travel ban to Japan. The detailed explanation of the entry-list was kept “secret.” At the time, first, Japan imposed financial sanctions targeting Russian high officials by freezing their bank accounts. After the July 2014 incident in which a Malaysian airline was shot down over Ukraine, Japan expanded its financial sanctions to Russian companies, and in September, by adding export limitations to arms sells to Russia, and by banning five major banks in Russia from getting access to credit in Japan. In 2016, two important visits of Russia’s senior state officials to Japan – by Valentina Matvienko, the Chair of the Russian Parliament, to meet with counterparts of the Upper House, followed by a visit of Russia’s President Putin to meet Japan’s Prime Minister Abe a month later – resulted in signing multiple bilateral agreements to promote bilateral cooperation in different spheres. At that time, Japan adopted only “soft” sanctions against Russia. “[T]he territorial dispute with Russia, China’s rising economic and military power, and the North Korean crisis have all shaped Japan’s soft response to Russia” (Shagina 2018). However, “neither Western sanctions nor Russian countersanctions have alleviated the harm to both” (Timofeev 2021: 90). Some Japanese academics refer to this “soft” type of sanctions as “ambiguous,” suggesting that they avoid the direct confrontation, rather coordinated conclusion without clear cut, as the effects of such sanctions are purely “cosmetic” and the reason for their adoption is purely political – in solidarity with the actions of the main sender states as same as the case of Japanese government’s attitude toward U.S. in 1980s (Yamamoto 1982b). Such actions are labeled “ambiguous” for their unclear strategic goals and relatively uncertain and weak impact on the target states. The Japanese preference for “ambiguous” political responses is reflected in the title of Kenzaburo Oe’s Nobel Prize Speech – “Japan, the Ambiguous, and Myself” that he gave in 1994. This title has a strong historical and cultural legacy: The Japanese try to abstain from making a clear and strict division between the “black” and “white.” Instead, the Japanese would opt for a so-called “Tamamushi-iro” (iridescent) complex decision, not based on the simplistic “black or white” duality (Yamamoto 1982b) – this cultural Japanese feature of “Tamamushi-iro” has been clearly witnessed in the contemporary Japan’s sanctions policies. This does not mean that the practices of “black” responses are fully excluded: To the North Korea, Japan adopted very strong “black” sanctions policies, far from being “iridescent.” However, Japan’s sanctions against Russia in 2014 were still “gray” and relatively “white” rather than “black.” Like it was in the case of Japan, South Korea adopted this type of “ambiguous” sanctions in 2014, when it (under the then “conservative” President Park) did not follow strict sanctions legislations of some Western states against Russia, but limited its sanctions policies to a temporary suspension of contacts between some high-level officials. The following section will further explore what is meant by sanctions “ambiguity” when it comes to Japan’s and South Korean sanctions policies by applying “as-if game” framework.

“As-if Game” Framework for Japan’s and South Korea’s Sanctions “Ambiguity” When explaining “ambiguous” actions, it is difficult to see straightaway why Japan and South Korea, although rhetorically agreed to follow the U.S. lead and impose sanctions against Russia, have nevertheless tried to evade implementing sanctions policies. Therefore, this chapter will use the theory of “as-if game” to provide understanding of such “ambiguous” actions by following the dynamics and the causes of two different types of actions – sanctions compliance and sanctions violation (for a detailed analysis of the framework – see Miyawaki 2016). 212

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This framework takes root from Milan Kusý, a Slovak intellectual, who introduced a story in which a grocer from socialist Czechoslovakia behaves as if he really believes in socialist slogans suggesting the importance of socialistic idea in daily life, and the authorities behave as if they really believe that he believes in the slogans (Kusý 1985: 163–166). “This as if is a silent agreement between the two partners …. If those in power occasionally break the agreement, … the powerless break it by making light of it and unmasking it. The as if game, however, can only be effective if both sides consistently avoid such extremes” (Kusý 1985: 166). This idea of “as-if game” could be successfully applied to various topics in international relations, and the case of Japan’s and South Korea’s sanctions against Russia over the period between 2014 and 2022 is not an exclusion. International politics have contained many areas of interpretations and many countries sabotage difficult goals to achieve, whose agreement had been officially or unofficially agreed by legal or political dimension. Many studies have not considered this fact directly because it is difficult to find out how actual diplomatic intentions or interpretations of agreements are mutually recognized among parties, especially with regard to international agreements reached under the typical circumstances of “same bed, different dreams,” to recall this famous historical Chinese expression. There are some studies examining the nonconduct of goals when agreeing with other actors by a country that would later violate sanctions without any hesitation (hereinafter, “breaching country”) as if they were not against the international agreement. I called this as-if-like behavior (Miyawaki 2016:6). Although we do not deny the significance of advantageous norms that stem from international agreements, this as-if-like behavior is generated by pretending as-if complying with the norm to conceal the emergence of a breach or a loophole against the norm at the same time. In rational thinking, there ought to be no way for anyone to approve an agreement that is not beneficial for a decision-maker. However, there are occasions when one has no other choice but to approve an agreement through linkage with other elements or to succumb to a third-party pressure. Then some actors will take the as-if-like behavior as an alternative. I have theorized that the as-if game is a type of diplomatic game, which is a combination of alternatives regarding whether as-iflike behavior is acknowledged or criticized by other countries (Miyawaki 2016:6). The responses from Country A complying with the norm (hereinafter, the “complying country” or A) to the as-if-like behavior of a breaching Country B unfaithful to the advantage of the norm, are mainly divided into either weak approval/toleration for exceptions or criticism on the loophole based on the breaching of the agreement. The criticism of A’s tolerance to B comes from the standpoint of making the agreement effective, not only in country A (public opinion in A) but also in breaching country B (e.g., nongovernmental organizations [NGOs] in B). Additionally, as it will be mentioned below, what largely determines the development of the as-if game is a third actor (NGOs, parliaments, media, private companies, etc.), who is an outsider in the process of forming the agreement? In this case, the pursuit of durable as well as effective promises is difficult. Although the breaching country B has a low self-expectation of implementing the agreement, for the complying country A, the self-expectation of implementing the agreement should be high. An international agreement that falls into the as-if game is asymmetrical among actors in terms of self-expectations (Miyawaki 2016:5). The relationship between the choices of breaching and complying countries is summarized in Figure 17.1. The politically difficult choice for the complying country is whether to criticize the breaching country for violating sanctions or not. The problem is that when the complying country criticizes the breaching country, there is a possibility that the breaching country may exit from the game. In such cases, the complying country often adopts strategies to tolerate B. To comply with Country A, because criticizing the breaching country (a1) costs politically more, tolerating (a2) 213

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Figure 17.1  Choices for the Complying and Breaching Country in the First Phase of the As-if Game. Source: Miyawaki (2007: 60), used with permission.

is a better choice. However, for breaching Country B, because nonbreaching (b1) costs more with less merit than breaching (b2), breaching (b2) is a more rational choice. This was the first phase of the as-if game scenario. For Country A, the gain is a2 > a1, and for Country B, it is b2 > b1. Thus, a2/b2 is the implicated equilibrium of this game, although to have some deep and implementation in the content of an agreement, it must move to the optimum solution on a1/b1. In this game, the gain itself may change, as a third actor is involved in the game process (Miyawaki 2016:7). The process of the game, from a2/b2 to other situations, is possibly seen in the middle game. The actors who should play a role in making A take (a1) instead of (a2) would be third actors, including public opinion, NGOs, parliament, or media (Miyawaki 2016:5–7). As mentioned in the former section, in the case of sanctions against Russia, Japan, and South Korea in 2014 are classified as breaching Countries B, while other Western countries including U.S. are complying Countries A. The gap between them is wide but not politically focused because of the tolerate by Countries A. Countries A and B agreed to impose strong sanctions against Russia in the G7 framework in April 2014, but Countries A substantially and implicitly declined it for Japan (and South Korea). Japan needed Russia for solving territorial disputes between the two countries over 70 years, and needed natural resources including LNG from Russia, with even the dreamful vision of building pipelines from Sakhalin to mainland of Japan for importing cheaper gas than LNG at the time. South Korea needs Russian market and hub of the exporting goods for Eurasian continent, as mentioned below, and diplomatically North Korean priorities. As a result, the two countries acted as if they had been complied with the goals of G7 or U.S. requests for Western states, but in simply speaking they substantially sabotaged the agreements. As a result, the game was in the box of a2/b2.

More “Sincere” Sanctions in 2022, but Serious Exceptions Still Exist Just after the Russian invasion of Ukraine, in March 2022, the United States, which had rushed for sanctions to deter Russian aggression, became skeptical of Japan and South Korea’s late and slow reactions against Russia, mentioning that it was watching a newly coming policy from Japan. Following this observation, Japan decided to impose strong economic sanctions against Russia. 214

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For example, it decided to stop importing coal from Russia, which accounted for 6% of its coal imports, though Japan no longer produced coal, except at only one coal mine. It should be noted that the sanctions Japan and South Korea have imposed against Russia seem to be weaker and came later than the United States expected. In spring 2022, the United States stridently checked whether Japan had implemented sanctions and maintained its promises. This black-and-white diplomacy from both sides is creating trouble for Korea and Japan, and the two might become targets for third-party sanctions by the United States. In fact, after the beginning of the war in Ukraine, the Korean government was concerned about that U.S.-based Korean companies’ exports of high-tech items to Russia would be restricted: “Semiconductors, electronics, and automobiles, South Korea’s top exports to Russia, could all be affected by the latest export controls announced by the U.S. Commerce Department. They will require companies that use U.S.-origin technology in products, such as semiconductors, computers and aircraft parts, to receive Washington’s approval before sending them to Russia” (Voice of America 2023). However, it was reported that the Korean government had no sign to impose sanctions against Russia as of February 25, 2022 (Voice of America 2023). If the United States were to put political pressure on countries that hesitated to impose sanctions against Russia, it would be a nightmare scenario for Japan and Korea, and therefore, they might be more likely to establish stronger sanctions against Russia owing to political pressure from the United States. Regarding third-party clauses, on May 31, 2022, Gina M. Raimondo, U.S. Secretary of Commerce, mentioned that Chinese companies that neglected the EU sanction against Russia should be listed on the Entity List and should be targeted for export control with the collaboration of allied states. Later, the U.S. Department of Commerce proclaimed a ban on exports by six companies to Russia and China because the companies traded “back-fill” with the Russian defense industry, which was already listed on the Entity List (CISTEC 2022: 77). The extended targeting to third parties might frighten Japanese companies as well, with memories of the 1986 Toshiba machine incident, where Toshiba exported dual-use items to the USSR and the United States sanctioned the company and U.S. public opinion went against Japanese companies and goods. Different from the 2014 sanction, in 2022, South Korea followed Japan. In February and March 2022, at the beginning of the invasion, the Korean government was slow in condemning Russia because it was said the “progressives” (the Moon government) might need Russian diplomatic cooperation to solve North Korean issues. However, South Korea finally joined U.S.-led sanctions because of the inhumanity of the war and due to the pressure from Western opinion. Russia has since listed South Korea as an “unfriendly nation.” After the dead-heat presidential election in 2022, Yoon Suk-yeol, a new President, was more against violence, but he looked to have also been rather careful. Korea is negotiating with the United States on exporting ammunition via the United States, but it is uncertain at this point (The Economist 2023). The main comparison of the sanctions by Japan and South Korea in 2022 is shown in Table 17.1.

Strong Exceptions or Loopholes? SakhalinⅡand Korean Companies “Closing” Until 2022, Japan had needed to extend its ties with Russia to manage Sakhalin II, which produced critical natural gas for Japan and other countries, although it had also imposed economic sanctions against Russia since 2014. Sakhalin II was established by Mitsui, Mitsubishi, and Shell, whereas Russia’s state-owned Gazprom owned 50%. The project remains in place with the explanation that this commitment is for Japan’s energy security because it produces few natural resources and 215

Noboru Miyawaki Table 17.1  Overview of Japanese and South Korean sanctions against Russia in 2022 Japan Trade sanction

Restriction of imports

Restriction of exports

Stopping MFN to Russia Financial sanction Other important exceptions

Influence on GDP increase in 2022 economy Russian share in each import/export to all countries Investment in Russia in 2021

South Korea

Stopping specified item imports Gradually stopping coal imports: April 8 In principle stopping oil imports: May 8 Stopping 38 import items: April 19 Stopping luxury goods, Export control on 57 including high-price cars nonstrategic items: March 26 Stopping materials related to oil production: April 5 March 15 (legally effective March 15 on April 21), except tariff of coals and LNG Prohibiting transactions with seven major Russian banks: February 28 Removing Russian banks from SWIFT: February 28 New investment to Fewer private companies Sakhalin II retreating from the Russian Still importing coal (as of market the end of 2022) 1.0% 2.7% Import: 1.6%* Export: 0.9%* Main import items: coal (11%), LNG (8.8%), crude oil (3.3%) Direct investment in Russia: USD 0.38 billion

Import: 1.5% Export: 2.8% Main import items: naphtha (23.4%), coal (16.3%), oil (6.4%), LNG (6.7%) Investment in Russia: USD 4.06 billion

Based on 2020 data; other statistics from 2021. The data in the table are those of the first announcement by each government. Source: Websites of JETRO, MOF and METI of Japan KIEP (2022), K-stat, and a MOTIE Korea press release. *

depends on imports from overseas. The Sakhalin II has accounted for approximately 8%–9% of its imports of LNG, after the Sakhalin II project actually started in 2009. After President Volodymyr Zelensky criticized the West for importing “bloody” gas from Russia, mainly through Ukraine, Japan’s government was unsure about halting Sakhalin gas imports. If raising the sensitive question, “Is it not bloody smelling from Sakhalin?”, it will be to indicate a taboo in Japan’s politics and economy. From 2022, Japan and Korea clearly aligned with other anti-Russia countries. As a result, Japan and South Korea can no longer serve as substantial go-between countries for the West and Russia because they have been pushed to become anti-Russian and pro-Ukrainian. Therefore, if the United States requests that Japan stop importing gas from Russia, then Japan would no longer be able to protect its interests in the Sakhalin Project, which is vital to its energy needs. However, Japan faces serious difficulties in terms of energy security. The prices of electricity and gas are going to rise, though 216

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by less than in the EU states, but a dramatic rise in ship insurance of 80% will increase the cost of importing LNG from Sakhalin II. Japanese companies continued to work with Russia to develop gas and oil fields around the Arctic Sea area, including Yamal, from the 2010s until the beginning of the war in 2022. Gas importers such as Japan suffered serious damage from the higher price of importing gas, and consequently, in 2022, Japan increased total payment of imports by 39.2% more than in 2021. Petroleum imports increased by more than 91.5%, coal by more than 178.1%, and LNG by 97.5%. The bilateral Russo-Japanese trade increased by 26.2% in 2022 compared to the year before. Russia’s countersanctions damaged the logistics of Japanese trade and global transportation. Consequently, air companies in Japan detour around Russia’s territorial airspace for the Europe– Japan line, and trade with EU states costs more and takes more time in the case of Korean companies. However, in the case of Chinese companies, there was no damage to transport via Russian airspace, maintaining routes much shorter than those from Japan. China’s relative superiority of time and cost is detrimental to Japanese companies. Apart from direct sanctions, direct trade, and transportation issues, the attack on Ukraine’s transit logistics infrastructure damaged Japan’s economy indirectly. Beginning in 2022, the Russian military strategically carried out large-scale destruction of infrastructure in Ukraine, including dam attacks and bombing of port facilities. In October 2022, a truck-bomb attack on the Crimean Bridge severely damaged traffic on the Crimean Peninsula and mainland Russia. These events are collectively referred to as “infrastructure-cide” (in short, “infracide”; Miyawaki 2023: 29  ｆ ). Infracide stands for a large-scale loss of human life due to the destruction of infrastructure such as water, electricity, and railroads due to military action, and it brings about a large-scale slaughter effect leading to genocide and ecocide. By destroying the livelihoods of the enemy’s people, infracide tries to weaken the enemy’s willingness and ability to continue the war and lead the war situation to its advantage (Miyawaki 2023: 29). Infracide diminishes the effectivity of the Belt and Road Initiative, whose merit covers Japanese companies as well, mainly based on using the Siberian railway to transport goods between Japan and the EU, thus having shortened the route via the Suez Canal by approximately from one to two weeks. However, the war obliged Japanese companies to shift their routes from land to sea, which required more loading time and additional cost. The infracide will affect Eurasian connectivity, if widened, and the dependence on sea routes will increase. In turn, South Korean companies in Russia are hesitant to retreat from the Russian market, whereas many global companies including Japanese ones retreated from Russia after the war began. As for Korean cars, they sold at the second or third highest rates in Russia before 2022. Samsung Electronics and LG Electronics had a major influence on the Russian market with their factories. Before 2022, they had dominated the market in Russia. In March 2022, many Korean companies closed their factories in Russia (although they did not fully retreat from Russia). For example, in the third quarter of 2022, Hyundai’s cumulative operating rate in Russia was only 29% (Ajunews 2023). After the designation of nonfriendly nations by Russia in May 2022, when the nonfriendly nations’ companies retreated from Russia, they needed to pay an extra 10%–50% of property value. In addition, the Russian market has excluded foreign companies’ investment, creating an invisible barrier to entry. Thus, if Korean companies try to reinvest in Russia after the war and sanctions end, one can easily imagine that it will be more difficult. “Russia is the center of the former USSR …. There is no choice of retreat. This is because if a company retreats, it will be difficult for us to reenter the Russian market” (Kukmin Daily Newsletter 2023). Indeed, the share of Korean producers in Russia has dropped, and Chinese producers have dramatically risen over the year since the outbreak of the war, especially in the Russian car and electronics markets. 217

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The Concept of Private-Level Sanctions to Explain the Scale of Loopholes Returning to the as-if game framework, the third actor matters in unmasking the ambiguity of the negative actors. In the case of the 2022 sanctions, is it politically acceptable for Japan to import LNG from Russia? The G7 agreements permit Japan to continue to import LNG from Russia as an exception until summer 2023. Japan must behave as though it has complied with the G7 in 2022 agreements in total, except in the case of importing LNG. As for the case of “sanctions busting” of reluctant Korean companies’ retreat from Russia, as well as the Sakhalin II exception for Japan, the concept of private-level sanctions (PLSs) is effective to explain the phenomenon, as follows. In fact, “sanction-like action” and sanction busting by the private sector have not been highly perceived, and therefore, many unknown cases might exist. PLS busting cannot be enumerated. As an example, after North Korea launched its missiles in 2006, Japan prohibited the travel of its civil servants and asked its citizens to refrain from traveling to North Korea. However, in reality, there were many cases of Japanese civilians traveling to North Korea. Strictly speaking, the sanction was not legally binding, and was an act similar to “breaking one’s self-restraint.” It can also be seen as a manifestation of the private sector rejecting the government’s sanction guidelines. It is more persuading to think that such sanction-like actions and sanction busting by civilians are historically recognized events. Why does the private sector emerge in the frontier of sanction measures? If the private sector imposes sanctions, the measures cannot be based on the government’s official directions. Conversely, it usually takes time to detect legal infringements in the form of sanction busting. It has been especially difficult to prove sanction busting in the case of private companies’ exports of sanctioned goods to nonsanctioned countries (Yamamoto 1982a). Because of the asymmetry between the government and the private sector, the success rate of sanctions busting has increased. Organizations such as consumer organizations and nongovernmental organizations, as well as individuals, may bust sanctions or conduct their own sanctioning acts. In the case of sanctions busting, the most important example is the import of internationally prohibited items by individuals (e.g., ivory or live animals). Examples are the act of obstructing for protest purposes (e.g., throwing eggs) at the time of a visit by a foreign leader and boycotts by consumer groups (e.g., Japan’s boycott of France due to French underground nuclear testing in 1995). In international political science, this movement can be understood as a transnational entity performing sanction-like actions. Sanction-like actions or sanction busting by the private sector are defined as PLSs (Miyawaki 2017: 31–42). PLSs evolved over the 20th century. The first generation of PLS was the boycott, which was an international consumer movement. The second generation included government-promoted PLSs (Miyawaki 2017: 37), such as the anti-Japanese riots in China (during the Sino-Japanese confrontation over the Senkaku Islands in the East China Sea in 2010 and 2012). The options of “do” and “do not” as tactics and sources of legitimacy can be divided into two categories – international norms and national policy. However, with the invasion of Ukraine, a third-generation of PLS has emerged. In other words, in terms of tactics, legitimacy spans international norms and national policies. This is known as the omnipotence of the PLS. As for what not to do, the withdrawal of Western capital from Russia, sanctions on sports (excluding athletes from Russia and Belarus), the boycott of vodka, and the refusal to provide accommodation for Russians (these measures were rescinded in Japan) enriched the means. In terms of what to do, there are cyberattacks by hackers against Russia and Belarus, and information leaks spread on the battlefield by open-source intelligence groups, but these are not widely seen in Japan. The legitimacy of PLSs is consistent not only with international norms on humanitarianism but also with the unilateral foreign policies of Western countries. Incumbent U.S. Sen. Lindsey Graham suggested in March 2022 that Russians 218

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should assassinate President Vladimir Putin, and then the PLS methods were suddenly diversified and radicalized in the Western world. However, an omnipotent PLS cannot be used as a shield because of its omnidirectionality. In other words, the PLSs against Russia are based on methods and norms so universal that they will return like a boomerang. For example, when a PLS criticizes Russia for its war crimes, the criticism will eventually rebound to the United States, which is not an International Criminal Court member. In the West, PLSs have strong influence on promoting sanctions from “grassroots.” Criticism of the Russian military that trampled on a nuclear power plant, together with the miserable memories of the major earthquake in Japan on March 11, 2011, will eventually promote a global movement against nuclear power. It is difficult for democratic countries to stop critical trends, such as national policy. This point is the strength of the “spike” that differs from the first-generation PLSs and the lack of control (e.g., a kite with a broken string) that differs from the second-generation PLSs. Of course, the third-generation PLSs, like the first and second generations, have strong synchronicity, so they are difficult to sustain, and they lack strategy because they narrow the target (e.g., public opinion in France in 1995). It is not difficult to imagine that Japan will not be able to avoid the trap of being opposed to nuclear testing but silent about China’s nuclear tests. With excessive “people’s sanctions” having only spears and no shields, Cold War-style politics will transfer to the street level and the freedom of speech will be lost. The PLSs in and from Japan are not as strong as those in the West. For example, the pressure to stop exporting coal power plants of Japanese companies to Asia or Africa in the2010s under the Abe administration came from the world network of global environmentalists who spoke up first. The PLS in Japan was a voice against these companies from the viewpoint of global warming. Japanese companies are often sensitive to the voices of civil society organizations, which are actually consumers for them. A PLS becomes a third player in the as-if game, and it can monitor the compliance of Japanese companies in terms of sanctions against Russia, even though it has not done well in comparison with EU states, which rushed to criticize Shell severely for buying cheaper petroleum from Russia just after the war began (i.e., March 2023) (Figure 17.2). The gap between the stronger PLS and weaker companies in Japan to comply with the high goals of sanctions might widen if the PLS becomes stronger with humanitarian norms and companies become weaker because of the higher costs of commerce.

Figure 17.2  Choices for Japan and the United States in the Sanction Regime against Russia. Source: Author’s creation.

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The greater ambiguity of Korean companies’ policy toward Russia coincides with the weakness of the private sector’s role in Korea’s political dimension. However, civil society organizations in Korea are still strong enough to change the government or president, election by election, but their pressure is usually not strong enough to affect companies, such as with appeals to global norms including the ones related to the war in Ukraine. Japanese PLSs have weaknesses similar to those in Korea, but Japanese companies are weaker in the face of public opinion than Korean companies are. The relative weakness of PLSs in Korea promotes the as-if game, leading to tolerance of the Korean private sector’s presence in Russia. At the same time, the magnitude of the effects of a PLS depends on the implementation of the sanction and may vary depending on the issue. For example, when comparing economic sanctions due to human rights abuses and economic sanctions due to security issues, which one has greater private involvement? Generally, in the case of the security domain, a PLS is more compelling than persuasive action, and it tends to become a “punitive sanction” (Baldwin 1985). In particular, sanctions against the private sector in this area become incomplete-information games because information becomes extremely highly specialized and substantial information asymmetry occurs for third parties.

Concluding Remarks: Can Japan and Korea Overcome the Bad Memories of the Germany and Iran Cases? During the Cold War, West Germany resembled Japan from the points of view of relationship with U.S.. In 1982, West German companies were targeted by U.S. pipeline sanctions. Prior to this, in 1962, against the backdrop of U.S. oil industry interests, the United States used a NATO directive to stop a West German company from exporting pipeline parts to the Soviet Union. Officially, it was under the guise of restricting technology exports to the communist bloc as symbolized by the Coordinating Committee for Multilateral Export Controls (COCOM), but in reality, it is said to have reflected the intentions of American oil capital. Then, British companies succeeded in contracting with the USSR instead of German companies. The first fault line in the confrontation between the United States and the Europe dates back more than half a century. The West Germany situation at the time reminds Japan of the bitter memory regarding its retreat from plans to develop an Iranian oil field. In the last century, Japan needed to deepen its relationship with Iran to develop its oil imports with nations other than Saudi Arabia and other Gulf States. Japan developed the Azadegan oil field, but U.S. sanctions against Iran due to Iran’s nuclear development program stopped this project. Japan’s “national” dream of an Iran oil field disappeared, triggered by an alliance between geopolitics and geoeconomics. Japan could have been the third party, but later, it became a U.S.-affiliated party; eventually, China developed that oil field following Japan’s retreat. How can third parties such as Japan, which is one of the main partners of the U.S. alliance but which hopes to sustain original economic ties with the targeted countries, proceed? There are two ways: The first is to align with the United States, or at least pretend to, as in a game in which one pretends to keep a promise but breaks it in reality, whereas the other remains silent (Miyawaki 2016). The second option is to establish an identity outside of that of an in-between country, but in this case, it will face more politically difficult management of the alliance. Japan is often frustrated by the alliance of sanctions against hostile states or enemies because the victim is usually weaker Japan, not the stronger United States. If the trade rules of international law are enforced more than expected, Japan will not have to be concerned about political attacks 220

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from the United States. However, in reality, the process of legalizing unilateral sanctions in the World Trade Organization (WTO) rules seems to be coming to a halt. As the legalization of free trade progressed and the trade friction between Japan and the United States became “highly politicized” until the early 1990s, “highly legalized” trade regulated by the establishment of the WTO framework became the trend (Iida 2006). However, in the legalized and globalized world, the WTO system not only does not clearly assume the subjects of sanctions but also the events when the private sector is subjected to sanctions. With regard to the relationship between the private sector and sanctions, it is possible to acknowledge sanctions as a problem of the private sector that has entered the era of globalization and legalization without returning sanctions to problems among sovereign states. The failure of Azadegan in Iran promoted Japan’s as-if action around the continued investment in Sakhalin II, and the relative weakness of PLSs has led South Korea to take as-if action in the sanction against Russia. This is because a serious contradiction exists: The bilateral alliance with the United States is the key for these two countries in the traditional military security and political dimensions, but at the same time, they must unilaterally survive in the field of economic and energy security.

Acknowledgments I would like to thank Editage (www.editage.com) for the English language editing. In addition, I appreciate the cooperation of Ms. Junting Zhao, a graduate student of Ritsumeikan University, for partly translating Korean into Japanese, and the permission of editorial board of Journal of Policy Science, for my partially and revised reproducing of the tables and sentences of my article on the journal.

Bibliography

Ajunews (2023) “러, ‘비우호국’ 딴지에…오도가도 못하는 한국기업,” January 4, 2023. Baldwin, David A. (1985) Economic Statecraft, Princeton University Press. CISTEC (2022) “Summary of US. And EU sanctions against Russia and related information.” https://www. cistec.or.jp/service/zdata_russia/20220318.pdf Iida, Keisuke (2006) Legalization and Japan: The Politics of WTO Dispute Settlement, Cameron May Lts. KIEP(Korea Institute for International Economic Policy) (2022) World Economy Today, vol. 22, No. 6. Kukmin Daily Newsletter (2023) “눈물의 철수는 없다… 러 진출 기업들 종전 기다리며 버티기 – 국민일 보,” February 28, 2023. Kusý, Miroslav (1985) “Chartism and ‘Real Socialism’,” John Keane ed., The Power of the Powerless, Citizens Against the State in Central-Eastern Europe, M.E. Sharpe, Inc., Armonk, New York. Miyawaki, Noboru (2007) “Lying and ‘As If Game’ in International Politics,” Policy Science, pp. 55–73 (in Japanese). Miyawaki, Noboru (2016) “The Energy Interconnections between Liberal Democracies and Non-Liberal Democracies in North East Area,” Journal of Policy Science, pp. 1–10. Miyawaki, Noboru (2017) “Can Private Sectors Conduct Smart Economic Sanctions?” Research on Economic Sanctions, Hajime Okusako, Mineko Usui and Takehiko Yamamoto eds., Shigakusha, Tokyo (in Japanese). Miyawaki, Noboru (2023) “Invasion to Ukraine and the Cold War ver. 2.0” Noboru Miyawaki ed., Why the Russo-Ukraine War Happened? From the Perspective of International Politics. Waseda University Press. Shagina, Maria (2018) “How to Make Sense of Japan’s Delicate Balance Between Russia and Ukraine,” At Atlantic Council (May 17, 2018), https://www.atlanticcouncil.org/blogs/ukrainealert/ how-to-make-sense-of-japan-s-delicate-balance-between-russia-and-ukraine/ The Economist (2023) “South Korea still refuses to send arms to Ukraine: The country’s president has global ambitions and parochial opponents,” February 2023.

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18 THE U.S. SANCTIONS OFFENSIVE Implications for “Third Parties” and the Transatlantic Relationship Alan Cafruny Introduction The last decade has experienced a dramatic increase in the U.S. use of coercive economic statecraft, including export controls, restrictions on foreign investment, and sanctions. By leveraging the massive power of the U.S. Treasury resulting from continuing centrality of the dollar as international reserve currency and the crucial importance of the U.S. market Washington has also greatly broadened the scope of secondary or extraterritorial sanctions, thereby increasing the number of impacted firms and states alongside an expanded range of policy objectives. Between 2000 and 2021 the number of individuals and entities increased dramatically and sanctions are now a “central tool of governments’ foreign policies” (Economist 2021). The war in Ukraine and growing U.S.-China tensions led to a further, dramatic increase in these numbers (Atlantic Council 2022). The literature on sanctions has focused primarily on their impact on targeted states and societies. Yet, whereas historically sanctions were enacted primarily in support of geopolitical objectives, their implementation now increasingly lies, either directly or indirectly, at the intersection of economic and political objectives, regardless of their official justification. Thus, sanctions are a form of coercive statecraft, but they can also tilt the playing field on behalf of a given national economy and favored corporations. Through the mechanism of extraterritoriality, they can damage the interest not only of target states but also of neutral or allied states and firms. The potential for collateral damage to European companies resulting from the extraterritorial application of U.S. laws has been recognized for many years, justified (by Washington) through their use of the dollar or even any “nexus” with U.S. law. Such application allows the United States “to acquire and manage information gain influence and promote its interests and those of its companies … and the growing risk that European businesses will be forced to withdraw from certain markets due to the conflict of laws with extraterritorial scope …” (Giuliani 2023: 2–3). Perhaps the most notorious example was the Department of Justice investigation of Alstom for bribery (outside the United States), culminating in the 2014 $17 billion takeover of the French company by General Electric (Economist 2019). In response, the EU and national leaders have appealed for the construction of a “sovereign Europe” based on a concept of “strategic autonomy” (Borrell 2020). National governments and EU officials have sought to establish the euro as an international reserve DOI: 10.4324/9781003327448-23

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currency and develop means of avoiding the long arm of the U.S. Treasury’s Office of Foreign Asset Control (OFAC) (Cafruny and Kirkham 2019). These initiatives reflect the desire for greater European autonomy. Yet, what are the prospects for autonomy? How does the European response accord with Europe’s aspirations? Focusing on the Joint Comprehensive Plan of Action (JCPOA), the Nord Stream pipeline project, and the United States’ escalating technology war on China, how have sanctions and other forms of U.S. coercive statecraft impacted European firms and states?

Europe, the United States, and the Joint Comprehensive Plan of Action Since the 1979 Revolution when the U.S. banned Iranian imports and froze $12 billion of Iranian assets in response to the “hostage crisis,” the United States has carried out harsh sanctions against Iran. At the outset, European states were “passive observers” of the American sanctions and they continued doing “business as usual” with Iran until the risk of secondary sanctions emerged in 2010 and they agreed to “targeted sanctions” (Cronberg 2018). Secondary sanctions were further expanded in 2013, enabling the U.S. Treasury not only to punish targeted states but also to harm competitors in global markets. Recognizing these risks, the EU facilitated negotiations within the working of the P5+1 group at the initiative of Barack Obama. This led to agreement in 2015 on the landmark JCPOA, otherwise known as the Iran Nuclear Deal, that secured Tehran’s commitment to halt its nuclear program and open itself to international inspections in return for the lifting of sanctions. In May 2018, President Trump unilaterally withdrew from the JCPOA, complaining that it failed to curtail Tehran’s ballistic missile program or prevent Iranian military intervention in Syria and included a sunset clause after which Iran could move quickly toward a nuclear weapons program. By imposing secondary sanctions on countries utilizing the SWIFT payments system to send and receive payment orders to Iran, Iranian banks were effectively disconnected from much of the world trading system while Washington seized Iran’s central bank assets. The EU’s attempt to sustain the JCPOA against American opposition represented one of the most serious rifts in the transatlantic relationship since World War II as the EU sought actively to work against the United States—and alongside Russia and China—on an issue of crucial strategic importance. The JCPOA is an emblem of Europe’s commitment to multilateralism, and its preservation serves as a fundamental test case of European autonomy and power with respect to global governance. Not only is Iran an important market for numerous European firms, through the JCPOA, but European countries have also sought to reduce political conflict and instability within the Middle East and thereby avoid further refugee flows. Seeking to preserve the JCPOA, the remaining members of the P5 group pressed Iran to continue to abide by its restrictions in order to deny the United States and Israel a pretext for military intervention. At a meeting in New York in September 2018 chaired by EU High Representative Federica Mogherini, China, France, Germany, Russia, and the UK issued a joint statement recognizing that Iran was in full compliance with the JCPOA and reaffirming their continued support for the agreement. Noting that “the lifting of sanctions, including the economic dividends arising from it, constitutes an essential part of the JCPOA (European Union External Action [EEAS] 2018),” the participants called for updating the EU’s Blocking Statute and extending the European Investment Bank’s external lending mandate to Iran. The statement specifically called for the establishment of a special purpose vehicle (SPV) to replace SWIFT and facilitate payments for Iran’s exports and imports, thereby enabling Iran’s energy exports. However, U.S. officials responded with fury. Washington imposed the first wave of sanctions in August 2018 with the aim of preventing Iran from gaining access to dollars and blocking its trade in autos, airplanes, steel, 224

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and aluminum. The United States implemented a second and more comprehensive round targeting Iran’s energy sector in November 2018. At the outset, the EU3 (along with Russia and China) declared their intention to save the accord and encouraged European firms to continue to trade with Iran. However, European firms were unwilling to risk sanctions and trade with Iran was quickly disrupted as all large corporations pulled out of the Iranian market. As EU-Iran trade diminished, Iran gradually reduced its commitments to the JCPOA. The EU then revised an earlier version of the European Blocking Statute, indemnifying European companies of penalties resulting from U.S. Court decisions. However, the revised Blocking Statute did not protect the companies from consequences in the United States resulting from their continuing operations in Iran (Giuliani 2023). The EU also established the Instrument in Support of Trade Exchanges (INSTEX), an SPV headquartered in France. Designed to function through barter, INSTEX would theoretically allow Iran to buy and sell to Europe without the use of the dollar, thus shielding European firms from U.S. sanctions. At the end of 2019, six European countries—Belgium, Denmark, Finland, Netherlands, Norway, and Sweden—joined INSTEX. At the beginning of 2020, following the U.S. assassination of Iran’s General Soleimani, Tehran announced that it would no longer maintain limits on enriching uranium although still allowing inspections and would reverse this decision provided the EU could resume trade. France, Germany, and Britain under strong U.S. pressure triggered the Dispute Resolution Mechanism of the JCPOA, although declaring their intention to save the accord. The United States enacted additional sanctions on 10 January across multiple sectors of the Iranian economy including manufacturing, construction, and mining. Finally, on 31 March INSTEX concluded its first and only transaction, for 500,000 euros of medical aid from Germany, exempt by virtue of humanitarian aid from U.S. sanctions (Deutsche-Welle 2020). Yet, the experience of INSTEX vividly illustrated the limitations of the EU. While at the outset the promise of INSTEX encouraged Iran to observe the agreement, EU-Iran trade declined by 75% in 2019. Iranian exports declined by 94% (Euractiv 2019). As Iran’s central bank concluded, “INSTEX was set up to save JCPOA, but it did not work as the European countries have not had enough courage to maintain their economic sovereignty.” Furthermore, they have no idea how the channel should be financed. Iran will not shift its resources to INSTEX just to keep it, and import the same goods that are already being supplied from other channels (Central Bank of Iran, 2021). While the U.S. withdrawal from the JCPOA and the enactment of harsh sanctions have obvious geopolitical motives there is also an important geo-economic dimension. Simultaneously geopolitical and commercial, the sanctions not only devastated Iran’s economy but they also provoked Europe’s resentment and charges of judicial extortion (Economist 2019). In 2021, Iran ranked as the world’s third largest oil reserve holder and the second largest natural gas holder, and thus a significant competitor with U.S. energy firms, especially as the development of fracking dramatically expanded U.S. oil and gas production. In 2018, sanctions reduced Iran’s oil exports to Europe by almost 9 million tons as U.S. exports to Europe increased by almost 14 million tons (Simonov and Grivach 2020) representing a significant windfall to the fledgling U.S. fracking sector. As noted earlier, EU-Iranian trade and investment linkages had increased significantly. By 2018, EU-Iranian trade had increased substantially to more than 20 billion euros (Brüggmann 2018). German companies accounted for 60% of EU investment and 40% of total industrial equipment in Iran. French oil giant Total and Anglo-Dutch Shell had made significant investments in Iran, including in the LNG sector. Airbus lost 19 billion euros as a result of its inability to deliver more than a hundred planes worth $19 billion to Iran Air. Unilever, Renault, Henkel, and Peugeot have carried out significant investments in Iran (France24 2018; Reuters 2018). Daimler was forced to terminate 225

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a joint venture with an Iranian car manufacturer. By contrast, Boeing’s loss of a $20 billion contract was, by contrast, exceptional (Wall and Parasie 2018). In 2017, U.S.-Iranian trade was just $200 million. Following the election of Joseph Biden in 2020, Europe along with Russia and China sought to revive the JCPOA. While there was significant interest shown by both Washington and Tehran, agreement was ultimately frustrated by a host of problems, including the U.S. refusal to guarantee continuing membership or drop sanctions on the IRG; Iran’s continuing development of ballistic missiles and further uranium enrichment, increasing domestic turmoil and repression in Iran, and cooperation between Russia and Iran following the war in Ukraine. Notably as transatlantic relations improved following Russia’s invasion of Ukraine, 24 EU member states collectively and individually themselves abandoned their longstanding relatively conciliatory posture toward Tehran. In September 2022, the United States enacted secondary sanctions on companies involved in Iranian oil exports, including Chinese ones (Tan and Taslimi 2023).

Nord Stream 2: The United States, Germany, and European Energy Autonomy On June 18, 2015, at the St. Petersburg Economic Forum, an agreement was signed between Gazprom Russia and a consortium of German (BASF and E.ON), French (ENGIE), Anglo-Dutch (Royal Dutch Shell), and Austrian (OMV) companies on the construction of Nord Stream 2. The project envisioned a pipeline with a capacity of 55 bcm that would run directly from Russia under the Baltic Sea to Germany, along the same route as the existing (Nord Stream 1) pipeline. If completed, the project would reduce Ukraine’s role as a transit corridor and thereby deprive Kiev of roughly $2 billion in annual transit fees. It would concentrate two-thirds of Russian gas exports to Western Europe in one route, and consolidate the position of Germany as the central hub for resale of Russian gas exports throughout Europe. U.S. opposition to the Nord Stream 2 (NS-2) pipeline reflected geopolitical concerns—a longstanding opposition to European energy dependence on Russia (and independence from the United States) dating back to the 1970s and reprised with the construction of Nord Stream 1 in 2011. However, U.S. opposition also clearly reflects commercial motives that have become increasingly salient during the past decade. Significant technological innovations in the form of hydraulic fracking and horizontal drilling disrupted longstanding global energy alliances and arrangements, enabling the United States to become the world’s largest producer of natural gas, overtaking the combined output of Russia and Saudi Arabia in 2015. In 2013, the United States became the world’s largest producer of hydrocarbon petroleum and is projected to achieve energy self-sufficiency by 2030. Aided by the expansion of the Panama Canal, the United States had become a net energy exporter by the end of 2017. At the present time, 30% of global energy needs are supplied by oil, 28% by coal, and 25% by natural gas. Prior to the war in Ukraine, Russia was the world’s second largest producer of natural gas and oil, behind the United States. However, in 2020, despite the pandemic, the United States surpassed Russia as the leading natural gas exporter and realized the highest natural gas exports on record. As European markets open up and export terminals are constructed, U.S. exports will continue to increase. However, the centrality of the German-Russian energy relationship meant that the supply of American LNG to Europe was constrained by price as well as by the limited infrastructure on both sides of the Atlantic. In 2015, the United States had no LNG terminals for supply of large volumes of liquefied shale gas to EU. Six terminals for the period from 2016 to 2020 with total export capacity of 118 billion cubic meter of natural gas per year have been commissioned, with 226

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an additional 54 such terminals under consideration, including at least three in Germany following the Russian invasion of Ukraine. Prior to this time, most U.S. LNG was bound for Latin American and Asia. Even if total export capacity and energy consumption in Europe remain the same, the United States will not be able to match Gazprom’s prices. The situation with respect to Nord Stream 2 has thus represented in microcosm, the complex balance of intra-European and transatlantic geo-economic relations. Ever since the 1970s, the Federal Republic has pursued energy ties with the USSR/Russia, vehemently opposed but tolerated by Washington in a context in which no U.S. commercial interests were in play. However, the development of fracking in the Permian Basin and other areas greatly increased pressure to impose sanctions on NS-2 (de Jong 2022). U.S. “freedom gas” was proposed as an alternative to Russian supplies, welcomed in eastern European countries but resisted by Germany: “The United States is again delivering a form of freedom to the European continent … rather than in the form of young American soldiers it’s in the form of LNG” (Euractiv 2019). Sanctions on Nord Stream 2 represented a “red line” for German industry, whose competitiveness would be substantially diminished if compelled to import more expensive LNG from the United States, and hence also for the German state. Indeed, the U.S. desire to phase out Russian gas exports to Europe called into question the fundamental economic developmental project of the Federal Republic (RWE 2022). Claudia Kemfert, an energy economist at DIW Berlin, points out that sanctions are “an aggressive instrument in a fossil energy war” (Harris 2021).” Germany agreed to construct LNG terminals although it did not follow through until the war in Ukraine. Russia committed to a five-year transit agreement with Kiev, ending in 2019 and was continuing to uphold this agreement, exporting gas throughout Ukraine, one year after the invasion. As the pipeline neared completion, further sanctions on companies involved in the construction of the pipeline were authorized in the December 2020 although the companies managed to circumvent them. The Biden administration resisted provoking either Moscow or Berlin during most of 2021, recognizing that enacting sanctions would be viewed as an existential challenge to the German state and industry. In May 2021, the Biden administration waived the sanctions in order to “rebuild relations with our allies and partners in Europe” (Shalal et al. 2021). For its part, the EU opposed NS-2 although opposing sanctions as a matter of principle. The French power company ENGIE reportedly withdrew from discussions with U.S. LNG exporters in 2020 after Congress had ramped up NS-2 sanctions. Russia’s invasion of Ukraine dramatically strengthened U.S. economic and political leadership within the transatlantic space and especially in relation to Germany, paving the way for the demise of German-Russian energy relations. During Chancellor Olaf Scholz’s inaugural visit to Washington prior to the invasion, President Biden said of NS-2 that he wanted to “put an end to it.” Immediately following the invasion, Scholz conceded that the pipeline should be placed on hold and then eventually accepted that it would be abandoned. Berlin’s capitulation under the pressure of global and domestic public revulsion against Russia—Scholz’s zeitenwende—represented a significant and probably irreversible victory for U.S. oil and gas sector and a severe blow to German industrial and energy companies, including Wintershall, Germany’s largest gas company and subsidiary of the chemical conglomerate BASF. In 2022, higher priced U.S. LNG represented 50% of Europe’s energy imports (Lefebvre 2023). In 2023, energy costs for German industry are expected to increase by 40% more than in 2021, significantly reducing corporate profits and investment (Reuters 2023). Responsibility for the sabotage of the Nord Stream pipelines has not been officially determined or publicly disclosed. U.S. intelligence officials subsequently acknowledged the lack of evidence in initial reports that blamed Russia while suggesting Ukrainian complicity. However, there can be no doubt that the destruction represents not simply a severance of German-Russian 227

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energy ties but a fundamental and likely permanent transformation of U.S.-German and transatlantic power relations (Cafruny and Fouskas 2023). The commercial windfall resulting from the severing of German-Russian energy relations is evident in the transformation of U.S. energy policies. In the name of national security, the Biden administration has substantially increased permits for drilling on public lands, expedited permits for energy infrastructure, and eliminated legal and regulatory uncertainty with respect to fossil fuels. In 2021 and 2022, the Biden administration approved more drilling permits for public lands than the Trump administration during its two years. Notably, the U.S. Federal Energy Regulatory Commission (FERC) and presidential climate advisor John Kerry have endorsed natural gas as a potential benefit for the climate. Stock prices and profits of major LNG companies (and oil companies) have soared (Bove 2022; OilandGas360 2023). European—and especially German—business leaders may press for a resumption of energy relations with Russia if and when the war in Ukraine comes to an end. However, even if Germany (and Russia) wished to restore their relations, following its decades-long crusade against the pipeline and congenital resistance to Ostpolitik, Washington will not easily relinquish its geopolitical and commercial spoils.

