In February 2022, the Russian President Vladimir Putin announced a “special military operation” against Ukraine, launching a full-scale ground and aerial attack on the country – the first seen on the continent of Europe since the conclusion of the Second World War.[1] The Western world and allies responded to this invasion with a series of financial and economic sanctions – aiming to cripple the Russian economy and disrupt the invasion from within.
Ever since the UN charter outlawed the use of force, nations of the world have searched for alternate tools to implement their foreign policy objectives. With an increasingly globalized and economically inter-twined financial system, implementing economic sanctions has increasingly become an instrument of foreign policy, and even warfare.
This article explains the varied Russian sanctions applied by the West, establishing the extent of structural power of the United States embedded within the global financial system. While indeed disruptive, and despite their popularity, we conclude that economic sanctions alone are rarely effective in altering the behaviour of other states. This article supports this by analyzing the efficacy of the international legal framework underlying economic sanctions, before placing them in the context of foreign policy implementation.
International Legal Framework Underlying Economic Sanctions
The United Nations (UN) Charter provides an initial basis for the application of sanctions – but with certain limitations. Article 2(4) of the United Nations Charter prohibits the use of force, however Articles 39 and 41 under Chapter 7 provide an indirect basis legalizing coercive economic measures.[2]
Article 39 states that: The Security Council shall determine the existence of any threat to the peace, breach of the peace, or act of aggression and shall make recommendations, or decide what measures shall be taken in accordance with Articles 41 and 42, to maintain or restore international peace and security.[3]
Article 41 further formulates a non-exhaustive list of measures (apart from the use of armed force) which may be adopted by the Security Council in response to a breach of the UN Charter. These include “complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations.”[4]
However, the UN Charter does not give the UN Security Council “unfettered power” in implementing sanctions.[5] Article 24 and 25 effectively bind the Security Council to act in accordance and conformity with the UN Charter and the principles of the United Nations. This can be broadly applied to include protection of human rights and even adherence to the principle of proportionality.
Unilateral sanctions or countermeasures refers to those sanctions that are unilaterally imposed by individual states, without any authorisation from any UNSC resolutions. Further defined under Article 49(1) on Responsibility of State for Internationally Wrongful Acts (ARSIWA, 2001)[6], ‘counter-measures’ are coded similarly to the measures prescribed under the UN Charter. Under Article 49(1) of the ARSIWA, if a country has committed a wrong against another country that does not take military form, the wronged country is allowed to adopt a ‘countermeasure’ to force the state that has committed a wrong to follow their obligations under international law.[7]
Furthermore, Article 50 of ARSIWA provides limitations to prevent the misuse of counter-measures under Article 49(1). Article 50 states that “countermeasures shall not affect obligations … [pertaining] to the protection of fundamental human rights, obligation of humanitarian character, … and other obligations under the peremptory norms of international law.”[8]
This implies that sanctions that supposedly target important civilian goods (such as food, medicine, etc.) might impact international human rights obligations, and thus would be considered unlawful.
The application of unilateral sanctions is problematic for several reasons. Firstly, it allows for States to determine what behaviour warrants the application of such measures. These determinations can be impacted by international political considerations, as international legal tenets in terms of application are not insulated from such pressures. Secondly, the application of sanctions – no matter how targeted or narrow in scope – carry the potential of disrupting economies and industries, infringing upon the right to economic and social development.
Countries from the global South continue to protest against the haphazard and harmful application of economic sanctions. The UN General Assembly has passed a resolution which calls upon all states “not to recognize unilateral extraterritorial coercive economic measures or legislative acts imposed by any state.”[9] Furthermore, the Asian-African Legal Consultative Organisation (AALCO) also purports that unilateral sanctions are of an extra-territorial character, and therefore, constitute a violation of international law.[10]
Economic Sanctions as Foreign Policy Implementation Tools
Economic sanctions are often implemented with the aim of changing the behaviour of States. Foreign policy analyses often focus on how an actor can influence another actor to do something which it would not otherwise do, or even contemplate doing. Therefore, while deciding the appropriate foreign policy implementation tool, actors need to be continuously mindful of the context in which the tool will be used and show flexibility in case the tool needs to be altered.[11] Actors also need to apply a strategic-relational approach.[12] This approach states that policy implementation tools create a cycle of feedback, both from the party which is being acted upon, as well as other actors in the environment. Hence, it is essential to consider the capabilities of the adversary, one’s own capabilities, as well as the expected response of the international community before choosing an implementation tool.
