Economic sanctions and financial penalties form an integral part of statecraft, whether they are used to pursue geopolitical interests or influence the decisions of other states. Since 1990, the use of economic sanctions, especially under Article VII of the UN Security Council, has dramatically increased; the sanctions imposed against Iraq and Yugoslavia serve as historical examples, while the current regimes against Russia and Iran are modern cases. In a globalized world, sanctions ought to have a significant impact on the decisions of countries, but that doesn’t always occur in practice.
Russia’s recent decision to formally annex Ukrainian territory underscores its refusal to back down in the Russo-Ukrainian War. Russian president Vladimir Putin has crossed the Rubicon and closed off any options for a retreat; the Biden administration has announced that the United States will never accept the result of these referendums. Russia has been sanctioned to the gills and its economy has been badly hit—the ruble has fallen significantly and almost 1,000 international firms, representing 40 percent of Russian GDP, have left its market. Russia has been cut off from many imports, particularly critical Western technology products like semiconductors, and Russian airlines are grounded. Despite the economic hammering Russia has absorbed, its military has not withdrawn from Ukraine, and sanctions will not alter Putin’s decision to invade. Putin still has some leverage and will weather the storm, provided his military doesn’t buckle under the Ukrainian counteroffensive. Russia has been cushioned by the degree of support it enjoys from China, India, and other countries that have not joined in sanctioning Russia.
The effectiveness of sanctions in altering nations’ behavior is debatable. This is because the policies and judgments of the sanctioned nation are determined by many diverse, coexisting variables and are assigned particular importance by the country’s leaders. These include security concerns, specific policy goals, economic welfare, and public opinion. Countries often exercise a “rational choice matrix”—they assess the strategies available to them and then reach a decision. Moreover, power dynamics between states and their ability to coerce each other also come into play. States’ capabilities to impose a serious economic cost and the ability of a targeted state to tolerate the cost imposed are key determinants of the eventual outcome. Ultimately, the success of economic sanctions imposed by foreign countries or multilateral institutions depends on how these numerous variables influence the targeted country.
A practical example of the interplay of these variables involves India and Pakistan’s development of nuclear weapons. Indian leaders concluded that the country’s economy was strong enough to weather U.S. sanctions, and the Indian public supported them in their pursuit of nuclear weapons. At the same time, Pakistan decided that not going nuclear posed a grave threat to its own national security and that sanctions, though detrimental to economic growth, were acceptable. Consequently, both countries went ahead with the detonation of a nuclear device. Pakistan was shielded from a severe economic collapse by Saudi Arabia providing aid and free oil during the duration of the sanctions. This demonstrates that the decision of other states to adhere to sanctions is of vital importance. Compared to India and Pakistan, Russia enjoys far more leverage, and half of the G20 countries have decided to put their economic interests vis-à-vis Moscow ahead of Ukraine’s sovereignty. Furthermore, on his seventieth birthday, Putin still enjoys an approval rate of more than 70 percent, far more than any other sanctioned leader in history.
The indefinite use of sanctions is not sustainable because of Europe’s geographic vulnerability and reliance on Russian energy. Roughly 40 percent of Europe’s natural gas originates from Russia, and Putin’s decision to throttle these supplies will impact Europe’s industry and manufacturing sector. In July, European leaders agreed to reduce the use of natural gas by 15 percent and affirmed their commitment to finding alternatives. In the long run, the Europeans could build liquefied natural gas terminals and look for new suppliers. However, this takes years; in the short run, a recession is inevitable. Europe is set to witness a 1 percent drop in GDP—or a potential 5 percent drop if alternatives to Russian gas are delayed—possibly mirroring the economic shocks of the 2008 financial crisis. To put it bluntly, Putin can wait two years—the European, Japanese, and South Korean economies cannot.