Europe in the Tech Crossfire On December 1, 2018, the United States Department of Justice issued an arrest warrant for Meng Wanzhou, CFO of China’s tech giant Huawei. Detained following her arrest in Vancouver airport, she was the subject to a provisional extradition request for alleged fraud in relation to circumventing sanctions against Iran. In May 2019, the United States Department of Commerce added Huawei to the Department of Commerce’s entity list and lobbied allies to ban Huawei from their emergent fifth generation wireless networks. Citing Chinese company law that endows the government with ultimate authority, it asserted that Huawei constitutes a threat to national security and privacy. Given its size and technological leadership, Huawei’s expansion represents a grave commercial threat to U.S. technological predominance, regardless of its connections to the CCP. By 2018, Huawei had become the dominant global provider of 5G equipment worldwide and leading smartphone producer. No U.S. company was a close competitor, but U.S. firms—and hence the U.S. government—control the technology used in the manufacture of semiconductors that are essential to Huawei. In 2021, China produced 50% of the world’s computers and mobile phones; the United States produced 6%. China produced four times the number of electrical vehicles as the United States and had nine times as many 5G base stations (Allison and Schmidt 2021). Given its size and technological leadership, Huawei’s expansion represented a grave commercial threat to U.S. technological predominance, regardless of its connections to the CCP and Washington’s national security concerns. The ensuing U.S. project of technological containment initiated by the Trump administration involved unilateral U.S. sanctions on China’s major tech giants such as ZTE, Huawei, and Semiconductor Manufacturing International Corporation (SMIC). These sanctions, representing the second phase of economic warfare starting with trade were justified on national security grounds but they had clear commercial implications. These were followed by extra-territorial or “secondary sanctions” on suppliers. In May 2019, the United States Department of Commerce banned all U.S. exports to Huawei and lobbied allies to exclude Huawei from their emergent fifth generation wireless networks. The imposition of a potentially devastating global embargo on semiconductor supplies to Huawei has been compared by numerous observers to the U.S.-led oil and steel embargo and subsequent freezing of Japanese assets in 1941 that precipitated the attack on Pearl Harbor (Allison 228

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2020; Kessler 2020). As U.S. Senator Ben Sasse observed, “The United States needs to strangle Huawei. Modern wars are fought with semiconductors” (Swanson 2020). U.S. military planners have suggested that Taiwan deter a Chinese invasion by threatening to destroy its TSMC semiconductor plants on which China relies (Moriyasu 2022). Washington’s campaign to contain Huawei’s growth and penetration into Western markets has reflected both the complexity of global high-technology value chains and the constraints on U.S. economic power deriving from its deep interdependence on China. Japan, and South Korea initially complied with Washington’s demands. However, citing a lack of evidence for U.S. allegations of cyber espionage and recognizing the sizeable cost benefits, most European countries sought initially to continue doing business with Huawei. When the United Kingdom initially rejected U.S. claims that Huawei represented a security threat and declared its intention to continue allowing Huawei participation in its 5G networks Ren Zhengfei, the company’s founder and CEO, compared the decision to the Soviet Union’s victory at Stalingrad (Strumf 2020). Recognizing the ineffectiveness of existing diplomatic and coercive efforts, in May 2020, the Trump administration opened up a new offensive in its attempt to contain China’s high-tech challenge. Through the State Department’s “clean network program,” it developed a “exclusionary geopolitical strategy” designed to decouple firms from China and establish a bifurcated digital economy (Mayer 2020). It tightened its own export controls on Huawei and enacted secondary sanctions on all companies selling computer chips to Huawei if the product has been manufactured or designed using U.S. technologies. Immediately following this announcement, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chipmaker, halted new orders from Huawei (Swanson 2020). Prior to the announcement, TSMC announced plans to build a $12 billion chip factory in Arizona (Ting-Fang and Li 2020). This “nuclear option” may have far-ranging impact on Huawei and indeed China’s technological future. The new U.S. rules “push the world into uncharted territory” (Goldman 2020). In December 2020, sanctions were also imposed on the Chinese chipmaker SMIC, further tightening the noose on Huawei. China retains the option of retaliating against U.S. companies including Apple, Qualcomm, Boeing, and Cisco as well as European companies to whom waivers were granted. In early 2023, the Biden administration reportedly was considering such waivers and thereby completely severing Huawei’s access to major U.S. suppliers such as Qualcomm and Nvidia. Europe is “the primary battleground” in the war between Washington and Huawei (Doffman 2019). Although Nokia and Ericson are Huawei’s main rivals, Europe as a whole has been heavily dependent on Huawei for its relatively inexpensive move into next generation telecommunications networks, and limitations on Huawei’s participation imposes significant costs. No U.S. company is a close competitor, but U.S. firms control the technology used in the manufacture of semiconductors that are essential to Huawei. Reflecting the determination of most EU member states to continue to allow Huawei to develop their 5G systems, the European Commission resisted U.S. pressure to impose a blanket ban. However, as the worldwide U.S. campaign intensified, many European countries capitulated by imposing legal or de facto exclusions. This is so even as Washington has apparently weaponized its supply chains by extending waivers that allow U.S. corporations to supply Huawei and thus seize market shares from their European counterparts (Yang 2020). France, Sweden, Romania, the Baltic states, Belgium, and Denmark issued outright bans or compelled operations gradually to sever ties. Huawei’s smartphone business in Europe was destroyed by U.S. sanctions that cut Huawei off from Android, Google’s operating system. The sanctions allowed Sweden’s Ericsson and Finland’s Nokia to overtake Huawei in 5G RAN. Germany has remained something of an outlier: However, notably it has moved gradually to accommodate the United States while retaining its options by imposing a “dual track” approval process that could 229

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allow Germany to circumvent the ban in the face of Chinese retaliation. However, in the wake of war and increasing pressure from Washington, Olaf Scholz’s government has taken a harder line, including blocking China’s purchase of a chip plant (Cerulus and Wheaton 2022). By the end of 2021, Huawei had fallen to number nine in the smartphone industry, far behind Samsung and Apple, and is likely to lose further ground in 2022, largely because of its inability to obtain necessary components amid more generalized semiconductor shortages. Its global telecom market share has also decreased significantly. In early 2023, the United States enacted a wholesale ban on Huawei, severing its connection with U.S. suppliers such as Nvidia, Qualcomm, and Intel (Sevastopulo and Hille 2023). At the beginning of 2022, the Biden administration extended its campaign against Chinese technology beyond Huawei to the entire global semiconductor ecosystem in what Financial Times columnist Martin Wolf called an “act of economic warfare” (Wolf 2022). In its February 2022 report to Congress, the U.S. Trade Representative asserted that “It is apparent that existing trade tools need to be strengthened, and new trade tools need to be forged” (Hiyashi et al. 2022). Using Section 301 of the Trade Act, U.S. officials targeted semiconductors, artificial intelligence, 5G wireless, and electric vehicles based on the abandonment of a “sliding scale” approach designed not simply to stay two generations of chips ahead but rather to maintain “as large a lead as possible” (Sevastopulo and Fleming 2023). This involved expanding the list of Chinese technology companies subjected to blacklisting over subsidies, connections to the CCP and PLA, and alleged human rights violations. This broader campaign has massive, further implications for Europe. As part of this policy, seeking to prevent the Dutch chip manufacturer ASML (and also Tokyo Electron and Nikon in Japan) from gaining an advantage over U.S. chipmakers Washington pressured the Dutch government to block China’s access to ASML critical technologies. Dutch capitulation drove a wedge between the Netherlands and the rest of Europe which, lacking an EU-wide policy, is vulnerable to potential retaliation from Beijing. Thus, the export controls on Huawei expanded to chips, and the most extensive set of controls, carried out unilaterally (Sevastopulo and Fleming 2023).

Conclusion The proliferation of U.S. extraterritorial or secondary sanctions and their impact on Europe illustrates vividly the formidable structural economic power of the United States based on dollar supremacy and the size and significance of the U.S. consumer market. The EU has made some progress against extraterritoriality with respect to data protection (Giuliani 2023). However, sanctions and other forms of coercive economic statecraft directed against Russia, Iran, and China have nevertheless involved significant collateral damage on Europe, at times to the benefit of U.S. companies. On the one-year anniversary of the Russian invasion of Ukraine, the EU adopted its 10th package of sanctions alongside the establishment of an EU Special Envoy on Sanctions. Yet, these efforts do not presage European “strategic” or “technological” autonomy but rather that “Western initiators of restrictive measures are marching in lockstep” (Timofeev 2023). The JCPOA provides perhaps the most clear-cut—albeit modest—example of European paralysis in response to U.S. sanctions. With respect to Nord Stream 2, both the Biden and Trump administrations faced trade-offs between geopolitical logic and economic interest. Both administrations held the U.S. oil and gas lobby at bay in order not to antagonize the United States’ most important European ally. Whether the lobby would have eventually prevailed in the absence of war cannot be known, but Vladimir Putin’s fateful decision to invade Ukraine has transformed global energy relations and vastly benefited U.S. energy companies at the 230

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expense of Germany and the EU. Notwithstanding the geopolitical dimensions, the energy transformation will have a profoundly destabilizing impact not only on Russia but also on Germany and Europe, especially in the context of the U.S. Inflation Reduction Act, which is likely to lure European (and American companies in Europe) to the United States (Cafruny and Fouskas 2023; Williams and Brower 2023). While the U.S. the project of selective technological decoupling remains at an early stage, it has already had a major impact on Europe. With the failure of the Comprehensive Agreement on Investments, signed by the EU but not ratified by the European Parliament, there remains no coherent EU policy toward China, and no basis for developing such a policy outside the framework of the U.S. imperium, especially in the aftermath of Russia’s invasion of Ukraine and further pressures from Washington. The Trade and Technology Council appears likely to harmonize transatlantic rules and standards in accord with U.S. interests (Tolstukhina 2022), thus serving as a “technological NATO.” In February 2022, the European Commission allocated 43 billion euros toward semiconductor production, but one year later, few companies were investing in Europe. The EU remained heavily dependent on U.S. and semiconductor products and policies and susceptible to pressures for compliance with the U.S. strategy of selective decoupling.

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Alan Cafruny Economist. (2021) “Sanctions Are Now a Central Tool of Governments’ Foreign policy,” April 22. https://www.economist.com/finance-and-economics/2021/04/22/sanctions-are-now-a-centraltool-of-governments-foreign-policy Euractiv. (2019) “Freedom Gas: U.S. Opens up LNG Floodgates to Europe,” 28 August. https://www. euractiv.com/section/energy/news/freedom-gas-us-opens-lng-floodgates-to-europe/ European Union External Action (EEAS). (2018). “Implementation of the Joint Comprehensive Plan of Action: Joint Ministerial Statement,” 24/09/2018. https://eeas.europa.eu/headquarters/headQuartershomepage/51036/node/51036_tg France24. (2018) “French Carmaker PSA to Leave Iran over Risk of US Sanctions.” Retrieved April 20, 2020. https://www.france24.com/en/20180605-business-iran-usa-france-carmaker-psa-peugeot-citroen-leaveover-risk-us-sanctions Giuliani, A. (2023) “Beyond Eurpoean Extraterritoriality, For Legal Intelligence and Compliance in the Service of Sovereignty,” European Issues, Fondation Robert Schuman, 31 January. Goldman, D. (2020) “Trump Bets the Farm on Huawei Equipment Ban,” Asia Times. Retrieved July 15, 2020. https://asiatimes.com/2020/05/trump-bets-the-farm-on-huawei-equipment-ban/ Hamilton, Daniel and Quinlan, Joseph (2018). The Transatlantic Economy 2018: Annual Survey of Jobs, Trade, and Investment Between the United States and Europe. Washington, DC: Center for Transatlantic Relations, Johns Hopkins University. Harris, L. (2021) “Nordstream Pipeline Ensnarled in the U.S.-Russia Fossil Energy War,” American Prospect, December 9. Hiyashi, Y. et al. (2022) “U.S. Moving to Confront China on Trade, Industrial Policy,” Wall Street Journal, March 2. https://www.wsj.com/articles/u-s-moving-to-confront-china-on-trade-industrial-policy-11646217002 Lefebvre, B. (2023) “How American Energy Helped Europe Best Putin,” Politico, February 23. Li, L. and Ting-Fang, C. (2020) “Inside the U.S. Campaign to Cut China Out of the Tech Supply Chain,” NikkeiAsia, October 7. https://asia.nikkei.com/Spotlight/The-Big-Story/Inside-the-US-campaign-to-cutChina-out-of-the-tech-supply-chain Mayer, M. (2020) “Europe’s Digital Autonomy and the Potentials of a U.S.-German Alignment Towards China,” American Institute for Contemporary German Studies, December 16. Miller, C. (2020) “America is Going to Decapitate Huawei,” New York Times, September 15. Moriyasu, K. (2022) “Taiwan Should Destroy Chip Infrastructure if China Invades,” Nikkei Asia, January 5. OilAndGas360. (2023) “U.S. LNG Giant Sees Revenues More Than Double in 2022,” February 23. Reuters. (2018) “Volvo Halts Iran Truck Assembly Due to U.S. Sanctions,” 24 September. Retrieved April 22, 2020. https://www.reuters.com/article/us-iran-nuclear-volvo/volvo-halts-iran-truck-assembly-dueto-u-s-sanctions-idUSKCN1M413A Reuters. (2023) “German Industry to Pay 40% More for Energy Than Pre-Crisis-Study says,” January 30. RWE. (2022) “Security of Supply Depends on Natural Gas,” 26 January. https://www.rwe.com/en/press/ interviews/security-of-supply-depends-on-natural-gas [Accessed 13 January 2023]. Sevastopulo, D. and Fleming, S. (2023) “Netherlands and Japan Join US in Restricting Chip Exports to China,” Wall Street Journal, January 27. Sevastopulo, D. and Hille, K. (2023) “Washington Halts Licenses for US Companies to Export to Huawei,” Financial Times, January 30. Shalal et al. (2021) “U.S. Waives Sanctions on Nordstream 2 as Biden Seeks to Mend Europe Ties,” Reuters, May 19. https://www.reuters.com/business/energy/us-waive-sanctions-firm-ceo-behind-russias-nordstream-2-pipeline-source-2021-05-19/ Simonov, K. and Grivach, A. (2020). “ Political Risks in Global Energy: From ‘Resource Nationalism’ to ‘Molecules of Freedom’ and Climate Weapons,” Valdai Discussion Club, July. Strumf, D. (2020a) “A Chinese Tech Giant Strikes Back,” Wall Street Journal, June 6–7. Strumf, D. (2020b) “Huawei Founder Ren Zhengfei Takes Off the Gloves in Fight Against the U.S.,” June 6. Swanson, A. (2020) “U.S. Delivers Another Blow to Huawei with New Tech Restrictions,” New York Times, May 15. https://www.nytimes.com/2020/05/15/business/economy/commerce-department-huawei. html?auth=login-email&login=email Tan, C. and Taslimi, T. (2023) “Xi Lacks Diplomatic Muscle on Iran Nuclear Talks,” Nikkei Asia, February 16. Tilford, Simon (2010). Pp. 6 in How to Save the Euro. Brussels: Centre for European Reform, September, 2010.

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The U.S. Sanctions Offensive Timofeev, I. (2023) “What to Expect from the EU Special Envoy on Sanctions,” Valdai International Discussion Club, February 3. https://valdaiclub.com/a/highlights/what-to-expect-from-the-eu-special-envoy/ Ting-Fang, C. and Li, L. (2020). “TSMC Plans to Halt Chip Supplies to Huawei in Two Months,” Nikkei Asian Review, July 26. https://asia.nikkei.com/Spotlight/Huawei-crackdown/TSMC-plans-to-haltchip-supplies-to-Huawei-in-2-months Tolstukhina, A. (2022) “EU Technological Sovereignty and Its Limits,” Valdai Papers #119. Wall, R. and Parasie, N. (2018) “Boeing and Airbus to Lose Billions in Orders from Trump’s Sanctions,” Wall Street Journal, May 9. https://www.wsj.com/articles/boeing-airbus-to-lose-billions-inorders-from-trumps-iran-sanctions-1525877490 Williams, A. and Brower, D. (2023) “U.S. Makes ‘No Apologies’ for Prioritising American Jobs, Clean Energy Tsar Tells EU,” Financial Times, 24 February. https://www.ft.com/content/cb0a8ddf6b32-49d8-8870-d1384580e9c9 Wolf, M. (2022). “Geopolitics is the Biggest Threat to Globalisation,” Financial Times, November 22. Yang, Y. (2020) “European Tech Accuses U.S. of Using Sanctions to Shut It Out of China,” Financial Times, December 22. https://www.ft.com/content/7baa8caf-ca3f-4d95-967c-e315a3ee348f

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19 THE IMPACT OF WESTERN SANCTIONS ON GLOBAL SUPPLY CHAINS AND THE GREEN TRANSITION The Case of EV Battery Manufacturing in South Korea and the EU Ksenia Kirkham and Alen Toplišek Introduction Sanctions are like earthquakes for global supply chains and at the moment of writing there are at least three epicentres: China, Iran and Russia. The ‘extraterritorial’ effects of US primary and secondary sanctions are the most disruptive (compared to EU, Canadian, Australian, Japanese and other ‘Western’ sanctions, or Russia’s and China’s ‘counter-measures’), for global supply chains, including supply routes of goods, critical raw materials and services, already severely disrupted by the COVID-19 pandemic. Compared to the pandemic, the impact of sanctions is much longerterm, as economic actors are forced not only to adjust to short-term logistics problems but to reconfigure their entire business strategies in the field of production, logistics and partnerships. The number of unilateral US sanctions regimes has grown exponentially, the most prominent being the Countering America’s Adversaries Through Sanctions Act (CAATSA) against Iran, Russia and North Korea, adopted in 2018, covering a wide array of restrictive measures on trade and financial transactions in the military and non-military sectors. In 2018, the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) and reinstated the sanctions against Iran that had been lifted in 2016. In 2022, the Republicans introduced a bill – ‘Say No to the Silk Road Act’ – targeting China’s central bank digital currencies (CBDC), driven by concerns that China’s digital yuan may be used to circumvent sanctions and compromise users’ personal information. If passed, the law will complement the constantly expanding list of anti-China sanctions that comprise the National Defense Authorization Act (NDAA) – 2019, the point of departure for the sanctions campaign against China’s telecom businesses (e.g. Huawei and ZTE), the Executive Order 13959, titled ‘Addressing the Threat From Securities Investments That Finance Communist Chinese Military Companies’ – 2020, the Hong Kong Autonomy Act – 2021. Sanctions do not only hit target states, but also spill over across global supply chain networks, industries and markets. They often undermine the performance of non-targeted companies sharing a common supply chain with targeted enterprises, as their immediate effects are increased costs of 234

DOI: 10.4324/9781003327448-24

The Impact of Western Sanctions on Global Supply Chains

production, transportation, additional transaction costs and a drop in sales. The immediate consequence of sanctions to the world economy has been a setback for the development of sustainable economies in response to climate change. The challenge is twofold, the first one being the dire situation in the gas market in Europe and Asia that spurs inflation worldwide, and the second – attempts at EV battery (BEV) market consolidation and monopolisation by key players. The energy crisis in Europe, however, was neither triggered by sanctions nor by the war in Ukraine. S&P Global vice chairman Daniel Yergin, a leading authority on energy markets, had long warned against the ‘pre-emptive underinvestment’ that caused cuts in investment in conventional energy which led to a ‘mismatch between available supply and growing demand’, and therefore a spike in energy prices, as demand had not yet started sloping downward (Nikkei Asia 2023). Moreover, the volatility of wholesale gas prices had been a consequence of a dramatic shift from coal to LNG, driven by the ‘transition’ to green energy agenda in the EU, China and other major global gas importers. Sanctions, coupled with an unfettered profit maximisation strategies of global LNG producers who capitalise on the dire situation, perpetuate a surge in energy prices as well as in some EV battery raw materials, due to increased anxiety over monopolisation of control and supply disruptions. Meanwhile, at least rhetorically, Net Zero plans are firmly on the political agenda in some developed countries. Yet carbon neutrality is still far from being a global security objective, as hydrocarbon rich states in the Global South have different energy security priorities - their very existence and social stability is highly dependent on oil and gas revenues (for more on energy security, please see Dannreuther 2010). Nevertheless, China’s President Xi Jinping announced China’s goal to achieve carbon neutrality by 2060, while the EU has adopted the Long-Term Low Greenhouse Gas Emission Development Strategy to make the EU ‘climate-neutral’ by 2050. These strategic goals are in line with states’ international commitment to ‘global climate action’ under the 2016 Paris Accords. According to IEA, to reach net-zero by 2050 the share of electricity in total final consumption should rise from its current 20–49% (IEA 2021). However, the surge in costs in power generation have already caused ‘twin challenges of the transition to clean energy and protecting grids against worsening climate events’ (i.e. worsening storms and more severe weather worldwide), as more than 60% of global power for electrification (necessary for lower-carbon emissions) is generated from fossil fuels (Gaffen 2022). As Nick Akins, CEO at American Electric Power Company puts it: ‘If everyone is doing renewables at the same time, it further exacerbates that issue… Pure and simple, it’s the supply chain’ (Ibid.) In response to Western sanctions, target ‘contender’ states retaliate by turning into senders of economic sanctions (or counter-sanctions), and accelerate various economic security policies to boost their import substitution programs, as in the case of Russia (Kirkham 2022), or aggressive measures to enhance their competitiveness and global market share, as in the case of China. As a result, with such escalation of tensions between sender states and sanctioned states, many governments and businesses, i.e. ‘third parties’, are caught in between. Some East Asian states, such as South Korea and Japan have been caught in a dilemma. On one side, their firms are willing to continue their mutually beneficial cooperation, on another, US pressure makes it difficult for businesses to remain committed to China, as US sanctions ‘pose liability risks to third-country parties even if the underlying activity has no US touchpoint’ (Chen Zhu 2021). Meanwhile, the new comprehensive sanctions against Russia have disrupted the strategic plans of many European companies with a presence in Russia. Such a situation can be referred as a ‘pause in globalisation’ when global producers are facing a new challenge of ‘figuring out how to make supply chains more robust by adding more factories, suppliers and sources of materials’ (Mims 2022). In logistics, the experts call this reshuffling in global supply chains – a shift 235

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from supply chains to webs – as ‘multiple sourcing,’ which proves to be expensive and timeconsuming (Mims 2022). In this sanctions crossfire, the transition to net zero neutrality will be inevitably slowed down in many parts of the EU and other OECD countries, as further adoption of battery electric vehicles (BEVs) and other important developments technologies will be stalled (BEVs are all-electric vehicles/cars that run on batteries (e.g. lithium-ion batteries that are also used in smartphones, laptops, etc.). The US sanctions against China cause China’s counterreaction in the form of a more aggressive drive for control of the BEV and EV batteries market, not only of the end-product, but also of the entire production process and vital raw materials. Therefore, the race to ‘net zero’ will increasingly divert attention of the practitioners in the public and private sectors to the security of supply of critical minerals and metals needed to manufacture EV batteries – a component that accounts for 30–40% of the value of an electric vehicle (IEA 2022a). The main argument of this chapter is that sanctions undermine transition to green energy strategy not only by perpetuating chaos in the global gas markets with surging LNG prices that benefit no one but major LNG producers, with governments turning a blind eye on the situation, but also by challenging future development of the EU’s and South Korea’s BEV manufacturing industries, as supplies of EV batteries, and core raw materials, critical in battery production, such as lithium, cobalt and nickel (except for manganese, which is more widely available) are severely disrupted. Moreover, destabilised prices cause severe uncertainties, ‘with lithium holding strong on brisk demand and tight supply while nickel and cobalt start to fall out of favour in the crucial Chinese market’ (Nikkei Asia 2022b). For instance, the price of lithium, a crucial input in the EV supply chain, has soared nearly tenfold in 2022 compared to the previous year. This is putting strong pressure on battery makers to pass higher costs on to customers. The following sections will explore the effect of sanctions on energy security and the transition to net zero neutrality target by examining the impact on global supply chains and business practices, and the disruptions in the BEV and wider automotive industry supply chains in the EU and South Korea. These two cases display some notable parallels. In the BEV markets, the problems are expected to emerge on the supply side – despite fierce competition amongst producers – some of the key players will be struggling to cover demand in the EU and South Korea, which is expected to grow due to upcoming carbon tariffs. Recent trends in the EV batteries segment in electric car manufacturing demonstrate how economic sanctions have undermined the ambitious plans for the transition to greener energy in Europe (and in Asia).

The Impact of Sanctions on Global Supply Chains The combined impact of the pandemic, the war in Ukraine, and sanctions has reconfigured vital supply chains of the ‘goods we rely on for our daily existence’ (Mims 2022). With the adoption of shipping containers in the 1960s, modern supply chains have become cost-effective, as transcontinental shipping has become cheaper and ‘manufacturing could move to wherever wages were lowest’. Consequently, most production was moved to East Asia, and predominantly to China (Ibid). Flexible arrangements that suited cost-efficient business models, however, are failing to withstand the pressures of economic sanctions without readjustments by lead firms. This is particularly true regarding the production of complex technologies, such as IT equipment (smartphones, computers and their components), electronic components (e.g. batteries) with a complex geography of production to synthesise rare raw materials, intermediate components and advanced logistics. The following trends in sanctions policies will continue to reshape and restructure global supply chains. 236

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First, the number of target states, especially with the transformation of anti-Russian sanctions into a comprehensive blockade – will continue to rise. Second, existing sanctions regimes against ‘contender’ states, unless they are willing for immediate cooperation in joining the blockade, will be strengthened. This is because competitive pressures in strategic economic sectors of the future, including AI, biotechnology and quantum technology, will continue to persist in a capitalist oriented global economy. Third, the number of third parties affected by sanctions will increase, posing a significant question of legitimacy of sanctions from the standpoint of international law. Fourth, it will become more difficult to comply with sanctions because of the complexity of sanctions legislation and the rising costs of compliance. Fifth, not only the imposition but even the threat of sanctions will be disturbing for businesses, as sanctions do not even need to come into effect to increase uncertainty in markets, and to disrupt investment flows and production (e.g. consider the 30% surge in the aluminium prices in response to the threat of sanctions against Rusal in 2018). Finally, the legal base will continue to become more complex, with vague definitions: it will be harder to understand but apply to a larger number of entities. This will significantly increase the risk of sanctions non-compliance. At the moment, there is a growing number of companies that are penalised even when the ‘violations’ are unintentional (due to lack of information): since 2009 only 15% of US Treasury designations were ‘wilful violations’, while 37% were committed out of ‘recklessness’, the remaining cases – out of other ‘forms of carelessness’, such as managerial audit errors (Timofeev and Khomenko 2020). Overall, the atmosphere of struggle with sanctions compliance greatly disrupts business confidence and undermines trust in relations, already hit by the pandemic. Corporate boards, reshuffled under the claims made by investors, did not have the chance to meet in person during lockdown. Analysts suggest that global M&A activities have stalled due the lack of connectivity, confidence, trust and a sense of collegiality. Companies are cautious about pursuing growth opportunities through acquisitions, sales, or other structural changes. Sanctions disrupt long-term business connections while the re-establishment of professional and personal ties and new trustful relations is a very time-consuming task (Herbst-Bayliss, French, and Hu 2022). The level of trust is further disrupted by constant pressures for businesses to meet sanctions compliance requirements, not only in relation to the initial fine that might be imposed, but also concerning the risk of reputational damage and difficulty in raising capital in future. Expenditure on a well-designed, risk-based compliance business strategy is rising. Such strategies are based on the risk profiles of the company’s suppliers, intermediaries and customers and on a timely identification of the most challenging sanction and export control developments. Sanctions compliance has become a very costly business on its own, necessary for a company’s long-term survival. One of the most important factors is that sanctions and export control have become increasingly intertwined. Export controls exemplify the effects of sanctions as they apply to goods produced in any country as long as they use US technology (e.g. chipmakers like Taiwan Semiconductor Manufacturing and the Shanghai-based Semiconductor Manufacturing Industry Corp).

South Korea In 2019, the US Congress passed the National Defense Authorization Act to reinforce economic security measures and to increase pressures on its other allies, like South Korea and Japan, to accelerate their economic decoupling from China, to decrease their over-dependence on China’s technologies over the long term. This is done to shut out Chinese high-tech companies from global markets, however, the business community is split over the question of economic security. The U.S sanctions on China aim at restructuring global production into ‘China-free’ supply chains. In 2021, 237

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the Presidents of South Korea and the US, Moon Jae-in and Joe Biden, reiterated their willingness to strengthen cooperation in core industries (i.e. semiconductors, artificial intelligence, electronic batteries, 5G and 6G, biotechnology and quantum technology). Korea’s four largest business conglomerates – Samsung, SK, LG and Hyundai Motor announced investment to wean themselves from China: Samsung will invest $17 billion in a new semiconductor manufacturing plant, LG Energy Solution and SK Innovation – $14 billion in battery production, and Hyundai – $7.4 billion in the manufacturing of electric cars and charging stations (Ah-jin 2021). However, the results of these developments could be paradoxical, as by switching to domestic production, South Korea will become heavily dependent on China for the raw materials in many high-tech industries. The segments of rechargeable batteries and semiconductors are the most striking examples. South Korea, poor in own natural resources (as it imports 97% of its energy sources), is trying to move away from fossil fuels (as is the EU). BEV car manufacturing is part of South Korea’s net zero strategy (along with its plans for a hydrogen-based economy, despite growing scepticism). However, South Korea’s plans are challenged by the US sanctions against China with multiple pressures on ‘third parties’ to decouple from the country’s supply chains, along with a recent $430 billion Clean Energy Tax Provisions in the Inflation Reduction Act (IRA) that proposed US tax credits for EV purchases (by lifting the cap on the $7,500 tax credit and imposing restrictions for vehicles not assembled in North America to get credit). Key South Korean battery producers – LG Energy Solution (LGES), SK Innovation’s, SK On and Samsung SDI – point to the fact that this act is discriminatory for foreign-made EVs according to WTO rules. These corporations are particularly concerned about the US EV new tax credit rules, under which manufacturers qualify for US tax credits only if a minimum 40% of the value of critical minerals for batteries come from the US and American free-trade partners. These actions contribute to already fierce market competition between South Korean and top world BEV producers (i.e. China, Germany, Belgium and the US). According to LGES, ‘It is extremely difficult to build most clean energy technologies, including EV batteries in the US without using certain foreign-made parts and, specifically, raw materials extracted or processed in China’, while Samsung SDI is urging the US to allow flexibility to meet supply chain requirements in automotive supply chain contracts (Reuters 2022c). Manufacturing of batteries, especially for electric vehicles, which are in high demand due to soaring oil prices and the transition to net zero, is currently dominated by China. Eighty percent of lithium-ion battery demand comes from the EV market (battery accounts for 30% of an EV’s price), with material to produce cathodes – e.g. nickel, cobalt and manganese powder – making up to 60% of an EV battery’s cost (for metal prices, see Figure 19.1). According to Wood Mackenzie, over the period from 2021 to 2030, global lithium-ion battery capacity is expected to rise over fivefold to 5,500 gigawatt-hours (GWh). However, electric cars will only become competitive with combustion-engine cars if battery prices drop to $100 per 1 kWh, but this is unlikely to happen until 2026 (Reuters 2022b). The government of South Korea aims at developing the BEV into an industry second only to semiconductors. Business analysts warned that ‘Korea’s efforts to bring home the production of parts and equipment will not only paradoxically end up in its increased dependence on China. The problem is that China plays a crucial role in the global supply of raw materials, controls the lithium market through its stakes in the “lithium triangle” – Argentina, Bolivia and Chile, as well as the markets for the cobalt and nickel used in making the transmission rods. Therefore, South Korea’s battery industry is ‘alarmingly dependent’ on China for four core components: cathodes, graphite anodes, membranes and electrolytes (e.g. China controls 58% of the global cathode market, while South Korea only 9%) (Jung 2021). For instance, to manufacture its own cathodes, South Korea must import from China almost all of the raw materials. The most expensive ingredient – cobalt – is mainly produced in the 238

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Figure 19.1  Metals Prices for EV Battery, 2015–2022. Source: IEA (2022a), Author’s Calculations.

Democratic Republic of the Congo (78% of global cobalt production), however, 72% of the DRC’s cobalt industry is controlled by China. Lithium, another core component is mainly mined in Australia and Chile, where China owns over 60% of the mines, making battery production ‘impossible without China’, according to market experts (Jung 2021). The independent domestic production of electrolytes is even more problematic, as in 2021 ‘the price of Chinesemade lithium that goes into electrolytes rose from $15 per kg early this year to $80 recently’, adding immense price volatility risks. As for graphite anodes, China accounts for 66% of its global market, and for the global market for membranes, China’s Shanghai Energy New Materials Technology overtook Japan’s Asahi Kasei which used to dominate, becoming the leader of its production as well. Regarding semiconductors, South Korea has become increasingly dependent on raw materials imported from China to meet the needs for the switch to domestic production after Japan curbed exports of key semiconductor materials (e.g. hydrogen fluoride that is used to eliminate contaminants in the manufacturing process). While the imports of Japanese-made hydrogen fluoride to South Korea decreased from 42% in 2018 to 13.6% in 2021, the proportion of Chinese raw materials increased by 17.7 percentage points instead (Hyeong-tae 2022). As Ahn Ki-hyun, a member at the Korea Semiconductor Industry Association, suggested: ‘We’re importing Chinese raw materials to manufacture materials ourselves, but that means we’ll end up even more dependent on China’. The dynamic in the production of the EV batteries correlates with the trends in the electronic vehicle manufacturing. In 2021, South Korean BEV ‘retreated in the global market on the ascension of its Chinese and German competition’: China’s global export market share was up by 9.5 percentage points while Germany’s was 3.8 percentage points (the Federation of Korean Industries 2022) (see Figure 19.2). Moreover, sanctions against China (and against Russia) set the preconditions for China’s political leaders to reconsider its economic policies and business strategies, to boost economic 239

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Figure 19.2  Top Five World BEV Producers (%). Source: ITC, 2022, International Trade Centre, trade map, Author’s Calculations.

competitiveness and to secure China’s leading positions in the global markets, including the BEV and EV batteries segments. Notably, the EU is the world’s largest importer of BEVs, with the market share of Chinese suppliers reaching15.9% in 2021 (4.2% in 2020). In 2021, China’s car manufacturers, such as Tesla’s factory in Shanghai, SAIC Motor Corp. and BYD Auto Co. boosted their exports to the EU by 513.9%. As for the global EV battery market, the total share of Chinese battery companies (e.g. CATL, BYD and CALB) grew to 48.7% (38.4% in 2020), while the share of South Korean largest battery producers (e.g. LG Energy Solution, Samsung SDI and SK On) declined from 34.7% in 2020 to 30.4% (Korea Herald 2022). As mentioned previously, the problem with the US strategy of decoupling ‘third party’ states from China’s supply chains of end-products of the EV batteries results in increasing dependency of third parties on China’s supplies of raw materials, as China dominates the entire downstream EV battery supply chains (see Figures 19.3–19.5). Therefore, with the entire EV supply chain (from battery materials to EV) concentrated in China, further decoupling and sanctions against China will undermine the prospects of South Korean battery producers for cooperation with Chinese material makers, crucial for the expansion of manufacturing infrastructure. Closer relationships with Western automakers (recent JVs with Ford Motor, General Motors and Stellantis) would not resolve the problem related to the risks of supply chain disruptions. Another crucial question that will impact BEV production, as it will further boost China’s competitive advantage, is the standardisation policies in the EV battery production (i.e. the standards for measuring the purity of lithium used in EV batteries). China is working hard on securing its leading position. ISO certification helps demonstrate a product’s quality to customers. In 2020, the ISO approved a Chinese proposal to establish a technical committee for lithium standards. As China chairs this panel, some other members of the association worry that ‘the Chinese will seek to advance standards that benefit their country’s battery industry’ (Nikkei Asia 2022a). 240

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Figure 19.3  China in Global Mining Supply Chains for EV Battery (%). Source: IEA (2022a), Author’s Calculations.

Figure 19.4  China in Global Material Processing. Note: Inner circle – 1. Lithium, 2. Nickel, 3. Cobalt, 4. Graphite – Outer circle Source: IEA (2022a), Author’s Calculations.

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Figure 19.5  The Share of China in Global Supply Chains of Cell Components (%). Source: IEA (2022a), Author’s Calculations.

The EU While already recognising the strategic importance of microelectronics for the European economy in 2013, it was only in December 2018 that the EU backed the public investment worth €1.75 billion by France, Germany, Italy and the UK to support research and innovation in the sector, largely in response to growing trade tensions between the US and China (European Commission 2018a). In 2017, the European Commission (EC) continued with the formation of industrial alliances and launched the European Battery Alliance (EBA). In May 2018, the EC put forward a strategic action plan to create a whole battery supply chain in Europe, including the sourcing of raw materials, cell and cell component manufacturing, battery pack manufacturing, production of electric vehicles, and recycling (European Commission 2018b). In 2020 and in light of the COVID-19 pandemic, the European Raw Materials Alliance (ERMA) was formed to support the domestic production of raw and advanced materials needed for European battery value chains (ERMA 2021). Mirroring the mission-oriented approach to innovation policy (Mazzucato 2018), these new sectors of the future became the important projects of common European interest (IPCEI), enabling member states to pull public investment together, in partnership with private investment, and bypass stringent state aid rules at the EU level. With the acceleration of the green transition during the COVID-19 crisis, notably as part of the European Green Deal and the Recovery Plan for Europe, the EU’s industrial policy embraced these economic sectors through industrial alliances with the overall objective of making the critical supply chains more resilient and reducing trade dependence on China (European Commission 2022b). The sanctions against Russia in light of its military attack on Ukraine, however, have complicated the steady progress of the green transition and achieving strategic autonomy for the European economy. In the following two subsections, we will analyse the impact that sanctions have had on the production of key intermediate inputs in the electric vehicle industry, namely semi-conductors and EV batteries – so necessary for the energy transition. 242

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Figure 19.6  Natural Gas Spot Prices by Region $US per million Btu. Source: IEA, https://www.eia.gov/dnav/ng/hist/rngwhhdm.htm, and IEA (2022b), Author’s Calculations.

The increase in electricity prices, which already started in 2021 (European Commission 2022a), and the substitution of natural gas from Russia (which dropped to its minimum after the sabotage of Nord Stream pipelines) with much more expensive LNG and the attendant skyrocketing of gas prices on the global markets (see Figure 19.6), have acted as an accelerator of the green transition in the EU (note that gas prices in the US – i.e. Henry Hub – stayed relatively stable and did not affect the price levels). In 2020, around 24% of the total energy supply in the EU derived from natural gas and 34% from oil and petroleum, both of which are for the most part imported from outside the EU (Eurostat 2023). In response to the energy crisis in Europe resulting from the war in Ukraine, the EU adopted the REPowerEU Plan, which focused on: (1) diversifying the EU’s energy supplies of gas, oil and coal in the short-term; (2) increasing energy efficiency and reducing energy consumption by consumers and businesses; and (3) accelerating the green transition and the use of renewable energy by 2030 (European Commission 2022c). According to energy think tank Ember, wind and solar power generated a record one-fifth of EU electricity (22%) in 2022, overtaking fossil fuels (20%) for the first time. The crisis, however, also meant that the transition from fossil fuels had to be put on hold. Alongside the war in Ukraine, draught in Europe in 2022 meant that hydro power contributed less to the overall EU energy mix, as well as lower nuclear power generation. The resulting gap thus needed to be filled with increased power generation from coal, rising 7% in 2022 compared to 2021 (Ember 2023). The progress in the implementation of measures to improve energy efficiency in production was slow before the 2022 energy crisis. With increasing energy costs eating into European industry’s revenue, some businesses have taken measures to reduce their energy consumption, such as shifting to less energy-intensive activities and production methods and closing inefficient units. Alongside the chemical industry, food and non-metallic minerals (glass and ceramics) are the biggest consumers of imported natural gas in EU industry (Defauw, Benoit, and Pestiaux 2022). For example, the chemical industry transforms energy and other raw materials to produce intermediate 243

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inputs that are then used by many other industrial sectors to produce final products (CEFIC 2022). Due to rising energy prices, many companies in the chemicals industry, such as the Norwegian chemicals group Yara and the US fertiliser group CF Industries, had to temporarily or permanently close some of their plants to cope with record gas prices, whereas others have curtailed their production. The demand to secure energy for industrial production at competitive prices meant that the focus was on securing reliable energy sources regardless of the carbon intensity of the energy source, at least in the short term – see, e.g. Germany’s U-turn on coal production (The Federal Government 2022). In the battery manufacturing and semi-conductor industries, which produce key inputs for the automotive and electronics industries amongst others, the supplies of materials like lithium, cobalt and nickel in battery production, and gases such as neon and hexafluoro-1,3-butadiene (C4F6) needed for micro-chip production, were also disrupted as a result of international sanctions and COVID-19 related bottlenecks in supply chains (Euractiv 2022). Lithium and nickel, manganese and cobalt (NMC) are key metals that are used in the production of batteries for most electric vehicles (e.g. Audi, BMW, Hyundai, Nissan and Renault). As the prices of lithium and nickel, key battery cathode components, continued to increase in the first half of 2022, European car manufacturers, such as Volkswagen and Audi teamed up with the US battery recycling startup Redwood Materials in July 2022 to establish a closed-loop supply chain that will ensure that the rechargeable cells from EV batteries are recycled (Forbes 2022). In November 2022, Volkswagen’s new battery company PowerCo and the Belgian circular materials technology company Umicore established a joint venture, which is predicted to cover a large part of the supply for PowerCo’s giga-factories in Europe by the end of the decade. Gases, such as neon and C4F6, are used in laser technology that is employed in lasers for dry etching of integrated circuits in semi-conductors. Around 50–55% of the supply of neon, a by-product in steel production, used to come from Russia and Ukraine (Russia Briefing 2022), further compiling problems for European manufacturers in automotive and electronics industries that were already facing microchip shortages due to COVID-19 related restrictions imposed in China and other East Asian countries in 2021 and 2022. After the start of the Russo–Ukrainian War in February 2014, the price of neon gas rose by 600% in early 2015, prompting semiconductor companies to diversify their supply model, develop recovery and recycling technology, and this way reduce their consumption of neon (GizChina 2022). By the time the conflict expanded in February 2022, the major semiconductor industry chain companies, such as the American Intel, Dutch ASML and South Korean SK Hynix, had secured multiple sources of neon gas supply. Despite the supply chain risk management strategies employed by companies, ASML still needed to examine alternative sources for the small amount of neon (around 20% of total gas used in production) that it procured from Ukraine and Russia (Reuters 2022a). In most cases, however, the major semiconductor companies are expected to have the capability and the resources, including support from state authorities (e.g. subsidies), to mitigate the ongoing disruptions to the sourcing of critical raw materials. The EU responded to the disruptions in the EV battery and semi-conductor supply chains with varied measures and tools. In March 2022, the Enterprise Europe Network, managed by the European Innovation Council and SMEs Executive Agency (EISMEA), launched the Supply Chain Resilience Platform to link international suppliers with buyers of goods and services and in this way assist European SMEs in retaining, restructuring and replacing existing supply chains. Furthermore, in response to the increasing technological competition between the US and China, the EU allocated €2.9 billion of public funding for IPCEI on localising an entire battery value chain in the EU in January 2021 and put forward a European Chips Act package in February 2022 to 244

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mobilise €43 billion of public and private investments to strengthen the semi-conductor supply chain and create a coordination mechanism at the EU level to address semiconductor shortages. However, when sanctions are imposed unilaterally by EU’s political allies, e.g. the October 2022 US’ unilateral imposition of export controls for advanced semiconductor technology to China, EU member states and companies are left in a dilemma. This was demonstrated by the fact that the EU was side-lined as the US forged a political deal with the Netherlands, which restricted the sale of advanced microchips manufacturing equipment by the ASML to China. When it comes to the manufacturing of EV batteries and EVs, a further obstacle for the EU industry came from the US with the adoption of $430 billion-heavy protectionist IRA in August 2022. The act foresaw generous subsidies for battery and EV manufacturers if they set up production in North America, which posed a challenge to the EU’s effort to attract investment in these strategic sectors on its territory in line with its “open strategic autonomy” objective. For example, US consumers purchasing an EV that was assembled in NAFTA countries would be offered a tax credit worth $7,500, and the EV manufacturers in these countries also needed to source a substantial share of battery components from the US or countries that had trade agreements with the US. The EU and the US tried to defuse tensions through bilateral negotiations within the US-EU Task Force on the IRA, with the bigger EU member states threatening to take the US to the WTO in case the negotiations failed (Kurmayer 2022). Although the main target of the US protectionist measures are the Chinese EV and battery manufacturers, with 77% share in global EV battery production capacity in the world, the EU companies were caught in between as the adopted act did not include any exemption for the EVs manufactured in the EU, unless the EU negotiates a free trade agreement with the US.