Economic sanctions are foreign policy implementation tools that are employed to alter the behaviour of the target state by impacting its economic welfare.[13] The term economic sanction is usually interpreted as a tool of punishment. However, in foreign policy literature, economic sanctions can be both positive and negative.[14] Positive sanctions can be viewed as rewards for what is deemed to be ‘good behaviour’, and according to Baldwin, not enough attention is paid to them. This can include things like trade deals, favourable tariffs, military aid, or even suspension of previously imposed sanctions. With regards to negative sanctions, they are primarily in the form of trade restrictions, embargos and suspension of aid.
However, Baldwin argues that withholding of promised rewards also counts as negative sanctions. The United States remains a leader in employing unilateral sanctions, often using human rights, counter-terrorism and regional stability-based narratives to legitimize these sanctions. During the 1990s, global sanctions were placed on Saddam Hussein’s regime, yet it resulted in the deaths of nearly 1,500,000 Iraqis, with at least half a million children.[15] Similarly, economic sanctions have been employed to limit Iran’s ability to sponsor terrorist activities – these have veen severely detrimental to the Iranian economy, particularly crippling for the lives of ordinary civilians. Sanctions were also imposed on Russia following the annexation of Crimea in 2014, with a view to punish Russia for the territorial violation and prevent such expansionist measures in the future – with lackluster results.[16] These examples illustrate largely how the US has exceeded the limits imposed under ARSIWA – with its sanctions proving punitive and determined solely by its own decision that an international wrong has taken place.
Weaponizing Countermeasures: Scope of Russian Sanctions
The range of sanctions applicable on Russia for its invasion of the Ukraine are comprehensive in nature and scope. The West (including the United States, European Union, United Kingdom, Australia) and key allies (South Korea, Japan, etc.) have all levied a range of sanctions aimed at crippling the Russian economy.[17] Applied incrementally, the countermeasures adopted range from sanctioning the assets (financial and otherwise) of around a thousand key individuals, to outlawing the export of dual-use goods, to banning Russian imports and limiting Russia’s participation in global financial systems.[18] Even key energy imports, such as oil and gas, have either been banned directly, or will be phased out within the next year despite Europe’s heavy reliance on Russian imports. Multinational companies have also announced a cessation of operations within Russia – ranging from fast food chains to credit card companies and commercial banks.
The financial measures imposed on Russia are even more far-ranging. The West has frozen the assets of the Russian central bank to prevent it from using its expansive foreign exchange reserves (over $630 billion) in a bid to keep the Russian rouble afloat.[19] Furthermore, Western states and allies have also banned a range of parties from transactions with Russia’s central bank in a move supposedly unanticipated by even Moscow itself. Within hours of the sanctions taking effect, the central bank raised its main interest rate from 9.5% to 20% to prevent a currency freefall.[20]
In addition to these, a ban was placed on certain Russian banks’ usage of SWIFT transactions which severely limited the country’s ability to process international transactions. SWIFT (Society for Worldwide Interbank Financial Telecommunications) is a messaging system between banks used to communicate the status of transactions throughout the world.[21] Employed by nearly 11,000 financial institutions worldwide, it is the default method of transacting funds across jurisdictions. Russia had recently invested in its own inter-bank messaging system System for Transfer of Financial Messages (SPFS), however it has nowhere near the universal usage as SWIFT does.[22] Alternatively, Russia could also turn to the Chinese CIPS system, with the caveat that it would be compelled to conduct all transactions in the Chinese yuan.[23] These developments are shocking given that Russia has served as a board member for SWIFT since the year 2015[24] – and illustrates how international financial institutions are willing to penalize the country due to the Ukrainian crisis.
