The Costs (Many) and Benefits (Few) of Sanctions

The Costs (Many) and Benefits (Few) of Sanctions


by Kerim Can Kavakli, Dept. of Social and Political Sciences

Economic sanctions are an increasingly important part of international politics. Under Trump the US was eager to use economic sanctions against several countries including China, Russia, and Turkey, and it was not alone. Other recent examples include sanctions by China (against Australia), Saudi Arabia and UAE (against Qatar), and the EU (against Russia).

Sanctions limit a target state’s economic interactions (e.g. trade, finance) with other countries unless it changes a particular policy. The policy in question can range from matters of international security (e.g. US sanctions against Iran’s nuclear weapons program) to trade or human rights. Sanctions do not have a very high rate of success; depending on how one counts, they seem to succeed in changing target behavior between 35 and 50% of the time. The main advantage of sanctions, from the perspective of the sanctioner, is they put substantial pressure on the target without risking the immense costs of outright war.

Although less destructive than war, sanctions still take lives. Especially in target countries both human rights and public health deteriorate significantly during sanctions episodes. For this reason, it is important to understand what makes some sanctions more effective and design them more carefully in a way that minimizes the collateral damage.

Past research on sanctions’ political effectiveness has highlighted two important factors: (i) the size of the demands and (ii) the political openness of the target country. Economic pressure alone is rarely sufficient to convince a target to give up a national security policy or depose its leadership. Likewise, authoritarian countries resist foreign economic pressure more easily, because their leaders can remain in office while their citizens suffer hardship.
Unfortunately, we know less about the economic factors that influence sanction effectiveness. Level of pre-sanction trade between countries is a weak predictor of success.
Some target countries are able to tolerate broad sanctions imposed for long durations while other countries capitulate quickly. Although some analysts have coded the “costliness” of past sanctions, such measures are only available after the fact. The key question remains: how can we predict the costliness and effectiveness of a hypothetical sanction so that this costly tool of statecraft will not be used in vain?

My recent paper (co-authored with Tyson Chatagnier and Emre Hatipoglu) makes theoretical and empirical contributions to this research area. To understand the costs of trade disruption on each side (target and sanctioner), we first describe the strategies that they can use to minimize their own costs while maximizing the costs of their opponent. Next, we use fine-grained bilateral trade data to measure each side’s ability to employ these strategies and test their explanatory power in a statistical analysis.

We arrive at three main findings, two theoretically expected and one surprising. First, using the concept of “revealed comparative advantage”, we show that sanctions are less likely to work if the target can easily find alternative buyers for its exports and alternative sellers for its imports. For example, when the US imposed a grain embargo on Soviet Russia in 1980, sanctions failed to bite, because the Soviets easily switched to buying their grain from Argentina and Canada. Second, we find that targets that produce a large variety of goods at home are better at resisting sanctions, which demonstrates the importance of creating a “resistance economy” for a country like Iran.

Here is the surprising finding: all else equal, targets that have a concentrated portfolio are harder to beat through sanctions. The recent failure of Arab sanctions against Qatar, an economy built on natural gas exports, is a stark, but by no means the only, example of this relationship. We do not have a good explanation for it, but hope that our paper will encourage others to delve into this puzzle. 

There are several important avenues for future research. One, existing work on sanctions (including ours) is unable to explain the effectiveness of financial and targeted sanctions, which make up a growing portion of economic coercion. Two, we lack detailed measures of sanction evasion and the factors that facilitate it. Thirdly, we lack an understanding of how groups of sanctioner countries agree on common goals and coordinate their trade policies in the first place. Given the growing importance of this issue area, we look forward to reading and conducting many more exciting projects on the topic.

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