Conclusion The growing enthusiasm for sanctions and countermeasures (i.e. counter-sanctions), coupled with unprecedented level of sanctions which are almost a full embargo, imposed on an economy as big as Russia, is reshaping the global political economy. No doubt the Russian economy has been hit very hard and will face an economic contraction, spiking inflation and the risk of further defaults. However, as Russia’s $1.5 trillion economy is the world’s 11th largest, with a 6% share in the aluminium output, 7% in nickel supply, 12% in crude-oil production, 18–19% in wheat and naturalgas exports and 25% share in copper supply – ‘no countries have tried pushing an economy of that size to the brink of collapse, with unknown consequences for the world’ (Wong and Crowley 2022). As for the US–China economic war, US sanctions and export controls (i.e. another form of sanctions) against China have been increasingly disturbing for global value chains and global supply chains. Current trends in EV batteries and in electric car manufacturing demonstrate how sanctions undermine ambitious plans for the transition to greener energy in Europe, and in Asia. While the goal of net zero neutrality by 2050 was adopted in a more optimistic period of global governance, exemplified by the 2015 Paris Agreement, the rising geo-political and geo-economic tensions between global powers have inadvertently complicated the execution of the green transition strategies adopted by states. If before the start of the Russo–Ukrainian war and US–China trade tensions the commercial logic of large automotive and electronics multinationals relied on horizontal expansion strategies, resulting in geographically dispersed global supply chains, the growth in the employment of economic sanctions by states for geopolitical purposes has recalibrated the supply management strategies of big manufacturers. The increasingly uncertain business and regulatory environment necessitates lead firms in the strategic economic sectors, such as the semi-conductor 245

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industry and battery manufacturing, to restructure and align their production strategies within the newly imposed parameters and ideologically motivated industrial alliances. These trends will have monumental consequences for open global trade, as the global economy is more and more fragmented into West-centred and East-centred blocs/spheres of influence. The impact of the sanctions against Russia had a critical impact on the EU strategy to reduce CO2 emissions, which initially involved continuing reliance on natural gas imports from Russia as a transitory phase towards increasing the share of renewable energy sources in the overall energy mix. The international geopolitical situation was instead used as an opportunity to reduce the European dependence on natural gas from Russia and speed up the transition to renewable sources of energy. International alliances with allies and trading partners have been a key tool to achieve this. For example, in December 2022, the EU and the Association of Southeast Asian Nations (ASEAN) held a summit of national leaders for the first time to discuss expanding trade and infrastructure assistance as the EU seeks to strengthen ties with the Asian bloc and counter Russian and Chinese influence in the region. Through such alliances, the EU and South Korea are attempting to restructure their critical raw materials and the EV/semi-conductor supply chains. The increasing technological competition between the US and China is also pushing the EU towards a major rethinking of its state aid policy and European industrial policy, which will have important repercussions for the liberalising project of the single market. The EU is increasingly taking a more pragmatic approach to the new geopolitical and geo-economic realities and adapting its policy tool box to be able to match the public investment heavy protectionist measures adopted by its major trading partners. This will transform not only the nature of economic relations and capitalism in Europe, but also scale back the globalising tendencies of the global economy towards greater re-localisation and regionalisation. The US–China sanctions crossfire incentivises the governments in South East Asia to build mechanisms of economic protection and self-sufficiency to shield their welfare states from the negative consequences on potential supply chains disruptions and financial turmoil in the future.

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20 HOW DO THIRD PARTIES REACT TO COMMODITY SANCTIONS?1 Martijn C. Vlaskamp2

Introduction Many of today’s sanctions packages include provisions on trade in specific natural resources (Security Council Report 2015). Some of the most prominent examples of commodity sanctions have been unilaterally imposed by individual countries or alliances of like-minded countries. Most recently, Western sanctions against fossil fuels from Russia have drawn much attention. But the sanctions against Russia are by no means the first or only unilateral commodity sanctions regime. In fact, one can go back in time for more than 2,400 years to see how Athens imposed a ban on all commodities from the seaside town of Megara for allying itself with Sparta (Carisch, RickardMartin, and Meister 2017, 112). When a powerful sender state imposes commodity sanctions on a target, the impact of these measures can go beyond the recipient. Third states may feel the economic impact of these sanctions but also see business opportunities. The re-imposition of sanctions on Iranian oil exports by the United States in 2018 and the subsequent lifting of Turkey’s import waiver forced the latter to cut its import of Iranian crude oil, significantly harming Turkey’s economy and oil supplies (Badawi 2020). Inversely, in the 1960s and 1970s, Japan benefitted economically from the USimposed sanctions on Cuba by importing large amounts of sanctioned Cuban sugar at a lower price (Early 2010, 23). Whether sanctions are successful or not depends to a large extent on the behavior of third states (Drezner 2000; Early 2015; McLean and Whang 2010; Peterson 2021; Shyrokykh 2022). However, there is little research about the behavior of third actors with respect to commodity sanctions. This chapter aims at closing this research gap by explaining how third parties may react to commodity sanctions. There are some concepts worth defining. A commodity is a “good sold for production or consumption just as it was found in nature” (Eurostat 2022). Most sanctions regimes target hydrocarbons (mainly oil), but there are also sanctions that refer to metallic or non-metallic minerals and biological resources, such as timber or agricultural products. Commodity sanctions are understood as “coercive and restrictive trade practices for constraining the supply of strategic commodities” (Carisch, Rickard-Martin, and Meister 2017, 113). The broadness of this definition is predicated upon various forms of commodity sanctions. Finally, third parties are state and non-state actors (e.g., countries, companies, and individuals) which neither belong to the jurisdiction of “senders” DOI: 10.4324/9781003327448-25

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nor “targets” of sanctions. For analytical clarity, state, quasi-state, and non-state entities should be conceptualized as distinct actors whose sometimes competing interests and actions shape each actor’s response to sanctions. The structure of this chapter is as follows. A brief overview of different types of commodity sanctions will be followed by an assessment of third actors’ diverse reactions and countermeasures. The conclusion will not only summarize the findings but also propose some directions for future research in this area.

Types of Commodity Sanctions Export sanctions on commodities have often been used to limit an opponent’s capability and ability to wage war (Carisch, Rickard-Martin, and Meister 2017, 111). An historical example is the 1941 US oil embargo on Imperial Japan after its invasion of French Indochina, which left Tokyo with only approximately 18 months of oil reserves (Anderson 1975, 202). Another example is the 1999 NATO oil embargo against Yugoslavia during the Kosovo War whose declared aim was to bring “the Yugoslav military machine (…) to a halt and very quickly” (Shea 1999). Today, however, most commodity sanctions seek to change the behavior of the target by causing economic pain. Commodity sanctions can be imposed by both exporters and importers. Countries rich in specific natural resources can limit their exports for both political and economic reasons. One of the best-known examples is the 1973 oil embargo by the Organization of Arab Petroleum Exporting Countries on countries that had supported Israel during the Yom Kippur War. More recently, in 2010, in a dispute over Japan’s detention of a Chinese fishing trawler captain, China supposedly halted shipments of rare earth elements to the island nation. China produced at that point about 97.5 percent of the world’s rare earth minerals and the, perceived, use of this monopoly as a tool of political coercion shocked many developed economies, whose high-tech products relied on those raw materials. This episode is often seen as a cautionary tale about China’s use of their natural resource wealth for political objectives (Wilson 2018, 360). Generally, the likelihood of export sanctions depends on the degree to which the country is willing to pay an economic price for their sanctions. The exports of rare earths are for the Chinese economy of less importance than, say, energy exports are for Russia. In March 2022, as a reaction to US and EU sanctions, Russia suspended the export of several types of timber and timber products to “states that are undertaking hostile actions against Russia” (Russian Government 2022). However, it shied away from banning oil and gas exports to these countries: a suspension of energy exports to the EU at that time would have been devastating not only for many European countries, but also for Russia. Russian policymakers opted for benefitting from high commodity prices instead. As this example shows, export sanctions on commodities are a double-edged sword for resource-rich countries and can cause more pain to a sender than to a target. Therefore, commodity sanctions in the form of export sanctions are infrequent in the 21st century. In contrast, import sanctions on commodites are more common. The main senders of commodity sanctions are multilateral institutions (e.g., the United Nations), the United States, the European Union (EU), the United Kingdom, and other Western like-minded actors. As with other sanctions regimes, Western actors often coordinate their measures. Import sanctions on commodities can be categorized into four groups based upon targets. Many sanctions packages combine elements from these four groups. The first group consists of sanctions that target a specific commodity from a country. One example is the 2022 US ban on Russian crude oil, liquified natural gas (LNG), and coal as a reaction 250

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to the invasion of Ukraine (The White House 2022). Another non-energy-related example is the 2022 EU ban on the import of wood and wood products from Belarus in the same context (Council of the EU 2022). Here the entire commodity production of a country is targeted to hurt its economy and eventually, usually, the regime in power. Most commodities are only sanctioned in their primary state, but there are increasingly policies that also target products that have used sanctioned commodities in their production process. For example, the eighth sanctions package of the EU on Russia includes products that incorporate Russian iron and steel products (Council of the European Union 2022). As a result, if, a Chinese company used Russian iron ores in their products it will not be allowed to sell them on the EU Single Market anymore. Similar provisions are also used for timber in the EU Timber Regulation and the US Lacey Act: importers of a broad range of timber products such as solid wood products, flooring, plywood, pulp and paper have to show they have used legally logged timber in their products (European Parliament, and Council of the EU 2010; US Department of Agriculture 2022). Such provisions create obligations for companies in third countries to comply with the sanctions regime if they want to continue selling their products on the sender’s markets. The second group does not aim at the commodity itself, but targets persons and entities that are involved in the commodities sector. The result can be virtually the same when all relevant state-owned and private industry actors are placed on the sanctions list. The United States, for example, has not explicitly banned the import of oil from Venezuela but put Venezuela’s state-owned Petróleos de Venezuela, S.A. (PDVSA) in 2019 on the sanctions list (Office of Foreign Assets Control 2022). Given that all the country’s oil fields are exploited by the company, these sanctions bring Venezuela’s oil exports to the United States, previously its largest market, close to zero (Weisbrot and Sachs 2019, 10). Furthermore, figures or entities – also in third states – that have been suspected of sanctions busting can also be added to sanctions lists. For example, in August 2022, the United States imposed sanctions on four companies from Hong Kong for facilitating the sale of Iranian petroleum and petrochemical products to East Asia (Office of Foreign Assets Control 2022; Psaledakis and Arshad 2022). The third group of sanctions seeks to make it more difficult for the targeted actor to produce or sell a commodity on the world market. For instance, sanctions may target a commodity by prohibiting the export of key technology, equipment, and the provision of technical and financial assistance, necessary for its production (e.g., the sanctions packages against Iran or Venezuela). Alternatively, sanctions might constrain the capacity of the recipient to sell their commodities by targeting banks that are used to facilitate financial transactions and trade partners in third countries (e.g., shipping companies). Finally, the fourth group of commodity sanctions targets extraction-related behavior rather than entities. Actors are only allowed to export their commodities to the sender if they can demonstrate that they have acted in a socially and/or environmentally responsible manner in the extraction process. This group of commodity sanctions is relatively modern and emerged with the rise of the foreign accountability norm (Partzsch and Vlaskamp 2016). Section 1502 of the US Dodd-Frank Act or the EU Conflict Minerals Regulation target, for example, minerals that have funded violent conflicts. To some extent, these sanctions have moved away from the more geostrategic purpose of most of the previously mentioned types of sanctions and rather seek to satisfy corporate social responsibility endeavors (Carisch, Rickard-Martin, and Meister 2017, 111). In brief, commodity sanctions take on different forms and have different objectives. The effect of these sanctions spills over beyond the targets. The next section will turn to third actors’ reaction to sanctions. 251

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Reactions to Natural Resource Sanctions A third-state state actor has essentially three options on how to react to sanctions: support them, stay neutral, or actively oppose them (Early 2015, 18ff). Under support, I understand that the country adopts similar sanctions or declares its intention to do so. When the third state remains neutral, it is hedging and neither declares any intention to adopt similar sanctions nor proactively supports sanctions-busting. Finally, under opposing sanctions I understand a situation in which the third state takes active steps to sabotage the effectiveness of the sanctions regime. Companies can comply with the commodity sanctions which the sender has imposed but can also decide to ignore them. Of course, there are also some gray zones between these opposites: companies may declare that they will follow the sanctions in the future but apply a long transition period. I will understand compliance as a situation in which the company has set up concrete steps to significantly reduce the use of the sanctioned commodity as a result of a sanctions regime. These two choices lead to six possible scenarios (see Table 20.1) that will be discussed in the remainder of this section.

Scenario (I): Third State Supports Sanctions; Companies Comply with Sanctions In the first scenario, the third state supports the sanctions, and the companies comply with the sender’s sanctions. Third-state governments can decide to follow commodity sanctions for a number of reasons. They might support sanctions as they agree with the sender in wanting to change the target’s behavior due to ideological or normative reasons. Moreover, they might have a political interest in supporting the sender’s sanctions due to a political or military alliance, and/or political pressure exercised by the sender state (McLean and Whang 2010, 429). This scenario will prevail when the political gains from following the sender’s sanctions are greater than the economic costs incurred by domestic firms’ lost trade with the target (Drezner 2000, 83). How a third state follows commodity sanctions can vary. In the strongest form, they adopt the sanctions through legislation and ensure that domestic firms obey the sanctions. In this case, they become a sender themselves and companies which do not follow the sanctions violate the law. However, even if a third state agrees with the sender’s sanctions, they may not (immediately) implement them. It can take some time until importers can find alternative suppliers and many commodity sanctions regimes therefore include transition periods. Many commodities are sold with long-term contracts and there is only a limited amount of them available on the (often more Table 20.1  Support for commodity sanctions Scenario

Third-state actor

Company in third-state actor

(I) (II) (III) (IV) (V) (VI)

Supports sanctions Supports sanctions Stays neutral Stays neutral Opposes sanctions Opposes sanctions

Complies with sanctions Ignores sanctions Complies with sanctions Ignores sanctions Complies with sanctions Ignores sanctions

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volatile) spot markets. To give the domestic industry time to reorganize their supply chains, even countries that are sympathetic to the sender’s sanctions may therefore wait with the legal implementation. The time frame is influenced by the amount of commodities imported from the targeted state and the difficulties to finding alternatives on the commodity markets. One example is the reaction of Japan to Western commodity sanctions after the Russian invasion of Ukraine, which was influenced by both political and economic considerations. Due to its lack of natural resources, Japan is one of the world’s largest importers of crude oil, LNG and coal (U.S. Energy Information Administration 2020). About 5 percent of Japan’s crude oil and 9 percent of its LNG imports came in 2020 from Russia (U.S. Energy Information Administration 2020). Its position as a major commodity importer made Japan’s economy very sensitive to changes on global commodity markets. Politically, Japan quickly aligned itself with the United States and other western countries in their support for Ukraine and provided non-lethal military support. In terms of commodity sanctions, however, the government’s reaction was more cautious. After a G7 agreement on energy sanctions, Prime Minister Fumio Kishida limited himself to saying that the country “would take its time to take steps towards a phase-out” (Reuters 2022). The reaction of Japan’s companies to the invasion of Ukraine was mixed. Japan’s largest oil refiners soon decided to not purchase any more oil from Russia and oil imports from Russia ended in mid-April 2022. The import of coal was reduced by some 62 percent after four months of conflict (Centre for Research on Energy and Clean Air 2022, 7). LNG, however, was a different story and imports from Russia only declined marginally. One reason was that Russia supplied a large share of the commodity under long-term contracts for prices far below the – at that point– high market prices. Moreover, Japanese companies Mitsubishi and Mitsui & Co were large investors in the Sakhalin 2 oil and gas development project in Russia’s Far East, which provided a significant amount of LNG to Japan (S&P Global 2022). As this example illustrates, even if states support sanctions, they may still take their time with the implementation. This does, however, not mean that companies wait for as long. They may start to change their behavior from the moment the sanctions are announced, out of fear, for example, of future sanctions. But they may also decide to not take much action until there is a more concrete threat of legal pressure.

Scenario (II): Third State Supports Sanctions; Companies Ignore Sanctions There are also cases in which the third state follows sanctions, but some companies ignore them and engage in trade with the sanctioned state. In the case of Japan, major energy companies, including Jera – Japan’s largest power generator – continues importing gas from Sakhalin 2 as long as it is legally impossible because the alternatives would be more expensive. But in other cases in which the sanctions are already legally binding, some companies deem the risks smaller than the possible economic benefits that sanctions busting can offer (Lektzian and Biglaiser 2013; McLean and Whang 2010, 431). These transactions might occur through illegal markets or through offshore firms and intermediaries and might be facilitated by the inability of the government to monitor the firms’ activities and enforce punishment (Drezner 2000, 83; Kaempfer and Lowenberg 1999, 45; Morgan and Bapat 2003, 66–68). A government may support a sanctions regime in public, but the authorities turn a blind eye when domestic companies violate it for economic reasons. For instance, after their governments pledged to support the 1980 US grain embargo against the Soviet Union, Canadian and Australian firms still gradually increased their exports of grains to the Soviet Union (Drezner 2000, 85). 253

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Scenario (III): Third State Ignores Sanctions; Companies Comply with Sanctions Third-party governments may also choose to neither support nor sabotage sanctions and leave it to companies to deal with the sanctions. This can lead to situations in which one part of the industry follows the sanctions and other parts do not. It should be kept in mind that business actors are not a monolithic block and different companies can come to different conclusions. There are a number of reasons why companies decide to comply with the sender’s sanctions in a situation like this. One driver can be the fear of secondary sanctions. In several cases, such as with Iran and Venezuela, the United States has declared that it would also impose sanctions on foreign actors that continue trading with targeted actors. For example, US persons or entities may be prohibited from doing business with this third-country company. Denying third-country companies the possibility to transact with US companies or to participate in the US financial system can have devastating economic consequences. When in 2019 the Spanish energy company Repsol considered importing oil from Venezuela as part of a crude-for-debt deal, John Bolton, then White House national security adviser, wrote on Twitter: “My advice to bankers, brokers, traders, facilitators, and other businesses: don’t deal in gold, oil, or other Venezuelan commodities being stolen from the Venezuelan people by the Maduro mafia. We stand ready to continue action” (Sheppard 2019). In their following 2020 Annual Report, Repsol explicitly clarified that it was complying with US regulations in relation to Venezuela, and if these insecurities continued over the long term, their activities in Venezuela could be affected (Repsol Group 2021, 54). A second main motive for companies in third countries can be concerns about their public reputation. As a striking example of the role of reputational costs for companies, in 1982 the US firm General Electric withdrew from a joint venture with a South African mining company, publicly acknowledging the role played by domestic anti-apartheid pressure on the decision. The Comprehensive Anti-Apartheid Act was only passed by Congress in 1986 (Davis 1993). A recent example is the reaction of some companies to mandatory due diligence requirements for so-called conflict minerals. Section 1502 of the US Dodd-Frank Act, of which many parts are currently suspended, made it mandatory for companies that were registered at the US Securities and Exchange Commission (essentially all major public companies), to disclose whether they used possible “conflict minerals” (tin, tungsten, tantalum, and gold) from the Democratic Republic of the Congo (DRC) or an adjoining country in their products. If that were the case they had to submit a detailed report in which they explained how sure they were that the used minerals were “conflict-free” (US Congress 2010). The SEC clarified that compliance with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas would serve as proof that a company had applied due diligence. There was no legal obligation to only use conflict-free minerals, but the hope was that companies would shy away from them because they did not want to be associated with the war and sexual violence in the region. As a result, other business actors in third countries that were not subject to the legislation decided to follow the guidelines. For example, the China Chamber of Commerce Metals, Minerals & Chemicals Importers and Exporters (CCCMC) developed their own, following the OECD guidelines (OECD 2015). Even without legal pressure, companies may decide to follow commodity sanctions.

Scenario (IV): Third State Ignores Sanctions; Companies Ignore Sanctions Another situation is in which the third state remains “neutral” with respect to the commodity sanctions, but many companies violate them. A government might decide to potentially incur the political costs associated with not following sanctions to allow domestic firms to take advantage of 254

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the exceptionally large profits provided by trade with the sanctioned state, resulting in a situation where economic gains surpass political costs. This often occurs due to heavy lobbying by domestic firms (Early 2015, 11). Ignoring sanctions can provide cheaper access to natural resources or allow the country to become a hub for natural resource trade. Analyzing the 2008 sanctions against Iran, Haidar (2017) shows that two-thirds of non-oil exports were deflected to non-sanctioning countries. The exporting firms reduced their prices to attract new clients and aggregate exports to these third countries even increased. While this was not a good deal per se for the Iranian companies, the importers in the third countries had lower prices. Su (2021) even argues that sanctions-busting behavior can increase the likelihood of new preferential trade agreements between the third state and the sanctioned states. Companies in the third state would lobby their government to sign those agreements to secure their first-mover advantage in the sanctioned country. Under certain circumstances, sanction regimes can also lead to new investments in third countries. Barry and Kleinberg (2015) argue that companies from the sender of the sanctions may shift investments to third states that can provide them with indirect access to the sanctioned economy. In such cases, being seen as a potential sanctions buster can even be a competitive advantage for third states: major trading partners of the targeted country or countries with a history of sanction busting are particularly interesting locations for these investments. There are plenty of examples of this form of behavior where states take a permissive stance toward their companies that bust sanctions. Early argues that many trade-based sanctions busters of US sanctions are “large, open economies that possess preexisting commercial ties to target states and alliance relationships with the United States and/or target states” (Early 2015, 211). The governments hedge to not alienate the United States too much, while also not excessively harming the economic benefits of their firms. In the mid-1980s, the United States imposed sanctions on oil extraction from Angola and oil imports from Iran. In both cases, French firms replaced US ones in capturing oil rents with the explicit support of the French government (Lektzian and Biglaiser 2013, 76). A recent example lies in the exclusion of diamonds from EU sanctions regimes against Russia. The United States has sanctioned the gems, but the Belgian Government, heavily lobbied by the Antwerp diamond industry, has managed to keep those gems out of all EU sanctions regimes. Antwerp is one of the world’s leading diamond trading hubs and excluding Russian diamonds would weaken its market position vis-à-vis other trading hubs, such as India or the United Arab Emirates (Gridneff 2022). As these examples illustrate, third states can take a neutral position with respect to the sender’s commodity sanctions while their companies do not comply with them. When these states are otherwise close to the sender – the United States in these examples – the political costs of coercing these countries into more cooperation is often not worth the limited expected benefits for the sender (Early 2015, 209).

Scenario (V): Third State Opposes Sanctions; Companies Comply with Sanctions Governments might also decide to not only not follow sanctions, but even encourage sanction busting behavior. This might involve costly actions such as the provision of aid to the target, or less costly measures such as the provision of subsidies to encourage domestic firms to trade with the target, or the protection of the firms from the sender state’s potential secondary sanctions or pressure (Early 2015, 26ff).When the sender is an enemy state, or the target an ideological ally, third-party governments have an incentive to take actions to promote the sanctions’ failure. If the government perceives large economic and/or geopolitical gains from maintaining a good 255

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relationship with the sanctioned state, it might also decide not to follow the sanctions for economic and/or geopolitical interests (Shagina 2020). Under certain conditions, domestic companies may nevertheless decide to comply with these sanctions for the economic reasons explained earlier. After the decision of the Trump Administration to withdraw from the Iran nuclear deal and to reimpose sanctions, the EU announced a special payment channel for crude oil from Iran to keep the agreement alive. The promise was to reimburse European oil companies for the potential economic damages from US secondary sanctions. However, the major European oil companies, such as Eni or Total, nevertheless decided to pull back from Iran. The threat of US sanctions weighed on these companies more than the comparably small Iran business. It was seen as unlikely that any EU payment scheme could cover the financial damage of US sanctions (Peel, Sheppard, and Keohane 2018). In sum, companies may comply with sanctions against their governments’ will if their businesses are extensively exposed to transactions with the sender state and are vulnerable to sanctions.

Scenario (VI): Third State Opposes Sanctions; Companies Ignore Sanctions In the final scenario, the third state opposes the sanctions and seeks to sabotage it, while its companies are actively involved in those activities. The US sanctions against the Venezuelan oil company PDVSA illustrate some of the motivations of third states. China opposes these sanctions, and its companies continue buying oil from Venezuela. This decision is largely motivated by economic considerations. Venezuela is estimated to have the world’s largest oil reserves. China’s economy needs large imports of oil and, moreover, Venezuelan oil was sold at a discount price due to the US sanctions. Sanctions busters therefore go to great lengths to ship oil from Venezuela to China under the radar of US authorities. Moreover, oil is used as a way for Venezuela to pay off its debt to China (Faucon and Talley 2021). Besides economic motives, third countries can also promote sanctions busting for political reasons. Russia is a close ally of the Maduro regime and has provided it with loans, military equipment, and investments in the oil industry. About 15 percent of the country’s oil output in 2022 came from joint ventures with the Russian state-owned company Roszarubezhneft (Zerpa and Fieser 2022). Besides the economic benefits, these investments also have geopolitical advantages for Russia: they provide them with an ally in Latin America and some leverage over the country’s oil reserves, allowing it to control an even larger share of global oil reserves. As in this example of Russia, it is not always completely clear where the political motivations end and the economic motivations start: sometimes both factors can reinforce each other.

Conclusion Western sanctions on Russia’s exports of natural resources have attracted public attention to commodity sanctions. Commodity sanctions, however, are not anything new and have been a crucial part of many sanction packages for years. As this chapter demonstrated, their impact is not limited to the target states, but can also trigger decision moments for third parties. Both state actors and private companies have to choose how to deal with them. Third states can support them (e.g., by imposing similar sanctions themselves), they can oppose them and seek to sabotage their effectiveness, or they can stand aside. The decisions of third states, however, do not always overlap with the reactions of the companies in their countries. Depending on the political and economic context of the sanctions regimes and the characteristics of the targeted commodity, there can be powerful incentives to follow the sanctions regime or to ignore it. In some cases, it is wiser for companies 256

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to avoid tensions with powerful sender states, but in other cases the economic incentives of sanctions busting can be very tempting to them. The effectiveness of sanctions regimes can depend to a great extent on these considerations. In third states in particular where the government stays on the fence with respect to the sanctions, the decisions of the relevant companies determine the impact of the sanctions regimes. While this chapter has summarized the main reactions of third actors to commodity sanctions, it has not addressed the reasons for their choices. So far, there is still little structural research available that seeks to explain the decisions of third states, or companies in third states, with respect to commodity sanctions. There is still a research gap here. Future research may ask why, and how fast, third actors follow commodity sanctions.

Notes 1 The author would like to thank Margaux Dandrifosse for excellent research assistance. The responsibility for the content and any remaining errors remains exclusively the author’s. 2 The author’s research program, as Juan del Cierva Incorporación Research Fellow at IBEI, is funded by the Ministry of Science and Innovation of Spain (Grant number: IJC2019-040540I).

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21 OVERVIEW OF SECONDARY SANCTIONS Turkey under the Ghost of Western Economic Sanctions Mehmet Onder Introduction International economic sanctions are important in determining international business and politics outcomes (Dai et al., 2021). Trade between states either increases exponentially or decreases dramatically contingent upon economic sanctions scope and intensity. The realm of secondary sanctions has been unexplored although they can hurt targeted economies as a supporting measure to the primary economic sanctions (Klinova & Sidorova, 2019). The present analysis sheds light on the conceptual parameters of secondary sanctions in relation to primary sanctions and international affairs. It will focus on the effects US-led secondary sanctions against the Russian government with a concentration on the role of Turkey. The goal of the secondary sanctions is similar to the primary sanctions which is to ban thirdparty countries from performing certain economic activities with the targeted state during the period of the economic sanctions (McCarthy, Puffer, & Satinsky, 2019). To the contrary, however, states that have precarious relations with the sender state may augment their relations with the targeted state benefiting from economic sanctions as a third party (Onder, 2019b). Iran constitutes a prime example when it assisted Qatar withstand the embargo launched by Saudi Arabia, The United Arab Emirates, Bahrain, and Egypt in 2014. Iran assisted Qatar in making its ports accessible to the Qataris allowing them to still perform trade at a higher cost benefiting the local economy (Boussois, 2019). Another recent illustration of secondary sanctions is the effects of Western-led economic sanctions due to the developments in Ukraine against Russia on the economic conditions of Turkey (Ozdamar & Shahin, 2021). Secondary sanctions are indirect economic ramifications affecting third-party countries inadvertently (Ruys & Ryngaert, 2020). For instance, when the US sanctioned Iraq during the 1990s, the Arab state neighbors could not conduct many types of trading with the Iraqi government to ensure their compliance with the international measures negatively influencing their economic returns (Ismael & Ismael, 2020). Today, it is the case that every targeted state by any economic sanctions episode has many economic partners, and it should not be surprising that many of these partners are also close to the industrially developed states, especially Western states. Thus, if a sanctioning state is a powerful country like the US, then it is quite possible that secondary sanctions focusing on third-party actors can be introduced as a follow-up option for the primary 260

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economic sanctions focusing directly on the target state or states to increase the effectiveness of the primary economic sanctions (Peksen, 2019a). This way of introducing economic sanctions is frequently used by the US, even including against the NATO ally countries, like Turkey. If the third-party government does not act proactively and try to find common denominators that balance the relations with the sanctioning country and protect the trade relations of their businessman, it is possible to see the tendency for the implicit and irregular trade activities favoring certain individuals, groups, companies, organizations, and the like within the third-party countries. Thus, it is important to have leaders, or at least their advisors, who are (a) skilled in the art of international diplomacy, (b) talented in analyzing and responding the geo-political developments, (c) well equipped with the knowledge of international economics as well as domestic realities, and (d) altruistic meaning that their purpose is to promote welfare state rather than creating a predatory society in their targeted country. A leadership with these four pillars can make better decisions on the negotiation table with the sender states’ leadership and minimize the detrimental effects of secondary sanctions. Given the influence of secondary sanctions on the sanctioned governments, it can be an enticing option for the sanctioned government to implement illegal practices like applying transactions in the black markets.

Conceptualizing Secondary Sanctions Figure 21.1 demonstrates a typology of economic sanctions in general. Three broad dimensions define any sanctions episode: (a) primary vs. secondary, (b) comprehensive vs. selective, and (3) unilateral vs. multilateral. Primary sanctions oftentimes involve a single state, but it can also be comprised of a coalition of states. In these cases, with multiple senders, there is always a main

Figure 21.1  Illustration of Primary and Secondary Sanctions. Source: Own creation.

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sender state (Hufbauer, Schott, & Elliott, 1990). On the other hand, multilateral sanctions involve one main sender state and joining parties, which is called as the coalition of sanctioning states. Such sanctions could target either a single state or several states. Historically, the US accounted for most of the international economic sanctions, both unilaterally and multilaterally as the main sender state, since the end of World Wars (Hufbauer & Jung, 2020). On many occasions, other countries or coalitions of countries joined the US making sanctions multilateral. They also could be comprehensive or selective. Comprehensive sanctions target entire sectors or portions of the economy without discriminating the individuals. Selective sanctions, on the other hand, generate lists of individuals or firms/institutions that are targeted by the episode. Primary sanctions historically involved one target state, which has been a US deemed adversary. On several instances, the US targeted more than a single target. In most of the multitarget episodes, the US or main sender states sought the cooperation of other states or international organizations to increase the legitimacy of the episode (Onder, 2022). Figure 21.1 shows the primary and secondary sanctions.

Objectives of Secondary Sanctions First, increasing multilateral cooperation. Economic globalization constitutes an important factor in determining the effectiveness of secondary sanctions. The degree to which the target state has access to markets determine whether sanctions could deliver their promise or not. For instance, if the US sanctioned Turkey, while the latter has established robust relations with Russia, China, neighboring Arab states, and Central Asian countries, the effectiveness of sanctions would be minimal. To guarantee more effective sanctions, sender states need to prohibit targeted states from accessing the resources from world markets by bolstering international support and installing swift harsh punishments based on clear rules communicated frequently and repeatedly (Onder, 2021a). Second, serving as complimentary to primary sanctions. Secondary sanctions cannot exist without primary sanctions as they serve as ancillary measures helping in curbing target state access to key resources. Most of the time, secondary sanctions target firms, trade associations, and private entities considering the traded goods and services within third-party countries (Forrer, 2018). Such features make secondary sanctions indiscriminate in nature. They attempt to cut main target state off essential economic pipelines. Anyone helping the main target state could be a new target in secondary sanctions. Therefore, secondary sanctions can be considered similar to the effects that comprehensive sanctions create on the targeted environments. Third, increasing the cost. The payoff on the third party determines the behavior of the governments of these countries (Eland, 2018; Han, 2018; Peksen, 2019a; Onder, 2019b). If the sender state offers economic fortunes and benefits based on cooperation, then the third party is more likely to abide by the sanctions (Onder, 2021b). If the sender launches an ambitious sanctions program against a target without having economic benefits clear to secondary actors, compliance becomes low (Martin, 1994). Even if governments in secondary states believe that cooperation is necessary and beneficial, they will likely struggle with policing non-state actors that are self-interested and desire to exploit the situation to generate large amounts of profits or financial gains during the sanctions period (Han, 2018). Fourth, penalizing institutions. One of the least recognized factors contributing to the success of secondary sanctions is timely communications. Many foreign banks and financial institutions are unaware of changes to the exports and imports regulations once sanctions or their ancillary rules are declared by the US government or other states, and, thus, it is expected that these entities 262

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should be mindful of the secondary sanctions according to the US authorities (Economic Sanctions & Anti-Money Laundering, 2020). It is incumbent on US agencies to act quickly in disseminating information necessary for ensuring the smooth compliance by other parties. Fifth, expanding the scope of economic sanctions. The expansion of sanctions scope is an effective strategy making them more successful (Ghorbani, Yusof, & Shahbaz, 2018). The conventional wisdom is that if the sanctions affect essential economic activity in targeted states, they will be more willing to change their behavior (Bogdanova, 2021; Drezner, 2021). For instance, if the US sanctions Turkey because of its increasing economic relations with Russia, the Turkish domestic banks can no longer access large funding programs or loans, then the pressure will build up to bend government policy. By the same token, if a sufficiently large number of population groups are affected by the sanctions, they will exert influence on different decision-making circles across government to change policy. While few experts debated the usefulness of the scope expansion strategy because of the rallying around the flag effect leaders may resort to domestically (Frye, 2019), many policymakers in Washington D.C. are still supportive of the technique (Gomez, 2022). Sixth, providing multinational advocacy. The fewer global access the target state has to the international resources, the harsher the economic effects are felt if multilateral participation of economic sanctions increased (Forrer, 2018). Less political support from international leaders to targeted states translates into less popularity in the world arena (Onder, 2019a). The most successful sanctions are the ones with the greatest international support. Domestic actors opposed to staunch leadership in sanctions harness more financial and economic support from all around the world presenting serious threats to expedient leaders (Onder, 2019b). Seventh, deterring undesirable behavior. The application of deterrence theory principles, as recommended by the realist scholars, should increase the effectiveness of secondary sanctions. The theory postulates that if an actor is punished harshly quickly and his or her detection is ultimately high, the actor will be deterred (Hufbauer & Jung, 2021). Sender states imposing secondary sanctions need to establish high level detection systems that once identify a violation case, punishments are applied in real time. Such an approach sends credible signals showing the high level of willingness and determination to institutions that conduct non-compliant business interactions (Smeets, 2018). Eighth, catalyst in changing state behavior. The targeted nature of secondary sanctions also ameliorates their chances to succeed in changing policy directives within target states. If sanctions single out very powerful individuals, their assets, and institutions, they are likely to be more effective (Geranmayeh & Rapnouil, 2019). Although targeted sanctions still bring out human insecurity to some extent (Peou, 2019), individuals with higher clout in policy circles exert influence on political leaders to shift positions (Ahn & Ludema, 2020). By the same token, if key assets for international stakeholders with powerful leverage over political groups are in question, the conflict causing sanctions could be altered to evade the negative costs associated with sanctions. Ninth, increasing compliance with international law. Serious enforcement applications implemented by the sanctioning state facilitates the success of secondary sanctions (Forrer, 2018). For instance, senders like the US that do not monitor the behavior of violating entities would not generate compliance. The North Korean sanctions have low compliance rates because many Chinese and Russian firms still conduct business with the state without being punished (Lukin, 2021). Deterrence only works when active monitoring and punishment takes place. Failure to hold violators accountable for transgressing sanctions result in unsuccessful episodes (Hovell, 2019). Tenth, facilitating the formation of sanctioning coalitions. Levels of political support influence the degree of secondary sanctions effectiveness. In sender states, if the government and the 263

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opposition are both supportive of sanctions, more popular support is funneled to the sanctions program awarding it further legitimacy (Onder, 2019a; Onder, 2019b). If in target states, the opposition is in support of the sanctions, more pressure is generated on the ruling regime to withstand the pressures of the sanctions (Portela et al., 2021). Once domestic and international support for sanctions exist, they become much more effective.

Factors Facilitating the Effectiveness of Secondary Sanctions First, compliance monitoring. One of the critical success factors for secondary sanctions is the constant enforcing and monitoring processes. For example, Turkish banks resumed operations with Russian payments systems after Western-led sanctions against Russia after the invasion of Ukraine in February 2022 (Ravelli, 2022). Once the US government agencies began enforcing sanctions measures, they discovered the benefits Turkish banks are gaining from augmenting relations with Russian clients given the lower number of financial institutions available to Russian government proxies (Ravelli, 2022). The US government warned Turkish financial institutions through official and informal channels prompting banks to suspend their Russia-based operations. Such an illustration notes to the success of sender states in ensuring the intended measures effectiveness via continued active monitoring. Second, determination. Another critical success factor for secondary sanctions effectiveness is sending credible threats (Grauvogel, 2021). When sender states swiftly deter institutions by imposing harsh penalties or punishments for failure to comply with sanctions, intended measures are more likely to be followed. For instance, when the United States Department of the Treasury (USDT) gets suspicious about the activities of certain banks, organizations, and governmental institutions abroad for their economic cooperation with the sanctioned states, it does not hesitate to threaten the use of secondary economic sanctions nor impose secondary sanctions. The recent example was the USDT’s announcement directly threatening of the Turkish banks for their involvement in the Mir system (Russia’s alternative to the SWIFT system). The Turkish reaction was to immediately suspend their involvement within the Mir system (Ravelli, 2022). The fear of losing better deals with the West coupled with reputational damage potentially incurred from failing to comply with the law instigated Turkish private sector executives to move away from Russian-associated transactions. Third, economic dependency. This factor is related to the degree of economic interconnectivity between sanctioner and sanctioned third parties. The best-case scenario for this situation is that the level of economic dependence between third-party county with sender country (i.e., α) should be higher than the level of economic dependence between third-party country and targeted country (i.e., β). In other words, the value of α should be bigger than the value of β as seen in Figure 21.2. When economic stakes are high, banks and government agencies in secondary jurisdictions are more likely to abide by the sanctions’ regulations (Peksen, 2019b). For instance, Turkish banks with high economic transactions volume with US institutions will likely implement all American-led sanctions procedures compared to banks with little ties to the American economy. More importantly, if the executive board members or high-ranking officials have financial assets and interests in the sender state, like the US, they will ensure the enforcement of sanctions, primary or secondary. On the opposite end of the spectrum, if institutions have little to no interests in sender states economy, they will be less likely to abide, especially given the high economic opportunity offered by dealing with the sanctioned state that is on the lookout for institutions willing to deal with it. 264

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Figure 21.2  Economic Relations of Countries in a Sanctions Regime. Source: Own creation.

Barriers to Effectiveness: Challenges to Overcome First, it is hard to enforce. One of the main problems in secondary sanctions lies in their difficult enforcement (Meagher, 2020). Firms could still legally conduct business with companies targeted by the sanctions in the target state. For instance, firms in a neighboring country to a target state could falsify the source country information when exporting raw materials. While manufacturing materials originate in the main target state, on papers, firms in the neighboring country could claim that the materials were produced in a non-target state. Then, the firm ships the products as manufactured in their home country while all raw materials belong to target state companies. In another scenario, target state firms could export raw materials to non-target state, which is not targeted by sanctions. The non-targeted state could export the same imported materials to a neighboring friendly state. Then, firms sell the same product to the sender state as an ally state commodity. Circumventing secondary sanctions is a prevalent practice that is difficult to recognize and be punished. Second, persuasion matters. Sender states need to persuade the targeted third parties to comply. This process can include offering certain incentives to these countries and can also require the proactive use of carrot and stick policies. In many instances, targeted countries perceive the suspension of relations or economic activities with other states as threats to their domestic and foreign interests. Thus, the governments in third-party countries can implicitly support firms to circumvent secondary sanctions. Leaders in sender states need to create better incentives and establish swift punishments to help in the enforcement of secondary sanctions. Another strict strategy may have worked similar to the outcasting of the country’s financial institutions from world markets. The following section of this chapter explains the necessary conditions for the effectiveness of the secondary international sanctions. 265

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Third, honoring trade deals. Secondary sanctions target trading partners with targeted states whether explicit or hidden. States and non-state actors, such as multinational corporations, and individuals might all have economic interests with the target state governments. For example, the Russian government has longstanding deals with many Western companies that are partly owned by Middle Eastern governments who are not part of the sanctions regimes (Doornich & Raspotnik, 2020). Nevertheless, such companies and governments are expected to honor the sanctions by ensuring their compliance with regulations intending to limit the Russian economic sphere in hopes for policy change. Multinational corporations (MNCs) may resort to several strategies evading the sanctions negative implications (Su, 2021; Sun et al., 2021). On the one hand, they may establish subsidiaries in non-friendly countries that do trading with the targeted state. On the other hand, they may implement illegal tactics to preserve business operations with all trading partners like dealing with local networks known to employ all sorts of business practices, legal and illegal. Further, some businesses may offshore their operations nominally or even transfer their assets to other countries to escape sanctions. Reports have indicated that many Russian influential wealthy personalities moved their economic fortunes to Turkey fearing confiscation from domestic or foreign governments after the density of the Western economic sanctions increased when Russia invaded Ukraine in February 2022 (Daily Sabah, 2022; Tognini, 2022). Fourth, absence of transparency. Since most countries targeted by both primary and secondary sanctions are usually non-democratic countries with poor human rights practices, it is hard to see transparent trading regulations and not to circumvent economic sanctions in these countries (Veebel & Markus, 2018). Even worse, secondary sanctions can trigger the emergence of predatory economies that deplete the general wealth of the people and businesses in the targeted country leading dead ends in these countries (Gutmann et al., 2018). Thus, it should not be surprising to see that secondary sanctions endanger liberal economic practices globally and pave the way for trading practices orchestrated by certain interest groups exploiting the sanctions regimes in these countries. Fifth, evasion. It is difficult to prevent one country from conducting business with an allied target state. As a hypothetical example considering the recent US–Western backed sanctions against Russia due to the developments in Ukraine, Jordan could still perform business with Belarus that expressed explicit support to Russia and would like to use the financial advantages gained from the Jordanian transactions to support Russian local economy. Furthermore, these types of indirect trade relationships can enable US-sanctioned countries to obtain US Dollars, which is the world’s major reserve currency today, to engage in trade relationships by obscuring the international financial transactions. It is also worth mentioning that some MNCs can create innovative techniques to make financial gains by cooperating with partners who bypass regulations stated in secondary sanctions (Meyer et al., 2023). For instance, local governments may partner with MNCs to offshore assets from targeted states businesses to new uninvolved states that are supposed to comply the sanctions. Additionally, political leaders may encourage the transfer of assets from targeted states to stimulate local economies via legal or illegal channels.