This sentiment has been echoed by regional and inter-governmental organizations, such as the Financial Action Task Force (FATF), as well. The Russian advance into Ukraine in 2022 saw the FATF significantly alter its tone, despite the fact that the aggressor in question remains a Member State of the FATF body.[25] In March 2022, the FATF issued a statement on the Ukrainian issue, reiterating “grave concern” about the “(Russian) invasion’s impact on the ML, TF and proliferation financing risk environment,” as well as its jeopardizing impact on the sanctity of the broader international financial system. In a departure from its usual even-handed statements, the FATF went on to categorically state that actions such as the invasion of Ukraine were fundamentally opposed to the FATF’s core principles and “represent a gross violation of the commitment” of the FATF Mandate. It also stated that Russia’s role at the FATF is under “review” and that the body will “consider what future steps are necessary to uphold these core values.”[26]
Similarly, the Council of Europe issued a declaration to exclude Russia in what is being termed “a setback for human rights.”[27] These developments not only underscore alignment of the Western bloc on the Ukraine issue manifesting in international and regional organizations, but also that such bodies – unlike the United Nations – are willing to censure its own Member States without the threat of any veto or such powers being used to paralyze its functions. This gives these institutions considerable influence in imposing extreme economic costs as well as undermining a State’s actions if in violation of international commitments.[28] Taken in tandem however, the Russian government has declared all the above countermeasures tantamount to “an act of war.”[29]
Efficacy of Economic Sanctions: Literature Review
In terms of academic literature, there have been several studies that highlight the success of economic sanctions. Hufbauer, Schott and Elliot are some of the most prominent advocates of the effectiveness of economic sanctions.[30] They conducted a study (hereafter called HSE study) that looked at the history of economic sanctions between 1915 and 1990. The HSE study concluded that economic sanctions were successful in 40 out of the 115 cases. This was much higher than what foreign policy practitioners believed it to be.
However, Robert Pape challenged the outcomes of the HSE study by re-examining all the cases that the original study considered as part of its analysis.[31] He adjusted the parameters of the study by redefining what constituted economic sanctions and successful outcomes. He also factored in situations where other implementation tools, especially the use of force, were used in tandem with economic sanctions. Resultantly, he found that economic sanctions were successful in only 5 of the 115 cases. Furthermore, 18 of the initial successes involved the use of force. It should also be added that some scholars point to the fact that economic sanctions have reduced economic growth of target countries by over 2 percent.[32] However, one has to be careful in considering these as successes as adverse economic impacts do not necessarily translate to a change in the target state’s policies. These conclusions provide us with the theoretical bedrock on which one can further dispute the stand-alone effectiveness of economic sanctions.
Why Economic Sanctions Alone are Rarely Effective
The last part of this article focuses on some reasons why economic sanctions fail to work. The presence of an authoritarian regime in the target state can be one of the reasons behind this failure. This is because such regimes tend to securitize the sanctions,[33] tap into nationalism and create a ‘rally around the flag effect.’[34] An excellent example of this is Iran, who despite facing over three decades of sanctions, has been able to prevent regime change. This period also includes the ongoing COVID-19 pandemic where questions have risen about Iran’s access to COVID-19 vaccine. Despite this, Iran informed the International Atomic Energy Agency that it would enhance enrichment at its Fordow Fuel Enrichment plant.[35] This clearly shows how even crippling sanctions can fail to work, especially on authoritarian regimes.
Economic sanctions can also fail due to the availability of alternate pathways for the target state. While this might not have been true during the brief American unipolar moment following the end of the Cold War, the recent return to multipolarity due to China’s rise and Russia’s resurgence has created a scenario where the target state simply attaches to another power to meet its needs.[36] North Korea is an example of such a case where the presence of China has enabled the Korean regime to resist U.S. sanctions and even pursue a nuclear plan. On the other hand, absence of an alternate pathway can coerce a state to comply. This was the case during the Kargil War of 1999 when China asked Pakistan to respect the Line of Control, which rendered Pakistan incapable of resisting U.S. economic sanctions.[37]
Lastly, changes in the environment and the fact that states are pursuing multiple policies simultaneously can also lead to the failure of economic sanctions. In 1976, the U.S. used the Symington Amendment to impose economic sanctions on Pakistan in order to deter it from developing nuclear weapons.[38] To American policymakers, this would have seemed like the best possible way for Pakistan to give up its pursuit of the bomb. However, the Soviet invasion of Afghanistan just a few years later forced the United States to change its decision and it ended up providing substantial aid to Pakistan.[39] Hence, by focusing on its policy of containing the Soviets, the United States inadvertently allowed Pakistan to speed up its nuclear weapons program.[40]
Despite these considerations, it is important to note that the line of imposing sanctions arises primarily from the West, with the United States leading efforts to control and mould other states’ behaviour. This can be traced primarily to the strength of the US dollar as the ‘global currency’, effectively guaranteeing the US’ continued power and influence in an increasingly integrated system. With such power woven into the fabric of the global economy, there would be little need for it to control every particular issue and create problems of legitimacy, or democratic deficit – rather, the US’ power manifests in the form of limited options being available to other actors in the system lest they defy the US in any manner.[41] This logic is also applicable to other international organizations, given the strong neo-liberalist leanings of most global institutions, often rooted centrally in the tenets of the Washington Consensus.[42]
Conclusion
On January 8th 2020 President Trump responded to Iran’s Operation Martyr Soleimani by stating “the United States will immediately impose additional punishing economic sanctions on the Iranian regime. These powerful sanctions will remain until Iran changes its behavior.”[43] The sanctions might have increased but Iran did not give in to U.S. pressure. This follows the lessons from the literature review and examples shared above that while the threat and use of economic sanctions might be effective in boosting domestic ratings of leaders, their isolated use as tools of foreign policy is rarely, if ever, successful in altering the conduct of another state.