Additionally, almost a quarter of global wheat and grain supplies originate from Ukraine and Russia. Rising energy and food prices have overwhelmed low-income countries, particularly in Africa and the Middle East, resulting in social unrest and upheaval. The inevitable result will be starvation, disease, and waves of refugees migrating to Europe. Understandably, some lower-income countries are eager to ignore sanctions and purchase food and commodities directly from Russia. On the other hand, not many countries were in a hurry to bypass sanctions and conduct business with Yugoslavia, Cuba, South Africa, or Rhodesia, which is why the economic impact of sanctions was stronger in those countries. When Iraq was sanctioned, America’s allies in the Middle East were on board. In Russia’s case, they are not.
Sanctions are not imposed in a political or economic vacuum, and even coercive diplomacy has its limits. Consider Iran’s support for the Assad regime in Syria, which helped it stay in power, or China’s help for Iran in undercutting sanctions. Governments also keep in mind their domestic conditions, often deciding they have no choice but to live with sanctions. For example, North Korea developed nuclear weapons despite crippling sanctions, even as its population starved. Likewise, the Iranian regime may decide that it cannot risk liquidation or survive being removed from power, leading it to develop nuclear weapons to ward off foreign intervention or regime change, even at the expense of its economy. If it does, Iran can look to China for support, with which it signed a twenty-five-year strategic cooperation agreement. In 1999, Pakistan chose to ignore the Pressler Amendment, which banned most U.S. economic and military aid, and pursued a policy it deemed indispensable to its own survival. The Iranian regime may reach the same decision.
Moreover, there are times when actions above and beyond sanctions are necessary. Coalition forces—not economic sanctions—forced the Iraqi army out of Kuwait in 1991. Sanctions didn’t have a major impact on the decisions of Serbian leaders during the Bosnian and Kosovo wars. Serbia’s GDP fell from $24 billion to $10 billion under sanctions, but it took U.S. military intervention to force Serbian leaders to negotiate. Israeli airstrikes, rather than economic sanctions, prevented the development of the Iraqi and Syrian nuclear programs. Nor should we overlook the role of individual decision-makers and authoritarian personalities. For instance, economic sanctions and international isolation failed to convince the Taliban to crack down on militant groups operating from Afghanistan in the 1990s. These examples demonstrate that sanctions often simply don’t alter the strategic calculus of a country’s leaders and prove the efficacy of military force and covert operations. Consequently, the success or failure of the Ukrainian counteroffensive will ultimately decide the outcome of the conflict.
It should be noted that there are instances when sanctions have been effective. This normally occurs when sanctions are applied under the auspices of multilateral institutions, are spearheaded by powerful countries, and are backed by international opinion. Two notable examples are the sanctions regimes against Rhodesia and South Africa, which resulted in the end of Apartheid. Recently, the Pakistani government, fearing the economic costs of getting blacklisted by the Financial Action Task Force, has been acting against militant groups operating from its soil. In these cases, the costs of sanctions outweighed the benefit of policy outcomes, forcing the targeted countries to alter their decisions. However, in the case of Iran and Russia, their strategic calculus indicates that they deem the cost of sanctions acceptable.
One unintended consequence of imposing sanctions without thorough prior introspection may be the long-term decline of U.S. economic leadership, especially as Washington’s unrivaled economic power is challenged by Beijing. Countries could end up resenting what they perceive as the exploitation of American financial might. For example, China and Russia are working on a payment system that can serve as an alternative to the U.S.-dominated SWIFT payment system, and Indian-Russian trade now occurs in their domestic currencies instead of the U.S. dollar.
The harsh reality of the world compels states to pursue national objectives through the coordinated application of both soft and hard power tools, including diplomacy, political intervention, economic statecraft, and military force. Perhaps economic sanctions are so popular because there is nothing else in-between dialogue and force that can be used to coerce a country. Western military action is now increasingly unpopular and would be costly, especially against Russia or Iran. Still, history demonstrates that stability and change are seldom achieved through dialogue alone. Therefore, the tradition of utilizing economic sanctions is likely to continue, though they will continue to struggle to compel nations to change their behavior.
Ahmed S. Cheema is a Senior Advisor and Strategic Forecast Analyst for the Government of Pakistan. He is an advisor to cabinet ministers and members of the Parliamentary Committee on Foreign Relations.