Turkey as a ‘Third-Party’ Turkey has a unique geo-political status. The country has strong relations and influence on the Muslim World as it is the descendant of a great Empire that ruled the Middle East and North Africa for over 400 years, The Ottoman Empire. Turkey is a strategic partner to the West as it contributes to NATO’s quest of securing the Western Hemisphere’s influence and asset. It is the gateway to Europe from the Middle East acting as a buffer zone between the East and the West. For the 266

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Russian Federation, Turkey is the strongest military power on the Mediterranean that brings real leverage to the negotiations table on international affairs. The Kremlin realizes the power of Ankara to reject European or American proposals that do not suit the Republic’s interests. In sum, Turkey possesses special places in Western, Eastern, Arab, and Muslim political circles allowing it to exert hard and soft power changing political outcomes on the ground. The purpose of secondary sanctions is to deter persons or institutions from contributing to the advancement of a targeted state. One prime recent illustration is the Countering America’s Adversaries Through Sanctions Act (CAATSA, US Public Law 115-44) legislation passed in December 2017 under the Trump Administration. The American government realized the need to limit Russian influence around the world and decided to sanction third-party governments or officials that contribute to the advancement of Russian power (Fried & O’Toole, 2017). The Turkish leadership concluded a missiles defense system deal with the Russian government promoting the US to proceed with the activation of the secondary sanctions provisions in 2020. Turkey opposed CAATSA’s provisions (US Department of State [2020] CAATSA Section 231) because of its perception that the purchase of Russian S-400 missiles will make it safer and more neutral in international affairs (Daily Sabah, 2021). US leaders’ visits to Turkey did not work as a deterrent effect on the willingness of leaders’ approach to Russian officials. The desire for autonomous decision making by some Turkish leaders can result in the violation of the American sanctions creating a crisis in the relations between the two allies according to the US officials. The CAATSA sanctions effectiveness is still debated, however, Turkish leaders, as members of NATO, declared their compliance with their American allies’ intentions to curb Russian spheres of influence around the globe. On the ground, however, Turkish–Russian relations have improved especially after the Ukraine’s episode where many Russian oligarchs moved their assets to Turkey in their attempt to escape Western sanctions. Following the CAATSA sanctions, the US–Turkey relations were strained again because of the increasing intensity of the Western sanctions imposed on Russia under the US leadership because of the Russian policies started with the annexation of Crimea since 2014. The US government passed a series of secondary economic sanctions measures targeting any state or non-state actor contributing to the Russian regime’s supremacy after Moscow’s invasion of Ukraine. Western allies and NATO members have echoed the secondary sanctions and made it illegal to any firm to process payments with Russian official channels contributing to the war in Eastern Europe. American officials from the OFAC had bilateral meetings with countries including Turkey about their concerns on Russian transactions in Turkey completed via Mir system, a Russian international payment system like Visa or Mastercard (Akman & Kozok, 2022; Jones, 2022). Turkish banks have vested interests in the Russian economy given the country’s proximity to Moscow and its traditional strong bilateral relations (Dorian, 2022). After several warnings from Washington and various visits from Treasury officials to Istanbul and Ankara reminding Turkish officials with the ramifications associated with violating secondary sanctions, Turkish financial institutions began to pull back their operations from Russia (Dorian, 2022). One of the most important consequences was the move of three large Turkish banks to leave Moscow deals voluntarily and suspend payments to Russian accounts (Dorian, 2022). For many analysts, this was considered as the successful implications of the secondary sanctions imposed by the Western countries under the US leadership. The number of transactions between major Turkish banks and Russian parties dwindled in a short amount of time. Turkey’s officials and businessmen were anxious of the consequences threatened by US agencies including but not limited to assets freezes or international travel bans. Once the Americans pressed hard on their Turkish peers by sending top officials and warning letters, Turkish institutions began changing their behaviors. During the six months following the 267

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Russian invasion of Ukraine, many oligarchs moved their money to Turkey from Russian banks since they considered the country as a safe haven for protecting their wealth. More business conducted with the world went through Turkish institutions given the high stakes sanctions on Russia. When the US and its NATO allies realized the benefits, Turkish financial instructions were incurring from easing business transactions to Russian officials and firms, they pressured Ankara to downgrade its relationship with Moscow. Afraid from being cut off from world markets, Turkish financial institutions began to end their transactions with the Russians without any further warnings both from the Turkish and American officials. The potential exploitation of secondary sanctions is an ultimate reality. States and private institutions have incentives to defect from compliance given the high economic returns of noncompliance. For instance, Turkish businesses were approached by Russian firms to conduct large amounts of financial transactions during the early months of the Ukraine’s invasion (Agence France-Presse [AFP], 2022). Despite the decrease in numbers and intensity of transactions after repeated threats of US government agencies and officials, Turkish businesses—like many European firms—still perform business with key sectors and individuals linked with the Russian government (AFP, 2022). Turkish officials resisted American pressures by urging their businessmen to continue their business relations with Russia. The official response of many Turkish top politicians was that Turkey is an autonomous regional power that has its interests beyond international agendas (AFP, 2022). In sum, secondary sanctions in this case were successful in changing behaviors that are well documented like banking system, but it seems that it is difficult to change undocumented relations between businesses. Secondary sanctions create several challenges to the sender state given the inevitable economic gains offered to many actors who choose noncompliance. The power of sanctioned states moderates the effectiveness of secondary sanctions. For instance, Russia has more access to markets compared to a Sub-Saharan African country like Sudan, and, therefore, it could withstand pressures from sanctions for a longer period. Russian officials approached neighboring countries that have stable relations with Moscow for years, despite occasional crises, for opening their markets. Turkey is one of the strongest tied states to the Russian economy given its proximity and global integration. Russian officials and businesses began to set up businesses in Turkey using local ownership structures to avoid sanctions provisions. The move was successful to a great extent benefiting Turkish local economies and Moscow’s government. Russia was able to perform such a program given the large trade it conducts with the world. The high number and complexity of resources required to enforce secondary sanctions make them difficult to be effective. According to the sender’s logic, non-complying parties need to be punished severely to deter future defectors (Early & Preble, 2018; Erickson, 2020). The decision to isolate a state actor or a set of institutions by sender states may result in other unnecessary diplomatic debacles (Early & Preble, 2018). For instance, when Turkish officials refuses to enforce or tend to resist the American secondary sanctions against Russia (AFP, 2022), the US officials could have taken a more aggressive approach by freezing officials’ assets in American banks. Nevertheless, such a measure could start another spiral of political crises that no politicians from both countries desires especially after the deterioration of bilateral relations between the US and Turkey after the failed coup attempt in Turkey until today. Therefore, the amount of soft power sender states has on other governments should be important in determining some of the effectiveness portion of the secondary sanctions. Prior to sanctions being imposed, sender states must generate working realistic mechanisms to hold violations quickly and accurately (Early & Preble, 2018; Erickson, 2020). However, many 268

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Russians oligarchs could already transfer their assets to Turkey fearing from the ramifications of the Russo–Ukrainian War. They chose to open new businesses in a foreign NATO member while still maintaining economic ties with Russian government backed businesses in their home state. Sender states could establish legal avenues with its allies or other countries like Turkey to handle violations of sanctions. Such processes need to be linked with incentives to every actor involved in the process to ensure their enforcement (Erickson, 2020). Failure to do so results in more violations going unnoticed generating low effectiveness for secondary sanctions. The strength of economic ties between target states and other global economies moderates the effectiveness of secondary sanctions. According to trusted news outlets, the number of Russian tourists increased exponentially in the Summer of 2022, arriving about 20,000 tourists from the country every day (Tanis, 2022). On the other hand, Turkey relies heavily on Russian tourism because it helps to improve its developing economy in many ways, among which are to create direct income for the people living and businesses operating on the Mediterranean coasts, to increase the tax revenues for the government, to provide employment opportunities, and to help diffuse its soft power in the Eurasian region (Linebaugh & Knutson, 2022). By the same token, Ankara heavily uses Moscow’s gas and oil given the geographic proximity and affordability of goods which further contributes to strengthen these ties (Cohen, 2022). More importantly, the political regional power Turkey possesses allows it to insulate its decisions from superpowers who are forced to pay nominal attention to Istanbul. The US failure to provide real incentives to Turkish policymakers in recent years forced the latter to normalize relations with the Russian government (Cook, 2018; Tuysuzoglu, 2021). When the US expected Turkey to follow with secondary sanctions compliance, the reality pointed elsewhere where Turkey is getting much closer to Russia economically every day. Such a phenomenon has naturally led to the waning effects of secondary sanctions. Secondary sanctions need to be tailored and specific enabling all actors the reasonable ability for enforcement. The latest American sanctions against any party conducting business with Russia are broad. Russian wealthy oligarchs like Roman Abramovich were able to sell key assets across the West and start new businesses in economies deemed as friendly to Moscow. Yachts docking in Turkish waters owned by Russian billionaires, including Mr. Abramovich’s, has been a recurring theme during the initial period following the sanctions (AFP, 2022). Russian wealthy oligarchs used social networks to circumvent international law regulations protecting their assets and business. In addition, Turkey has promoted Russians on establishing new business and institutions in an attempt to revive their economy (Clinch, 2022). The duration of secondary sanctions is an underrated key variable presenting serious challenges to senders. In cases where swift interventions are not immediately implemented to address deviations from policy, sanctions are less likely to be effective. On the contrary, once the sender state begins coalescing more pressure from allies, then sanctions become more effective. In the case of Turkey, Washington has increased its demands frequency and intensified the tone directing Turkish officials to sway from Russian deals. Simultaneously, the US government sought the cooperation of the European Union states to curb Turkish violations of secondary sanctions. Such attempts have been working given the lower number of banks willing to take risky deals with Russian business community and institutions (Kozok, 2022). Russian dealers can also target Turkey because it is a viable option given its geographic proximity, ease of raw materials transfers, and the notable ally status with Western countries given the NATO membership of Turkey. Despite the recent political and diplomatic skirmishes between Turkey and the US after the failed coup attempt in Turkey in 2016, both countries still maintain strong relationships given their interests in NATO’s mission, which can also be exploited by ambitious Russian plywood makers. 269

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Conclusion Secondary sanctions have been used frequently by US policymakers as an option to increase the intensity of economic sanctions imposed on a country or a group of countries. Since sending credible signals are important for the effectiveness of economic sanctions, the imposition of secondary sanctions serves as an indication of determined sanctioning country on achieving the goals. They target third-party states and institutions in a larger sanctions episode to ensure the effectiveness of original sanctions. For instance, the recent Western sanctions led by the US against Russia included secondary sanctions against almost any country or institution that facilitates Russian government operations in Ukraine. Theoretical examination of secondary sanctions in the world politics literature is limited. Some accounts suggest states that the high costs associated with imposing sanctions incurred by secondary governments and actors outweigh expected gains, and therefore lead to diminished compliance. By the same token, given the self-interested profit maximization goals of multinational corporations, such organizations would be more likely to pursue exploitative strategies to generate more wealth in uncertain conditions provided by the secondary sanctions. Sanctions regulations and protocols inevitably feature loopholes exploited by affected parties. Contingent on interests, each party acts in ways circumventing expected behaviors by the sanctions statutes to advance its stakes. This chapter introduced secondary sanctions with a focus on the relationships between the sanctioning country and the third-party countries. By using examples from both ally and nonally countries depicting the imposition of US secondary sanctions, this chapter showed that it is very difficult to monitor and hard to stop circumventing secondary sanctions. Furthermore, this chapter mentioned that secondary sanctions can be in accordance with the domestic law, but it is difficult to apply the imposition of secondary sanctions when it comes to the international law. Although the level of effectiveness of secondary sanctions is higher for ally countries, like Turkey on Mir system (i.e., Russian card payment system), in general secondary sanctions do not work when third-party countries are not allies. Further, as seen from the case study on plywood trade, secondary sanctions can be orchestrated between different countries obscuring the origin of the raw materials like birch tree timbers. In sum, secondary sanctions are ineffective unless constantly monitored and updated according to the developments in the international trade.

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22 EMERGING INDIA AND SANCTIONS Balancing Norms and Interests Rishika Chauhan

Introduction The last two decades have been crucial for the study of sanctions, and emerging economies – both independently, as well as concertedly. India, a rising state, has been at the centre of the new global political and economic changes, as well as deliberations on sanctions. Over the years, New Delhi has maintained its aversion for unilateral sanctions, while supporting such measures when imposed by the United Nations Security Council (UNSC). In the past, India has also been a primary target of Western sanction regimes especially after it conducted nuclear tests in 1974 and 1998, however, the tables have turned. Beginning as one of the most protected economies in the world with a sluggish growth rate, the state is now one of the biggest and fastest-growing economies in the world. The economic might has brought with it the capability to influence the success or failure of sanctions regimes placed against other states, concurrently, the aspiration of gaining a bigger role in world politics. The need to support global norms, for which Western sanctions regimes are often conceptualised, is not entirely lost on India. Historically, India has positioned itself as a supporter of peaceful resolution of military conflicts. India’s current Prime Minister, Narendra Modi aspires for India to become a “Vishwa Guru” or World teacher that leads by example. He has also advanced concepts like “Vasudhaiva Kutumbakam”, that call for the world to be one family (Modi 2014), implying, New Delhi’s possible intent to appear as the defender of international norms, despite its opposition to unilateral sanctions. Unresolved domestic problems and issues, such as poverty, underdeveloped infrastructure, poor healthcare and standard of living in some regions, have made India conscious of its own needs. Home to more than a billion people, its per capita income is notably low (The World Bank 2020). Besides, as the world’s biggest democracy, its policies are obligated to convey public opinion, emphasising the need for the Indian leaders to not overlook the development and growth agenda in pursuit of higher stature, and global norms. India’s security concerns also have a bearing on its policies. With unsettled boundary disputes with Pakistan and China, India’s nuclear-armed neighbours, New Delhi staunchly protects its security interests in the region. The geopolitics, makes India dependent on the United States (US), as well as Russia to fulfil defence and security compulsions, which in turn complicates the situation as the US and Russia remain adversaries. Consequently, the India of today is conscious of global norms, 274

DOI: 10.4324/9781003327448-27

Emerging India and Sanctions

mindful of its own interests, but dithers on geopolitics. Sanctions, particularly US’ secondary sanctions, that penalise entities for their interactions with the primary target of the regime, have been criticised by India. Citing their extra-territoriality as well as ability to impede economic development, India has either individually or as part of groups like BRICS (Brazil Russia India China and South Africa) voiced its distaste for such measures. Yet recently sanctions have presented an opportunity. India has taken advantage of sanctions by offering its own markets to sanctioned states. The process has however exposed the rising power to the threat of US’ secondary sanctions. Acknowledging this predicament, this chapter delves into India’s perspective on sanctions. To understand the emerging power’s stand, it probes into the views of the state as articulated by its leaders at domestic and international forms as well as in official documents. The chapter is divided into three sections, the first recounts India’s historical legacy of sanctions and attempts to articulate India’s stand. The second explains the Indian experience as a primary target of sanctions. Taking sanctions against Russia and Iran as case studies, the third section investigates the effect of sanctions on India as a secondary target or “third-party”. It explains how India has balanced norms and its interest in each case. This section particularly deals with the impact of sanctions on India, focusing on the primary impact, evident in the security and energy sectors, and incidental impact that came about in the form of development of new payment channels and geopolitical ramifications. It also gages into the deterrent effect and unexpected gains that have come India’s way while dealing with sanctions against Russia and Iran. Finally, it concludes by highlighting how mutual accommodation took place between India and the Western states on the topic of sanctions, while India found a middle ground between supporting global norms and pursuing its own interests.

Historical Legacy of Sanctions Indian leaders did not always view sanctions in a negative light. The utility of sanctions was understood even before India gained its independence from the British rule in 1947. Ram Manohar Lohia, an eminent politician and activist of the time, discussed economic sanctions in 1937. He said, India could use economic sanctions, to support “national, democratic and socialist forces” of the world (Lohia 1937) India’s first prime minister, Jawaharlal Nehru also articulated his views on sanctions. A firm believer in collective action, he brought up the subject in context of collective security, emphasising that sanctions could be used as a “peaceful method” to solve problems (Nehru 1938). Later on, Indian leaders and political thinkers understood sanctions as actions taken by the UN, that deserved to be backed (Appadorai 1949). Historically, India has supported a few unilateral sanctions regimes and imposed sanctions on occasions. In the 1940s, when South Africa’s apartheid government, threatened the well-being and interests of the Indian diaspora, the government placed sanctions on the African state. In this case, the Indian public vehemently backed sanctions as a form of retaliation. After gaining independence from the British rule, India not only continued sanctions against South Africa, but also encouraged other states and international organisations to adopt similar measures (Lloyd 1991). In 1987 India again used sanctions as a reaction to policies detrimental to the interests of its diaspora, this time in Fiji (Fogleman 2008). After winning independence, the state used sanctions to pressurise the provinces of Hyderabad, and Goa to integrate within the Indian union in 1948 and 1954, though later Delhi’s achieved its goal by using military force (Chauhan 2013). There is evidence that suggests that India has also used sanctions against Nepal (Garver 1991, 953) and Pakistan (Singh 2001), with security interests in mind. 275

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New Delhi does not always mention or accept when it imposes sanctions on other states or entities. In fact, Indian authorities have at times also argued that the state has “never supported unilateral sanctions against any country” (The Times of India 2014). Conversely, when sanctions are used to protect the Indian diaspora and are backed by public, New Delhi acknowledges placing sanctions. India’s scepticism for this tool of statecraft comes from its own experience as a sanctioned state. Indian leaders, especially between the 1970s to the end of 1990s, when sanctions were imposed against India, viewed sanctions as a means of denial. After years of British rule in India, it is not surprising that Indian leaders are sceptical of the Western world. Weary of economic exploitation and political subjugation, the former colony is still led by the generation of leaders and officers, who view Western tools of statecraft suspiciously. Consequently, the discourse endorsed by leaders and scholars has garnered a public aversion towards sanctions. Yet, as India gains power, and a new generation takes over the reins of the country, its stance as well as public opinion towards sanctions is bound to change. In the last decades, the memory of India being under Western sanctions seems to be fading and sanctions are understood in different ways.

India’s Policy on Sanctions So far India has not articulated its stand on sanctions through a White Paper or official document devoted exclusively to the topic. Nor does New Delhi endorse an explicit policy of using sanctions to secure its foreign or security policy goals, However, through the years the Ministry of External Affairs has emphasised that India does not “entertain” unilateral sanctions, meaning sanctions imposed by individual states, but as a member of the United Nations, implements the UNSC sanctions (Government of India 2019). Jointly, with other states, India has again made its opposition to unilateral sanctions known. For instance, since 2014, India’s joint statements with Russia have often maintained that the two states are averse to sanctions that, “do not have the approval of the United Nations Security Council” (Government of India 2014). India bases its objections to unilateral sanctions mainly under three rubrics – first, sanctions are against international law; second, unilateral sanctions are inherently ineffective; and finally, they have a detrimental effect on the world economy, as well as Indian interests (Chauhan 2021, 62). Debates on sanctions have altered overtime. Between 1970s and 2000, sanctions were brought up in the context of the measures imposed against India to change its nuclear policies. In the last few decades sanctions have been discussed when sanctions are imposed on other states or questions on secondary sanctions placed on Indian entities are raised. Secondary sanctions, a significant constituent of US sanctions regimes, are sanctions imposed to penalise entities for their interactions with Washington’s primary target. These sanctions are often responsible for changing the behaviour of the targets and making the sanction regimes successful as they widen the scope of the measures and make it possible for the US to use its economic might even outside its territory. India has been critical of the “extra-territorial” nature of such measures, as Indian individuals and businesses have also come under the scope of these sanctions (Rao 2010). New Delhi has been concerned about the threat of secondary sanctions on Indian entities and has addressed the topic at various multilateral meetings. BRICS summits and Russia-India-China (RIC) trilaterals are most prominent of them. While the joint statements and declarations are shared by the group, they are representative of the views of all member states. Therefore, studying BRICS stance on sanctions also reveals India’s position. From 2013 to 2017 the Joint Statements of the BRICS states stressed that the UNSC has the “sole authority” to impose sanctions, and states should refrain “from any coercive measures not based on international law, in particular the UN Charter” (BRICS 2021). Along with other BRICS 276

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members, India has called for, “consolidation and strengthening of the working methods of the UN Security Council Sanctions Committees to ensure their effectiveness, responsiveness and transparency” (BRICS 2021). Since 2014, when BRICS member Russia became the target of Western sanctions regimes, the group has fiercely opposed such unilateral measures. To further comprehend India’s perception of the subject, it is important to examine how New Delhi reacted to sanctions on self or on other states.

Historical Overview: India as a Primary Target Sanctions were specifically discussed in the policy circles of New Delhi, after India conducted its nuclear tests in 1974 and 1998. Both times the concerns and effects of sanctions on India were different. In the 1970s external aid was important to India, then a protected economy with a marginal growth rate. While economic reforms of the early 1990s had liberalised the economy, bringing both systematic as well as a systemic change, paving the way for more sustainable economic growth and prosperity (Panagariya 2004). Consequently, in 1998, India was better equipped to deal with sanctions (Fair 2005, 25). After the nuclear tests, each time India remained defiant and believed that the impact of such measures would not be considerable. Following India’s first nuclear test, Pokhran-I in 1974, sanctions were brought up in the parliamentary debates many times. In Lok Sabha, the lower house of the parliament, the ruling government was constantly questioned about sanctions. On 9 August 1974 about three months after the nuclear test, a parliament member inquired if any country had suspended aid to India as a reaction to India’s nuclear test. Responding to the query, the then finance minister Yeshwantrao Chavan said that only Canada had, “suspended assistance in the field of nuclear energy development”, he added that, “No other country has indicated any intention to stop or cut aid” (Chavan 1974, 123). In the following years as well, Indian leaders did not share any concern or fear of sanctions. When similar questions were raised, the ministers appeared confident that there would be no impact of sanctions on India. Post Pokhran I, US government was determined to put in place a sanctions regime that could have a deterrent effect and check the nuclear aspirations of states that desired to conduct a test. As Perkovich (2002, 207) explained, Senator Percy put forth the idea that India would not have tested if sanctions were already in place. Indian nuclear tests sparked conception and adoption of new nonproliferation measures, as well as sanctioning laws. The formation of the Nuclear Suppliers Group as well as amendments in the International Atomic Energy Agency (IAEA) safeguards also followed. While the US occupied itself with deliberating on a clear position on nonproliferation, the need to persuade states to ratify the Nonproliferation Treaty (NPT) was also recognised (O’Mahoney 2020, 24–25). Moreover, India’s nuclear test incited Pakistan to further develop its nuclear weapon program (Ahmed 1999). India conducted its second nuclear test, Pokhran-II in 1998, inviting US sanctions, which were not only advanced this time but also nuanced. The US sanctions regime sought to punish all states not recognised as nuclear-weapons states by the NPT on conducting nuclear tests. However, major sanctions were lifted by US President Bill Clinton later that year and rest in the following years (Rennack 2002). In 1998 again, the Indian leaders did not appear to be overly concerned about the impact of sanctions. Following the nuclear test the then, Indian Prime Minister, Atal Bihari Vajpaye argued, “the talk of sanctions does not stand the scrutiny of logic or fairness. Besides, it sounds hypocritical … I believe our decision to conduct the (nuclear) tests is in supreme national interest – then we have to face the consequence and overcome the challenge … Sanctions cannot and will not hurt us. India will not be cowed down by any such threats and punitive step” 277

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(Vajpayee 1998). Other Indian leaders shared similar assessments and denounced sanctions as well as their threat. To understand, India’s current policy and response to sanctions, it is imperative to study the subject further and delve into the instances that involved sanctions use against India as a secondary target.

India as a Secondary Target – A “Third Party” In the last two decades sanctions have often been discussed in context of impact on India as a “third-party”. Two cases significant for New Delhi, are sanctions against Russia, a “friend”, and Iran, an important trade “partner”. Both the cases have been discussed similarly, yet their impact on India has differed. They are also vital, as the US sanctions regime against Moscow and Tehran, entails secondary sanctions. Indian businesses have major investments in the US, making them vulnerable to such measures. India, meanwhile, has attempted to balance its interests with global norms in its policy on the issue. Moreover, the sanctions have had a notable impact on India, that can be categorised into primary impact and incidental impact.

Russia: Sanctions against a “Friend” India and Russia’s security and economic cooperation as well as political bond, dates to the Soviet era. Indian leaders have signed “friendship and cooperation” treaties with Russia, and called Russian President Vladimir Putin a “valued friend of India” (Singh 2012). The Russian public, in turn has ranked India among their state’s top five friends in the world (The Times of India 2018). Following Russia’s annexation of Crimea in 2014 several states and international organisations placed sanctions on Russian entities and banned various imports from Moscow. Then again in 2022 when the news of Russian invasion of Ukraine came to light, Western sanctions were imposed, focusing on significant sectors like oil, gas, technology, and heavy machinery (Brookings 2022). Sanctions against Russia in 2014 and 2022 were particularly discussed in India regarding New Delhi’s position on sanctions against its old friend and the effect of such measures on India. Moreover, US’ 2017 enacted Countering America’s Adversaries Through Sanctions Act (CAATSA) made the issue of secondary sanctions critical in 2022.

Balancing Interests and Global Norms India and Russia share close economic ties; besides, Russia is India’s chief defence equipment exporter. With engagements in sectors like machinery, electronics, aerospace, automobile, commercial shipping, and oil, New Delhi’s interests in Russia have remained steady. Active conflicts at the border, make India one of the largest importers of arms in the world, and India relies on Russia for defence equipment. Since 2014, Indian authorities have frequently stated, or implied that New Delhi will continue to engage with Russia despite unilateral sanctions. In 2014, a joint statement released on the side-lines of India-Russia bilateral summits, stressed, “India and Russia oppose economic sanctions that do not have the approval of the United Nations Security Council” (Government of India 2014). Speaking at a domestic forum in April 2022, India’s Foreign Affairs Minister S. Jaishankar said that India cannot be a “pale imitation” of other states, nor does it need their “approval”. Hinting at the futility of sanctions he added, “best way forward is to focus on stopping the fighting, getting the talking and finding ways of moving forward” (Jaishankar 2022). In 2022, the Ministry of External affairs spokesperson again emphasised that India’s “position on sanctions hasn’t changed one bit. We have always stood by UN sanctions” (The Hindu 2022). 278

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Indian leaders do not favour Russian policy of war and annexation in its region, however, New Delhi has not explicitly expressed its position. Indian representatives have shared their state’s discomfort with the situation in East Europe and Ukraine, subtly. In March 2022 when a resolution condemning Russia for its invasion of Ukraine came up, India abstained from voting (RFI 2022). Later, India’s permanent representative to the UN emphasised that India was deeply “disturbed” by the situation in Ukraine and stressed that, “no solution can ever be arrived at the cost of human lives” (Hindustan Times 2022). In the opening remarks of Indian Prime Minister Narendra Modi’s bilateral meeting with Russia’s President, Putin, he voiced his dislike of war. He said, “today’s era is not of war” and “democracy, diplomacy and dialogue … touch the world” (Modi 2022). Moreover, Modi has also offered to mediate and shared his country’s willingness to help in bringing peace to the region (The Tribune 2022). This shows that, while India has not supported unilateral sanctions, it has lent support to the norms it deems important. However, it has struggled to find a balance. As India’s finance minister mentioned in this case, her state’s position on sanctions was formulated considering not only the “economic interests, but also its security interests”. She added that India has tried to maintain the “balance” owing to its “geopolitical location” (Sitharaman 2022).

Impact of Sanctions against Russia on India Though the Western states imposed sanctions against Russia, the measures also had an impact on India. Remarkably, the effect that sanctions placed in 2014 had on New Delhi, was different to the impact of 2022 sanctions. Primary impact remained in the defence and crude oil sector, while incidental impact, led to the creation of new payment channels, and entailed geopolitical ramifications for India. In 2014, India’s imports from Russia plummeted (Department of Commerce 2014). Stockholm International Peace Research Institute (SIPRI) estimates that in 2009–2013, India imported 76 per cent of its total arms from Russia, but between 2014 and 2018, the figure decreased to 58 per cent (Wezeman et al. 2019). Though, the drop in arms imports was attributed to many factors, they also seem to be the deterrent impact of sanctions. India made an effort to indigenise its defence industry as well as diversified arms importers, to steer clear of sanctions (The Economic Times 2019). Nevertheless, the situation altered in 2022. Though India remained critical of sanctions, censuring the measures for their ability to restrict trade, the 2022 sanctions against Russia unfolded differently. Prior to 2022, Russia had remained the top defence exporter to India, but Russian crude oil had not featured prominently in India’s import basket. Indian government’s Department of Commerce Export-Import data shows that by the end of 2022, India’s oil imports from Russia were colossal. With 1.27 million barrels per day, the increase was a whopping 384 per cent (Department of Commerce 2022). As the US and European states curtailed their oil imports from Russia to stem Moscow’s capability to wage war, Moscow diverted its oil exports to India, offering oil at a discounted price. While Russia’s market share in India’s oil import basket was less than 1 per cent before the start of the Russia-Ukraine war, by the end of the year, it stood at 28 per cent. Meanwhile, from April 2022 to January 2023, Russia climbed the ranks of India’s trading partners and emerged fourth (Business Standard 2023). This was undoubtedly an unforeseen impact of sanctions. Among the incidental impacts of Russian sanctions on India, was the creation of alternative payment mechanisms and channels. Though India has not come under the purview of secondary sanctions, US banking, and insurance restrictions placed on Russia by Western states have made transacting with Moscow difficult. To continue trade and payments for imports, particularly 279

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the staggering amount of oil imported from Russia, New Delhi allowed Moscow to open special overseas, or rupee vostro accounts in more than twenty banks across India (Outlook 2023). This payment mechanism enabled New Delhi to pay in rupees by depositing the payment in Russian bank accounts and in turn allowing Moscow to purchase from India by using the rupees deposited in its account. With the involvement of both the governments, the adoption of alternative payment mechanisms was quick and uncomplicated. Additionally, to enable financial transactions with Moscow, Indian oil refiners paid Moscow in different currencies. These companies include state-run Hindustan Petroleum Corp, and private businesses of Reliance Industries Ltd., Bharat Petroleum Corp Ltd. and Nayara Energy Ltd. The currencies used to clear the payments have varied from Russian roubles to United Arab Emirates dirhams (Reuters 2023). Hindustan Petroleum Corp, meanwhile, has found it hard to navigate through the changed financial landscape compared to its privately run counterparts (Bloomberg 2023). Meanwhile as a consequence of sanctions, new sectors of cooperation have appeared. According to reports, in December 2022 Russian authorities requested New Delhi to export five hundred different products to Moscow, which India agreed to (Reuters 2022a). The sanctions against Russia have geopolitical implications for India. Following sanctions, Beijing and Moscow increased cooperation among themselves. Russia’s President Vladimir Putin and Chinese President Xi Jinping stressed through joint statements that their friendship has “no limits”, and their cooperation has no “forbidden area” (Russian Federation 2022) Predictably trade between the two states has increased, and China has become Russia’s biggest importer of oil (CNN 2022). Given India’s active border disputes with China, and dependence on Russia for military equipment, Moscow’s reliance on Beijing, is not in Indian interest and adverse for its strategic calculations (Madan 2022). Meanwhile, another geopolitical ramification of sanctions has come to light. Given the US’ interest in resisting China, India was given a waiver from CAATSA sanctions by US House of Representatives in April 2022. Dubbed as the “most consequential vote since the India-US civilian nuclear deal”, the decision shows that the US is responsive to Indian interests. The waiver would make it possible for India to purchase S-400 missile defence system from Russia without the fear of secondary sanctions (The Hindu 2022). Previously, the UK also offered to enhance defence cooperation with India. London’s offer appropriately acknowledged Indian dependence on Russian defence equipment, thus the UK proposed a gradual weaning from Moscow’s defence relationship (Chauhan 2022).

Iran: Sanctions against a Trade Partner India and Iran have shared strong cultural and trade ties since decades. Over the years, political disagreements, especially on the subject of Kashmir and treatment of Muslims in India, have made Tehran censure New Delhi. However, trade between the two had continued even through the short-lived squabbles. Sanctions, though proved to be a major impediment, especially to the import of crude oil. Led by the US, several states, including the EU, imposed sanctions against Iran in mid-2000s with an aim to change Tehran’s nuclear policies. In this case, secondary sanctions were a concern for India right from the start. Though the issue was somewhat resolved, after the Joint Comprehensive Plan of Action (JCPOA) came into effect in 2016, Donald Trump, then the US president, resumed sanctions in 2018. Though US President Joe Biden shared his intent to join back the 2016 arrangement, no major sanctions were lifted (Reuters 2021). 280

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Balancing Interests and Global Norms India and Iran majorly trade in agricultural products, pharmaceuticals, chemicals, industrial machinery, and oil. For India, Iran has remained a stable and reliable exporter of crude oil. In the absence of major oil reserves in India, sanctions against Iran brought New Delhi’s fragile energy security in pressure. Before nuclear-related sanctions were imposed against Iran, Tehran was among the top three suppliers of crude oil to India (Radhakrishnan and Varghese 2022). Moreover, the percentage of Iran’s share in India’s oil imports was also substantial. India has maintained its support for the UNSC sanctions against Iran, however, has voiced its uneasiness over unilateral sanctions. The subject has been discussed domestically and been brought up at multilateral groups like BRICS. In the Indian parliament, the subject was deliberated in context of India’s energy security. In 2012, speaking to the media India’s Commerce and Industry minister, Anand Sharma emphasised that, Iran has been and “continues to be” a “key energy suppliers” (Livemint 2012). In the following years, unilateral sanctions were criticised by BRICS and their extension was particularly opposed. While Iran was not always directly mentioned in BRICS statements, a diplomatic resolution of the issue was emphasised, implying the BRICS stand against unilateral sanctions on both Iran and Russia (BRICS 2022). India has argued that Iran should not develop nuclear energy for military purposes. In fact, it has supported US’ efforts to impede Iran’s nuclear aspirations. In 2005, at the IAEA, India stood against Iran, recognising Tehran to be deficient in its compliance of NPT safeguard obligations (IAEA 2005). The next year, India sided with the group that voted to refer Iran to the UNSC (The Tribune 2006). While in 2009 India and the US, were on the same side as they insisted on the cessation of Iran’s uranium enrichment (The Hindu 2009). India’s Foreign Secretary Nirupama Rao (2010) articulated India’s views, underlining that IAEA was the, “best framework for addressing technical issues related to the Iranian nuclear programme” (Rao 2010). Without alluding to US sanctions, she said that New Delhi was concerned about the “extra-territorial nature” of unilateral measures “imposed by individual countries” which could have a “direct and adverse impact on Indian companies … and energy security” (Rao 2010). Even at BRICS India articulated its view in joint statements. The Fourth BRICS Summit-Delhi Declaration, highlighted Iran’s nuclear issue, stressing, “The situation concerning Iran cannot be allowed to escalate into conflict, the disastrous consequences of which will be in no one’s interest” (BRICS 2012). India’s stand has not changed much on Iran sanctions, as it continues to balance its interests while showing consideration for nuclear nonproliferation norm.

Impact of Sanctions against Iran on India India felt the impact of sanctions against Iran quite early. In 2004, under the provisions of the US’ Iran, North Korea, Syria Nonproliferation Act (INKSNA), two Indian scientists were sanctioned. The next year, Sabero Organics Chemical and the Sandhya Organics Chemical, two Indian firms were sanctioned by the US for conducting business with sanctioned Iranian entities (Rediff 2005). The Ministry of External Affairs, maintained India’s disapproval of unilateral sanctions, emphasising that the sanctions should be “revoked” and the issue should be resolved at common forums (Government of India 2004). However, the major impact of US sanctions against Iran, was experienced by India in the energy sector. Similar to the Russian case, the incidental impact of sanctions was on banking and payment systems as well as geopolitics. India is one of largest consumers of energy in the world and is dependent on external sources for around eighty percent of its crude oil supply. Nevertheless, after sanctions were imposed on Iran, India decreased its imports from the state. Within five years, from 2008 to 2012, India’s oil 281

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imports from Iran fell from 16 percent to 10 percent, and later to a mere 6 percent (Katzman 2022). According to the Indian government’s Department of Commerce, India was importing around ten percent of its crude oil from Iran in the 2010s. This percentage fell to less than one percent by 2019–2020 and then dwindled (Department of Commerce 2022). Overall trade also decreased, as it stood at USD 2.10 billion during financial year 2020–2021, but decreased to 1.91 billion in financial year 2021–2022, and further to USD 1.3 billion from April 2022 to September 2022 (Department of Commerce 2022). Meanwhile, the US offered New Delhi sanction waivers for decreased oil imports from Iran. The exemptions allowed India to import as much as 1.25 million tonnes of oil per month from Iran for a short period of time (The Economic Times 2018). Reportedly, the private sector also had to adapt to US sanctions regime against Iran. The sanctions had a deterrent effect on Indian companies as they stopped importing oil from Iran due to the fear of sanctions. Oil refining firms like Reliance India Limited entirely ceased importing oil from Iran in 2018, when the US resumed sanctions on Tehran (Reuters 2018a). Sanctions also led to import diversification, which became a priority for India, as it started importing oil from the US to fulfil its energy needs. To lessen import risks, India also sought new partners in Nigeria and Angola (Taneja 2023). The transition however proved to be expensive, as it required a change in critical infrastructure. Mangalore Refinery and Petrochemicals Limited (MRPL), a state-run oil refinery found it especially hard to adjust to new oil suppliers as it was built to refine the specific type of oil which was imported from Iran (Reuters 2018b). Like the Russian case, an incidental impact of the sanctions was the introduction of new payment mechanisms, to avoid Western banking and financial systems. To maintain oil trade, Tehran opened a rupee vostro bank account with an Indian UCO bank in Kolkata. While initially transactions were successfully carried out, however as the sanction regime tightened, increasing financial restrictions, the alternative payment mechanism started to fail (The Economic Times 2014). Moreover, sanctions also made it impossible for India to honour agreements signed with Iran. The Indian Railway Construction Company got involved in building a rail link between Iran and Afghanistan in 2018. Yet, as sanctions became more rigid, the staterun company withdrew. Moreover, Indian businesses also retracted from ports construction in Iran owing to sanctions (Firstpost 2020). Sanctions against Iran also had geopolitical impact on India. As India withdrew from rail and port construction, China rushed in to fill the void. Given India’s suspicion, that China is following an encircling strategy, popularly called “string of pearls”, the implication of Beijing’s involvement in India’s backyard were graver (India Today 2017). Meanwhile, Western sanctions against Iran brought non-Western states together who took a stand against unilateral sanctions, a position that they have reiterated in the case of Russia. It initiated a non-Western discourse against sanctions and the realisation that groups like BRICS can be used to articulate a response to Western policies dawned on its members. Sensing an opportunity to diminish the impact of Western sanctions and look for alternative markets proactively, Iran applied for BRICS membership in 2022 (Reuters 2022b).

Conclusion: Mutual Accommodation In the last few decades, interactions between India and the states imposing sanctions, have been a constant process of mutual adaptation. In the case of Russia and Iran, India was evidently reliant on both the sanctioned states, particularly for defence equipment on the former, and crude oil on the latter. In both the cases, conversation on sanctions was not one-way, but bilateral. Sender states were cooperating with India to find a middle-ground which was accommodative of the interests 282

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and worldviews of both the states. In the case of sanctions against Russia, India was given an exemption from CAATSA, enabling New Delhi to carry on importing defence equipment from Moscow. Likewise, US offered New Delhi waivers from secondary sanctions if it decreased oil imports from Tehran. While the arrangement was not permanent, it signalled the sanctioner’s attempt to accommodate the Indian interests. Evidently, the subject of sanctions has acquired prominence in India’s foreign policy discourse. Discussions on sanctions are no longer limited to international forums but have invited curiosity and attention from domestic audience. Indian leaders are increasingly and clearly articulating their position on the measures, conveying a confidence that was previously lacking. A steady economy with a notable growth rate, along with a sizable domestic market, India’s confidence is backed by its economic might. Growing economic power has provided India the capability to expand its trade and defence relations, guaranteeing India a feeble impact of secondary sanctions if imposed against it. Yet, accommodation and restrain are also perceivable in India’s stand on sanctions. While India stands against unilateral sanctions, its position on sanctions is not entirely devoid of normative concerns. When sanctions support relevant issues, India attempts to balance its interests and international obligations. While states like China have now formulated their own laws to combat the effect of sanctions, India has not followed suit. Nevertheless, New Delhi’s stand on sanctions is constantly evolving and amenable to change.

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SECTION V

Hot Debates Legal Aspects of Sanctions

23 HUMANITARIAN IMPACT OF UNILATERAL SANCTIONS Alena F. Douhan

Scope of Unilateral Sanctions No clear or uniform definition of sanctions appears to exist in international law. The terminology used is also very inconsistent. States and regional organisations identify their unilateral activity as “sanctions”, “restrictive measures” (Council of the European Union 2018) and “unilateral measures not in accordance with international law” (UNGA Resolution 2015, para. 1; UNGA Resolution 2017, para. 2). UN organs refer to economic sanctions and their humanitarian impact assessment (UNGA Resolution 1998; Economic and Social Council 2000). Numerous resolutions of the UN Human Rights Council (from 15/24 of 6.10.2010 (Human Rights Council 2010, paras. 1–3); to 45/5 of 6.10.2020 (Human Rights Council 2020, preamble) and 49/6 of 31.03.2022 (Human Rights Council 2022, preamble, paras. 1–3) and the General Assembly (from 69/180 of 18.12.2014 (UNGA Resolution 2014, paras. 5–6) to 75/181 of 16.12.2020 (UNGA Resolution 2020, paras. 1–6) refer to the illegality of unilateral coercive measures. As a result, states prefer to present their unilateral activity as not constituting unilateral coercive measures, and to therefore use other terms, in particular, sanctions. The current practice of unilateral sanctions demonstrates their variety: political, sectoral, diplomatic, cultural, economic, trade, financial, cyber, targeted and many others. Compliance companies classify sanctions as unilateral, multilateral and global. Reference is also made to international sanctions, sectoral sanctions, targeted sanctions, counter-sanctions, direct or indirect sanctions, primary or secondary sanctions, and intended or unintended sanctions (Douhan, Report, A/HRC/48/59, 2021). Trade embargoes aim to prohibit nationals/residents of the sanctioning country, or any company willing to do business in a sanctioning country or has partners in the sanctioning county from trading with the country under sanctions, their nationals or companies. Financial sanctions may include decisions to designate the central bank of the country under sanctions, or public or private banks to prevent any transfer of money to/from the country under sanctions. The freezing of state and private banks’ assets abroad is used to put pressure on states, too, thereby preventing them from guaranteeing their citizens’ basic needs. For example, the Bank of England refused to unfreeze any of the $1 billion in gold that it held for the Central Bank of Venezuela (Douhan, Report, A/HRC/48/59, 2021, para. 29). DOI: 10.4324/9781003327448-29

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Political influence in international institutions has started to be used as a part of sanctions tools. In April 2020, the USA opposed the efforts of Iran and Venezuela to obtain loans from the International Monetary Fund (IMF) in its fight against COVID-19. A similar situation has reportedly arisen in respect of requests by Cuba, Sudan and Zimbabwe for emergency loans from the World Bank (Ibid., para. 30). Trade sanctions often take the form of so-called sectoral sanctions, which apply non-selectively to individuals and organisations in a particular sphere of the economy without any identifiable reason or violation from their side. Such methods differ significantly from those that have prompted traditional targeted sanctions (Ibid, para. 33). A special form of sectoral sanctions can be seen in the closing of airspace for flights of air companies registered in targeted states – such as Qatar (2017–2020), Venezuela, Belarus and Russia – and prohibiting the targeted state’s air companies to enter the airspace of the sanctioning country, thereby affecting the designated state’s travel industry. A similar situation exists as concerns trade with Cuba, Iran, Syria and Venezuela (Ibid, para. 32). Economic sanctions also include measures of a targeted character, affecting designated individuals or companies. For example, the European Union’s financial sanctions include several thousand individuals and companies (European Union 2023), and far more are listed by the United States (OFAC 2023). A number of unilateral measures are taken in or relevant to the cyber area in response to “malicious cyber activity” or via operations in and access to software on online platforms, databases and online conferences, access to the Internet, information, public announcements of designated individuals as criminals, etc. (Douhan, Report, A/77/296, 2022) (cyber and cyber-related sanctions). The current moment is also characterised by the expansion of so-called “secondary sanctions” as a means to enforce unilateral sanctions against states or key economic sectors, or to target foreign companies, organisations or individuals. Secondary sanctions are also applied extraterritorially to entities or individuals for their presumed cooperation or association with sanctioned parties or for helping them to circumvent sanctions. Foreign companies subject to secondary sanctions can be blocked from doing business in the sanctioning state, be banned from using its financial markets or be prohibited from transactions involving its currency; while foreign individuals can be refused entry to the sanctioning country and have any assets there frozen (Douhan, Report, A/ HRC/51/33, 2022). Penalties can reach the level of billions of USD; criminal penalties reach up to 20 years of imprisonment (eCFR 2023).