In international legal terms, while economic sanctions and other countermeasures are permitted, there are limitations placed on their usage – particularly in terms of adherence to the United Nations Charter and principles. There is considerable push-back particularly from the global South regarding the unintended consequences of imposed sanctions on human rights when applied practically, as certain forums declare it an outright violation of international law.
There is little doubt that globalizing patterns have created an interdependent world. Economies were integrated on the basis of pooling in resources, ensuring specialization and tackling shared challenges. However, underlying these realities is the old-standing structural power of the US dollar flowing through the arteries of the global financial system. Limiting access to finances, or to other avenues of transacting funds now is an economic threat that could have dire circumstances on countries. Despite their limited efficacy long-term, economic sanctions and other countermeasures have become important tools in foreign policy relations, ones that are “here to stay.”[44] Yet these options can completely disrupt the lives of ordinary civilians – even if they do little to sway governments themselves.
References
[1] ‘Unilateral and Extraterritorial Sanctions Symposium: A Rejoinder – Part I’, Opinio Juris (blog), 4 March 2022, http://opiniojuris.org/2022/03/04/unilateral-and-extraterritorial-sanctions-symposium-a-rejoinder-part-i/.
[2] United Nations, ‘UN Charter’, United Nations (United Nations), accessed 5 April 2022
[3] Ibid.
[4] Ibid
[5] Syed Ali Akhtar, ‘Do Sanctions Violate International Law?’, 27 April 2019.
[6] ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries – 2001’, State Responsibility, n.d., 114.
[7] Ibid
[8] Ibid.
[9] ‘General Assembly Adopts Resolution Calling On States Not To Recognize Unilateral Coercive Economic Measures | Meetings Coverage and Press Releases’, accessed 5 April 2022, https://www.un.org/press/en/2002/ga10083.doc.htm.
[10] Asian-African Legal Consultative Organization, ‘Extraterritorial Application of National Legislation: Sanctions Imposed Against Third Parties’, n.d., https://www.aalco.int/59thsession/Final%20Extraterritorial%20Brief%202021%20on%2013.10.2021.pdf.
[11] Joseph S. Nye, ‘Get Smart: Combining Hard and Soft Power’, Foreign Affairs 88, no. 4 (2009): 160–63.
[12] Elisabetta Brighi, Foreign Policy, Domestic Politics and International Relations: The Case of Italy (London: Routledge, 2013), https://doi.org/10.4324/9781315884943.
[13] Robert A. Pape, ‘Why Economic Sanctions Do Not Work’, International Security 22, no. 2 (1997): 90–136, https://doi.org/10.2307/2539368.
[14] David A. Baldwin and Robert A. Pape, ‘Evaluating Economic Sanctions’, International Security 23, no. 2 (1998): 189–98, https://doi.org/10.2307/2539384.
[15] ‘Razing the Truth About Sanctions Against Iraq’, accessed 5 April 2022, https://www.gicj.org/positions-opinons/gicj-positions-and-opinions/1188-razing-the-truth-about-sanctions-against-iraq.
[16] Sergey Aleksashenko, ‘How Much Damage Will Sanctions Do to Russia?’, accessed 5 April 2022, https://www.aljazeera.com/opinions/2022/3/3/how-much-damage-will-sanctions-do-to-russia.
[17] Clifford Chance, ‘Developments In Ukraine: The Latest Global Sanctions And Export Controls’, 1 March 2022, https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2022/03/developments-in-ukraine-the-latest-global-sanctions-and-export-controls-1-march-2022.pdf.
[18] ‘What Sanctions Are Being Imposed on Russia over Ukraine Invasion?’, BBC News, 24 March 2022, sec. Europe, https://www.bbc.com/news/world-europe-60125659.
[19] ‘Western Sanctions on Russia Are like None the World Has Seen’, The Economist, 5 March 2022, https://www.economist.com/briefing/2022/03/05/western-sanctions-on-russia-are-like-none-the-world-has-seen.
[20] Ibid.
[21] Ibid.
[22] ‘Explainer: Russia Could Work around SWIFT Ban but with High Costs | Reuters’, accessed 5 April 2022, https://www.reuters.com/markets/europe/russia-could-work-around-swift-ban-with-high-costs-2022-03-07/.
