Sanctions as more than verbal condemnation and less than the use of armed forces.
– UN general secretary Kofi Annan
The USA has been using economic sanctions as a foreign policy tool. It has imposed economic sanctions against Russia, China, North Korea, Iran, Afghanistan, Venezuela, etc.
Besides other countries, the sanctions are also used against members of commercial entities and private individuals, as well as non-state actors such as terror groups, etc. affecting their participation in global trade.
Nonviolent Coercive Diplomacy. The sanctions in the conflict continuum fall somewhere midway between censure and armed hostilities. Sanctions are frequently used as part of nonviolent coercive diplomacy to coerce targets away from unacceptable behaviour and restrain them from behaving in those ways in the future as well. This nonviolent nature of sanctions has made them so appealing in international relations and since the end of the cold war, they have grown very popular.
Likely Objectives. Sanctions may also be in the form of penalties aimed at enforcing certain international norms such as nuclear non-proliferation, weapons of mass destruction, upholding human rights and acting against terror groups, thwarting drug trafficking, gun running, discouraging armed aggression, and regime change.
Financial Restrictions. The sanctions in addition to economic measures include travel restrictions (such as denial of visas, and stoppage of flight operations, etc.), exclusion from international financial transactions, freezing of assets deposited in the host banks, trade embargoes, denial of foreign aid and loans, blocking Foreign Direct Investments, imposing unreasonably high tariffs to discourage trade, withdrawal of Most Favoured Nation status and negative votes in international financial institutions.
Impact of Sanctions. The economic impact of the sanctions depends on the degree of integration of the target economy with the international economy and also the innovativeness of the target economy in circumventing the restrictions that accompany the sanctions.
Sanctions Paradox. The sanctions do not affect only the target states but have an economic impact on the sanctioning country as well.
- They deny financial benefits to own financial institutions, trading and manufacturing companies, and individuals.
- The sanctions indirectly hurt their own companies as they cede business to competitors who are out of the ambit of these sanctions.
- They in turn cause harm to their own manufacturers, by cutting down on jobs.
- Sanctions also often invite tit-for-tat sanctions from the target nations.
- While sanctions are a cheaper alternative to the use of armed forces to achieve foreign policy goals, the long-term consequences of sanctions could be counterproductive.
- Prolonged and frequent use of sanctions could result in the evolution of new modes of conducting international trade.
- Sanctions create an Anti-feeling amongst the target and affected countries towards the sanctioning country.
- Sanctions also affect the allies more than the target nation.
- Sanctions prove to be anti-globalisation.
- Sanctions at times have had minimal effect, failing to achieve their intended objective and in certain cases being counterproductive.
Sanction Mitigation Measures. Sanctions have become a norm and part of the planning process for the target countries. Various measures are taken by the target countries to mitigate the effects of the sanctions. Some of these include:-
- Strengthening of ties with other like-minded friendly countries.
- Building up of economic strength and Forex reserves to tide over the sanctions.
- Increase in trade of surplus commodities like oil etc.
- Enhancement of self-reliance and domestic industries.
- Alternative common local currencies for trade.
- Alternate sources of sanctioned items.
- Trade agreements with friendly countries.
- Development of alternative payment and settlement systems.
Method in Madness
The Bretton Woods System is a set of unified rules and policies that provided the framework necessary to create fixed international currency exchange rates for currencies around the world.
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Disclaimer:
Information and data included in the blog are for educational & non-commercial purposes only and have been carefully adapted, excerpted, or edited from sources deemed reliable and accurate. All copyrighted material belongs to respective owners and is provided only for purposes of wider dissemination.
References:
- Richard N. Haass, Economic Sanctions: Too Much of a Bad Thing, June 1, 1998, Brookings Policy Brief available at https://www.brookings.edu/research/economic-sanctions-too-much-of-a-bad-thing/
- Lance Davis and Stanley Engerman, Sanctions: Neither War nor Peace, Journal of Economic Perspectives—Volume 17, Number 2—Spring 2003—Pages 187–197, available at https://pubs.aeaweb.org/doi/pdf/10.1257/089533003765888502
- Russia-India Trade Prospects in 2023 & The Emergence Of The Ruble and Rupee In Asian Trade Flows, Russia Briefing, 08 Jan 2023, available at https://www.russia-briefing.com/news/russia-india-trade-prospects-in-2023-the-emergence-of-the-ruble-and-rupee-in-asian-trade-flows.html/
- India hopeful of rupee trade with Russia after imports surge, Reuters, 16 Jan 2023 available at https://www.reuters.com/world/india/india-hopeful-rupee-trade-with-russia-official-2023-01-16/
- Anthony Tellez, Here Are All The U.S. Sanctions Against China, The Forbes Magazine, 28 Feb 2023, available at https://www.forbes.com/sites/anthonytellez/2023/02/08/here-are-all-the-us-sanctions-against-china/?sh=2e61bd5015b4
- Vijay Eswaran, A common currency in ASEAN will benefit citizens, The Statesman, 23 Sep 2022 available at https://www.thestatesman.com/business/a-common-currency-in-asean-will-benefit-citizens-1503116247.html