Humanitarian Impact of Unilateral Sanctions: Key Facts Due to the multiplicity of unilateral sanctions regimes, and the expansion of unilateral sanctions, zero-risk policies and over-compliance with unilateral sanctions, it is not possible to identify the impact of unilateral sanctions imposed by a specific country or of specific unilateral sanctions. It is thus only reasonable to assess the cumulative impact of all unilateral sanctions and overcompliance with unilateral sanctions on all categories of a country’s population, including the most vulnerable groups, humanitarian workers as well as the population in general. Reports received as well as country visits demonstrate that usually the whole population of a target state becomes subjected to the negative impact of unilateral sanctions and also of overcompliance. Sanctions against states, sectoral sanctions on trade involving specific sorts of goods critical for the national economy, especially fuel, mineral resources, gold, wood etc., and civil aviation undermine the economy of the state under sanctions as a whole, resulting in an overall economic crisis, growing levels of unemployment, poverty, food insecurity, and a reduction of 292

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available social support and assistance programs (Douhan, Report, A/76/174/Rev.1, 2021, paras. 10, 13–14) (Cuba, Venezuela (Ibid., para. 11), Iran, Russia (Ibid., para. 15)). Sanctions against individuals and companies affect human rights of designated individuals and their families, employees of companies and often the whole sector of the economy, if imposed on persons in charge of such sectors, like ministers (Ibid., paras. 20–45). In particular, the inability to sell oil abroad prevents Venezuela from having the revenues needed to maintain its basic infrastructure, resulting in electricity, gas, gasoline and water supply shortages and the development of unsanitary situations. It prevents people from having access to education and the Internet, going to work and travelling, affecting thus their right to work and their rights to health, to clean water and sanitation, to food, to education, to freedom of expression, to freedom of movement and, consequently, their right to life and the right to development (Douhan, Report, A/HRC/48/59/Add.2, 2021). The rights of the Syrian population are similarly harmed by unilateral sanctions and overcompliance, as the country is prevented from any rebuilding and reconstruction of the critical infrastructure, including schools, hospitals, electricity, water and gas supplies, the transportation infrastructure, irrigation, and agricultural and industrial activities. The cutting of banks from SWIFT prevents businesses from doing any international transactions and people from getting any remittances from abroad, affecting the enjoyment of economic, social, cultural and civil rights, including the right to development through access to basic resources, education, and health services (Douhan, Syria country visit, 2022). Unilateral sanctions applied against Iran’s oil, banking, aviation, transportation and trade sectors have negatively impacted the country’s economic situation, resulting in hyper-inflation, a reduction of average income, rising poverty levels, especially among Afghan refugees, the unavailability of international assistance, rising levels of unemployment including among people engaged in handicrafts, and the unavailability of resources to develop infrastructure, to use natural resources sustainably, and to protect the environment and cultural heritage (Douhan, Report, A/ HRC/51/33/Add.1, 2022). Unilateral sanctions and over-compliance may affect the human rights of the whole population of a country even if sanctions formally include only targeted measures, as, for example, in Zimbabwe (Douhan, Report, A/HRC/51/33/Add.2, 2022, paras. 7–13). The designation of high state officials and main companies, and fines imposed on banks in Zimbabwe amounting up to 3.8 bln USD, resulted in correspondent banks and foreign investors deciding to leave the country, hyperinflation, and the reluctance of foreign partners to deal with Zimbabwe and Zimbabweans. The poverty index increased correspondently to up to 50 per cent of the population, with high rates of food insecurity, anaemia and acute malnutrition. Over-compliance with unilateral sanctions prevents Zimbabwe from the possibility to rebuild industry and even water infrastructure, resulting not only in unemployment and growing rates of involvement in crime and sexual exploitation of the youth, but also in cholera outbreaks. Parents are often not able to cover expenses to send their children to school or to buy medical insurance (Ibid.). Over-compliance with unilateral sanctions prevents, delays or makes more costly the purchase and shipment to sanctioned countries of goods, including humanitarian goods and services such as essential food, medicine, medical equipment and spare parts for such equipment, even when the goods are not under sanctions lists or are exempted from sanctions regimes and even when the need is urgent and if they are of a life-saving nature (OHCHR, n. d.). Such practices also prevent international organisations and humanitarian NGOs from transferring funds to pay their employees in sanctioned countries, and block people in these countries from accessing their property, meeting their financial obligations, exercising business activities 293

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and handling normal day-to-day interactions, including ordering goods, transferring money for or getting money from their families, making simple payments for ordinary needs and purposes, booking flights and hotels, and participating in international cooperation including in the spheres of culture, science, sport and many others. They also impede their access to justice, including in national and international courts and investment tribunals, to respond to accusations and defend themselves, thus denying such fundamental rights as the presumption of innocence, due process, the right to defence and to fair hearings and trials. Although the negative impact of unilateral sanctions and over-compliance applies to nearly all categories of human rights, due to the limited scope of the chapter, it will focus on the impact on the right to health. In accordance with art. 12 of the International Сovenant on Economic, Social and Cultural Rights (ICESCR) of 1966, states are obliged to take a broad scope of steps necessary to achieve the right of everyone to the enjoyment of the highest attainable standard of physical and mental health (ICESCR 1966). Yet every area of health is apparently affected by sanctions, something that was identified already in early 2000th while assessing the impact of the legal sanctions of the UN Security Council on Iraq in 1991–2003 (Garfield 2020, 16–18), as well as on Yugoslavia, Nicaragua, Cuba, Burundi and Haiti (Kokabisagh 2018, 376, 385–387; Hanania 2020). The healthcare system is very vulnerable in the face of sanctions and over-compliance due to high inflation, growing poverty, impediments in procurement, delivery and distribution of the necessary medical equipment, spare parts, software, medicine, raw materials and reagents and the migration of medical personnel (Kasturi, Al Faisal and Alsaleh 2012, 198; Korea Peace Now 2019). Companies are reluctant to provide medical equipment, services and medicine even with formally announced humanitarian exemptions, the ineffectiveness and insufficiency of which has been noted by the Committee on Economic, Social and Cultural Rights (Committee on ESCR) in its General comment No. 8, even as regards sanctions of the UN Security Council (CESCR, E/C.12/1997/8, 1997, paras. 3–5), which caused much less over-compliance than unilateral ones do. As sanctions lead to deepening economic crises, insufficiency of funds, impediments in payments, procurement, insurance and delivery of medical equipment and medicines, many countries become unable to deliver WHO recommended vaccinations including for measles (Venezuela (Douhan, Report, A/HRC/48/59/Add.2, 2021, paras. 41–43), polio (Venezuela, Zimbabwe, Syria (Kasturi, Faisal, and Alsaleh 2012, 197–198), Iran (Pelter, Teixeira and Moret 2022a, 13) and yellow fever (Venezuela). ***The absence of proper tests and medicine results in outbreaks of typhus, roseola (Syria) (Hanania 2020), HIV/AIDS (Venezuela (Douhan, Report, A/HRC/48/59/ Add.2, 2021, para. 51), Zimbabwe), opportunistic infections (Venezuela (Ibid.)) and tuberculosis (North Korea (Korea Peace Now 2019, 7). Over-compliance by the private sector prevents access to medicine even in the absence of comprehensive or sectoral sanctions (Zimbabwe) (Douhan, Report, A/HRC/51/33/Add.2, 2022, para. 38). Limited access to clean water and sanitation due to the impossibility to maintain and rebuild the water supply infrastructure and to buy water-purifying reagents results in outbreaks of cholera (Zimbabwe (Ibid., para. 30), Syria (Douhan 2022). The impossibility to procure and deliver necessary medicine, medical equipment and raw materials affects even countries which used to have developed healthcare and pharmaceuticals systems (Iran, Cuba (Garfield 2020, 19), Syria (Douhan 2022) (Pelter, Teixeira and Moret 2022b, 22; OXFAM 2021), especially if producers are based in the sanctioning countries. Even international cooperation in the sphere of organ transplants is affected due to impediments to payments and freezing assets of central banks and public companies (AL USA 23/2021, 2021; Douhan, Report, A/HRC/48/59/Add.2, 2021, para. 47). 294

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Reports reflect growing mortality rates, levels of suffering and reduced life expectancy for people suffering from chronic and severe diseases, in particular specific forms of diabetes, haemophilia, leukaemia, ichthyosis, multiple sclerosis, autism (Douhan, Report, A/HRC/51/33/Add.1, 2022, para. 28), epidermolysis bullosa (AL SWE 4/2022, 2022; AL OTH 95/2022, 2022), thalassemia (OHCHR 2023), cancer and many others (Douhan 2022). UNICEF estimates the average reduction of life expectancy to 3-4 months per year of sanctions in force (Pelter, Teixeira and Moret 2022b, 22). Insufficient transportation and fuel and the impossibility to rebuild transport infrastructure in the face of unilateral sanctions prevent people from getting to hospitals even for urgent cases and baby deliveries, resulting in growing mortality rates (Douhan, A/HRC/48/59/Add.2, 2021, para. 65; Korea Peace Now 2019, 25; KNOEMA, n. d.). These reasons and the impossibility to procure vehicles and helicopters qualified as dual-use goods undermine emergency response capacities in the cases of natural disasters in Zimbabwe, Iran (Douhan, Report, A/HRC/51/33/Add.1, 17 August 2022, para. 50; Douhan, Report, A/HRC/51/33/Add.2, 2022, para. 76); this was clearly illustrated by the February 2023 earthquake in Syria (OHCHR 2023). It is generally recognised that the availability of food, access to clean water and sanitation, raw materials, electricity, gas and fuel, seeds and other agricultural goods are essential for achieving the highest possible level of health (OHCHR 2022) although all of these spheres are affected by unilateral sanctions. The broad interpretation of relations to the government causes sanctions to impact the entire public sector of countries under sanctions, making payments impossible; even medical professionals from countries under sanctions cannot get access to online platforms, participate in medical conferences, subscribe to medical journals or participate in joint research (Douhan, Report, A/HRC/51/33/Add.1, 2022, para. 58; Douhan, Report, A/HRC/51/33/Add.2, 2022, paras. 41–86).

Impact of Unilateral Sanctions on the Achievement of the Sustainable Development Goals Another important issue refers to the impact of unilateral sanctions on the achievement of the Sustainable Development Goals (SDGs) fixed in the 2030 Agenda for Sustainable Development (A/RES/70/1, 25 September 2015). A detailed analysis of the problem is not possible due to the limited length of this article, therefore it gives an overview of several examples, although unilateral sanctions affect every single humanitarian, economic and environmental SDG. Goal 1 (Elimination of poverty) and Goal 8 (Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all) are closely related. Sectoral sanctions and sanctions against states, huge companies and high state officials, including those responsible for specific spheres of the economy, result in economic crises, reductions in working places and salaries, growing unemployment (Douhan, Report, A/HRC/51/33/Add.2, 2022, paras. 20–21), and the migration of people facing a deterioration of income, which negatively affects these people and their family members (Douhan, Report A/76/174, 2021, paras. 36–55). Countries under sanctions report a high involvement in the shadow economy (Venezuela (Douhan, Report, A/HRC/48/59/Add.2, 2021, para. 32), while around half of vital public sector positions – doctors, nurses, teachers, university professors, state officials, policemen, judges etc. (Venezuela (Ibid., para. 37), Zimbabwe (Douhan, Report, A/HRC/51/33/Add.2, 2022, paras. 41, 46–48), Syria (Douhan 2022)) – and positions in tourism, handicrafts and restaurants (Venezuela (Douhan, Report, A/HRC/48/59/Add.2, 2021, para. 67), Zimbabwe, Iran (Douhan, Report, A/HRC/51/33/ Add.1, 2022) are unfilled. 295

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As a result, poverty rates are enormously increasing, reaching above 90 per cent in Venezuela (Douhan, Report, A/HRC/48/59/Add.2, 2021, para. 30) and Syria (Douhan 2022) and thus affecting SDG 2 (End hunger, achieve food security and improved nutrition and promote sustainable agriculture); this is clearly demonstrated by FAO statistics, with 30.4 per cent of the population living in moderate hunger (people are reducing the quality and/or quantity of their food) (FAO 2023) and 11.9 per cent being severe food insecure (people run out of food and, at the most extreme, go for days without eating (Ibid.)) (FAO 2021: Xi, 10). Countries under sanctions report high levels of food insecurity in their populations, varying from specific regions only (Iran (Douhan, Report, A/HRC/51/33/Add.1, 17 August 2022, para. 42) up to 24 – 50 per cent (Venezuela (Douhan, Report, A/HRC/48/59/Add.2, 2021, paras. 32, 35), 60 per cent (Zimbabwe (Douhan, Report, A/HRC/51/33/Add.2, 12 August 2022, para. 42)) and 90 per cent (Syria (Douhan 2022)). Agricultural unsustainability is exacerbated by the aforementioned impediments in access to irrigation, diesel fuel, agricultural equipment, spare parts, seeds and fertilisers (Douhan, Report, A/ HRC/48/59/Add.2, 2021, paras. 56–66; Douhan, Report, A/HRC/51/33/Add.2, 2022, paras. 24, 27; Douhan, Report, A/HRC/51/33/Add.1, 2022, para. 41; FAO 2022, 72, 77). The crisis is typically most severe for the most vulnerable groups including women, which prevents the achievement of the SGD 5 (Achieve gender equality and empower all women and girls). Women and girls are the first to lose jobs during crises (Zimbabwe (Douhan, Report, A/HRC/51/33/ Add.2, 2022) North Korea, Iraq (Korea Peace Now 2019, 23–24)), are often subjected to human trafficking and sexual exploitation (Douhan, Report, A/HRC/48/59/Add.2, 2021, para. 32; Douhan, Report, A/HRC/51/33/Add.2, 2022, para. 45), lose access to medical assistance due to the absence of fuel, including for pregnancies and baby deliveries (Venezuela) (Douhan, Report, A/ HRC/48/59/Add.2, 2021), and sacrifice food for men and children, which results in growing anaemia of pregnant women (Venezuela (Ibid.), Zimbabwe (Douhan, Report, A/HRC/51/33/Add.2, 2022, para. 24)) and maternal mortality (Venezuela (KNOEMA, n. d.), North Korea (Korea Peace Now 2019, 25), Zimbabwe (KNOEMA, n. d.)). Goals 6 (Ensure availability and sustainable management of water and sanitation for all) as well as Goal 7 (Ensure access to affordable, reliable, sustainable and modern energy for all) are interdependent as water pumping and supply traditionally need sustainable electricity or access to other fuel. Unilateral sanctions often primarily target the energy sector via oil and gas embargoes, and prohibit trade including for spare parts and reagents necessary for the functioning of the oil industry (Venezuela (Douhan, Report, A/HRC/48/59/Add.2, 2021, paras. 62, 64), Russia, Cuba, Iran, Syria (Douhan 2022)). The unavailability of electricity and fuel results in the collapse of water and sanitation systems with water to be available once per week for a few hours (Venezuela (Douhan, Report, A/ HRC/48/59/Add.2, 2021, paras. 62–63)) or not at all (Zimbabwe (Douhan, Report, A/HRC/51/33/ Add.2, 2022, paras. 28–29), Syria (Douhan 2022)), leading to cholera outbreaks (Zimbabwe, Syria (UNICEF, 2022)) and insufficient water for irrigation (Iran (Douhan, Report, A/HRC/51/33/ Add.1, 2022, paras. 45–47), Syria (Douhan 2022). The environmental SDGs – SDG 13 (Take urgent action to combat climate change and its impact), 14 (Conserve and sustainably use the oceans, seas and marine resources for sustainable development), 15 (Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss) – directly depend on the availability of financial resources and necessary infrastructure. In crisis situations states usually switch to “survival mode”, prioritising food, health and agriculture (Madani 2021) at the expense of environmental projects, including maintenance of national parks and protection of endangered species (Zimbabwe (Douhan, Report, A/HRC/51/33/ 296

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Add.2, 2022, paras. 52, 88), transporting and treating solid waste and medical waste, addressing conflict-related pollution, including toxic munitions ingredients and explosive material undergoing chemical transformations (Douhan 2022), using environmental friendly technologies (Iran (Agence France-Presse 2018; Heger and Sarraf 2018, 9; AL USA 17/2022, 2022; Douhan, Report, A/HRC/51/33/Add.1, 2022, para. 45), Venezuela, Syria), procuring filters and filtering technologies, cutting wood for cooking and heating (Syria (Douhan, 2022), Venezuela), using sewage water for drinking, cooking and irrigation (Syria (Ibid.), Venezuela (Douhan, Report, A/ HRC/48/59/Add.2, 2021, paras. 37, 50), Zimbabwe (Douhan, Report, A/HRC/51/33/Add.2, 2022, paras. 28–30, 61) and developing alternative sources of energy (Iran (Climate Home News 2019), Zimbabwe).

Humanitarian Impact on Humanitarian Actors and Humanitarian Work The delivery of humanitarian assistance as well as the work of humanitarian actors at both the international and national levels have also been substantially affected by the use of unilateral sanctions, in particular due to the unclear, over-lapping, confusing and complicated sanctions regulations, the multiplicity of terms and confusing regulation for identification of and methodology for getting licenses for humanitarian deliveries through humanitarian exceptions (a general approval of transfers of certain goods and services), exemptions (a specific approval or licencing procedure for a specific category of activities and transfers which are to be excluded from the imposed restrictions) or derogations (AL USA 21/2022, 2022). Structural and application inconsistencies for such humanitarian exemptions can challenge the missions of humanitarian actors, seriously undermining their emergency response capabilities and resulting in a feeling of uncertainty and fear. Humanitarian actors, donors and financial institutions often do not have the expertise or the financial and human resources to navigate complex and interlinked sanctions regimes, and the current humanitarian carve-outs are often too technical and open to various interpretations, exacerbating existing uncertainties and fears of unintended transgressions, and thus leading to instances of over-compliance and de-risking. In particular, US general licenses traditionally provide for the possibility of certain types of derogations involving specific sorts of goods, for example, food or medicine, but even in this case other provisions of sanctioning regulations can result in over-compliance, for example, prohibition to receive money from countries under sanctions, or to enter its sea or air space, or to insure cargo (Douhan, Report, A/HRC/51/33/Add.1, 2022; Douhan, Report, A/HRC/48/59/Add.2, 2021), resulting in the impossibility to deliver food, medicine and medical equipment to the countries under sanctions (AL SWE 4/2022, 2022) even in the course of the pandemic (Douhan, Report, A/75/209, paras. 21–23). In other cases, humanitarian organisations are to apply for multiple licenses even for a single minor delivery (Douhan, 2022), like fuel for a car in the sanctioned country (European Commission 2020, 8). On top of the reported serious delays in processing license requests, which may take up to a year, humanitarian actors have reported cumbersome legal fees for regulatory interpretation and legal support, which can sometimes outweigh the cost of the provided humanitarian aid itself. Humanitarian actors are also subjected to risks while engaging in their humanitarian work; in particular, they may be prohibited from delivering any humanitarian assistance due to the narrow interpretation of the term “humanitarian aid”. Its interpretation by sanctioning countries traditionally excludes everything beyond “purely humanitarian purposes” (AL USA 21/2022, 2022; European Commission 2022, paras. 3.9–3–10), such as things that help development of the country (Zimbabwe) (Douhan, Report, A/HRC/51/33/Add.2, 2022) or assist the government in rebuilding 297

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it (Syria (Douhan 2022)). All projects for clean water delivery and electricity production have thus stopped in Iran (Douhan, Report, A/HRC/51/33/Add.1, 2022, paras. 45–47). Repeated calls to exclude critical infrastructure and services including electricity, water, gas supply systems, transportation, irrigation, seeds and fertilisers, etc. (OHCHR, n. d.), have not been accepted by sanctioning countries. Moreover, public sector activity including the work of school teachers, university professors, doctors in public hospitals, or water-pump stations are traditionally excluded from any projects (Douhan 2022). As a result, in the face of unilateral sanctions, threats of secondary sanctions, unclear mechanisms of humanitarian exemptions and the impossibility to get exemptions even in emergencies or for reconstruction and development projects, and overcompliance with unilateral sanctions, the procurement of all necessary and critical equipment, spare parts, reagents and soft-ware is prevented, impeding the achievement of SDGs 9, 11 and 16. Numerous international and local organisations have expressed serious concerns about the high costs of operations, including due to sanctions-induced rising prices in fuel and the challenges to financial transactions, procurement and delivery of goods and services. Foreign banks are often reluctant to process payments destined for countries under sanctions. Restrictions and delays in processing payments with suppliers can take months, leading to a restricted and less competitive market, rising costs, and putting at risk the implementation of life-saving humanitarian interventions. In Syria in particular, even the programmes of UN agencies have reported procurement and money transfer delays of up to 1.5 years (Douhan 2022). Under the humanitarian exemptions provisions, humanitarian organisations bear the burden of proof of the “purely humanitarian” nature of their work and are obliged to guarantee that the assistance delivered is properly distributed and not misused. Humanitarian organisations often live in constant fear of possible breaches of the sanctions when engaging with entities and suppliers in countries under sanctions. Thus, otherwise authorised financial transactions may still be refused due to the generalised fear of potential sanctions violations (OHCHR 2022). Due to grounded or ungrounded fear to lose donations, some humanitarian organisations were scared even to talk to the Special Rapporteur during her country visit to Zimbabwe (Douhan, Report, A/HRC/51/33/Add.2, 2022). Therefore, humanitarian exemptions are very narrow and ineffective. They do not help much to mitigate the negative humanitarian effects of the imposed sanctions, even for delivering lifesaving goods. It is further argued that the nature of humanitarian exemptions may only allow for ad hoc micro-level interventions which do not suffice in the context of broad macro-level structural changes caused by the imposed sanctions regimes and the high economic and social costs experienced by sanctioned countries. Even the processing and granting of humanitarian exemptions licenses are very lengthy, expensive and confusing. As mentioned earlier, they are limited exclusively to food and medicine, and even these are delivered to a very limited extent with enormous delays, and are even more limited due to over-compliance and de-risking policies. The recent earthquake in Turkey and Syria of 6-7.02.2023 can be used to illustrate the insufficiency and ineffectiveness of humanitarian exemptions. Despite the recognised catastrophic impact directly affecting right to life, right to health, right to housing, access to water, freedom from torture and many others, the earthquake-related humanitarian consequences in Syria added to the already existing devastating effects of 12 years of military hostilities and unilateral sanctions (OHCHR 2022). Despite the inadequacy and insufficiency of humanitarian exemptions repeatedly stated in the documents of Special Rapporteur (OHCHR 2022), and the joint voice of humanitarian organisations (SANA 2023), the Church (Al Mayadeen 2023) and external advocacy groups (ADC 2023) to lift unilateral sanctions to provide the free flow of humanitarian aid to Syria, official policies of both the US and the EU are that existing humanitarian channels are sufficient and sanctions 298

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will stay in force in the same way as before (AhramOnline 2023; HindustanTimes 2023; U.S. Department of State 2023). The US General License No. 23 of 8.02.2023 authorising transactions related to earthquake relief in Syria (Office of Foreign Assets Control 2023) does not provide any guidance about what shall be qualified as the allowed “earthquake relief” transactions and what are prohibited reconstruction and rebuilding ones, keeping in force all risks of over-compliance. Similarly, the license does not include any guarantees for humanitarian actors that they won’t be punished, including with secondary sanctions, because of their humanitarian work. Similar approach is taken by the UK (Office of Financial Sanctions Implementation 2023). EU decision taken 16 days after the Earthquake takes a broader approach (Council of the European Union 2023), but still does not provide guarantees for humanitarian actors. It is also remarkable that existing problems of with the use and implementation of humanitarian exemptions and delivery of humanitarian aid prevent proper implementation of the relevant UN Security Council resolutions. In particular, the Security Council, in resolution 2615 (2021) relating to its sanctions against individuals, groups and entities associated with the “Taliban” in Afghanistan, decided that “humanitarian assistance and other activities that support basic human needs in the country are not a violation” of the freeze on their assets “and that the processing and payment of funds, other financial assets or economic resources, and the provision of goods and services necessary to ensure the timely delivery of such assistance or to support such activities are permitted (…)” as long as “reasonable efforts” are made to minimise any benefits to the sanctioned individuals and entities (UN Security Council, S/RES/2615, 2021). Formally, states are to guarantee that banks and service providers act in the spirit of that resolution, avoid over-compliance with sanctions and act in accordance with the due diligence principle of under the UN Guiding Principles for Business and Human Rights (Guiding principles on Business and Human rights, 2011) and General Comment No. 24 of the Committee on ESCR (CESCR, E/C.12/GC/24, 2017). Unfortunately, it does not happen in reality as states do not provide any guarantees to private businesses that they won’t be subjected to secondary sanctions. The Security Council, in resolution 2664 (2022) of 9.12.2022, addressed the main issues of sanctions in response to threats to international peace and security; it noted the importance of “assessing potential humanitarian impact of sanctions prior to establishment of sanctions’ regime” (preamble) (UN Security Council, S/RES/2664, 2022) as well as the importance of humanitarian assessment of national measures aimed to fight terrorism financing (preamble), and obligations to ensure implementation of humanitarian principles: humanity, neutrality, impartiality and interdependence (preamble). No similar assessment unfortunately takes place while introducing and implementing unilateral sanctions. Moreover, unilateral sanctions and over-compliance with such sanctions often prevents the implementation of the Security Council resolutions. Documents adopted by sanctioning states and organisations, for example, EU Council regulation 2023/331 of 14.02.2023 provide for very limited release of funds to be used for humanitarian purposes by the UN and UN partner NGOs only (Council of the European Union, 2023/331, 2023).

Conclusions The world community is currently facing an expansion of various forms and types of unilateral sanctions applied to all sorts of governmental and non-governmental actors and economic sectors, as well as uncertainty and overlaps of sanctions regimes, threats of secondary sanctions, civil and criminal penalties for circumvention of sanctions regimes, and a growing level of zero-risk policies and over-compliance by banks, producers of goods, transportation and delivery companies as well as other types of private actors. 299

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Contemporary sanctions regimes have also been characterised by complexity, comprehensiveness, extraterritoriality of legislation, invoking the state of emergency (e.g. in the US) as a ground for extraordinary powers of the executive bodies beyond the standards of art. 4 off the ICCPR, over-compliance by banks, states, trade partners and donors; the complicated and unclear character of getting humanitarian exemptions for delivering humanitarian aid; the absence of any comprehensive mechanism for protecting human rights as well as accountability and redress for those whose rights have been violated by unilateral sanctions. The humanitarian impact of unilateral sanctions and over-compliance with them can only be assessed cumulatively and usually affects the whole population of the country under sanctions, being especially harmful for the most vulnerable groups: poorest, migrants, people suffering from chronic and severe diseases, women, children and the elderly. As a result, nearly all categories of human rights are affected: civil, economic, social, cultural, right to development, including in many cases even the right to life. Special study is necessary to identify the general impact of unilateral sanctions and over-compliance on specified groups of human rights, specific human rights, rights of every category of vulnerable groups of a population, and the impact on the achieving the Sustainable Development Goals.

Bibliography ADC (2023) ADC calls on lifting sanctions to allow Aid into Syria. Available at: https://adc.org/aid-syria/ (Accessed: 25.02.2023). AhramOnline (2023) US sanctions on Syria not an obstacle to aid delivery: US official. Available at: https:// english.ahram.org.eg/NewsContent/2/8/487761/World/Region/US-sanctions-on-Syria-not-an-obstacletoaid-deliv.aspx (Accessed: 25.02.2023). Al Mayadeen (2023) Middle East Council of Churches: Lift sanctions off Syria immediately. Available at: https://english.almayadeen.net/news/politics/middle-east-council-of-churches:-lift-sanctions-off-syria-im (Accessed: 25.02.2023). AL OTH 95/2022, 11 October 2022. Available at: https://spcommreports.ohchr.org/TMResultsBase/ DownLoadPublicCommunicationFile?gId=27592 (Accessed: 25.02.2023). AL SWE 4/2022, 11 October 2022. Available at: https://spcommreports.ohchr.org/TMResultsBase/ DownLoadPublicCommunicationFile?gId=27591 (Accessed: 25.02.2023). AL USA 17/2022, 27 September 2022. Available at: https://spcommreports.ohchr.org/TMResultsBase/ DownLoadPublicCommunicationFile?gId=27571 (Accessed: 25.02.2023); Iran country visit report, para. 45. AL USA 21/2022, 26 October 2022. Available at: https://spcommreports.ohchr.org/TMResultsBase/ DownLoadPublicCommunicationFile?gId=27622 (Accessed: 25.02.2023). AL USA 23/2021, 12 July 2021. Available at: https://spcommreports.ohchr.org/TMResultsBase/ DownLoadPublicCommunicationFile?gId=26508 (Accessed: 25.02.2023); Visit to Venezuela, para. 47. Appendix A to part 501 of the Economic Sanctions Enforcement Guidelines. Available at: https://www.ecfr. gov/cgi-bin/text-idx?SID=082b813329e2def1ecd3cadfeb66acc4&mc=true&node=ap31.3.501_1901.a& rgn=div9%20;%20https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber.pdf (Accessed: 25.02.2023). Climate Home News (2019) Empty car shows and stalled solar as sanctions keep Iran dirty. Available at: https://www.climatechangenews.com/2019/01/15/empty-car-shows-stalled-solar-sanctions-keep-irandirty/ (Accessed: 25.02.2023). Council Regulation (EU) (2023). Amending certain Council regulations concerning restrictive measures in order to insert provisions on a humanitarian exemption, ST/5296/2023/INIT, OJ L 47, 15.2.2023, p. 1–5. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R0331 (Accessed: 25.02.2023). Council of the European Union (2018) Guidelines on the implementation and evaluation of restrictive measures (sanctions) in the framework of the EU Common Foreign and Security Policy, doc No. 5664/18.

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Humanitarian Impact of Unilateral Sanctions Council Regulation (EU) 2023/331 of 14.02.2023 amending certain Council regulations concerning restrictive measures in order to insert provisions on a humanitarian exemption, ST/5296/2023/INIT, OJ L 47, 15.2.2023, p. 1–5. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R0331 (Accessed: 25.02.2023). Council Regulation (EU) 2023/407 of 23 February 2023 amending Regulation (EU) No 36/2012 concerning restrictive measures in view of the situation in Syria, ST/6382/2023/INIT, OJ L 56I, 23.2.2023, p. 1–3. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32023R0407 Economic and Social Council (2000) Review of Further Developments in Fields with Which the Subcommission Has Been or May Be Concerned, E/CN.4/Sub.2/2000/33. Available at: https://www.globalpolicy. org/global-taxes/42501-the-adverse-consequences-of-economic-sanctions.html (Accessed: 25.02.2023). European Commission (2020) ‘Commission Guidance Note On The Provision Of Humanitarian Aid To Fight The Covid-19 Pandemic In Certain Environments Subject To EU Restrictive Measures’. Available at: https://reliefweb.int/sites/reliefweb.int/files/resources/200511-syria-humanitarian-aid-guidance-note_ en.pdf (Accessed: 25.02.2023). P. 8. European Commission (2022) ‘Commission Guidance Note On The Provision Of Humanitarian Aid In Compliance With Eu Restrictive Measures (Sanctions)’, paras. 3.9-3-10. Available at: https://finance.ec.europa. eu/system/files/2022-07/220630-humanitarian-aid-guidance-note_en.pdf (Accessed: 25.02.2023). European Union Financial sanctions consolidated list (2023) Available at: https://webgate.ec.europa. eu/europeaid/fsd/fsf/public/files/pdfFullSanctionsList/content?token=dG9rZW4tMjAxNw (Accessed: 25.02.2023). FAO (2021) ‘The State of Food Security and Nutrition in the World 2021. Transforming food systems for food security, improved nutrition and affordable healthy diets for all’, p. Xi, 10. Available at: https://www.fao. org/3/cb4474en/cb4474en.pdf (Accessed: 25.02.2023). FAO (2022) ‘Food Outlook. Biennial Report on Global Food Markets’. Available at: https://www.fao.org/3/ cc2864en/cc2864en.pdf (Accessed: 25.02.2023), pp. 72, 77. FAO, ‘Hunger and food insecurity’. Available at: https://www.fao.org/hunger/en/ (Accessed: 25.02.2023). Agence France-Presse (2018) ‘Iran: le retrait de Peugeot et Renault mauvais pour l’environnement (responsable)’, Le Point. Available at: https://www.lepoint.fr/automobile/iran-le-retrait-de-peugeot-et-renaultmauvais-pour-l-environnement-responsable-02-10-2018-2259594_646.ph (Accessed: 25.02.2023). Garfield, R. (2020) ‘The Public Health Impact of Sanctions: Contrasting Responses of Iraq and Cuba’, Middle East Report, pp. 16–18. Genuine solidarity with earthquake survivors calls for lifting of sanction-induced restrictions: UN experts. (2023) Available at: https://www.ohchr.org/en/statements/2023/02/genuine-solidarity-earthquakesurvivors-calls-lifting-sanction-induced (Accessed: 25.02.2023). Guidance Note on Overcompliance with Unilateral Sanctions and its Harmful Effects on Human Rights. Available at:https://www.ohchr.org/en/special-procedures/sr-unilateral-coercive-measures/resourcesunilateral-coercive-measures/guidance-note-overcompliance-unilateral-sanctions-and-its-harmfuleffects-human-rights (Accessed: 25.02.2023). Hanania, R. (2020) ‘Ineffective, Immoral, Politically Convenient: America’s Overreliance on Economic Sanctions and What to Do about It’, Policy analysis, Available at: https://www.jstor.org/stable/pdf/ resrep23040.pdf?refreqid=excelsior%3Ad66928b8f68e09c8bba2c58fe72142e2&ab_segments= 0%2Fbasic_search_gsv2%2Fcontrol&origin= (Accessed: 25.02.2023). Heger, M., Sarraf, M. (2018) ‘Air Pollution in Tehran: Health Costs, Sources, and Policies’, World Bank, p. 9. Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/29909/126402-NWPPUBLIC-Tehran-WEB-updated.pdf?sequence=1&isAllowed=y (Accessed: 25.02.2023). Hindustan Times (2023) Syria seeks European Union help for earthquake relief. Available at: https://www. hindustantimes.com/world-news/syria-seeks-european-union-help-for-earthquake-relief- 101675869667509. html (Accessed: 25.02.2023). Human Rights Council. Human rights and unilateral coercive measures, A/HRC/RES/15/24, 6 October 2010. Available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/G10/167/12/PDF/G1016712. pdf?OpenElement (Accessed: 25.02.2023). Human Rights Council. Visit to the Bolivarian Republic of Venezuela, Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena Douhan, A/HRC/ 48/59/Add.2, 6 September 2021. Available at: https://reliefweb.int/attachments/2c45fc17-c098-3ddd-855bcfe5c3930e74/A_HRC_48_59_Add.2_AdvanceUneditedVersion.pdf (Accessed: 25.02.2023). paras. 41–43.

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Alena F. Douhan Human Rights Council. The negative impact of unilateral coercive measures on the enjoyment of human rights, A/HRC/RES/49/6, 31 March 2022. Available at: https://documents-dds-ny.un.org/doc/UNDOC/ GEN/G22/307/98/PDF/G2230798.pdf?OpenElement (Accessed: 25.02.2023). Human Rights Council. Human rights and unilateral coercive measures, A/HRC/RES/45/5, 6 October 2020. Available at: https://undocs.org/en/A/HRC/RES/45/5 (Accessed: 25.02.2023). International Covenant on Economic, Social and Cultural Rights (1966, 16 December), Available at: https:// www.ohchr.org/en/instruments-mechanisms/instruments/international-covenant-economic-social-andcultural-rights (Accessed: 25.02.2023). Iran: Over-compliance with unilateral sanctions affects thalassemia patients say UN experts (2023) Available at: https://www.ohchr.org/en/press-releases/2023/02/iran-over-compliance-unilateral-sanctions-affectsthalassemia-patients-say (Accessed: 25.02.2023). Kasturi, S., Al Faisal, W., Alsaleh, Y. (2012) ‘Syria: The Impact of Sanctions on Public Health’, Journal of Public Health, 35(2), p. 198. Korea Peace Now (2019) The Human Costs And Gendered Impact Of Sanctions On North Korea, Available at: https://koreapeacenow.org/wp-content/uploads/2019/10/human-costs-and-gendered-impact-of-sanctionson-north-korea.pdf (Accessed: 25.02.2023). Kokabisagh, F. (2018) ‘Assessment of the Effects of Economic Sanctions on Iranians’ Right to Health by Using Human Rights Impact Assessment Tool: A Systematic Review’, International Journal of Health Policy and Management, 7(5), pp. 376, 385–387. Madani, K. (2021) ‘Have International Sanctions Impacted Iran’s Environment?’, World 2021, 2(2), pp. 231–252. Negative impact of unilateral coercive measures on the enjoyment of human rights in the coronavirus disease pandemic. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena Douhan, A/75/209, 21 July 2020. Available at: https://documents-ddsny.un.org/doc/UNDOC/GEN/N20/190/03/PDF/N2019003.pdf?OpenElement (Accessed: 25.02.2023). OFAC (2023) Specially Designated Nationals and Blocked Persons List. Available at: www.treasury.gov/ ofac/downloads/sdnlist.pdf (Accessed: 25.02.2023). Office of Financial Sanctions Implementation (2023) ‘General Licence. Humanitarian activity’, INT/2023/2711256’. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/1137354/INT-2023-2711256__Amended_17-02-2023__Syria_Humanitarian_ GL.pdf (Accessed: 25.02.2023). Office of Foreign Assets Control (2023) ‘General License No. 23 Authorizing Transactions Related to Earthquake Relief Efforts in Syria’. Available at: https://home.treasury.gov/system/files/126/syria_gl23.pdf (Accessed: 25.02.2023). OHCHR (2022a) Humanitarian exemptions in unilateral sanctions regimes ineffective and inefficient: UN experts. Available at: https://www.ohchr.org/en/statements/2022/11/humanitarian-exemptions-unilateralsanctions-regimes-ineffective-and-inefficient (Accessed: 25.02.2023). OHCHR (2022b) UN expert calls for lifting of long-lasting unilateral sanctions ‘suffocating’ Syrian people. Available at: https://www.ohchr.org/sites/default/files/documents/issues/ucm/statements/2022-1109/20221110-eom-syria-sr-ucm-en.docx (Accessed: 25.02.2023). OHCHR, ‘UN experts urge States to consider humanitarian impacts when imposing or implementing sanctions’. Available at: https://previous.ohchr.org/SP/NewsEvents/Pages/DisplayNews.aspx?NewsID= 28362&LangID=E (Accessed: 25.02.2023). Pelter, Z., Teixeira, C., Moret, E. (2022a) ‘Sanctions and their impact on Children’, p. 13. Available at: https://www.unicef.org/globalinsight/media/2531/file/%20UNICEF-Global-Insight-Sanctions-andChildren-2022.pdf(Accessed: 25.02.2023). Pelter, Z., Teixeira, C., Moret, E. (2022b) ‘Sanctions and their impact on Children’, p. 22. OXFAM (2021) ‘Right to Live without a Blockade: Impact of the US sanctions on the Cuban population and women’s rights’. Available at: https://oxfamilibrary.openrepository.com/bitstream/handle/10546/621191/ bp-cuba-blockade-women-250521-summ-en.pdf;jsessionid=4DEE90884C8B0120039F23E740FD33C7? sequence=4 (Accessed: 25.02.2023). Preliminary findings of the visit to the Syrian Arab Republic by the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights. Available at: https://www .ohchr.org/sites/default/files/documents/issues/ucm/statements/2022-11-09/20221110-eom-syria-sr-ucmen.docx

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Humanitarian Impact of Unilateral Sanctions Preliminary findings of the visit to the Syrian Arab Republic by the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights. Available at: https://www.ohchr.org/ sites/default/files/documents/issues/ucm/statements/2022-11-09/20221110-eom-syria-sr-ucm-en.docx (Accessed: 25.02.2023). SANA (2023) Syrian Arab Red Crescent calls for lifting siege on Syria to support rescue efforts. Available at: https://sana.sy/en/?p=299370 (Accessed: 25.02.2023). Secondary sanctions, civil and criminal penalties for circumvention of sanctions regimes and overcompliance with sanctions. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena F. Douhan, A/HRC/51/33, 15 July 2022. Available at: https:// documents-dds-ny.un.org/doc/UNDOC/GEN/G22/408/16/PDF/G2240816.pdf?OpenElement (Accessed: 25.02.2023). Targets of unilateral coercive measures: notion, categories and vulnerable groups. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, A/76/174/Rev.1, 13 September 2021, Available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/ N21/245/76/PDF/N2124576.pdf?OpenElement (Accessed: 25.02.2023). paras. 10, 13–14. Transforming our world: the 2030 Agenda for Sustainable Development (A/RES/70/1) of 25 September 2015. Available at: https://www.un.org/en/development/desa/population/migration/generalassembly/docs/ globalcompact/A_RES_70_1_E.pdf (Accessed: 25.02.2023). U.S. Department of State (2023) Department Press Briefing – February 6, 2023. Available at: https://www. state.gov/briefings/department-press-briefing-february-6-2023/ (Accessed: 25.02.2023). UN Committee on Economic, Social and Cultural Rights. General comment No. 24 on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, E/C.12/GC/24, 10 August 2017. Available at: https://www.refworld.org/docid/5beaecba4.html (Accessed: 25.02.2023). UN Committee on Economic, Social and Cultural Rights (CESCR). General Comment No. 8: The relationship between economic sanctions and respect for economic, social and cultural rights, E/C.12/1997/8, 12 December 1997. Available at:https://www.refworld.org/docid/47a7079e0.html (Accessed: 26.02.2023). UN experts urge States to consider humanitarian impacts when imposing or implementing sanctions. (2022) Available at: https://www.ohchr.org/en/press-releases/2022/03/un-experts-urge-states-considerhumanitarian-impacts-when-imposing-or (Accessed: 25.02.2023). UN Security Council, Resolution 2615 (2021). Adopted by the Security Council at its 8941st meeting, on 22 December 2021, S/RES/2615 (2021). Available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/ N21/413/83/PDF/N2141383.pdf?OpenElement (Accessed: 25.02.2023). UN Security Council, Resolution 2664 (2022). Adopted by the Security Council at its 9214th meeting, on 9 December 2022, S/RES/2664 (2022). Available at: http://unscr.com/en/resolutions/doc/2664 (Accessed: 25.02.2023). UNGA Resolution. Human rights and unilateral coercive measures, A/RES/69/180, 18 December 2014. Available at: https://www.ohchr.org/Documents/Issues/UCM/Res/A-RES-69-180.pdf (Accessed: 25.02.2023). UNGA Resolution. Human rights and unilateral coercive measures, A/RES/75/181, 15 December 2020. Available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/N20/372/60/PDF/N2037260.pdf? OpenElement (Accessed: 25.02.2023). UNGA Resolution, Human rights and unilateral coercive measures, A/RES/71/193, 20 January 2017 https:// daccess-ods.un.org/tmp/2279203.83214951.html. UNGA Resolution, Unilateral economic measures as a means of political and economic coercion against developing countries, A/RES/52/181, 4 February 1998. Available at: https://digitallibrary.un.org/ record/251268/files/A_RES_52_181-EN.pdf UNGA Resolution, Human rights and unilateral coercive measures, A/RES/70/151, 17 December 2015, para. 1; UNGA Resolution, Human rights and unilateral coercive measures, A/RES/71/193, 20 January 2017, para. 2. UNICEF (2022) ‘Cholera situation report 10 November 2022’. Available at: https://www.unicef.org/syria/ reports/cholera-situation-report-10-november-2022 (Accessed: 25.02.2023). Unilateral coercive measures: notion, types and qualification. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena Douhan, A/ HRC/48/59, 8 July 2021. Available at:https://documents-dds-ny.un.org/doc/UNDOC/GEN/G21/175/86/ PDF/G2117586.pdf?OpenElement (Accessed: 25.02.2023).