[23] Ibid.
[24] Ibid
[25] Noor Fatima, ‘FATF Plenary Update – March 2022’ (Global Governance Initiative, Research Society of International Law, 11 March 2022), https://rsilpak.org/2022/fatf-plenary-update-march-2022/.
[26] ‘FATF Public Statement on the Situation in Ukraine’, accessed 5 April 2022, https://www.fatf-gafi.org/publications/fatfgeneral/documents/ukraine-2022.html.
[27] Jannika Jahn, ‘The Council of Europe Excludes Russia: A Setback for Human Rights’, EJIL: Talk! (blog), 23 March 2022, https://www.ejiltalk.org/the-council-of-europe-excludes-russia-a-setback-for-human-rights/.
[28] Fatima, ‘FATF Plenary Update – March 2022’.
[29] ‘Russia Says Western Sanctions and Arms Shipments to Ukraine Are Acts of War’, The Economist, 22 March 2022, https://www.economist.com/europe/2022/03/22/russia-says-western-sanctions-and-arms-shipments-to-ukraine-are-acts-of-war.
[30] Gary Clyde Hufbauer, Jeffrey J. Schott, and Kimberly Ann Elliott, Economic Sanctions Reconsidered, 2nd ed (Washington, DC: Institute for International Economics, 1990).
[31] Pape, ‘Why Economic Sanctions Do Not Work’.
[32] Matthias Neuenkirch and Florian Neumeier, ‘The Impact of UN and US Economic Sanctions on GDP Growth’, FIW Working Paper series (FIW, January 2015), https://econpapers.repec.org/paper/wsrwpaper/y_3a2015_3ai_3a138.htm.
[33] Barry Buzan, Ole Wæver, and Jaap de Wilde, Security: A New Framework for Analysis (Boulder, Colo: Lynne Rienner Pub, 1998).
[34] Shoon Murray, ‘The “Rally-’Round-the-Flag” Phenomenon and the Diversionary Use of Force’, Oxford Research Encyclopedia of Politics, 28 June 2017, https://doi.org/10.1093/acrefore/9780190228637.013.518.
[35] ‘Iran Tells IAEA It Plans to Enrich Uranium to up to 20 Percent | Nuclear Energy News | Al Jazeera’, accessed 5 April 2022, https://www.aljazeera.com/news/2021/1/1/iran-iaea-enrich-uranium-to-20-percent.
[36] Stephen M. Walt, ‘The World Might Want China’s Rules’, Foreign Policy (blog), accessed 5 April 2022, https://foreignpolicy.com/2021/05/04/the-world-might-want-chinas-rules/.
[37] Swaran Singh, ‘The Kargil Conflict: Why and How of China’s Neutrality’, Strategic Analysis XXIII, no. 7, accessed 5 April 2022, https://ciaotest.cc.columbia.edu/olj/sa/sa_99sis04.html.
[38] ‘Foreign Relations of the United States, 1977–1980, Volume XIX, South Asia – Office of the Historian’, accessed 5 April 2022, https://history.state.gov/historicaldocuments/frus1977-80v19/d6.
[39] ‘Pakistan’s Sanction Waivers: A Summary’, Carnegie Endowment for International Peace, accessed 5 April 2022, https://carnegieendowment.org/2001/10/29/pakistan-s-sanction-waivers-summary-pub-10778.
[40] Shubhangi Pandey, ‘US Sanctions on Pakistan and Their Failure as Strategic Deterrent’, ORF, accessed 5 April 2022, https://www.orfonline.org/research/42912-u-s-sanctions-on-pakistan-and-their-failure-as-strategic-deterrent/.
[41] Susan Strange, ‘Finance, Information and Power’, Review of International Studies 16, no. 3 (July 1990): 259–74, https://doi.org/10.1017/S0260210500112501.
[42] Ibid, 268.
[43] ‘U.S. Has Already Imposed Increased Sanctions on Iran: Trump | Reuters’, accessed 5 April 2022, https://www.reuters.com/article/us-iraq-security-iran-sanctions-idUSKBN1Z825W.
[44] ‘Unilateral and Extraterritorial Sanctions Symposium: A Rejoinder – Part I’, Opinio Juris (blog), 4 March 2022, http://opiniojuris.org/2022/03/04/unilateral-and-extraterritorial-sanctions-symposium-a-rejoinder-part-i/.
Authors: Noor Fatima Iftikhar, Mubashar Rizvi
