National governments and international bodies use economic sanctions to coerce, deter, punish, or shame entities that endanger their interests or violate international norms of behavior. This policy tool is used across a wide range of foreign policy goals, including counterterrorism, counternarcotics, nuclear nonproliferation, democracy and human rights promotion, conflict resolution, and cybersecurity.
Sanctions impose costs for the targeted country, its people, and other countries that trade with it. Broad-based sanctions such as embargoes aimed at restricting total trade tend to generate the most severe negative externalities, such as worsening health outcomes, a decline in governance, and reduced lifespans. In some cases, these costs can bring about regime change, but this is a rare outcome. Countries with strong ruling ideologies can often spin this negative impact as an assault on the nation, encouraging their citizens to rally round the flag and support the government.
In other cases, a target country can circumvent the impacts of sanctions by indigenously manufacturing sanctioned goods and exploiting third-party trade channels that are friendly to it. For example, during the crisis in Ukraine in 2014, when Russia’s foreign reserves were frozen, many Russian oligarchs such as Roman Abramovich offered to donate their assets (valued at over $330 billion) to benefit victims of war in both Russia and Ukraine. However, these offers were not accepted.
Sanctions that target individuals or firms may also reduce their trade with a country by increasing the risk they face in investment and transaction decisions. For instance, European firms are often wary of conducting transactions with Iran due to re-imposition of sanctions, related-party bank lending risks, terrorism exposures, and corruption issues.
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