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Alena F. Douhan Unilateral sanctions in the cyberworld: tendencies and challenges. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena Douhan, A/77/296, 17 August 2022. Available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/N22/464/10/ PDF/N2246410.pdf?OpenElement (Accessed: 25.02.2023). United Nations (2011) ‘Guiding principles on Business and Human rights’. Available at: https://www. ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf (Accessed: 25.02.2023). Visit to the Bolivarian Republic of Venezuela. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, A/HRC/48/59/Add.2, 6 September 2021. Available at: https://reliefweb.int/attachments/2c45fc17-c098-3ddd-855b-cfe5c3930e74/A_HRC_48_59_ Add.2_AdvanceUneditedVersion.pdf (Accessed: 25.02.2023). Visit to the Islamic Republic of Iran. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena Douhan, A/HRC/51/33/Add.1, 17 August 2022. Available at: https://www.ohchr.org/sites/default/files/documents/hrbodies/hrcouncil/regularsession/session51/ 2022-09-07/A_HRC_51_33_Add1_AdvanceUneditedVersion.docx (Accessed: 25.02.2023). Visit to Zimbabve. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, Alena Douhan, A/HRC/51/33/Add.2, 12 August 2022, Available at: https://reliefweb.int/attachments/ec766d56-a7e0-4c9a-9fc4-73ae61d0506a/G2244831.pdf (Accessed: 25.02.2023). paras. 7-13. ‘Zimbabwe - Maternal mortality ratio’. Available at: https://knoema.com/atlas/Zimbabwe/Maternal-mortalityratio (Accessed: 25.02.2023). ‘Venezuela (Bolivarian Republic of) - Maternal mortality ratio’. Available at: https://knoema.com/atlas/ Venezuela-Bolivarian-Republic-of/Maternal-mortality-ratio (Accessed: 25.02.2023).

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24 US SECONDARY SANCTIONS Lawful After All? Joshua Andresen

Introduction The sanctions regimes employed by the United States are often painted with a broad brush as unlawful. Those who look a bit closer generally concede that US sanctions that apply on US territory and to US citizens are probably lawful. However, the conclusion usually follows that US sanctions with extraterritorial effect, and especially “secondary” sanctions that target, or at least encompass, foreign actors completely outside US jurisdiction, must surely be unlawful. Such arguments are generally based on appeals to principles of international law such as non-intervention, sovereignty, and jurisdiction. Few authors delve into actual US sanctions law and enforcement actions in any detail or depth. This chapter proposes to do precisely that by examining some of the main examples used to challenge the lawfulness of US sanctions, including BNP Paribas’ notorious $8.9 billion settlement with the United States and direct challenges to the extraterritorial application of US secondary sanctions in the US case against Reza Zarrab. By closely examining US sanctions law and enforcement cases, the chapter argues that neither the principle of non-intervention nor the international law of jurisdiction is a persuasive basis for challenging the lawfulness of US secondary sanctions. In particular, the chapter argues that the penalties threatened by secondary sanctions follow from the United States’ sovereign prerogative to regulate access to its markets rather than a feature of sanctions that raise additional jurisdictional difficulties. US sanctions may sometimes be unwelcome, unwise, or otherwise awful, but at least as a matter of general international law they remain lawful. The next part of the chapter defines primary and secondary sanctions and sets out the central charges against US sanctions as unlawful interventions into the sovereignty of other states and thus an abuse of rights. These criticisms founder on both the vagueness of the principles in question and the lack of positive international law on coercive economic measures. The third part focuses on the more serious challenge to US secondary sanctions, that they are incompatible with the principles of jurisdiction under international law. The discussion is largely structured as a response to the most extensive and incisive analysis of US secondary sanctions to date, that of Tom Ruys and Cedric Ryngaert in “Secondary Sanctions: A Weapon Out of Control?” As we find in other insightful analyses,1 Ruys and Ryngaert show that most US secondary sanctions take the form of “denials of privileges” that are fully consistent with recognized principles DOI: 10.4324/9781003327448-30

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of jurisdiction. However, they maintain that the threat of civil and criminal penalties on foreign actors for trade or transactions with foreign sanctions targets have no legitimate jurisdictional basis. In response to these jurisdictional criticisms, this chapter closely examines three aspects of US sanctions law singled out for jurisdictional deficiency: the United States claims to jurisdiction over US-owned or controlled foreign entities, over the reexport of US-origin goods, and over foreign financial transactions that access the US financial system. By closely examining the principles of jurisdiction under international law, US sanctions statues, and US enforcement actions, I show that the United States has persuasive bases for claiming both prescriptive and enforcement jurisdiction in the secondary sanctions context. Moreover, I show that the threat of penalties for violations of secondary sanctions should be understood as following from the United States’ power to regulate access to its own markets and thus unproblematic from a jurisdictional perspective. By way of conclusion, I address the criteria that should be applied when assessing whether the security principle of jurisdiction has been legitimately invoked. I argue that attempts to specify the legal criteria for invoking the security principle by analogy to invocations of security exception provisions in treaties and the law of self-defense conflate three importantly distinct legal questions. More importantly, using the security exception criteria needed to justify breaching a treaty or using military force in self-defense imports strict and objective legal standards that are inapt when applied to the international law of jurisdiction. Following the international law of jurisdiction, justifiably invoking jurisdiction comes down to demonstrating a state’s “genuine connection” to or “reasonable interest” in the activity in question (Crawford, 2019, p. 441). Before diving into the analysis, I want to make clear what I am not doing in this chapter. The chapter is not examining the possible legal limits on sanctions that could be derived from human rights law and other sources.2 Moreover, the chapter takes no position on the wisdom or effectiveness of US sanctions. The aim of the chapter is solely to clarify the legal status of US secondary sanctions under general principles of international law and the international law of jurisdiction.

US Sanctions Under General Principles of International Law While some suggest that all “unilateral” sanctions, that is, sanctions deployed by states independently of the UN Security Council, are unlawful,3 there is no basis in either customary or positive international law to support this claim.4 Moreover, the widespread and increasing state practice of imposing economic sanctions would appear to render a decisive blow against such arguments. More careful commentators thus conclude, “in the absence of a binding international treaty regulating unilateral sanctions and without identifying or establishing the existence or formulation of a rule of customary international law regulating unilateral sanctions it is difficult to regard such sanctions unlawful” (Subedi, 2021, p. 32). Given states’ sovereign prerogative to regulate and restrict goods and persons within their own jurisdiction, it is common to distinguish between “primary” and “secondary” sanctions and focus criticism on the latter. We can understand primary sanctions as conditions placed on economic activity between the targeting state and the target state without seeking to directly influence the economic activity of third states and their nationals. By contrast, secondary sanctions seek to deter third-state nationals from certain economic relations with the target state, usually by conditioning access to economic privileges with the targeting state on third-state nationals’ abstention from specified economic relations with the target state.5 To illustrate these two kinds of sanctions with a simple example, a US primary sanction may prohibit US banks from processing transactions for individuals or entities determined by the United States to be involved in the proliferation of weapons of mass destruction.6 A US secondary sanction may restrict a foreign bank’s access to 306

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correspondent banking in the United States if it “provides significant financial services” for persons or entities determined by the United States to be involved in the proliferation of weapons of mass destruction.7 In this way, secondary sanctions are generally designed as a direct reinforcement of primary sanctions, by incentivizing foreign actors not to participate in activity that is closed off to US persons, or to prevent what has become known as “backfilling.” Although there is a clear logic behind secondary sanctions insofar as they seek to shore up the effects of primary sanctions, many see secondary sanctions with extraterritorial effect as violative of the principle of non-intervention and an abuse of rights. Thus Julia Schmidt has recently argued, “although not all unilateral extra-territorial sanctions are problematic under the law on jurisdiction, and not all might reach the threshold of an intervention into the domaine réservé of sovereign actors, the extra-territorial sanctions contained in the US sanctions regimes against Iran and Cuba amount to an abuse of rights” (Schmidt, 2022, p. 57). The problem with these kinds of charges, however, is made clear by Ruys and Ryngaert. They argue that the principles of non-intervention and abuse of rights “are vague” (2020, p. 10).8 They go on to argue, precisely when an intervention unlawfully impinges on a foreign state’s sovereignty is notoriously difficult to define… Insofar as secondary sanctions may potentially constitute an abuse of rights, in particular in cases of arbitrary or disproportionate application of sanctions legislation, it remains in the eye of the beholder what is arbitrary or disproportionate in a given case—an issue which has long dogged the related principle of jurisdictional reasonableness. (2020, p. 10)9 Whether secondary sanctions amount to an unlawful intervention or an abuse of rights is thus very difficult to make out in the absence of a clear breach of an established rule of international law, such as would follow from an unjustified armed attack against another state.10 Despite casting doubts on the viability of claims that secondary sanctions infringe on a foreign state’s sovereignty, Ruys and Ryngaert themselves conclude that, “[b]y forcing foreign companies to either trade with the US or with the state subject to primary US sanctions, the US has succeeded in imposing its foreign policy agenda on non-nationals at the expense of the economic sovereignty of third states” (2020, p. 112). They make the further claim that “[t]he assertive use of secondary sanctions has also eroded the political sovereignty of third states, and of the EU” (2020, p. 112). Setting aside the fact that Ruys and Ryngaert do not further specify what is included in economic and political sovereignty, two observations are in order. First, even if Ruys and Ryngaert were correct that US secondary sanctions affect the economic and political sovereignty of other states, that would not, by itself, indicate that such effects were unlawful. Indeed, Ruys and Ryngaert do not draw that direct conclusion. Second, and more decisively, the idea that US secondary sanctions diminish or erode the economic or political sovereignty of other states appears to be premised on an implausible understanding of sovereignty. Whatever sovereignty or its exercise consists in, it cannot be premised on having an open set of costless choices. However unpalatable secondary sanctions may be, they certainly do not take away states’ or private actors’ ability to make economic choices, as is demonstrated by the facts of overcompliance with economic sanctions generally and EU firms’ compliance with US sanctions despite the EU blocking statute declaring precisely that unlawful. All sovereign choices have costs. Through secondary sanctions, the United States has found a way to leverage its market position to impose costs on choices. The United States may be unwise in doing so. The tool it is using may be ineffective for achieving its goals. However, as a general matter of international law, US secondary sanctions do not unlawfully infringe on states’ sovereignty.11 307

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Specifically, with respect to political sovereignty, Ruys and Ryngaert focus on the “US withdrawal from the [JCPOA] and the reactivation of harsh secondary sanctions,” which they claim “have fundamentally crippled Europe’s leverage to use the promise of investment and trade with Iran as a ‘carrot’ to keep Iran’s nuclear programme in check” (2020, p. 112). Here again, the sovereignty of the EU is not in question. The EU is still perfectly free to choose to trade with and invest in Iran and need not seek the United States’ permission to do so (a condition which really would be an erosion of EU sovereignty).12 Of course, such choices are never made in a vacuum and all free choices are, in fact, constrained. However unwise and disruptive the United States’ choice may have been, by withdrawing from the JCPOA and reimposing secondary sanctions, the United States has put back in place trade constraints vis-à-vis the United States, which is perfectly within its sovereign prerogative. The EU has no right to the privilege of trading with both the United States and Iran (rights which must be conferred by the United States and Iran, respectively). Moreover, the withdrawal of a privilege is not an erosion of sovereignty, but simply a change in the constraints under which sovereignty can be exercised. While arguments that US secondary sanctions violate general principles of international law are unsuccessful, more challenging questions are raised by arguments that US secondary sanctions are incompatible with the international law of jurisdiction. It is to these, more serious, charges against US sanctions that I now turn.

Jurisdictional Questions and Answers There are a number of jurisdictional claims that one might make against US sanctions that are aimed at the extraterritorial conduct of foreign persons. At the most general level, we can ask first whether it is a legitimate exercise of prescriptive jurisdiction for the United States to enact legislation that purports to regulate the conduct of foreign persons outside of its territory. There remains a degree of controversy over whether states enjoy unfettered discretion to exercise jurisdiction as long they do not “overstep the limits which international law places upon its jurisdiction,”13 or whether states that intend to project “prescriptive jurisdiction extraterritorially … must find a recognized basis in international law for doing so” (Crawford, 2019, p. 442).14 Without attempting to resolve that debate, it is clear that any state exercising extraterritorial jurisdiction will stand on firmer ground if they can ground jurisdiction on one of the well-established principles of territory, nationality, passive personality, or the protective or security principle.15 As nearly all US sanctions are based in one or more Executive Orders by the President of the United States declaring a “threat to national security” under the International Emergency Economic Powers Act,16 there is at least a prima facie basis for claiming jurisdiction under the security principle, which allows for “jurisdiction over aliens for acts done abroad which affect the internal or external security or other key interests of a state” (Crawford, 2019, p. 446). However, most aspects of US secondary sanctions will have a far stronger jurisdictional claim in the territory or nationality principles. Most US sanctions that have extraterritorial effect describe a range of activities that any “person” may undertake, such as exporting goods or services to Iran that would materially contribute to Iran’s ability to acquire nuclear weapons.17 Such sanctions legislation clearly applies to non-US persons extraterritorially. The actual sanctions imposed on those found to perform such actions, however, are directed entirely at US persons and range from prohibiting the Export-Import Bank of the United States from issuing “any guarantee, insurance, extension of credit, or participation in the extension of credit in connection with the export of any goods or services,”18 to prohibitions on “any United States financial institution from making loans or providing credits to any sanctioned person totaling more than $10,000,000 in any 12-month period unless such person is engaged in 308

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activities to relieve human suffering and the loans or credits are provided for such activities.”19 These sanctions put foreign actors on notice that, if they participate in the specified activities, they will be cut off from certain privileges in the US market. Although these sanctions clearly intend to influence the activity of foreign persons, they have a solid jurisdictional basis in both the territory and nationality of the United States insofar as they only truly regulate the activities of US persons. Thus, Ruys and Ryngaert conclude, “[a]s international law does not entitle foreign persons to financial, economic, or physical access to the US, such measures do not, in principle, raise jurisdictional problems” (2020, p. 12). There may be an important difference, however, in those aspects of US secondary sanctions that go beyond access or privilege restrictions and threaten civil and criminal penalties on foreign persons for foreign conduct (Ruys and Ryngaert, 2020, p. 17). The imposition of penalties raises the question of whether the United States has enforcement jurisdiction to fine or punish foreign persons for conduct outside of its territory. Again, appeal to one of the four central pillars of jurisdiction will place US enforcement actions in good stead vis-à-vis the international law of jurisdiction. Ruys and Ryngaert argue, however, that there are central areas of US secondary sanctions enforcement where the United States lacks a sufficient jurisdictional basis. Those are when the United States claims jurisdiction over US-owned or controlled foreign entities, over the reexport of US-origin goods, and over foreign financial transactions that access the US financial system.20 I will now examine each of these in turn.

Jurisdiction Over US-Owned or Controlled Foreign Entities Ruys and Ryngaert argue that application of US sanctions to foreign corporations that are owned or controlled by a US person is inconsistent with the nationality principle that can serve as the basis of jurisdiction because, under international law, the nationality of a corporation is derived from its place of incorporation, not the nationality of its owner or directors (2020, pp. 18–19). Ruys and Ryngaert are absolutely correct about the general understanding of the nationality of corporations under international law. However, they underrepresent the extent to which responsibility for the actions of foreign subsidiaries is directed at US persons, over whom the United States unquestionably has jurisdiction. For example, if we look more closely at the Iran Threat Reduction and Syrian Human Rights Act of 2012, we will find that the penalties for a foreign subsidiary’s activity are directed entirely at US persons: “The civil penalties provided for … shall apply to a United States person ….”21 Moreover, the Act allows US persons 180 days to divest from or terminate business with the foreign subsidiary, after which point the Act and its penalties would no longer be triggered by the activities of the foreign entity.22 Insofar as these US sanctions are addressed to US persons, they follow a similar logic to the denial of privileges sanctions and thus are difficult to regard as an exercise of extraterritorial jurisdiction. These US sanctions hold US persons responsible for the actions of the entities they own or control and instruct US persons either to divest from those entities or ensure that they do not violate US sanctions law. Even if the US principle of ownership or control is not one generally recognized under international law, that does not mean that it is not a reasonable extension of the nationality principle. The “cardinal principle” of extraterritorial jurisdiction “is that of genuine connection between the subject matter of jurisdiction and the territorial base or reasonable interests of the state in question” (Crawford, 2019, p. 441). It would seem imminently reasonable for the United States to have a fundamental interest in the activities that US persons undertake both directly and through the entities they own or control, as we find also in the EU context.23 Moreover, where there are examples, such as in the Cuba sanctions context, in which the foreign subsidiaries are held to lie 309

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directly within US jurisdiction and thus directly responsible for violations, those sanctions provisions should be redrafted so that they are addressed to the US-person owners in the way we have seen in the Iran Threat Reduction and Syrian Human Rights Act of 2012 cited above.24 Finally, if the ownership or control extension of nationality is found to be unreasonable, then the United States may invoke the protective or security principle as a basis for jurisdiction, either in tandem with nationality or on its own.25 The limits of reliance on the security principle will be discussed in greater detail below, but for now it is sufficient to note that “[t]he categories of what may be considered a vital interest for the purposes of protection jurisdiction are not closed, and no criteria exist for determining such interests beyond a vague sense of gravity” (Crawford, 2019, p. 446). While states do not have completely unfettered discretion to exercise jurisdiction based on their own perception of what is in their security interests, international law permits considerable discretion to invoke security jurisdiction and a close analysis will be required to show that any particular invocation is unlawful.

Jurisdiction Over the Reexport of US-Origin Goods Another example of a potentially unlawful extension of extraterritorial jurisdiction by the United States lies in the reexport controls it places on US-origin goods. Ruys and Ryngaert argue that once US-origin goods leave the United States, they no longer have US nationality or a territorial basis for jurisdiction (2020, p. 20). First, it should be noted that it is not altogether certain whether a country has no nationality claim over goods simply because those goods are no longer in its territory. Even when goods leave a country, they retain the stamp of that country through “rules of origin.” The European Commission itself states that the origin of goods “is the ‘economic nationality’ of goods traded in commerce.”26 Under the WTO Agreement on Rules of Origin, the country of origin will change if exported goods are significantly transformed, making the country in which the goods were transformed the new country of origin.27 In the absence of such a transformation, the originating country remains the country of origin. US law is consistent with the transformation principle insofar as it excepts from reexport controls goods and technology that have been “[s]ubstantially transformed into a foreign-made product outside the United States.”28 US reexport controls thus apply to goods and technology for which the United States would remain the recognized country of origin. Even if exported US-origin goods lack the traditional nationality basis of jurisdiction, it is not clear that the US extension of nationality jurisdiction to such goods contravenes the nationality principle or that the US connection to such goods is “too tenuous to justify US secondary sanctions from a jurisdictional perspective” (Ruys and Ryngaert, 2020, p. 18). Moreover, if the nationality claim over US-origin goods stretches that jurisdictional basis too far, the United States can buttress it with the security principle as a basis of jurisdiction. The security principle may, in fact, be more apt, as US reexport controls come on top of a ban on the export, reexport, sale, or supply of goods, technology, or services from the United States and by US persons, wherever located.29 In the sanctions contexts in which such bans exist, the transfer of US origin goods to, e.g., Iran, is a matter which the United States takes to be of grave concern.30 Reexport controls thus comport well with the protective or security principle of jurisdiction over and above any nationality claim over US-origin goods.31 With respect to enforcement jurisdiction in the reexport context, the United States can exercise enforcement jurisdiction at least on the basis of the security principle as described above. It is worth noting, however, that enforcement settlements in reexport cases come at the consent of the parties against which enforcement actions are taken. For example, in the Iran sanctions context, Chinese and Indian corporations have recently consented to settlement agreements totaling more 310

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than $100 million for violations of US reexport controls.32 One might reasonably wonder why foreign corporations would consent to pay millions of dollars to the United States for violating its sanctions legislation. The clear rational basis for foreign corporations’ consent to US jurisdiction is in order to secure continued access to the US market and US origin goods. Sanctions legislation, such as the reexport ban found in the Iranian Transactions and Sanctions Regulations,33 puts foreign corporations on notice that the privilege of accessing the US market and its goods is contingent on playing by the rules set for those goods. In principle, those foreign corporations could simply walk away from US attempts to impose penalties. However, doing so would come at a greater cost to their business, as they would lose the US market access on which their business depends. If the United States, or any state, is within its rights to set conditions on, and indeed deny, market privileges and access for foreign parties, it would be quite odd if a state were not equally within its rights to set penalties for a failure to conform to such conditions as the price for maintaining or regaining market access. Again, foreign parties are always free to simply walk away from the US market. Through sanctions legislation like reexport controls, the United States makes it very clear to foreign actors exactly what the conditions of market access are, as well as what the price may be for failing to abide by those conditions.34

Jurisdiction Over Use of the US Financial System by Foreign Persons Abroad The final, and perhaps most prevalent, form of US secondary sanctions that I will examine concerns the United States’ assertion of jurisdiction over use of the US financial system. The challenge is whether “merely using the US financial system for an otherwise non-US business transaction is a sufficiently strong connection to pass muster under the international law of jurisdiction” (Ruys and Ryngaert, 2020, p. 22). It is not altogether clear whether the claimed deficiency in US jurisdiction in the financial context is one of prescriptive or enforcement jurisdiction, or both. I will thus consider the jurisdictional basis from both a prescriptive and enforcement perspective. Ruys and Ryngaert are happy to concede that the United States is within its jurisdictional rights to impose strict conditions on access to the US financial system, arguing that “the US can prohibit, or impose strict conditions on, the opening or maintaining in the US of correspondent accounts for foreign financial institutions. Such measures have a major impact on foreign financial institutions but, being access conditions, they fall within US sovereignty and do not, as such, raise jurisdictional concerns” (2020, pp. 20–21). Given this concession, it would seem to follow that the power to regulate the use of the US financial system, including by foreign actors, also falls within US sovereignty given both the territorial and nationality claims the United States has over its own banks and other financial institutions and actors located within the United States. Moreover, it would seem to follow from the power to regulate its own financial system and impose strict access conditions on it, that the United States would also have the prescriptive jurisdictional power to put foreign actors on notice of the penalties it can impose for violation of those access conditions. After all, it would be odd if a state were able to set strict access conditions, but then not be entitled to impose penalties for violation of those conditions. The reasonableness of penalties for violation of access conditions is perhaps especially clear when we recognize that acceptance of penalties by foreign banks and other actors is the very condition of their continued access to the US financial system following a breach. That is, similar to what we have seen above in the reexport context, foreign banks could refuse to settle with or pay fines to the United States on pain of forfeiting access to the US financial system. However, they almost always choose to settle with the United States in order to maintain their access privileges. 311

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Nevertheless, a range of scholars argue that the United States exceeds its jurisdictional rights when it takes “enforcement action which goes beyond access restriction and impose penalties, including forfeiture of assets, on foreign financial institutions for violations of secondary sanctions legislation” (Ruys and Ryngaert, 2020, p. 21).35 The main charge against enforcement jurisdiction is that grounding it on “the mere use of the US financial system … cannot be justified under any existing principle of jurisdiction” (Ruys and Ryngaert, 2020, p. 22). More specifically, the claim is that a territorial basis for jurisdiction is lacking in these cases, as “the territorial connection in these cases is rather tenuous and appears to be merely incidental to the essentially foreign character of the underlying economic transaction between two or more non-US persons” (Ruys and Ryngaert, 2020, p. 21). As Reza Zarrab stated in his motion to dismiss charges against him in US Federal Court, he “stands accused of violating U.S. law for agreeing with foreign persons in foreign countries to direct foreign banks to send funds transfers from foreign companies to other foreign banks for foreign companies. This is prosecutorial overreach of the first order.”36 Ruys and Ryngaert themselves state that “[t]he regulated economic transactions take place between non-US persons and occur outside the US” (2020, p. 17). As a general point about the territorial basis of enforcement jurisdiction, we might follow James Crawford in noting that “[t]he principle of territoriality is not infringed just because a state takes action within its own borders with respect to acts carried out in another state” (2019, p. 462). However, if it were really true that the financial transactions in cases like those leading to the $8.9 billion settlement with BNP Paribas or the criminal trial against Reza Zarrab were either entirely extraterritorial and between foreign persons, or had some contact with the United States but only tenuous and incidental contact, then it would be hard to see how the US could justify jurisdiction over them. As is often the case, the devil is in the details and a closer look at those details reveals essential and extensive contact with US persons on US territory as fundamental to the transactions in question. In the case against Reza Zarrab, the facts alleged in the indictment paint a very different picture to those claimed by Zarrab himself. Over a five-year period from 2010 to 2015, Zarrab and his co-conspirators went to extraordinary lengths to “willfully conceal information knowing that screening functions implemented by U.S. banks seeking to comply with OFAC regulations would block the transactions in which he was engaging.”37 He also “provided false and misleading statements through the use of multiple layered entities and by stripping material information from wire transfer instructions which influenced the decision-making of the U.S. banks.”38 Although some of Zarrab’s attempted transactions were blocked by US banks despite Zarrab’s efforts to obscure their true nature, he did manage to transfer through US banks “hundreds of millions of dollars-worth of transactions on behalf of the government of Iran and other Iranian entities.”39 Judge Berman agreed with the prosecution that there was no extraterritorial application of US law in the case, as “Zarrab is charged in connection with his scheme to intentionally export and supply financial services from the United States and to cause U.S. banks to export and supply financial services – in other words, with causing conduct and effects in the United States.”40 Although it may appear as if Judge Berman is invoking the questionable “effects doctrine” as a basis for jurisdiction, he expressly is not.41 Rather, the jurisdictional hook is territorial, insofar as Zarrab sought to export financial services from the United States to Iran and cause US banks to violate US sanctions law. To state this in the terms of our previous discussion, Mr. Zarrab was knowingly and willfully violating the conditions of access to the US financial system and was subject to penalties as a result. If it were truly the case that the only activity at issue in this enforcement action was an individual “merely ‘using the US financial system’ for an otherwise non-US business transaction,” then Ruys and Ryngaert’s conclusion that such activity may not constitutes “a sufficiently strong connection 312

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to pass muster under the international law of jurisdiction” would be more persuasive. However, the activity in question is not just an incidental use of the US financial system, but the extensive and purposeful deception of US banks that causes those US banks to violate US sanctions law. Seen in that light, the involvement of US banks is essential to the transactions and of grave concern for the United States. Far from incidental, such conduct goes to the heart not just of US security concerns, but also its sovereign power to regulate the conduct of its own banks and financial system.42 The details of the case against BNP Paribas involve even more extensive conduct in the United States and by US banks.43 As detailed in the Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and BNP Paribas SA (BNPP), BNPP processed 3,897 financial and trade transactions to or through banks in the United States between 2005 and 2012 in violation of Sudan, Iran, Burma, and Cuba Sanctions Regulations.44 As the Settlement Agreement recounts, BNPP and its various branches resorted to extraordinary measures to conceal, remove, omit, or obscure references to parties sanctioned by the United States in the payments it processed to or through US banks.45 These methods included “omitting references to sanctioned parties; replacing the names of sanctioned parties with BNPP’s name or a code word; and structuring payments in a manner that did not identify the involvement of sanctioned parties in payments sent to U.S. financial institutions.”46 While BNPP initially cleared US dollar transactions through its own branch in New York, it shifted its dollar clearing to a US bank’s New York branch in order “to shield BNPP New York from liability for violations of U.S. sanctions regulations.”47 Specifically in relation to dollar clearing for Sudanese sanctioned entities, BNPP developed an elaborate book-to-book transfer scheme with nine “regional banks” that ultimately cleared dollars through the United States in the name of the regional banks rather than the Sudanese sanctioned parties for whom the elaborate deception was employed.48 In at least one case where a US correspondent bank stopped a transaction and raised sanction compliance issues, BNPP assured the US bank that the transaction did not relate to a sanctioned jurisdiction despite information in BNPP’s possession that it did.49 Over a period of at least 7 years, BNPP employed elaborate deceptions to export financial services totaling more than $10 billion from the United States and to cause US banks to repeatedly violate US sanctions law.50 Given the great lengths to which BNPP went in order to process transactions for sanctioned entities to or through US banks, it is clear that the involvement of those banks, and the territorial connection to the United States, was neither incidental or tenuous. There is direct territorial activity in these transactions and a substantial link to US regulatory and security interests. Moreover, in terms of jurisdiction over BNPP itself, BNPP consented to US jurisdiction in its settlement precisely in order to maintain its access privileges to the US financial system. Thus Ruys and Ryngaert misunderstand and misstate the leverage that the United States has when they write, “[t]he threat of penalties has forced such firms to accept large settlements” (2020, pp. 16–17). BNPP does not opt to settle in order to avoid a civil or criminal judgment. They opt to settle to avoid being locked out of the US market altogether. The power to impose penalties for violating the conditions of access to the US financial system is part and parcel of the United States’ power to regulate the activity of its banks and the conditions of access to its financial system. Exercising that power is perfectly in keeping with the central territorial principle of jurisdiction and can be further buttressed by appeal to the security principle.

Conclusion I have argued that US secondary sanctions are neither unlawful under general principles of international law such as non-intervention, nor are they unlawful under the international law of jurisdiction. I have also argued that the penalties associated with reexport controls and secondary financial 313

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sanctions that have garnered the most criticism should be understood as conditions of access to US markets in goods, technology, and financial services. Finally, I have argued that, despite frequent claims to the contrary, when it comes to US enforcement actions, the United States generally has a very strong territorial or nationality basis for US jurisdiction. Nevertheless, in several instances, notably in the context of reexport controls, reliance on the security principle of jurisdiction may be necessary. As I mentioned above, merely invoking the security principle of jurisdiction does not, by itself, justify jurisdiction on those grounds. By way of conclusion, I want to address how we should judge whether the security principle has been legitimately invoked. Discussions of the security principle of jurisdiction often run together three different legal questions that we ought to distinguish from one another.51 The question of whether the security principle of jurisdiction is justifiably invoked, is quite a different matter from whether a “security interests” provision in a treaty has been reasonably invoked to justify violating the terms of the treaty, which is quite distinct again from the question of whether a state’s security has been lawfully invoked to justify resort to a military use of force in self-defense. While the latter two cases (breach of treaty and armed self-defense) are subject to an objective necessity showing,52 it is not at all clear that invocation of the security principle for jurisdiction is subject to any necessity showing at all. Even if some objective showing were required to justify jurisdiction via the security principle, it would be a lessor showing than that required to justify breaching a treaty, and less still than that required to justify resorting to military force.53 In Nicaragua, the ICJ addressed the question of what would be necessary to justify breaching the terms of the FCN treaty between Nicaragua and the United states. The court distinguished between measures that would be “merely useful” or which would “tend to protect” “essential security interests,”54 and those that would be “necessary” in some greater but undefined sense.55 By contrast, when considering the criteria bearing on a lawful invocation of jurisdiction under the protective or security principle, former Justice of the International Court of Justice, James Crawford, asserts that “[t]he categories of what may be considered a vital interest for the purposes of protection jurisdiction are not closed, and no criteria exist for determining such interests beyond a vague sense of gravity” (2019, p. 446). If the “vague sense of gravity” is subject to any legal review at all, then I suggest it will be much closer to what the ICJ in Nicaragua described as “merely useful” or what would “tend to protect” the security interests of a state, rather than the more robust showing of necessity required to breach the terms of treaty. It is thus much more difficult to invalidate the jurisdictional claims of states, particularly those based on the security principle, than some analyses suggest. Nevertheless, and even if states have a great deal of discretion in invoking the security principle, they have every incentive to do so prudently and with evidence, as the world will be the judge of such invocations.

Notes 1 See, e.g., Jeffrey Meyer, ‘Second Thoughts on Secondary Sanctions’ (2009) 30 University of Pennsylvania Journal of International Law 905, 967. 2 See Ruys and Ryngaert (2020) p. 6n15 for a list of possibly applicable human rights protections. 3 See, e.g., Natalino Ronzitti, “Sanctions as Instruments of Coercive Diplomacy: An International Law Perspective,” in Coercive Diplomacy, Sanctions and International Law, ed. N Ronzitti (Brill/Nijhoff, 2016) 31. Julia Schmidt also suggests a fundamental incompatibility of unilateral sanctions with international law. See Schmidt, “The Legality of Unilateral Extra-territorial Sanctions under International Law,” Journal of Conflict & Security Law (2022), Vol. 27 No. 1, 53–81 (60, 71). 4 See generally, Tzanakopoulos, “The Right to Be Free from Economic Coercion,” (2015) 4 Cambridge Journal of International and Comparative Law 616. 5 Cf. Ruys and Ryngaert 7.

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US Secondary Sanctions 6 See, e.g., 31 CFR §544.201(a)(2). 7 See, e.g., 31 CFR §561.201, §561.201(a)(5)(ii). 8 See also Tzanakopoulos, “The Right to Be Free from Economic Coercion,” 619–23. 9 See also James Crawford, Brownlie’s Principles of Public International Law, pp. 544–56, who concludes that the doctrine of abuse of rights “is not part of positive international law.” 545–46. 10 See, e.g., Nicaragua, para. 205. See also Tzanakopoulos, 619–21. 11 For a compelling analogous case in point, see Tzanakopoulos, 631–33 and his discussion of the “almost crushing” “but arguably not illegal[]” “leverage” that the EU used against Greece in the context of their bailout negotiations in July 2015. 12 Cf. Crawford, 433 (“‘sovereignty’ characterizes powers and privileges resting on customary law which are independent of the particular consent of another state.”). 13 SS Lotus (France v Turkey) (1927) PCIJ Ser A No 10, 19. 14 Crawford is referring to whether the Arrest Warrant case has reversed the dicta from Lotus. Arrest Warrant of 11 April 2000 (Democratic Republic of Congo v Belgium), ICJ Reports 2002 p. 3, 78 (Judges Higgins, Kooijmans, and Buerenthal), 169 (Judge ad hoc van den Wyngaert). 15 See Crawford, 442–46, 455. See also Ruys and Ryngaert 17, 18–27. 16 See, e.g., Executive Order No. 12170: Blocking Iranian Government Property (Effective Date - November 14, 1979) and the International Emergency Economic Powers Act, 50 U.S.C.A. sec. 1701 et seq. 17 Iran Sanctions Act of 1996 [As Amended Through P.L. 114–277, Enacted December 15, 2016], Sec. 5(b)(1)(B)(ii)(I). 18 Iran Sanctions Act of 1996, Sec. 6(a)(1). 19 Iran Sanctions Act of 1996, Sec. 6(a)(3). For the full range of prohibitions, see Sec. 6 generally. 20 Ruys and Ryngaert also discuss a fourth area limited to the Cuba sanctions context where the US has created a private cause of action for US persons whose property was confiscated by the Cuban Government to bring suit against non-US persons for trafficking in that property. See 22 USC § 6082 and Ruys and Ryngaerts, 23–25. Discussion of this private cause of action is beyond the scope of this chapter. 21 Iran Threat Reduction and Syrian Human Rights Act, Pub L No 112–158 (2012) s 218(c). See also US Department of the Treasury, OFAC FAQs: Iran Sanctions, question 621, https://home.treasury.gov/policyissues/financial-sanctions/faqs/621 (“Civil penalties for the U.S.-owned or -controlled foreign entity’s violation of Section 8, attempted violation, conspiracy to violate, or causing of a violation shall apply to the U.S. person that owns or controls such entity to the same extent that they would apply to a U.S. person for the same conduct.”). 22 Iran Threat Reduction and Syrian Human Rights Act, Pub L No 112–158 (2012) s 218(d). Indeed, US persons would not be required to completely divest from or relinquish all interest in the foreign entity, but only reduce their ownership or control below 50%. See s 218(a)(2). 23 See, e.g., Commission Delegated Regulation 285/2014 of 13 February 2014 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on direct, substantial and foreseeable effects of contracts within the Union and to prevent the evasion of rules and obligations [2014] OJ L85/1, art 3(2). 24 See, e.g., the Cuban Assets Control Regulations, 31 C.F.R. §§ 515.329(d) and 515.530(a)(4). 25 Crawford notes that “[t]he various principles [of jurisdiction] often interweave in practice.” Crawford, 461. 26 European Commission, “Rules of Origin,” https://taxation-customs.ec.europa.eu/customs-4/internationalaffairs/origin-goods_en. But see, European Communities: Comments on the US Regulations Concerning Trade with the USSR (1982) 21 International Legal Materials 891, 894 para. 8 (“Goods and technology do not have any nationality and there are no known rules under international law for using goods or technology situated abroad as a basis of establishing jurisdiction over the persons controlling them.”). 27 WTO Agreement on Rules of Origin, Art. 3(b), https://www.wto.org/english/docs_e/legal_e/22-roo_e. htm. 28 31 CFR § 560.205(b)(1). § 560.205(b)(2) also excepts goods and technology that have been “[i]ncorporated into a foreign-made product outside the United States if the aggregate value of such goods and. . . constitutes less than 10 percent of the total value of the foreign-made product to be exported from a third country.” 29 31 CFR § 560.204. 30 See, e.g., Executive Order 12959 of May 6, 1995, which puts in place an export and reexport ban on goods, technology, and services from the United States (Sec. 1(b-c)) in response to “the unusual and

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Joshua Andresen extraordinary threat to the national security, foreign policy, and economy of the United States” posed by “the actions and policies of the Government of Iran” (Executive Order 12957 of March 15, 1995). 31 An additional cure for any remaining jurisdictional concerns could be found in the requirement of enduser agreements or, more broadly, US sanctions compliance clauses in all export agreements that require a commitment not to reexport US qualifying goods, technology, and services to Iran or other sanctioned jurisdictions. 32 See, e.g., Settlement Agreement with Zhongxing Telecommunications Equipment Corporation (7 March 2017), https://home.treasury.gov/system/files/126/20170307_zte_settlement.pdf; Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and Yantai Jereh Oilfield Services Group Co. Ltd. (12 December 2018), https://home.treasury.gov/system/files/126/20181212_ jereh_settlement.pdf; Aban Offshore Limited Settles Potential Civil Liability for an Apparent Violation of the Iranian Transactions and Sanctions Regulations (12 January 2017), https://home.treasury.gov/system/ files/126/20170112_aban.pdf. 33 31 CFR § 560.205. 34 The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has also made public precisely how it calculate civil penalties. See 31 CFR § 501, Appendix A to Part 501—Economic Sanctions Enforcement Guidelines, https://home.treasury.gov/system/files/126/fr74_57593.pdf. 35 See also, Schmidt, 68–69. 36 United States v. Zarrab, No. 15 CR 867 (RMB), 2016 WL 6820737, at *1 (S.D.N.Y. Oct. 17, 2016), citing Defendant’s Motion to Dismiss of July 18, 2016 (emphasis in original). (United States Of America, v. Reza Zarrab, et al., Defendant., 2016 WL 10998479 (S.D.N.Y.)). 37 United States v. Zarrab, No. 15 CR 867 (RMB), 2016 WL 6820737, at *3 (S.D.N.Y. Oct. 17, 2016). 38 United States v. Zarrab, No. 15 CR 867 (RMB), 2016 WL 6820737, at *13 (S.D.N.Y. Oct. 17, 2016). 39 U.S. Department of Justice Press Release, “Turkish National Arrested for Conspiring to Evade U.S. Sanctions Against Iran, Money Laundering and Bank Fraud” (21 March 201), available at https://www.justice. gov/opa/pr/turkish-national-arrested-conspiring-evade-us-sanctions-against-iran-money-laundering-and 40 United States v. Zarrab, No. 15 CR 867 (RMB), 2016 WL 6820737, at *5 (S.D.N.Y. Oct. 17, 2016) 41 On “the effects doctrine,” its increasing use, and its questionable place in international law, see Crawford, 447–48. 42 The same argument applies to the founding jurisdiction on the “mere routing of (financial) messages via US servers.” Ruys and Ryngaert, 22. When such routing causes the owners of those servers to export services to sanctioned entities, the routing causes those owners to violate US sanctions law. 43 See Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and BNP Paribas SA (Doc No COMPL-2013-193659, June 30, 2014), https://home.treasury.gov/ system/files/126/20140630_bnp_settlement.pdf (hereinafter Settlement Agreement between OFAC and BNPP). 44 Settlement Agreement between OFAC and BNPP, paras. 18–21. 45 Settlement Agreement between OFAC and BNPP, para. 3. 46 Settlement Agreement between OFAC and BNPP, para. 3. 47 Settlement Agreement between OFAC and BNPP, para. 8. 48 Settlement Agreement between OFAC and BNPP, para. 9. 49 Settlement Agreement between OFAC and BNPP, para. 15. 50 Settlement Agreement between OFAC and BNPP, paras. 18–21. 51 See, e.g., Ruys and Ryngaert, 27 (“Reliance on essential security interests as a justification for economic sanctions is further fleshed out. . . in the context of security exceptions enshrined in trade and investment agreements.”). 52 Nicaragua paras. 222, 224, 282 (“But by the terms of the Treaty itself, whether a measure is necessary to protect the essential security interests of a party is not, as the Court has emphasized (paragraph 222 above), purely a question for the subjective judgment of the party for.”); Oil Platforms, para. 73 (“the requirement of international law that measures taken avowedly in self-defence must have been necessary for that purpose is strict and objective, leaving no room for any ‘measure of discretion’.”). See also Tzanakopoulos, 2015, pp. 621–22 for his discussion of the negotiation of VCLT and conclusion that there is no international agreement that economic coercion is a use of force in relevant sense. 53 In Nicaragua, the ICJ distinguishes between uses of force that would give rise to a right of self-defense and “a use of force of a lesser degree of gravity [that] cannot.” Para. 249. See also paras. 193–95, 211. The ICJ also holds that, for any use of force in self-defense to be lawful, it must satisfy “the criteria of the

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US Secondary Sanctions necessity and the proportionality of the measures taken in self-defence.” Nicaragua, para. 194. See also Oil Platforms, paras, 74, 76. 54 Nicaragua, 224, 282. 55 Nicaragua, 282. The Court does not further explore the “necessity” standard as it finds it had before it “no evidence at all” that Nicaragua’s actions were a threat to US security interests in the first place. It does, however, indicate that where treaties include subject language about what a party “considers necessary” to protect its security interests, that the showing required would be less than in treaties which do not refer to a state’s own perception of what is necessary. See Nicaragua, 222, 282.

Bibliography Arrest Warrant of 11 April 2000 (Democratic Republic of Congo v Belgium), ICJ Reports 2002. Crawford, J. (2019) Brownlie’s Principles of Public International Law. Oxford: Oxford University Press. Meyer, J. (2019) ‘Second Thoughts on Secondary Sanctions’, University of Pennsylvania Journal of International Law 30, pp. 905–967. Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States of America) (Merits) [1986] ICJ Rep 14 (Nicaragua). Ronzitti, N. (2016) ‘Sanctions as Instruments of Coercive Diplomacy: An International Law Perspective,’ in N. Ronzitti (ed.) Coercive Diplomacy, Sanctions and International Law. London: Brill/Nijhoff, pp. 1–32. Ruys, T. and Ryngaert, C. (2020) ‘Secondary Sanctions: A Weapon Out of Control? The International Legality of, and European Responses to, US Secondary Sanctions’, The British Yearbook of International Law, pp. 1–116. Schmidt, J. (2022) ‘The Legality of Unilateral Extra-territorial Sanctions under International Law’, Journal of Conflict & Security Law 27(1), pp. 53–81. SS ‘Lotus’ (France v Turkey) (Merits) PCIJ Rep Series A No 10. Subedi, S. (2021) Unilateral Sanctions in International Law. London: Hart Publishing. Tzanakopoulos, A. (2015) ‘The Right to Be Free from Economic Coercion’, Cambridge Journal of International and Comparative Law 4(3), pp. 616–633.

