Today, the United States uses sanctions more than any other country, hitting a third of all nations with financial penalties on people, properties, or organizations. These sanctions have become a default tool in America’s economic warfare, even though their overuse is acknowledged at the highest levels of government. However, American presidents find it hard to resist using them.
By cutting targets off from the Western financial system, sanctions can crush national industries, wipe out personal fortunes, and shift political power in troublesome regimes, all without risking American soldiers’ lives. But as sanctions have multiplied, concerns about their impact have grown reports Washington Post.
In Washington, the explosion of sanctions has created a multibillion-dollar industry. Foreign governments and big corporations spend huge amounts to influence the system, while elite law firms and lobbying groups profit by leveraging their expertise. Meanwhile, sanctions push autocratic regimes into black market trade, empowering criminal networks. U.S. adversaries are finding ways to work together to dodge these financial penalties. And like military action, economic warfare has collateral damage: Sanctions on Venezuela, for example, caused an economic collapse three times worse than the Great Depression in the U.S.
Sanctions can be an effective policy tool to punish bad behavior or pressure an adversary without military force. They have allowed U.S. governments to take moral stands against war criminals, helped end South Africa’s apartheid, and contributed to the overthrow of Serbian dictator Slobodan Milosevic. Even when they fail, proponents argue they are better than doing nothing or going to war.
However, some sanctions have lasted decades without achieving their goals. North Korea has been sanctioned for over 50 years yet continues developing nuclear weapons. U.S. sanctions on Nicaragua haven’t deterred its authoritarian regime. Recent sanctions on Russia over its invasion of Ukraine have hurt Moscow’s economy but also boosted black market oil trading and strengthened Russia’s ties with China.
High-level U.S. officials warn that overusing sanctions could diminish their effectiveness. Yet, the U.S. continues to impose them at a record pace, affecting more than 60% of low-income countries. The U.S. Treasury, which regulates the financial system, can impose sanctions on any foreign person, firm, or government it deems a threat, often without needing to prove a crime. This makes coming under U.S. sanctions almost like a global economic ban.
Economic warfare is not new. Ancient Athens used trade sanctions in the 5th century B.C., and U.S. presidents have restricted trade since the country’s founding. Modern sanctions began in earnest during the Cold War and gained momentum after the 9/11 attacks. With new powers granted by Congress, the U.S. Treasury became central to the global war on terror, using sanctions to cut off funds to malicious actors.
A pivotal moment came in 2003 when North Korea’s withdrawal from a nuclear treaty led the U.S. to target a Macao bank processing payments for Pyongyang. This move severely hindered North Korea’s finances without military action, showcasing the power of financial sanctions.
Under President Obama, sanctions became even more aggressive, targeting Iran to curb its nuclear ambitions and penalizing banks that traded with Tehran. These measures forced Iran to negotiate a nuclear deal. The success of these sanctions led to their increased use, targeting various regimes and individuals around the world.
However, by targeting large economies like Russia, the complexity and stakes of sanctions increased. Treasury officials, once obscure, now directly influence national security. Yet, the flood of sanctions requests and lawsuits overwhelmed the Treasury’s Office of Foreign Assets Control (OFAC).
There’s a risk that heavy reliance on sanctions could push nations to find alternatives to the dollar, reducing U.S. influence. Even Obama’s Treasury Secretary warned of “sanctions overreach.” Yet, the Trump administration continued to expand their use, targeting Venezuela, which worsened its economic collapse.
When Biden took office, there was consensus that something needed to change. Treasury staff drafted a plan to reform sanctions, but it was largely watered down. The invasion of Ukraine by Russia led Biden to unleash over 6,000 new sanctions, continuing the trend of aggressive economic measures.
Despite some steps to mitigate the unintended consequences of sanctions, such as ensuring the flow of humanitarian aid, the system remains overburdened. OFAC is inundated with requests, and the dollar remains the world’s top reserve currency, at least for now.
In late 2022, senior White House advisors discussed reforming sanctions again, but pressing demands shelved these ideas. The mentality in Washington seems to be to sanction in response to any global issue, often without considering the collateral damage, which can be as significant as the effects of war.
Sanctions remain a powerful tool in the U.S. arsenal, but their overuse raises questions about their long-term effectiveness and impact on global stability.