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25 THE PRINCIPLE OF NONINTERVENTION AND THE DILEMMA OF THE LEGALITY OF THE UNILATERAL COERCIVE MEASURES Pouria Askari* Introduction “SANCTIONS ARE COMING November 5”! That was the text of a poster tweeted by President Trump on 2 November 2018 to warn Iran on the implementation of his policy to target this country with more unilateral coercive measures (UCMs) (Wagner 2018). The United States (the US) Secretary of State Mike Pompeo later said that it is in Iran’s best interests to toe the line and listen to Washington or else its people will pay the price. He told the BBC that Iran’s leaders need to return to the table for talks “if they want their people to eat” (Cole 2018). The US sanctions against Iran continued to increase even in the time of the COVID-19 pandemic. It was in November 2020 that the US administration announced that there will be a “flood of new sanctions” on Iran (Ravid 2020). Alena Douhan, The United Nations (UN) Human Rights Council (HRC) Special Rapporteur, on the negative impacts of the UCMs on the enjoyment of human rights who has repeatedly criticized the sanction policy of the US, on 25 November 2020 in the virtual Arria meeting of the UN Security Council once again announced that: “[t]he humanitarian impact of unilateral sanctions is enormous” (Statement of the Special Rapporteur on the negative impact of the UCMs on the enjoyment of human rights 2020, 2). According to her, the UCMs “affect all categories of civil, economic, social and collective rights, including the right to development. In the longer term, unilateral sanctions […] impede targeted countries from developing or restoring critical infrastructure to guarantee the basic needs and well-being of their people” (Ibid). Her legal analysis against this practice is summarized in this way: [w]hile recognizing that States are free to organize their international relations and choose cooperation partners, […] any unilateral measures are only legal if they do not breach any international obligation of States; are taken with authorization of the UN Security Council, * The author wishes to acknowledge the valuable assistance of Shokooh Yazdani in preparing this chapter.

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or their illegality is excluded in the course of countermeasures taken in accordance with the standards of international responsibility. Measures directly affecting fundamental human rights shall not be used as the means of influencing any government. (Ibid, 3) What the Special Rapporteur has submitted before the members of the UN Security Council has a long history in the UN debates which despite the US disagreement resulted in the adoption of numerous Resolutions by the General Assembly (UNGA) and the HRC (Hofer 2017, 175). The question of the legality of UCMs and the issue of their negative impact on the life and health of ordinary people has recently also been discussed in many scholarly works from different legal angles (see e.g.: Asada 2020 and Subedi 2021). In this chapter, using the example of the US sanctions against Iran, it is argued that even though there is not a consensus among States and international lawyers on the illegality of UCMs, the principle of non-intervention in internal and external affairs has to be considered as a test for the legitimacy of the UCMs. The US practice in imposing sanctions against other States includes two types of primary and secondary sanctions. The primary sanctions are those sanctions targeting US individuals and companies and the secondary sanctions are the group of punitive coercive measures against individuals and companies of the third States. This chapter, in the second section, studies the relations between the sanctioning State and the target State to highlight how the negative impacts of the UCMs will affect the capacity of the later to implement its obligations under international human rights law. Then in the next section the compatibility of the secondary sanctions with the principle of nonintervention in the relations between the sanctioning State and the third States will be analyzed.

UCMs and Intervention in the internal Affairs of the Sanctioned State UCMs as Countermeasures Several scholars, based on the work of the UN International Law Commission (ILC) on the international responsibility of States (ILC 2001), have discussed the issue of the legality of UCMs when taken against the target State as countermeasures (see e.g.: Damrosch 2019, 249). In short, it is accepted that the countermeasures are not punitive in character (Tzanakopoulos 2019, 135–136). In other words, it is only the UN Security Council that is permitted under Chapter VII of the UN Charter to take punitive actions against States. Yet, customary international law permits the injured State to take proportionate, limited, and reversible actions against the responsible State only if these reactions are not in breach of certain obligations, such as the obligation not to use force, obligations of a humanitarian character, and obligations to respect human rights, other obligations under peremptory norms of international law, or certain obligations under diplomatic law (Ibid, 136–137). The UCMs usually are justified by political leaders of the sanctioning states as an action from their side to protect human rights, to suppress international terrorism or for other “common good” reasons (see: Statement of the Special Rapporteur on the negative impact of the UCMs on the enjoyment of human rights 2020, 3). This observation implicitly includes that the UCMs of today are not necessarily taken by the injured State and neither they fit into the form of countermeasures. Actually, most of the current UCMs especially those taken by the US are mainly part of the US foreign policy to force other States into taking a particular action. Taking the example of Iran, US officials clearly declared that the maximum pressure is there to force Iran to behave “like a normal nation” (Ging 2019). 319

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Here comes the dilemma. The UCMs are not usually justified in terms of legal countermeasures by the injured State but instead, as a form of foreign policy to achieve national and international interests. It is in this way that the US reaction to a draft UN resolution has to be read and understood: The text of this resolution is a direct challenge to the sovereign right of States to conduct their economic relations freely and to protect legitimate national interests, including taking related actions in response to national security concerns. It also attempts to undermine the international community’s ability to respond to acts that are offensive to international norms. Unilateral and multilateral sanctions are a legitimate non-violent means to achieve foreign policy, security, and other national and international objectives, and the United States is not alone in that view or in that practice (emphasis added). (The US Explanation of Vote on A/C.3/72/L.27 on Human Rights and Unilateral Coercive Measures 2017) As it is demonstrated in this Statement, in general terms it is the issue of the legality of the policy of coercion that forms the main challenge in this context. In other words, the main question in this discussion relates to the permissibility of pushing the other States to “behave normally”? And, the answer, in my view, is at the same time affirmative and negative. The States other than the injured State, in some circumstances, have a duty to pressurize the responsible State for grave breaches of erga omnes obligations of international law. The ILC clarifies that if the obligation violated by the responsible State was owed “to the international community as a whole” States other than the injured State may invoke responsibility (ILC 2001, 127). Yet, when the international responsibility of the targeted State for the breach of an erga omnes obligation is not established or when the obligation in question is not owed to the international community as a whole, coercion in the form of UCM with negative impact on human rights is not permissible. This explanation, however, seems controversial. On the one hand, States like the US do not necessarily tie their UCMs to the subject of preserving the interests of the international community and instead justify their sanctions as a sovereign right to conduct free economic relations. On the other hand, there is no consensus among States and international scholars on the extraterritorial application of human rights obligations.

The Sovereign Rights, Coercion, and the Lotus Principle In his thoughtful report to Tallinn session of the Institute of International Law in 2015, Allain Pellet, a well-known professor of international law, quoted a Statement from Grotius: kings have the right to demand punishment not only on account of injuries committed against themselves or their subjects but also on account of injuries which do not directly affect them but excessively violate the law of nature or of nations in regard to any persons whatsoever. (Pellet 2015, 723) This Statement is still valid to some extent. A commentator argues that if the [target State] is legally entitled to the advantage withdrawn or withheld, the ensuing question is whether there is any rule allowing for exceptions to such entitlement. The rules on State responsibility concerning reprisals (in traditional terminology) or countermeasures 320

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(modern terminology) are only one possibility among others for such exception. If advantages to which the [target State] has no legal right are withdrawn or withheld, the sanction might constitute an unfriendly act, but it is not unlawful (retorsion). (Bothe 2016, 34) Observations like this have their roots in the well-known Lotus principle which provides that international law recognizes that States possess “a wide measure of discretion which is only limited in certain cases by prohibitive rules” (Lotus Case 1927, 19). In other words, there is no limitation for states except where there is a rule of international law prohibiting an act or omission. Does such a prohibitive rule exist in the contemporary international law concerning the illegality of UCMs? From one side, according to the UN Charter, the Security Council (as the representative of the international community of States) under Chapter VII of the Charter is empowered to react or to punish those States whose behavior is threatening the international peace and security. On this basis, in both legal and political arenas there are some lawyers and political leaders who believe when there is no action requested by the Security Council, States are not permitted to take coercive measures against other States. For instance, Mahathir Mohamad, former Prime Minister of Malaysia, once said: “such sanctions clearly violate the United Nations Charter and international law. Sanctions can only be applied [instructed] by the United Nations in accordance with the charter” (Aljazeera 2019). His Statement is in line with the position of the Asian–African Legal Consultative Organization (AALCO). The ex-President of the AALCO, Rahmat Mohamad, believes that “International law only recognizes “collective or multilateral sanctions” applied as per Chapter VII of the UN Charter [emphasis added] (Mohamad 2015, 73). Idriss Jazairy, the former HRC Special Rapporteur also held that: “[UN Charter] Chapter VII gives the Security Council the exclusive power to adopt economic sanctions in situations that endanger such international peace and security. This leads to the dominant view of the international community, according to which economic sanctions taken outside this framework are “unilateral and unlawful” (Jazairy 2019, 291) [emphasis added]. In his view, such a foreign policy is also inhuman and unethical (Ibid, 299). On the other side, as discussed earlier, articles 48 and 54 of the ILC draft articles on the Responsibility of States do not deprive the sovereign States of taking lawful [counter]measures against a State who breached an erga omnes obligation. Yet, since there is no established general prohibition in positive international law including the treaty law and customary international law concerning economic pressure per se, the legality of both measures and/or countermeasures depends on the consequences of the actions taken by the sanctioning State. In his thought-provoking article, Tzanakopoulos dealt with the issue from a different angle. He asks whether there exists a right of States to be free from economic coercion. He studies the UN’s power to impose sanctions and also the possibility of States to invoke countermeasures and ultimately argues that there is no such a right unless one can identify “some specific obligation that has been breached on the part of the reacting State or international organization [who decided to use economic sanctions against a State]” (emphasis added) (Tzanakópoulos 2015, 633). In my opinion, such a specific obligation does exist and that is the obligation to respect the right of other States from foreign intervention in their domestic affairs which is essentially different from the right to be free from economic coercion. While the latter, as discussed by Tzanakopoulos, does not exist in the lex lata, the former is one of the most established principles of the current international legal order. On this basis, Judge ad hoc Momtaz in his declaration appended to the International Court of Justice (ICJ) ruling on provisional measures in the Case concerning the alleged violations of the treaty of amity between Iran and the US argues that in accordance with the 321

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UNGA resolution 2625 (XXV) on friendly relations among States and also the findings of the ICJ in the Nicaragua Case, the UCMs are unlawful (Momtaz 2018, 691–692). This argument is in line with article 32 of the Charter of Economic Rights and Duties of States proclaimed by the General Assembly in its resolution 3281 (XXIX) which clearly declares that no State may use or encourage the use of economic, political, or any other type of measures to coerce another State in order to obtain from it the subordination of the exercise of its sovereign rights (A/RES/3281(XXIX), 1974). Based on similar arguments, the UNGA has repeatedly stressed that the UCMs are contrary to international law (see e.g.: A/RES/75/181, 2020; A/RES/74/154, 2020; and A/RES/73/167, 2019). Having said that, it is worth mentioning that those sovereign rights which are subject to the principle of non-intervention are not unlimited. As Tzanakopoulos observes: This is because even the matters of choice of a political or economic or social or cultural system, and of formulation of foreign policy may be regulated by international law, and thus be put outside the sphere of freedom of the State. […] And so States are not free to choose their political or economic or social or cultural system, or to formulate their foreign policy. They are only free to do so to the extent that they have not assumed obligations, in one way or another, not to do so. (Tzanakópoulos 2015, 631) It seems that this counter-argument about the limited scope of the application of the principle of non-intervention led the campaign against the UCMs, to a paradigm shift towards human rights.

Human Rights Extraterritorial Application and the Principle of Non-Intervention The UCMs have lots of devastating negative impacts on the human rights of people living under sanctions. Many scholars (see e.g.: Bajoghli and Rouhi 2020 and Van Engeland 2019) as well as the UN officials (see e.g.: “Bachelet calls for major re-think over impact of sanctions on human rights” 2021) including the Special Rapporteur on UCMs have reported on these negative consequences (see e.g.: A/HRC/51/33/Add.1, 2022; Preliminary findings of the visit to the Syrian Arab Republic by the Special Rapporteur on the negative impact of UCMs on the enjoyment of human rights Prof. Dr. Alena Douhan 2022). These concerns, as discussed earlier have led the UNGA to adopt a series of resolutions under the title “human rights and unilateral coercive measures.” From a general point of view, UCMs with humanitarian consequences are immoral and inhuman. Yet, to put this Statement in a legal nutshell is problematic due to the controversies among both the States and commentators over the exterritorial application of human rights obligations (Dupont 2020, 51–54). Nonetheless, since the US, as the imposer of many UCMs, is not a party to the International Covenant on Economic, Social and Cultural Rights (ICESCR), and most of the rights affected by the UCMs adopted by the US are fit in the group of economic and social rights (this does not prejudice the fact that most of the rights included in the ICESCR are identified as customary rules of international law. See: Schabas 2021, 326–335), here we need to move one step back to see how the human rights dialogue can be relevant in our context. For this purpose, in this section, I try to link the principle of non-intervention to the obligations of the target State to implement human rights. In other words, besides challenges and controversies in connection with the extraterritorial application of human rights obligations, there is no doubt about the obligation of the sanctioned State to implement and ensure respect human rights in its territory. The reports issued by the UN and other international organizations verify that the 322

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UCMs are affecting the capacity of the sanctioned State to implement its international human rights obligations. For instance, a report by Human Rights Watch (HRW) displays that even before the Coronavirus pandemic, the so-called “maximum pressure campaign” against Iran had lots of negative impacts on the life and health of the Iranians. This report says: “Iranians’ access to essential medicine and their right to health is being negatively impacted, and may well worsen if the situation remains unchanged, thereby threatening the health of millions of Iranians” (HRW 2019). The report stresses that [t]hese restrictions on financing, combined with the sharp depreciation of the Iranian currency, the Rial, have resulted in severely limiting Iranian companies and hospitals from purchasing essential medicines and medical equipment from outside Iran that residents depend upon for critical medical care. Moreover, renewed US sanctions […], contributing to inflation rates of around 30 percent in the past year. Iran’s nearly universal healthcare coverage currently absorbs a significant portion of healthcare costs. But the failure of this system, which is already under serious financial stress, will likely have devastating effects on millions of patients. (Ibid) Having said that, I believe in the context of human rights and UCMs, the question should not necessarily address the obligations of the sanctioning State towards the people living in the territory of the target State. Instead, one might ask if the negative impacts of the UCMs on the capacity of the sanctioned State to respect, protect and fulfill human rights are against the principle of non-intervention. The ICJ in defining the scope of the principle of non-intervention observes that an intervention is only prohibited if it is: “bearing on matters in which each State is permitted, by the principle of State sovereignty, to decide freely. One of these is the choice of a political, economic, social and cultural system, and the formulation of foreign policy. Intervention is wrongful when it uses methods of coercion in regard to such choices, which must remain free ones” (emphasis added) (ICJ, Nicaragua Case 1986, 205). As discussed earlier, sanctions with negative humanitarian impacts are considered a method of coercion. Therefore, according to the formulation provided by the ICJ, what remains to be discovered is if the sovereign duty to implement international human rights obligations is included in the domain of exclusive domestic affairs of the States (for further discussion on the meaning of domestic jurisdiction, see: Kunig 2008). Human rights are considered international issues and the State’s obligations in accordance with the human rights’ international treaties which in many cases consist of erga omnes obligations are at the core of each State’s international obligations which are, in no way, limited to the narrow domain of the domestic jurisdiction of sovereign States. This is why when it comes to the application of Article 2(7) of the UN Charter Preuss observes: it is not possible here to enter into a prolonged and necessarily complex discussion as to whether or not the observance of Human Rights and fundamental freedoms has ceased to be essentially within the domestic jurisdiction of States as a result of the general provisions of the Charter. It was clearly the intention of the framers of the Charter only to lay down guiding principles, and not legal norms, with regards to this subject, and it was expressly stated in the travaux préparatoires that nothing in Chapter IX should be deemed to limit the operation of Article 2 (7). (Preuss 1950, 641) 323

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Nevertheless, this fact does not nullify the exclusive sovereign powers and duties of each State to implement these international obligations in its territory or wherever it applies its jurisdiction. States are under an obligation to respect, protect, and fulfill human rights (see: Jason 2019). In its general comment on the right to health, the Committee on Economic, Social, and Cultural Rights (CESCR) describes these three types of obligations in this way: the obligation to respect requires States to refrain from interfering directly or indirectly with the enjoyment of the Right to Health. The obligation to protect requires States to take measures that prevent third parties from interfering with article 12 guarantees. Finally, the obligation to fulfill requires States to adopt appropriate legislative, administrative, budgetary, judicial, promotional and other measures towards the full realization of the Right to Health. (E/C.12/2000/4, 2000, para. 33) The UCMs usually affect the capacity of the sanctioned States in fulfilling the aforementioned obligations. In other words, as raised by the HRC, the UCMs are against the enjoyment of Human Rights, because they prevent the sanctioned States from exercising “their right to decide, of their own free will, their own political, economic and social systems” (A/HRC/ RES/40/3, 2019, para. 5). The sanctioned State due to the burden of sanctions imposed on it is unable to implement its international human rights obligations towards its people. This point elucidates how the principle of non-intervention prohibits the UCMs with negative impacts on the capacity of the target State to implement its international obligations towards the people living in its territory or under its jurisdiction.

UCMs and Intervention in Affairs of the Third States As a result of the 8 May 2018 US withdrawal from the Joint Comprehensive Plan of Action (the JCPOA) and reimposition of sanctions, Iran brought a case before the ICJ (ICJ, Iran v. US 2018). In its preliminary objection to the jurisdiction of the Court, the US has declared that the measures taken by this country are actually to impact “third countries” (and their nationals and companies) (Ibid, Preliminary Objections of the US 2019, Chapter 7). The US thereby openly refers to its policy of enforcing sanctions beyond its territorial jurisdiction aiming at their compliance by nationals of third countries. These extraterritorial UCMs are also known as “secondary sanctions”. The US, through national legislation and presidential executive orders, regulates and restricts the trade between US persons and sanctioned countries; these sanctions are called “primary sanctions”. Secondary sanctions on the other hand deploy limitations on the trade and transactions between non-US persons and the target State (Rajput 2021, 216). The non-compliance by non-US persons would result in financial fines, loss of access to the US capital and financial markets and for individuals, there is also an extra risk of imprisonment (Ruys and Ryngaert 2020, 7–9). In addition to the threat of losing access to the US financial system, there also exists the risk of losing the presence in the US market. This explains why after the 8 May 2018 presidential announcement the Chinese and European companies, disregarding their respective Government’s requests, have decided to leave the profitable Iran market (Lohmann 2019). This US behavior and the compliance from the non-US companies raise this question: is it not an obvious example of interference in the internal affairs of third States forcing their subordinates to follow the laws of another sovereign? 324

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Let’s change our perspective now and study secondary sanctions from another angle. It might be argued that the ultimate aim of secondary sanctions is to ensure the US policy towards a country like Iran is respected by third States and no “black knight” arises to save the “sanctionee” (Portela 2010, 12–18). Yet in the Westphalian structure of international law where the respect to sovereign equality is literally cited in the UN Charter (UN Charter 1945, Art. 2(1): “The Organization is based on the principle of the sovereign equality of all its Members”), it might be unrealistic to expect equal sovereign States to follow the unilateral measures of another and to voluntarily allow enforcement of its jurisdictional power in their territory. In reality, in a situation where third countries are in disagreement with a government’s sanctions program, they would even endeavor to nullify those coercive measures like the EU and China’s blocking statute regulations that we will refer to in the following lines. A powerful State such as the US hence utilizes its financial and economic leverage in the form of extraterritorial UCMs to enforce its policy directly on the “nationals” of the third States. This way, it is the US that regulates their conduct and punishes them if they fail. In other words, it is the US that applies its sovereign power over the nationals and companies of third countries. Consequently, the political agenda of the third State would be aligned with the US, since its nationals are following the exact direction that the more powerful State has set for them. As a case in point, the Belgium-headquartered financial messaging service provider, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), has ceased its interaction with almost all Iranian banks including the Central Bank of Iran as of November 2018 (Lohmann 2019). To address this issue, the Instrument in Support of Trade Exchanges (INSTEX), a Parisbased company established under the laws of France, has been introduced by France, Germany, and the UK for the continuity of legitimate trade with Iran. Although designed in a way not to trigger any secondary sanctions, the scope of the restrictions in place by the US are so broad and the risk of million-dollar fines on the European banks and companies is so prone that no party has been willing to risk it (Knudson 2020) and despite the joint efforts of these three powerful European States and their clear instructions to their nationals, the European companies followed Washington (Ibid). The jurisdictional enforcement to implement laws and uphold security is within the inherent rights of a sovereign, but it is limited to be exercised within its borders (Jamnejad and Wood 2009, 345–381). In other words, the US under some conditions has the right to restrict the transactions of US persons with the sanctioned country within the territory under its sovereignty. The problem arises when through the application of secondary sanctions, it enforces its law extraterritorially and in the jurisdiction of other States and directly imposes them on their citizens. In 1927, the Permanent Court of International Justice (PCIJ) in the Lotus Case between France and Turkey, made it clear that a State cannot enforce its territorial power in another State (PCIJ, Lotus Case 1927, para 18). Judge Higgins in the case before the ICJ between Democratic Republic of Congo and Belgium, the Arrest Warrant case, also observes that jurisdictional enforcement in the territory of another State breaches the principle of non-intervention (ICJ, Arrest Warrant Case Judgement 2002, para 79. See also: ICJ, Corfu Channel Case 1949, para. 35). There is therefore some precedent in the international case law against the extraterritorial application of national laws. This is due to their interference with the domestic affairs of third countries and undermining the principles of sovereign equality and non-intervention. Since UCMs are not regulated by a united body of law in international law (Subedi 2021, 3) to better analyze their relationship with the principle of non-intervention, the study of State practice might be of help. First of all, we might argue that the UN General Assembly’s resolutions, as mentioned earlier, reflect the common opinion of States and there are many instances where these 325

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resolutions and the UN member States have doomed the secondary sanctions (Ibid, 42–50). In the practice of States, it is also noticeable that the extraterritorial application of UCMs has always been subject to opposition (Ibid). Despite the US’s rich history of extraterritorial authority to pursue national foreign policy objectives, the imposition of restrictive measures on the nationals of another sovereign has not been welcomed by their respective States. Third countries condemned the extraterritorial sanctions due to undermining the State’s sovereignty and interfering with their internal and external affairs (see: Tasnim News 2020). The Raegan administration in 1982 for instance imposed restrictive measures against the European companies that contributed to the Soviet Union pipeline construction (Knudson 2020). France and the UK in response called these sanctions illegal and against the independence of the European companies (Ibid). To protect its sovereignty, Thatcher’s government adopted the Protection of Trading Interests Act instructing the UK firms to comply with the laws of this country and not the orders of the US (Ibid). In the next decade, the US government attempted to resort to similar measures through HelmsBurton Act applying extraterritorial sanctions concerning non-US persons activities in Iran, Cuba, and Libya (Council Regulation (EC) No 2271/96, 1996). Back then, the European Union (the EU) has stood firm against the extraterritorial application of the US policy through passing the 1996 EU Blocking Statute (Knudson 2020) to nullify the impact of these sanctions by instructing the EU companies not to act in compliance with the US law. At that time there was no need for this Statute to become effective as it led both parties to reach an agreement in 1998 and as a result of which the US dropped the secondary sanctions against these countries (Ibid). In 2018, the EU has revived the 1996 Blocking statutes after the US initial announcement of leaving the JCPOA to make it illegal for EU entities to comply with the US secondary sanctions against Iran (Rajput 2021, 217). These regulations seem to be a come-back to the 1980s and 1990s strong opposition of Europe towards extraterritorial sanctions. Between the territorial and extraterritorial law, the former should prevail especially in the case of a conflict, the UK government held this opinion in the British Protection of Trading Interests Act (Davidson 1998, 1425–1435). Davidson in 1998 Stated that UK law rules its nationals and US extraterritorial actions count as unacceptable interference with the State sovereignty (Ibid). Another strong illustration of the third States’ resistance towards secondary sanctions is China’s Ministry of Commerce Blocking Rules as a set of measures to combat the extraterritorial application of unilateral sanctions (Zhang, Soliman and Schueren 2021). In January 2021, the Chinese authorities have announced the immediate enforcement of the blocking rules to protect the interest of the country and those Chinese individuals and entities that have been negatively impacted as a result of unjustified extraterritorial sanctions. There will be punishment for Chinese affiliates of non-Chinese multinational companies that act in compliance with the secondary sanctions. Despite all of these, in the pressure between compliance with the laws of their sovereign power and the severe US enforcement of its sanction laws, the companies have selected to follow the US sanctions and dropped the Iran market (Lohmann 2019). As a result of all their efforts being unsuccessful due to the non-compliance by banks and companies; chief among them the failure of E3-owned INSTEX, the European policymakers have consequently realized that it is Washington regulating and governing their entities and nationals (Ibid). It has been mentioned in a European Commission report that: “recent extraterritorial unilateral actions by third country jurisdictions like in the case of re-imposed sanctions on Iran […] are a wake-up call regarding Europe’s economic and monetary sovereignty” (Towards a stronger international role of the Euro 2018). Deducing from these instances where the citizens of third countries rather follow the instruction of the sender of sanctions, it is evident that secondary sanctions intervene with the 326

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internal affairs of third States. The extraterritorial measures enforce the jurisdictional power of another sovereign against the third countries’ companies and nationals over which they do not have a natural sovereign power depriving them of their right to enjoy free trade. They moreover disable the States’ exercise of sovereignty and the capacity to hold an independent political viewpoint contrary to the sanctioning country’s foreign policy. Since irrespective of its counter-political position, its nationals will follow the rules of the sender of sanctions and not their governments (The practice of some of the European companies has been beyond the requirements of the US reaching an “overcompliance” State, e.g. see: “Over-compliance with US sanctions harms Iranians’ right to health” 2021).

Concluding Notes The continuation of imposition of UCMs with negative humanitarian impacts promotes the idea that superpowers, so long as they can afford it financially and economically, without resorting to the mechanisms anticipated in international law like referring the case to the UN Security Council, can impose coercive measures on a State and their business counterparts to serve their national policy purposes. UCMs, not only by interfering in the domestic affairs of the target State deprive the population under its jurisdiction of basic human rights but also, have a devastating impact on third States. Chief among them is to apply coercion on the companies subject to another jurisdiction to follow the laws of the sanctioning State. Hence, extraterritorial sanctions undermine the sovereignty and political independence of third States. The US imposition of obligations on nonUS companies for the purpose of furthering its foreign policy beyond its territory is breaching the principle of non-intervention against the country the nationals of which are affected this way. Consequently, UCMs in general threaten the very fundamental rights of the international community and foundational principles of international law; to name sovereign equality, non-intervention, good faith, and cooperation among States.

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26 ASSESSING THE LEGALITY OF THE EU SANCTIONS IMPOSED ON THE RUSSIAN FEDERATION FROM 2022 Antonino Alì Introduction Between 2014 and 2022, the European Union (EU) and other countries imposed various sanctions on the Russian Federation in response to its annexation of Crimea and the destabilisation of eastern Ukraine. These sanctions included various measures such as asset freezes and travel restrictions on certain individuals. Economic sanctions were also introduced, targeting key sectors such as finance, energy, and defence. Sanctions have always been the subject of ongoing discussions and legal disputes, with questions being raised about their effectiveness, legality, and consequences for both Russia and the States implementing them. As underlined in September 17, 2020, by the Court of Justice of the European Union (CJEU) in Rosneft (C-732/18 P), the restrictive measures taken against the Russian economy “plainly contributes to achieving the objective of increasing the costs of the Russian Federation’s actions to undermine Ukraine’s territorial integrity, sovereignty and independence, and of promoting a peaceful settlement of the crisis” (§92). More recently, on July 27, 2022 (RT France, T-125/22), with reference to the facts of 2022, the General Court (GC) affirmed that the purpose of restrictive measures is to end the state of war and violations of international humanitarian law that may result from war. This objective also constitutes a fundamental public interest for the international community (CJEU, Bosphorus, July 30, 1996, C-84/95, §26). This analysis examines the legal aspects of sanctions implemented after 2022, taking into account the relevant case law, in particular those established post-2014. Over the past two decades, a number of judgments by the Court of Justice have had a profound impact on the development of the EU’s sanctions policy and the promotion of the rule of law within the EU (Lenaerts 2014; Happold 2016; Challet 2020). These rulings have clarified the legal requirements for imposing restrictive measures, while also emphasizing the need for robust evidence and the importance of upholding fundamental rights and procedural safeguards throughout the sanctions process (Poli 2022). The sanctions imposed on the Russian Federation after 2014 resulted in a significant number of cases being brought before the Court of Justice (Ali 2019). In these cases, the EU judges addressed a wide range of issues, including the scope of the Court’s jurisdiction and the legality of the grounds for imposing of sanctions on specific individuals or entities. 330

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The Jurisdiction of the Court of Justice of the European Union in CFSP and “Rosneft 2017” Article 19 of the Treaty on the European Union (TEU) provides that the CJEU shall ensure the observance of the law in the interpretation and application of the treaties. However, the jurisdiction of the Court in matters concerning the Common Foreign and Security Policy (CFSP) is restricted by the EU treaties. According to Article 275, §1, TFEU of the Treaty on the Functioning of the European Union (TFEU), the CJEU does not have jurisdiction over provisions relating to the CFSP or acts adopted on the basis of those provisions. Notwithstanding this limitation, EU judges have competence to adjudicate cases related to restrictive measures, which constitutes an exception to the general rule contained in Article 275, §1. As emphasized in 275, §2, TFEU “[…] the Court shall have jurisdiction to monitor compliance with Article 40 of the Treaty on European Union and to rule on proceedings, brought in accordance with the conditions laid down in the fourth paragraph of Article 263 of this Treaty, reviewing the legality of decisions providing for restrictive measures against natural or legal persons adopted by the Council on the basis of Chapter 2 of Title V of the Treaty on European Union”. The GC has jurisdiction to hear and determine at first instance (on the basis of) cases brought against EU institutions, bodies, offices, and agencies. The GC’s decisions can be appealed to the Court of Justice, which is the highest court in the EU. The ECJ has the power to review the legal interpretation of the GC’s decisions and to ensure the consistent application of EU law across all member states. Overall, the GC plays a crucial role in ensuring the rule of law within the EU by providing an avenue for individuals and companies to challenge the legality of EU acts and to seek redress for any harm caused by those acts. The relevant legal framework for challenging measures before the GC is set out in Article 263, §4, TFEU. Under this provision, individuals or entities who are directly and individually affected by an act of the EU institutions, such as restrictive measures, have the right to bring an action for annulment before the GC within two months of the act’s publication or notification (Article 263, §§4 and 6). Sanctions are renewed on an annual basis, bi-annual, or other periodic basis, in accordance with the legal basis that established them. Therefore, the date of adoption or renewal of the sanction is relevant for calculation of the time limit for challenging it before the GC. On March 28, 2017, in Rosneft (C-72/15), a case related to sanctions against Russia, the High Court of Justice of England and Wales asked the CJEU to give a preliminary ruling on the validity of certain restrictive measures adopted by the EU against PJSC Rosneft Oil Company. Rosneft is a company incorporated in Russia, specializing in the oil and gas sectors. Since September 8, 2014, Decision 2014/512 and Regulation No. 833/2014 have explicitly identified Rosneft in their respective annexes as an entity subject to some of the restrictive measures established by these acts. In its judgment, the Grand Chamber of the CJEU clarified that the exclusion of the CJEU’s jurisdiction in the EU’s CFSP must be interpreted narrowly. According to the Court, the principle of effective judicial protection enshrined in “[a]rticle 47 of the Charter cannot confer jurisdiction on the Court, where the Treaties exclude it, the principle of effective judicial protection nonetheless implies that the exclusion of the Court’s jurisdiction in the field of the CFSP should be interpreted strictly” (paragraph 74). The Court was expected to declare the request inadmissible, as it had not been submitted in accordance with Article 263(4). However, the Court confirmed its jurisdiction to assess the validity of measures enacted under the CFSP, insofar as such measures pertain to the freezing of assets and economic resources and the imposition of financial restrictions (§81). In essence, the Court has broadened its jurisdiction in matters pertaining to restrictive measures and issues concerning the validity of the acts that institute them. 331

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The Legality of the Measures against “Yanukovych Regime”: The Misappropriation of State Funds One of the first reactions of the EU in March 2014 was the adoption of a series of restrictive measures (assets freeze) against the pro-Russia leadership (Council Decision 2014/119/CFSP of 5 March 2014 and Council Regulation 208/2014 of 5 March 2014). Sanctions were introduced and, following the annual review, extended in the subsequent years. A consistent part of the measures was annulled, and the individuals were delisted. Funds and economic resources of several individuals identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations were frozen. These restrictive measures were adopted “with a view to consolidating and supporting the rule of law and the respect of human rights in Ukraine” (Recital n.2 in the preamble of Decision 2014/119), the Ukrainian blacklist, is therefore “uniquely a human rights sanctions regime concurrently to a misappropriation sanctions regime” (Portela 2019). Between 2014 and 2022, a significant body of case law had been generated before the Tribunal and the Court of Justice in relation to the review of the legality of such sanctions. The restrictive measures against former President Viktor Yanukovych and his entourage are those that have generated the largest number of cases. The number of annulments has been exceptionally high. The weakness of the reasoning put forward to support the diversion of Ukrainian funds has been the main reason for the illegality of the sanctions. The number of cases concerning sectoral sanctions was low compared to the “Ukrainian cases”. It worth noting that between 2018 and 2020, the ECJ annulled sanctions imposed against former Heads of State, close family members, and part of the government of Tunisia, Egypt, and Ukraine in order to assist third countries in recovering public funds that had been misappropriated by individual State bodies in 2011 and 2014. The condition for the Union to freeze these assets was that the listed individuals had been found to be responsible for the misappropriation of funds on the basis of judicial proceedings in their home jurisdictions. As noted by Poli (2022, p. 1072), this type of annually renewed restrictive measure is a highly unusual form of sanction as it is linked to the information provided by the judicial authorities of third countries. There is a risk of politicizing the criminal proceedings will be politicized, in violation of the right to effective judicial protection and the right of defence, particularly for the quality of the addressees of these sanctions (former State organs). Poli (2022, p. 1077) observes that the Council “does not have unfettered discretion: it cannot automatically renew the freezing of assets without verifying that, in the third countries where the judicial proceedings are conducted, individual rights are respected. The ECJ prevents the Council from assisting third countries that disregard the right to effective judicial protection and the right of defense”. The Portnov case (T-290/14) before the GC illustrates the challenges of imposing sanctions for misappropriation of state funds. The statement of reasons for these restrictive measures taken against Andriy Portnov former Adviser to the President of Ukraine reads: “Person subject to criminal proceedings in Ukraine to investigate crimes in connection with the embezzlement of Ukrainian State funds and their illegal transfer outside Ukraine”. Mr. Portnov filed an action for annulment before the GC challenging his inclusion on the above-mentioned list of individuals. On October 26, 2015, the GC reiterated that any restrictive measures must be based on a solid factual basis and emphasized that the ground for the adoption of sanctions must be based on specific and concrete evidence, rather than abstract considerations. Mr. Portnov was included on the list by the Council based on a letter dated March 3, 2014, from the Public Prosecutor’s Office of Ukraine to the High Representative of the EU for Foreign Affairs and 332

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Security Policy. The letter described Mr. Portnov as the subject of an investigation into acts involving the misappropriation of state funds and their illegal transfer abroad. The GC annulled the regulation insofar as it concerned Mr. Portnov, citing a lack of specific details regarding the alleged facts against him. Subsequently, the EU judges rejected the Council’s inadequately substantiated approach. Five Ukrainian individuals, including Mr. Azarov and Mr. Arbuzov, former Prime Ministers of Ukraine, succeeded in obtaining the annulment of their listings on the same statement of reasons as Mr. Portnov (Azarov, T-331/14; Azarov, T-332/14; Klyuyev, T-341/14; Arbuzov, T-434/14; Stavytskyi, T-486/14). The letter from the Prosecutor of Kiev did not contain specific details regarding the alleged matters or the nature of the individuals’ responsibility. It is therefore to the Council to verify whether the grounds for the adoption of the sanctions are well founded, based on a sufficient factual basis. Although the Council has wide discretion in determining the general criteria for imposing restrictive measures, the judicial review guaranteed by Article 47 of the Charter of Fundamental Rights of the EU necessitates that EU judges ensure the measures are taken on a solid factual foundation. As the Grand Chamber of the CJEU reaffirmed on April 21, 2015 (Issam Anbouba, C 605/13 P), this requires “a verification of the factual allegations in the summary of reasons underpinning that decision, with the consequence that judicial review cannot be restricted to an assessment of the cogency in the abstract of the reasons relied on, but must concern whether those reasons, or, at the very least, one of those reasons, deemed sufficient in itself to support that decision, are substantiated by sufficiently specific and concrete evidence” (§45). Similar situations have arisen in cases such as those of Victor Yanukovych and his son Oleksandr Yanukovych, where the freezing of funds has been partially confirmed and partially annulled since 2016. Similarly, in the case involving Klymenko, the former Minister of Revenue and Duties of Ukraine, there have been multiple annulments and a recently dismissed request for reparation (February 1, 2023, T 470/21). The initial list targeting the former Ukrainian government has become largely symbolic, as its members have either been delisted, subjected to court intervention, or transferred to Russian lists after February 2022, as exemplified by the cases of Yanukovych and his son. It may be argued that the EU judicial system demonstrated its willingness to expose the inadequacies of targeted sanctions against the Yanukovych regime. Nevertheless, the annulment of the restrictive measures often took place immediately after the annual renewal period, leading to numerous instances where annulments carried only symbolic value and did not significantly impact the situation. In the realm of reparation for damages, the burden of proof rests with the claimant, who must present evidence of the actual harm endured as a consequence of the restrictive measures. The action for damages is an autonomous legal remedy for compensation for damages caused by an EU institution, while the action for annulment is a prerequisite for bringing an action for damages before the Court. According to CJEU case law, the non-contractual liability of the Union (Article 340, §2, TFEU) for the unlawful conduct of its institutions or bodies is subject to certain conditions. These include the existence of a sufficiently serious breach of a rule of law intended to confer rights on individuals, the reality of the damage, and the existence of a causal link between the breach of obligation and the damage suffered by the injured parties. In most cases, establishing a connection between the damage caused by restrictive measures and the imposition of sanctions is extremely difficult. As a result, although EU law recognizes the right to seek damages, in practice, obtaining substantial compensation is often challenging. Thus, the action for damages remains a mostly symbolic remedy for individuals affected by EU sanctions, and the actual impact of this legal avenue on the protection of individual rights in the CFSP remains limited (GC, 25 November 2014, Safa Nicu Sepahan Co., T-384/11). 333

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The Economic Sectoral Sanctions and the (Broad) Discretion of the EU Institutions On July 16, 2014, following the adoption of some economic sanctions by the US, the EU adopted restrictive measures on July 31, 2014 in response to Russia’s destabilizing actions in Ukraine. The measures targeted the energy, defence, and financial sectors, including restrictions on EU capital markets to some Russian state-owned banks (including some oil companies and arms manufacturers from September), an arms embargo, and restrictions on cooperation with the Russian energy sector. Additional sanctions were imposed in relation to Crimea, including a ban on imports subject to approval by Ukrainian authorities and restrictions on investment and exports in six strategic sectors in Crimea, such as transport, telecommunications, and energy (later extended to all sectors). The number of cases brought before the EU judges that focused on economic sectors were relatively limited compared to the “Ukrainian cases”. One of the most notable cases was Rotenberg v Council (GC, 20 November 2016, T-720/14), in which a Russian businessman close to President Putin and a major shareholder of a company that had received a public procurement contract for a feasibility study on the construction of a bridge between Russia and Crimea, had his funds frozen. The fund freezing was confirmed for the period of 2015–2016 but annulled for the period of 2014–2015. As noted by the Court of Justice on September 17, 2020 (C-732/18, Rosneft, §§91–92), EU institutions must be allowed “a broad discretion in areas which involve political, economic and social choices on its part, and in which it is called upon to undertake complex assessments”, and that “the legality of a measure adopted in those fields can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue”. While the Court of Justice may have refrained from interfering with sensitive foreign policy decisions, it is noteworthy that the Court has played a crucial role in scrutinizing the Council’s actions and safeguarding the fundamental rights of individuals affected by the sanctions. Thus, despite the Court’s reluctance to interfere with foreign policy matters, it has still had a significant impact in protecting the rights of those affected by targeted sanctions.

Sanctions against Russia after February 2022: “Russia TV France” Case The 2022 sanctions against Russia were implemented under a sanctions regime that was initially established in March 2014 and subsequently expanded through the implementation of ten sanction packages over the following 12 months. The resulting system includes a unique set of measures targeting key sectors of the Russian economy and political elites (Portela 2022). Additionally, Belarus and Iran have also been subjected to new sanctions in response to their involvement in Russia’s war. There are currently around sixty cases pending before the Court in relation to the measures adopted. The large scale and scope of these sanctions pose new implementation and judicial challenges for the EU, requiring renewed efforts to achieve alignment and prevent circumvention. The first cases decided by the GC are particularly noteworthy because of their relevance and importance. As a result, these cases have been resolved quickly. In this context, we will focus on some of the most important cases. On March 1, 2022, the EU Council adopted restrictive measures prohibiting certain media outlets, including RT France, from broadcasting (Madiega 2022; Cabrera Blázquez 2022). These measures were initially implemented until July and then renewed. The Council accused the Russian Federation of using propaganda techniques to legitimize and reinforce aggression towards Ukraine. The Council alleged that certain media outlets disseminated disinformation and manipulated information about the invasion of Ukraine, with the intention of undermining the stability 334

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of neighbouring countries and the EU (Andriukaitis et al. 2021). In response, the EU imposed sanctions on media organizations and individuals found to have disseminated disinformation. The Council suspended the broadcasting activities of Sputnik and RT/Russia Today (including RT English, RT UK, RT Germany, RT France, and RT Spanish) in the EU or directed towards the EU. The Council had previously imposed restrictive measures on the management of RT, including editor-in-chief Simonyan, while Kiselev, the head of the news agency Rossiya Segodnya, had also been subjected to similar measures in 2014. On June 15, 2017, the EU Court rejected Kiselev’s appeal, finding that the Council’s adoption of restrictive measures against him for promoting propaganda in support of the actions and policies of the Russian Government, which destabilized Ukraine, did not constitute an excessive limitation on his right to freedom of expression. The Court reasoned that such measures were necessary in order for the Council to exert pressure on the Russian Government by imposing restrictive measures not only on those responsible for the actions and policies regarding Ukraine but also on those who actively support them (T-262/15, §§112–113). On March 24, 2022, RT France applied for annulment to the GC (T-125/22 R), seeking urgent measures to suspend the implementation of actions affecting its operations. The Court’s President dismissed the interim relief request on March 30; however, due to the exceptional nature of the case, the proceedings were accelerated. In its judgment, the Grand Chamber of the GC underscored, as appropriate, that the Council possesses broad discretion in determining the objectives of restrictive measures implemented by the EU under the CFSP. As such, the Council cannot be faulted for deeming the temporary prohibition of content broadcasting by specific media outlets financed by the Russian State as a necessary response to the grave threat to peace along Europe’s borders and the violation of international law, stemming from their support of the Russian Federation’s military aggression against Ukraine. With regard to the alleged violation of the freedom of expression and information, the GC has confirmed that the Council may impose restrictive measures limiting RT France’s freedom of expression, provided that specific conditions are satisfied. Namely, any restriction on freedom of expression must be provided for by law, and the scope and duration of the temporary prohibition should be in accordance with the fundamental essence of freedom of expression. The GC determined that the Council pursued a general interest objective of safeguarding the Union’s public order and security, as well as exerting pressure on the Russian authorities to cease military aggression against Ukraine through the imposition of restrictive measures. The Council presented a coherent, specific, and comprehensive body of evidence demonstrating RT France’s support for Russia’s aggression against Ukraine. Consequently, the EU judges emphasize that the limitations on RT France’s freedom of expression resulting from the restrictive measures are proportionate, as they are appropriate and necessary to achieve the intended objectives. The nature and extent of the temporary prohibition in question preserve the essential content of freedom of expression and do not undermine such freedom in its entirety. For these reasons, the GC dismisses RT France’s action.

Restrictive Measures and Family Ties The number of individuals and entities subject to targeted sanctions has experienced a tenfold increase, rising from a few hundred to a total of 1473 individuals and 205 entities. These measures are especially noteworthy, as they target not only Russia’s President Putin and Minister of Foreign Affairs Lavrov but also the economic and political support network that reinforces the power structure in Russia. This includes members of the Russian State Duma, National Security Council, 335

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Federation Council of the Russian Federation, ministers, governors and local politicians, highranking officials and military personnel, businesspeople, oligarchs, and propagandists. To guarantee the effective enforcement of sanctions, coordinating bodies have been established. One such example is the European Commission’s “Freeze and Seize” Task Force, created to streamline EU-level coordination in implementing sanctions against designated Russian and Belarusian oligarchs. This task force operates in conjunction with the newly formed “Russian Elites, Proxies, and Oligarchs (REPO)” Task Force, through which the EU collaborates with G7 countries—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States— as well as Australia. The measures imposed on Russian oligarchs and businessmen are substantial and affect assets generally held by large corporations. In many cases, these actions have also affected their family members. In this context, it is worth noting the parallel to the different situation concerning the Syrian regime. In response to the actions of the Syrian regime, the Council determined that Ms. Al-Assad was associated with and benefited from the regime due to her close personal relationship and inherent financial ties to the Syrian President and other key figures within the regime. Consequently, the Council included her name on the list of persons subject to restrictive measures, resulting in the freezing of her funds in the EU and a prohibition on her entry into, or transit through, the territory of EU Member States. For these reasons, Ms. Bouchra Al-Assad, the sister of Mr. Bashar Al-Assad, the President of the Syrian Arab Republic, and the former wife of Mr. Assef Shawkat, the Deputy Chief of Staff of the Syrian regime until his death, was added to the list of sanctioned individuals. In response to Ms. Al-Assad’s annulment request, the GC, in its judgment of March 12, 2014, stated that “the explanation provided to the applicant made it evident that her name was added to the list of individuals subject to the restrictive measures against Syria due to her personal and familial connections” (T-202/12, §50). According to the GC, the Council was justified in presuming that individuals with established ties to the Syrian regime could be considered as supporting or benefiting from it. The GC found that Ms. Al-Assad could be linked to the Syrian leadership by virtue of her family ties, although the Council’s reference to her relationship with other regime figures was vague. This is often the case in authoritarian regimes or where power is concentrated within a few families or individuals. In the case of Russia, however, the connection is not always clear-cut, particularly when there is insufficient evidence to establish the involvement of a family member in the economic activities of the primary target of the sanctions. In this regard, the recent case of Prigozhina before the GC on March 8, 2023 (Case T-212/22) highlights the need for adequate intelligence activities to support the imposition of sanctions and the challenges associated with establishing a link between the primary target of sanctions and their family members. In October 2020, the Council of the EU adopted restrictive measures against Mr. Yevgeniy Viktorovich Prigozhin, a Russian businessman with close links to the Wagner Group, which is involved in military operations in Libya (and later in 2022–2023 in Ukraine). On June 1, 2022, the Court of Justice rejected the application for annulment. Pursuant to Article 2 of Regulation 2069/2014, “[a]ll funds or economic resources belonging to, owned, held, or controlled by any natural persons or natural or legal persons, entities, or bodies associated with them as listed in Annex I shall be frozen. No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural persons or natural or legal persons, entities, or bodies associated with them as listed in Annex I”. The Council listed Violetta Prigozhina, mother of Mr. Prigozhin, on the basis that she is the owner of Concord Management and Consulting LLC, which is part of the Concord Group founded 336

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and owned by her son until 2019. She also owns other companies associated with her son. As a result, she is connected to a person responsible for deploying Wagner Group mercenaries in Ukraine and benefiting from substantial public contracts with the Russian Ministry of Defence following Russia’s illegal annexation of Crimea and the occupation of eastern Ukraine by Russian-backed separatists. According to the Council, she supported actions and policies that undermine the territorial integrity, sovereignty, and independence of Ukraine. Ms. Prigozhina requested that her inclusion on the list be annulled. In line with the established case law of the Court, imposing restrictive measures on individuals solely based on their family relationship with individuals associated with the leaders of a third country, regardless of their personal conduct, contravenes the principles upheld by the Court. This requirement ensures a sufficient nexus between the individuals targeted by the measures and the third country at which the measures are aimed. The link between the applicant and Mr. Prigozhin, which formed the basis of the Council’s decision to include the applicant on the contested lists, was established solely on their family relationship at the time of the adoption of the disputed acts. That relationship was therefore insufficient to justify the applicant’s inclusion in the lists. In addition, the Council failed to demonstrate the mother’s actual involvement in her son’s activities. During the proceedings, the Council argued that association criteria pose a risk of circumvention. According to the GC, association criteria typically apply to any entity having any type of connection with an entity providing support to the targeted government, as long as there is a non-negligible risk that this association can be exploited by the supporting entity to bypass the imposed sanctions. When an entity’s funds are frozen, there is a non-negligible risk that it will attempt to exert pressure on the entities it holds or controls to circumvent the effect of the measures concerning it. In this context, freezing the funds of these entities is necessary and appropriate to ensure the effectiveness of the measures taken and prevent circumvention. However, in this specific case, the association link between the parties through companies was not established, and the connection between them was solely based on family ties. In summary, the GC ruled that the risk of circumvention through association criteria cannot be invoked solely based on the basis of family ties, without additional evidence demonstrating a genuine risk of circumvention. The Council should have established a direct link between the individuals and the sanctioned activities to justify their inclusion in the sanctions list, rather than relying solely on their family relationship with sanctioned individuals.

Some Preliminary Conclusions Preliminary conclusions, already highlighted by Lester (2017), suggest that the most common reasons for targeted sanctions being annulled by the GC are insufficient evidence and vague reasons. Insufficient evidence refers to the inability of the EU Council to prove the allegations made in the published reasons for listing a person or entity, leading to an annulment of the listing. Another common reason for annulment is the failure to provide precise, detailed, and specific reasons for the sanction listings, which is the Council’s duty. It may be useful to refer to the case (T-249/20) involving a Syrian and Lebanese entrepreneur, Mr. Abdelkader Sabra, who was listed because he was considered a “leading businessperson” operating in Syria and was believed to be carrying out activities in support of the Syrian regime and its associates. This may well have implications for some future cases involving businesspeople and oligarchs who have been listed since 2022. On March 16, 2002, the GC annulled the listing of Mr. Sabra on the sanctions list, on the grounds that, although his status as a businessman operating in 337

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Syria had been established, the Council had not provided evidence that he was a “leading” businessman in that country, or that he supported or benefited from the Syrian regime. This underlines the importance for the Union to develop high-level information sharing. The use of open source intelligence (OSINT) is essential for maintenance of EU sanction regimes, particularly as the Council and Member States avoid disclosing classified documents despite the existence of procedures to safeguard their confidentiality in court proceedings. As underlined by Lester (House of Lords, European Union Committee 2017, §61), evidence or information offered by the Council is anything but intelligence; instead, it is often based on opinions and websites that are not always grounded in facts or subject to proper data validation. As a result, this information is often inaccurate and unreliable. In conclusion, while the number of sanctions annulled since 2014 may seem significant, especially when considering the “Ukrainian cases”, the EU’s sanction system has held up, and the Court has established rules to refine the Council’s sanctioning capacity. However, the foreign policy decisions regarding the use of massive economic sanctions against Russia have not been challenged. One of the tests for the resilience of the system will undoubtedly be the sanctions against oligarchs. Although these are personal restrictive measures, they affect significant financial funds and assets that are one of the pillars of the current power structure in Russia.

Bibliography Alì, A. (2019). The Challenges of a Sanctions Machine: Some Reflections on the Legal Issues of EU Restrictive Measures in the Field of Common Foreign Security Policy, in L. Antoniolli; L. Bonatti; & C. Ruzza (eds.), Highs and Lows of European Integration. Sixty Years after the Treaty of Rome, pp. 49–62. Andriukaitis, L., Kalensky J., Kargar S., Panchulidze E. Smetek J. Vangeli A. (2021). The misuse of social media platforms and other communication channels by authoritarian regimes: Lessons learned, European Parliament, In-depth Analysis, Requested by the INGE committee. Available at https://www.europarl. europa.eu/thinktank/en/document/EXPO_IDA(2021)653658 Cabrera Blázquez, F. J. (2022). The implementation of EU sanctions against RT and Sputnik, Observatory (Council of Europe). Available at https://rm.coe.int/note-rt-sputnik/1680a5dd5d Challet, C. (2020). Reflections on Judicial Review of EU Sanctions Following the Crisis in Ukraine by the Court of Justice of the European Union, College of Europe, Research Paper in Law, 4. Happold, M. (2016). Targeted sanctions and human rights, in Happold; & Eden (eds.), Economic Sanctions and International Law, pp. 87–112. House of Lords, European Union Committee (2017). The legality of EU Sanctions, 11th Report of Session 2016–2017, HL Paper 102. Available at https://publications.parliament.uk/pa/ld201617/ldselect/ ldeucom/102/102.pdf Lenaerts, K. (2014). The Kadi Saga and the Rule of Law within the EU, 67 SMU L. Rev. pp. 707–715. Available at https://scholar.smu.edu/cgi/viewcontent.cgi?article=1003&context=smulr Lester, M. (2017). Written evidence (EUS0001) before the UK Parliament, 2017. Madiega, T. (2022). Russia’s war on Ukraine: The digital dimension, European Parliamentary Research Service, EPRS. Available at https://www.europarl.europa.eu/RegData/etudes/ATAG/2022/729317/ EPRS_ATA(2022)729317_EN.pdf Poli, S. (2022). The right to effective judicial protection with respect to acts imposing restrictive measures and its transformative force for the Common Foreign and Security Policy, Vol. 59, No. 4, CMLR, pp. 1045–1080. Portela, C. (2019). Sanctioning kleptocrats. An assessment of EU misappropriation sanctions, CIFAR, pp. 23–24. Available at https://cifar.eu/wp-content/uploads/2019/03/CiFAR_Sanctioning-kleptocrats.pdf Portela, C. (2022). Slow-acting tools. Evaluating EU sanctions against Russia after the invasion of Ukraine, European Union Institute for Security Studies (EUISS). Available at https://www.iss.europa.eu/sites/ default/files/EUISSFiles/Brief_11_Sanctions_0.pdf

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Note: Page references in italics denote figures, in bold tables and with “n” endnotes. 2030 Agenda for Sustainable Development 295

Apple 229, 230 Arab oil embargo 30 Aristophanes 27 Asian–African Legal Consultative Organization (AALCO) 321 “as-if game” framework for sanctions ambiguity 212–214 ASML 230, 244–245 asset freezes 92–94 Association of Southeast Asian Nations (ASEAN) 246 Athens 27 Attia, H. 103, 106 autocracies: regimes 51; and sanctions 51

Abe, Shinzo 212, 219 Abramovich, Roman 269 Afesorgbor, S.K. 204 Africa 7; colonial invasion of 198; inequalities in 202; as most sanctioned continent 197; perpetual poverty in 205–206; ROs in 102 African Charter on Democracy, Elections and Governance 206 African Continental Free Trade Area (AfCFTA) 198 African Union (AU) 7, 105, 197; Constitutive Act 198–199; economic effects of sanctions 200–204; Peace and Security Council (PSC) 197; perpetual poverty in Africa 205–206; sanction cases 2003–2022 200; sanctions procedures at 198–200 Afriyie, F.A. 198 Ahn, D.P. 200 Ahn Ki-hyun 239 Airbnb 95 Akins, Nick 235 Al-Assad, Bashar 336 Al-Assad, Bouchra 336 Albright, Madeleine 202 all-encompassing comprehensive sanctions 31–32 Alstom 223 alternative to war, sanctions as 4, 16, 49–52, 112, 120, 175 Alvaredo, F. 198 Anglo-Dutch Shell 225 Anti-Monopoly Law (AML) 127 anti-sanction discourses 179–181 anti-sanction practices 181–184

Banco Central de Venezuela 98 Bank of England 291 Bapat, Navin A. 175 Barber, J. 15 Barry, Colin M. 255 Bartuste, Iturriaga 191 Bateman, Jon 126 Batmanghelidj, E. 140 Belt and Road Initiative (BRI) 130, 181 Bergeijk, P.A. Van 14, 198 Bergeijk, P. van 14 Berlin Decree of 1806 28 Bharat Petroleum Corp Ltd. 280 Biden, Joe 5, 64, 66, 68, 70, 226, 238, 280; administration’s sanctions on Iran 177–178; strategy of positive decoupling 129–130 Biersteker, T. 15, 61 bin Laden, Osama 92 Blanchard, J.-M. F. 51

339

Index Blinken, Antony 64–65 BNP Paribas SA (BNPP) 305, 312–313 Boeing 226, 229 Bolton, John 254 Borrell, Josep 20, 70 Boutrous-Ghali, Boutrous 53 Brexit 124 BRICS 276–277, 281, 282 British Protection of Trading Interests Act 326 Brownlie, I. 114 Build Back Better World (B3W) 129 Burns, William 68 Bush, George W. 191; Executive Order 13244 178

coercion 4, 15, 320–322; economic 71, 103, 114, 116; as economic warfare 115; forcible 113; political 48 coercive diplomacy 3, 59 coercive sanctions 118, 187, 194 Cold War 29–30, 31, 42, 91, 164, 175, 187 collective sanctions 38–39 collective violence 112 Committee on Economic, Social, and Cultural Rights (CESCR) 324 commodity sanctions: reactions to natural resource sanctions 252–256; support for 252; types of 250–251 Common Foreign and Security Policy (CFSP) 331 compliance: increasing, with international law 263; monitoring 264 Comprehensive Agreement on Investments 231 Comprehensive Anti-Apartheid Act 254 comprehensive blockade (‘bloqueo’) 7 Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) 95–96 comprehensive sanctions 26, 31–33, 136 Connolly, R. 19 constrain, and sanctions 60–62 Coordinating Committee for Multilateral Export Controls (COCOM) 220 Corera, G. 66, 70 Corporate Social Responsibility (CSR) 40 correspondence sanctions 26, 28 Cortright, D. 14, 50 Cotton, Tom 179 Council for Mutual Economic Assistance 195n3 Countering American Adversaries through Sanctions Act (CAATSA) 108, 154, 178, 234, 267, 278, 280, 283 Counter-Terrorism Committee (CTC) 42 Court of Justice of the European Union (CJEU) 10, 330; and CFSP 331; and “Rosneft 2017” 331 COVID-19 pandemic 1, 35, 145, 191, 234, 242, 292, 318, 323 Cox, Robert 48 Crawford, James 312, 314, 315n14 Creating Helpful Incentives to Produce Semiconductors (CHIPS) 129 credibility 62–63; assessing 67–68 Crimea: annexation of 18–19, 30, 32, 65, 81, 82, 85, 211, 267, 278, 330; embargo 17–18 Cruz, Ted 179 Cuba 7, 187–195; “chilling effect” as extension of sanctions on 193–194; embargo, boycott, or blockade 192; extraterritoriality 192–193; historical background 188–192; joined Council for Mutual Economic Assistance 195n3; over-compliance 193–194; U.S. economic sanctions on 188–192; U.S. sanctions on 30, 54, 94–95, 136, 192–193

Caesar Syria Civilian Protection Act (CEASER) 118, 137, 145 Caijing magazine 166–167 Carrie Lam 166 Carter, Jimmy 176 case study: EU sanctions against Russia 16–21; sanctions and deterrence, Russia 64–72 Castro, Fidel 108 Central Bank of Iran 325 Central Bank of Venezuela 98, 291 Central Intelligence Agency 189 Charron, A. 198, 202 Charter of Economic Rights and Duties of States 322 Charter of the Organization of American States 116 Chatham House 124 Chavan, Yeshwantrao 277 China 49; Anti-Monopoly Law (AML) 127; central bank digital currencies (CBDC) 234; counter-sanctions regimes 30; economic nationalism 125; geoeconomic rivalry with US 126–128; Iran, relations with 181; Ministry of Commerce Blocking Rules 326; as target state for sanctions 6; trade with Russia 157; US decoupling from 124–131; US economic/technological interdependence with 126–128; US sanctions against 5, 8, 50 China-Central Asia-West Asia economic corridor 181 China Chamber of Commerce Metals, Minerals & Chemicals Importers and Exporters (CCCMC) 254 China Communications Construction Company 165 “China Through the Ages” 166 Chinese left, and US sanctions 168–169 Chinese political economy: Chinese left 168–169; liberals 166–167; nationalists 167–168; new wave of sanctions 164–166; reactions 166–169; and US sanctions 163–171 Christie, E. 19 Cisco 229 class antagonism 167 Clinton, Bill 108, 126, 277

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Index Cuban Assets Control Regulations of 1963 188, 195n2 Cuban Democracy Act see Torricelli Act Cuban Liberty and Democratic Solidarity Act see Helms-Burton Act Cuban National Assembly 190 Cuban Revolution 190 Cuba Prohibited Accommodations List (CPA) 95 Cubatrade.org 194

environmental SDGs 296–297 Ericson 229 Escribà-Folch, A. 51 Eurasian Economic Union 155, 181–182 European Battery Alliance (EBA) 242 European Commission (EC) 242; “Freeze and Seize” Task Force 336 European Energy Autonomy 226–228 European Green Deal 242 European Innovation Council and SMEs Executive Agency (EISMEA) 244 European Raw Materials Alliance (ERMA) 242 European Union (EU) 190, 197, 292, 326, 330; Blocking Statute 224, 326; Common Foreign and Security Policy 29; Conflict Minerals Regulation 251; EV battery manufacturing in 234–246; global supply chains 242–245; legality of sanctions 330–338; lifting sanctions 103–108; Long-Term Low Greenhouse Gas Emission Development Strategy 235; REPowerEU Plan 243; sanctions against Russia 2, 10, 16–21; sanctions imposed on Russia 330–338; third parties in 10; Timber Regulation 251 EV battery manufacturing: in EU 234–246; in South Korea 234–246 Export-Import Bank of the United States 308 extraterritoriality 192–193 extraterritorial sanctions 8, 9

Davis, Paul K. 66 decoupling: defined 124, 126; as indirect sanction 125–126; positive 126; US decoupling from China 124–131 deglobalisation 124 de-risking 119, 297–298 deterrence 59; credibility 60–61, 63, 72; defined 71; Putin's susceptibility to 68–70; and sanctions 64–66; tactics by US/UK/West against Russia 64–66 deterritorialization 44 Dizaji, S.F. 198 Douhan, Alena 119, 318, 322 Drezner, D. W. 51, 61 Drury, Cooper 50 due process 92–94 Dulles, John Foster 91 East African Community (EAC) 197 Economic Community of West African States (ECOWAS) 102, 105, 197 economic effects of sanctions 200–204 economic growth 138–140, 139; Syria's 138; Venezuelans’ 140 economic sanctions 1; defined 3, 38, 40; and discretion of EU Institutions 334; diversification of actors 39–40; expanding scope of 263; global governance in 43–44; and power 41–42; semantic issues 38–40; theoretical and historical aspects 2–3; see also sanctions economic toxification 146 economic violence 112–113, 116–117 economic warfare 25, 27–30, 33–34, 115, 189, 228, 230 Economy-Security Conundrum (E-SC) 125 effectiveness of sanctions 48–49, 54–55 Eisenhower, Dwight D. 188, 195n1 Elliot, K.A. 14 embargo 27–28, 91–92, 192; Arab oil 30; arms 19, 53, 59–60, 175; Crimea 17; economic 18, 113; food 154; NATO oil 250; see also sanctions ENGIE 227 Eni 256 Enterprise Europe Network 244

fairness 42–43 Farrall, J.M. 114 Fassbender, Bardo 93 FCN treaty 314 Felbermayr, Gabriel 175 financial sanctions 26, 28, 31, 33 Foreign Assistance Act of 1961 188, 195n2 foreign exchange, and unilateral sanctions 142–144, 143, 144 foreign policy, and sanctions 175–176 foreign terrorist organizations (FTOs) 176 Fortress Russia 69, 71 Foster, John Bellamy 164 Free Trade Agreement (FTA) 130 Galtung, J. 13, 15, 19, 117 Gang Chen 164 Garfield, R. 203 Gas Exporting Countries Forum 181 Gasparini, L. 198 Gazprom Russia 226 General Electric 96, 223, 254 Germany 7–9, 32, 117, 211, 326–327; and EU energy markets 8; and Nord Stream 2 (NS-2) pipeline 226–228 Gibbons, E. 203

341

Index Giumelli, F. 15 globalization 170 Global South 7, 188, 235 global supply chains: EU 242–245; South Korea 237–241; and Western sanctions 236–245 Google Corporation 155 Gordon, Joy 118 governance: global, in economic sanctions 43–44; potentials of multi-sectoral 45–46; significance of multi-level 44–45 government-promoted PLSs 218 Graham, Lindsey 218 Gramsci, Antonio 52 Grauvogel, J. 103, 106 Great Britain 27–28 Great Britain–Spain War 34 Grossman, N. 116 groupthink 2, 49

Indo-Pacific Economic Framework for Prosperity (IPEF) 129–130 Inflation Reduction Act (IRA) 238 institutionalists 51 institutions: penalizing 262–263; secondary sanctions 262–263; see also specific institutions Instrument in Support of Trade Exchanges (INSTEX) 225, 325, 326 Intel 230, 244 International Atomic Energy Agency (IAEA) 277, 281 International Commercial Law 189 International Court of Justice (ICJ) 113, 314, 321–322, 323, 324 International Covenant on Economic, Social and Cultural Rights (ICESCR) 294, 322 International Criminal Court 219 International Emergency Economic Powers Act 308 internationalism 167 international law: public 113; reconceptualizing sanctions in 119–120; sanctions gap 113–116 International Monetary Fund (IMF) 292 International Sanctions Termination (IST) dataset 4, 102, 103 International System of States 125 inter-state violence 113 intervention: in affairs of the third states 324–327; in internal affairs of sanctioned state 319–324 Iran 6, 49, 54, 140, 144, 280–282; 114th Congress (2015–2016) 178; 115th Congress (2017–2018) 178; 116th Congress (2019–2020) 178; 117th Congress (2021–2022) 178–179; anti-sanction discourses 179–181; anti-sanction practices 181–184; Biden administration’s sanctions on 177–178; comprehensive sanctions 136; constitutionalism 56; cooperation with other sanctioned countries 183–184; Covid-19 pandemic situation 54; discourses and practices on US sanctions 174–184; diversifying economy 182–183; expanding trade with neighbors 183; knowledgebased economy 182; “maximum pressure campaign” against 323; relations with China 181; and Russian trade 158; sanction as tool in foreign policy 175–176; trade relations with Eurasian Economic Union 181–182; Trump administration’s sanctions on 176–177; US Congress’ sanctions on 178–179; US sanctions against 10, 30, 95–97, 176–179; Western ‘oil sanctions’ against 3–4, 81–83 Iran, and Libya Sanctions Act (ILSA or ISA) 174

Haidar, Jamal Ibrahim 255 Hellquist, E. 198 Helms, Jesse 193 Helms-Burton Act 7, 33, 42–43, 189, 190, 193, 195n2, 326 Henkel 225 Hindustan Petroleum Corp 280 horizontal sanctions 31 Hovi, J. 14 Huawei 128, 164, 228, 234 Hufbauer, G.C. 14, 62–63, 198, 202 humanitarian: actors 297–299; aspects of sanctions 53–54; principles 9; trade and sanctions 145; work 297–299 humanitarian impact: on humanitarian actors 297–299; on humanitarian work 297–299; of unilateral sanctions 292–295 Human Rights Council 119 human rights extraterritorial application 322–324 Human Rights Watch (HRW) 323 Hu Shuli 166 Hu Xijin 168 hyperinflation: defined 141; Venezuela 141 Hyundai Motor 238 India 9; balancing interests/global norms 278–279, 281; historical legacy of sanctions 275–277; historical overview 277–278; impact of sanctions against Iran on 281–282; impact of sanctions against Russia on 279–280; and Iran 280–282; mutual accommodation 282–283; overview 274–275; policy on sanctions 276–277; as primary target 277–278; and Russia 278–280; as secondary target 278–282; as third party 278–282; trade with Russia 157 Indian Railway Construction Company 282

342

Index Iran, North Korea, Syria Nonproliferation Act (INKSNA) 281 Iranian Revolutionary Guard Corps (IRGC) 96, 99 Iranian Transactions and Sanctions Regulations 311 Iran/Libya Sanctions Act 43 Iran Nuclear Agreement Review Act (INARA) 178 Iran Nuclear Deal 224 Iran Sanctions Act 178 Iran Threat Reduction and Syrian Human Rights Act 309–310, 315n21, 315n22 Iraq 51; economic sanctions on 39; sanctions imposed by UN 26 Iron Curtain 130 Iron Curtain 2.0 130–131 Islamic Republic of Iran Shipping Lines (IRISL) 96–97 Islamic Revolution 174

knowledge-based economy 182 Komlev, Vladimir 156 Korea: ambiguous style of sanctions 211–212; “as-if game” framework 212–214; and Germany/Iran cases 220–221; and privatelevel sanctions (PLSs) 220; privatelevel sanctions and loopholes 218–220; SakhalinⅡ 215–217; strong exceptions/ loopholes 215–217 Kosovo War 250 Krustev, V. L. 103 Kusý, Milan 213 Lang, A.F. 120 Lavrov, Sergey 70 Law for the Protection of the National Independence and Economy of Cuba 190 League of Nations 49, 91 Lebow, R. N. 62, 67 Lee, Y.S. 205 Lewis, Leo 171 LG Electronics 217, 238 Li, Minqi 169 Liberal International Order (LIO) 125 liberals 166–167 Lieber, Charles 164 Lindsay, J. M. 61 liquified natural gas (LNG) 182, 214, 216–218, 226–228, 235–236, 250 Li Rui 166 Lohia, Ram Manohar 275 Lomé Declaration 7 long-term sanctions 81, 83 Lopez, G. A. 14, 50 Lotus principle 320–322 Lou Jiwei 168 Lowenberg, A.D. 202 Ludema, R.D. 200

Jaishankar, S. 278 Jalili, Saeed 184 Japan 7; ambiguous style of sanctions 211–212; “as-if game” framework for sanctions ambiguity 212–214; and Germany/Iran cases 220–221; and private-level sanctions 219–220; private-level sanctions and loopholes 218–220; sanctions imposed by US, Dutch and Britain 29; strong exceptions/loopholes 215–217 Japan–US War 34 Jian, J. 198 Johnson, Boris 64 Joint Comprehensive Plan of Action (JCPOA) 54, 137, 174, 224–226, 234, 280, 308, 324, 326 Jones, L. 52, 54–55 jurisdiction: over re-export of US-origin goods 310–311; over US-owned/controlled foreign entities 309–310; US Financial System and foreign persons 311–313 Just War doctrine 93 just war theory 115

Maastricht Treaty 29 Macdonald, Terry 45 “Made in China 2025” (MIC) 127 Maduro, Nicolás 82 Magnitsky, Sergei 153 Magnitsky Act 153 Mahadevan, R. 204 Malley, Robert 177 Mallory, L. 188 Mangalore Refinery and Petrochemicals Limited (MRPL) 282 manufactured inflation 140–142, 141 Mao Zedong 6, 167–170 Marossi, Ali Z. 41 MATLAB 165 Matvienko, Valentina 212 maximum pressure campaign (Iran) 323

Kadi, Yassin Abdullah 93 Kaempfer, W.H. 202 Kanfash, Mohammad 119 Kaufmann, William 62 Keatinge, Tom 67 Kemfert, Claudia 227 Kennedy, John F. 188 Kerry, John 228 Khamenei, Ayatollah 6–7, 179, 184 Khatam al-Anbia 96 Kimberly Process Certification Scheme 46 Kingdom of Spain 27–28 Kirkham, Ksenia 175 Kishida, Fumio 253 Kleinberg, Katja B. 255

343

Index Max Planck Encyclopedia of Public International Law (MPEPIL) 38 Medvedev, Dimitri 115 Megarian Decree 27, 37, 49 Menendez, Bob 179 Meng Wanzhou 228 Milaninia, Nema 41 military conflicts 1, 274 military regime 51 Millennium Development Goals (MDGs) 5, 134, 202 Milley, Mark 66 “Mir” payment system 154, 156 Mitsubishi 215, 253 Mitsui & Co. 215, 253 Mnuchin, Steven T. 98 Modi, Narendra 9, 274, 279 Mogherini, Federica 224 Mohamad, Mahathir 321 Mohamad, Rahmat 321 Moon Jae-in 238 Morgan, T. Clifton 103, 175, 198 Mulder, Nicholas 53 multilateralism 224 multinational advocacy, and secondary sanctions 263 multinational corporations (MNCs) 266 Muzhenko, Victor 68

Neumeier, F. 198, 205, 206 new wave of sanctions 164–166 New York Times 65–66 Ngan, Jane 67 Nicaragua vs. USA 113, 115–116 Nokia 229 non-governmental organizations (NGOs) 40, 192, 213–214, 293 non-intervention 2, 9, 113, 116, 190, 305, 307, 313, 322–327 Nonproliferation Treaty (NPT) 277, 281 nonterritorial governance 45 Nord Stream 2 (NS-2) pipeline: and European Energy Autonomy 226–228; and Germany 226–228; and United States 226–228 North-South Transport Corridor (INSTC) 158 Nossal, K. R. 60 Novak, Alexander 81 Nuclear Suppliers Group 277 Nvidia 229, 230 Nye, Joseph 127 Nyoni, T. 205 Obama, Barack 191, 224; policy of decoupling from China 128–129 Observer Net 168 Oegg, B. 198, 202 Office of Foreign Assets Control (OFAC) 137 oil sanctions 3–4; effectiveness of 79–80; international 79–88; on Iran 81–83; overview 79; research framework 80–81; on Russia 81–83; target states response to 83–88; on Venezuela 81–83; see also sanctions operation of sanctions 16 Organisation of African Unity (OAU) see African Union (AU) Organization of Arab Petroleum Exporting Countries 250 organized unilateral sanctions 39 Ottoman Empire 266 Øygarden, K.F. 204

NAFTA 241, 245 naïve theory 2, 14, 19 Napoleonic Wars 28 Nathan, L. 200 National Defense Authorization Act (NDAA) 234, 237 National Emergency Act (1976) 176 nationalism 6, 50, 125, 167–168; China 167; China’s economic 125 nationalists 167–168 National Security Advisor (NSA) 64 NATO 71, 155, 192, 220, 267–268; oil embargo against Yugoslavia 250 natural resource sanctions: reactions to 252–256; third state ignores/companies comply 254; third state ignores/companies ignore 254– 255; third state opposes/companies comply 255–256; third state opposes/companies ignore 256; third state supports/companies comply 252–253; third state supports/ companies ignore 253 Nayara Energy Ltd. 280 near-term sanctions 81, 83–84 negative sanctions 39 Nehru, Jawaharlal 275 neoprotectionism 49 Nephew, R. 60, 114 Net Zero plans 235 Neuenkirch, M. 198, 205, 206

Pape, R. A. 50 Paris Accords 235 Partnership for Global Infrastructure and Investment (PGII) 129 Peksen, D. 198 Pellet, Allain 320 Peloponnesian War 27, 49 Pelosi, Nancy 168 People’s Daily 170 Pericles 37 Perkovich, G. 277 Permanent Court of International Justice (PCIJ) 325 perpetual poverty in Africa 205–206

344

Index ‘personalist’ regimes 51 Petrescu, I.M. 202 Petróleos de Venezuela, S.A. (PdVSA) 82, 84, 97–98, 99, 251 Peugeot 225 Pipe-Line Dispute 43 Pokhran-II nuclear test (India) 277 Poli, S. 332 political economy 3–5; of sanctions 187–195 Pompeo, Mike 177, 318 Portela, C. 202 Portnov, Andriy 332–333 positive decoupling 126; Biden's strategy of 129–130 positive sanctions 39 power: and economic sanctions 41–42; issues on 41–42 PowerCo 244 Price, Ned 120 Prigozhin, Yevgeniy Viktorovich 336–337 Prigozhina, Violetta 336–337 primary sanctions 262, 324; illustration of 261 principle of non-intervention 322–324 private-level sanctions (PLSs) 218–220; defined 218; first generation of 218–219; governmentpromoted 218; and Japan 219–220; and Korea 220; against Russia 219; and scale of loopholes 218–220; second generation of 218; third-generation 219 private/public entities: humanitarian trade 145; overcompliance and sanctions 144–146 Protection of Trading Interests Act 326 public choice theory 50–51 public international law 113 Putin, Vladimir 60, 64–66, 212, 219, 230, 278, 279, 280, 335; susceptibility to deterrence 68–70

Rodriguez, Barrera 191 Rodríguez, F. 98, 146 Rodríguez, Raúl 54 “Rosneft 2017” 331 Rosneft Oil Company 330–331 Rouhani, Hassan 174–184; discourses on US sanctions 179–180 RT France 10, 334–335 Russia 278–280; 2022 sanctions 155–159; annexation of Crimea 30, 32, 65, 82; China trade with 157; counter-sanctions regimes 30; deterrence tactics by US/UK/West 64–66; EU sanctions against 2, 10, 16–21; impact of sanctions against, on India 279–280; India trade with 157; invasion of Ukraine 8, 18, 35, 49, 54, 59–60, 125, 214, 227, 230, 253, 268, 278; legality of EU sanctions imposed on 330–338; oil production 83; oil sanctions on 3–4, 81–83; private-level sanctions against 219; “rainy day” reserves 85; restrictive measures and family ties 335–337; social contract 55–56; as target state for sanctions 6; vertically integrated oil companies (VICs) 83–84; Western sanctions against 151–159 “Russian Elites, Proxies, and Oligarchs (REPO)” Task Force 336 Russian Federation Council 153 “Russia TV France” Case 334–335 Russo–Ukrainian War 244, 269 Ruys, Tom 54, 305, 307–312, 315n20 Ryngaert, Cedric 54, 305, 307–312, 315n20 Sabero Organics Chemical 281 Sabra, Abdelkader 337 SakhalinⅡ 215–217 Samsung Electronics 217, 230, 238 ‘Sanction Club’ 184 sanctioned states 54–56 sanction rents 86–88 sanctions: affect on third parties 7–9; as alternative to war 4, 16, 49–52, 112, 120, 175; capability to circumvent 86–88; conditions for success 13–15; defined 8, 59, 104; duration of 105; economic effects of 200–204; efficacy 13–21; functions of 15–16; as instrument of war 52–54; mechanisms of 48–57; normative intent of 2; overcompliance of private/public entities 144–146; political economy of 187–195; regimes 136–138; against Russia after February 2022 334–335; theoretical aspects of 37–46; as tool in foreign policy 175–176; unilateral (see unilateral sanctions); varying design of 106–107; as violence 116–119; see also economic sanctions

Qatar 181, 260, 292; sanctions on 29 Qin Hui 166 Qualcomm 229, 230 Raeisi, Ebrahim 174–184 Raimondo, Gina M. 215 Rand Corporation 96 Rao, Nirupama 281 Reagan, Ronald 108 Recovery Plan for Europe 242 regional organizations (ROs) 101; in Africa 102; lifting sanctions 103–108 Reliance Industries Ltd. 280, 282 Renault 225 Ren Zhengfei 229 Repsol 254 resistance economy 56 resource dependency 138–140 Ripsman, N. M. 51

345

Index sanctions termination 4; conceptualizing 102–103; differences in 105; international sanctions 101–109; overview 101–102; processes of sanctions 107–108; of sanctions, conceptualizing 102–103 Sandhya Organics Chemical 281 Sasse, Ben 229 Scholz, Olaf 227, 230 Schott, J.J. 14 secondary sanctions 9–10, 26, 32–33, 54, 260–270, 305–314; barriers to effectiveness 265– 266; catalyst in changing state behavior 263; challenges to overcome 265–266; compliance monitoring 264; compliance with international law 263; conceptualizing 261–262; cost, increasing 262; determination 264; deterring undesirable behavior 263; economic dependency 264; enforcement of 265; and evasion 266; expanding scope of economic sanctions 263; factors facilitating effectiveness of 264; honoring trade deals 266; illustration of 261; and international law 306–308; jurisdictional questions/answers 308–313; multilateral cooperation 262; multinational advocacy 263; objectives of 262–264; overview 260–261; penalizing institutions 262–263; and persuasion 265; re-export of US-origin goods 310–311; and sanctioning coalitions 263–264; serving as complimentary to primary sanctions 262; and transparency 266; Turkey as third-party 266–269; US Financial System and persons abroad 311–313; US-owned/controlled foreign entities 309–310 “Secondary Sanctions: A Weapon Out of Control?” (Ruys and Ryngaert) 305 sectoral (surgical) sanctions 26, 32 Secure and Trusted Communications Networks Act 128 selective sanctions 32, 137 selective targeted sanctions 26, 32 self-protection of society 55 Semiconductor Manufacturing International Corporation (SMIC) 228 Senate Committee on Foreign Relations 177 Seven Years War 27–28 Shahrokni, N. 142 Shawkat, Assef 336 Shell 215, 219 Sherman, Wendy 65 signal, and sanctions 60–62 ‘single-party’ regime 51 SK Hynix 238, 244 Skripal, Sergei 154 Skuld, 97–98

Snyder, Glenn 71 Social Conflict Analysis (SCA) 52, 54–55 Socially Responsible Investment (SRI) 40 Society for Worldwide Interbank Financial Telecommunication (SWIFT) 224, 264, 293, 325 Socrates 56 Son, B. 198 South Africa: apartheid 40, 48, 198; sanctions 55, 275 South China Sea 165 Southern Africa Development Community (SADC) 197 South Korea 2, 7–8; EV battery manufacturing in 234–246; global supply chains 237–241 sovereign rights 320–322 Soviet Union 30, 108, 126, 163, 189, 220, 229, 253; see also Russia Sparta–Athens War 34 Specially Designated Nationals (SDNs) 94, 95–97 Stano, Peter 67 Stockholm International Peace Research Institute (SIPRI) 279 St. Petersburg Economic Forum 226 “strategic autonomy” 223 structural violence 112, 117 Su, Yi-Hao 255 Sullivan, Jake 64, 66 “Supplement to an Agenda for Peace” 53 susceptibility 62–63 sustainable development 138–140 Sustainable Development Goals (SDGs) 5, 134– 136, 135, 300; achievement of 295–297; unilateral sanctions 295–297 Syria 118–119; economic growth 138; hunger issues 143; targeted sanctions 137; unilateral sanctions 137, 138, 143 Tai, Katherine 130 Taiwan Semiconductor Manufacturing Company (TSMC) 229 Taliban 92 Tallinn Manual on the International Law Applicable to Cyber Warfare 115–116 targeted/smart sanctions 4, 26, 31–32, 39, 50, 53, 79, 93 target states: China 6; economic context of 85–86; factors specific to oil sector of 83–85; response to oil sanctions 83–88; Russia 6 technological NATO 231 Tehran Chamber of Commerce 182 Terán, Iliana Josefa Ruzza 98 termination see sanctions termination Thatcher, Margaret 326 third states/parties: in EU 10; intervention in affairs of 324–327; sanctions affect on 7–9; UCMs in affairs of 324–327

346

Index Tocci, Nathalie 64 Torricelli, Robert 189–190 Torricelli Act 189, 191, 193 Total 225, 256 trade deals: honoring 266; secondary sanctions 266 trade embargoes see embargo trade sanctions 26, 27; see also sanctions Trade Sanctions Reform and Export Enhancement Act (TSRA) 190–191, 195n2 Trading with the Enemy Act of 1917 195n2 Trans-Pacific Partnership (TPP) 128 transparency, and secondary sanctions 266 travel sanctions 26; Megarian Decree 27 Treasury’s War (Zarate) 188 Treaty of Versailles 29 Treaty on the European Union (TEU) 331 Treaty on the Functioning of the European Union (TFEU) 331 Trump, Donald 54, 69, 118, 124, 126, 165, 190, 191, 224, 280, 318; administration’s sanctions on Iran 176–177; Executive Order No. 13876 177; policy of decoupling from China 128–129 Trumpism 124 Truss, Liz 67 Türk, Volker 113 Turkey 157–158, 260–270; as a ‘third-party’ 266–269 Tzanakopoulos, A. 119–120, 321, 322

United Nations (UN) 26, 91–92, 175, 192, 197; Charter 30, 175, 187, 190, 319, 321, 323, 325; General Assembly 134, 180, 325; Guiding Principles for Business and Human Rights 299; Human Rights Council 291; International Law Commission (ILC) 319; lifting sanctions 103–108; Security Council Resolution 2664 9; Sustainable Development Goals 5, 198 United Nations Security Council (UNSC) 25, 43, 91, 92, 134, 187, 194, 274, 294, 306, 319, 327 United States (US) 224–226; China geoeconomic rivalry with 126–128; decoupling from China 124–131; Department of Commerce 165, 215, 228; Department of Justice 165; Department of the Treasury (USDT) 165, 176, 193, 264, 316n34; economic sanctions on Cuba 188–192; economic/ technological interdependence with China 126–128; Federal Energy Regulatory Commission (FERC) 228; lifting sanctions 103–108; and Nord Stream 2 (NS-2) pipeline 226–228; Securities and Exchange Commission 254; termination requirements 106–107 US Army Corps of Engineers 96 US Congress 40 US Congress and sanctions on Iran 178–179 US Dodd-Frank Act 251, 254 U.S. Inflation Reduction Act 231 US Innovation and Competition Act 129 US Innovation and Competition Act of 2021 (USICA) 165 US International Emergency Economic Powers Act 176 US Lacey Act 251 US–Nicaragua Treaty of Amity 116 US-origin goods: jurisdiction over reexport of 310–311 US-owned/controlled foreign entities 309–310 US sanctions: against China 5, 8, 50; and Chinese government 169–171; and Chinese political economy 163–171; against Cuba 30, 54, 94–95, 136; on Cuba 192–193; under general principles of international law 306–308; against Iran 10, 95–97, 176–179; Iranian discourses/ practices on 174–184; Raeisi’s discourses on 180–181; Rouhani’s discourses on 179–180; against Russia 64–66; against Venezuela 97–99, 137–138; see also sanctions US secondary sanctions see secondary sanctions US Treasury Department 96 Utilizing Strategic Allied Telecommunications Act 129

Ukraine: Russian invasion of 8, 18, 35, 49, 54, 59–60, 125, 214, 227, 230, 253, 268, 278; war 124 Umicore 244 unilateral coercive measures (UCMs): and coercion 320–322; as countermeasures 319–320; human rights extraterritorial application 322–324; in internal affairs of sanctioned state 319–324; and Lotus principle 320– 322; principle of non-intervention 322–324; sovereign rights 320–322; and third states 324–327 unilateral sanctions 2–3, 25–35, 38–39, 293; Ancient Period 27; Commercial Revolution Period 27–28; Contemporary Period 29–33; defined 25; and foreign exchange 142–144, 143, 144; humanitarian impact of 292–295; Late Modern Period 28–29; manufactured inflation 140–142; overview 25–27; scope of 291–292; as sustainable development decelerators 134–146; Sustainable Development Goals (SDGs) 295–297 Unilever 225 United Kingdom (UK) 28, 326; defence cooperation with India 280; sanctions against Russia 64–66, 71

347

Index Vajpaye, Atal Bihari 277 Van Bergeijk, P.A. 198 Van Wyk, J.-A. 202, 206 Venezuela: economic growth 140; hyperinflation 141; oil sanctions on 81–83; poverty headcount 141; public services 142; unilateral sanctions 137–138; US sanctions against 97–99, 137–138; Western ‘oil sanctions’ against 3–4 Vines, A. 198 violence 5; collective 112; defined 112, 117; definition in international law 5; economic 112–113, 116–117; economic forms of 5; sanctions as 116–119; structural 112, 117 Violence Prevention Alliance 112 von der Leyen, Ursula 20 von Soest, C. 103

Wolfers, Arnold 39, 41 World Bank 137–138, 141, 193, 201, 274 World Health Organisation (WHO) 53, 92, 294 World Peace Foundation 119 World Trade Organization (WTO) 193, 221 World War I 28 World War II 175, 176, 184, 187, 198, 224 Wright, J. 51 Wu Jinglian 166 Xiao Ke 166 Xi Jinping 124, 181, 235, 280 Xinjiang Uygur Autonomous Region (XUAR) 164 Yanhuang Chunqiu 166 Yanukovych, Oleksandr 333 Yanukovych, Victor 332, 333 Yanukovych Regime: legality of measures against 332–333; misappropriation of state funds 332–333 Yergin, Daniel 235 Yom Kippur War 250 Yoon Suk-yeol 215

Wagner Group 336–337 Wallerstein, Immanuel 169 Welfare State Regime (WSR) approach 3, 49, 55 Western ‘oil sanctions’: against Iran 3–4; against Russia 3–4; against Venezuela 3–4 Western sanctions 2; impact on global supply chains 236–245; impact on green transition 234–246; against Russia 151–159; sanctions effectiveness 152–153 Western Union 95 Wilson, Woodrow 49, 112 Wolf, Martin 230

Zarate, Juan 188 Zarif, Javad 174, 181 Zarrab, Reza 305, 312 Zelensky, Volodymyr 216 Zhang Guobao 168 ZTE 128, 164, 166–167, 228, 234

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