Sanctions

How to Fix America’s Failing Sanctions Policy

By Edward Fishman
Thursday, June 4, 2020, 9:21 AM

In his landmark 1921 book “The Command of the Air,” the Italian military theorist Giulio Douhet argued that the advent of airpower would dramatically alter the nature of war. Until that point in history, the spatial limitations of ground and sea combat meant that “it was impossible to invade the enemy’s territory without first breaking through his defensive lines.” But Douhet perceived that this fundamental constraint no longer applied. “[F]or now it is possible to go far behind the fortified lines of defense without first breaking through them,” Douhet explained. “It is air power which makes this possible.”

The upshot of Douhet’s analysis—that the distinction between the battlefront and the home front had disintegrated—was terrifying. Yet Douhet saw in it reason for hope. If a country could attain unchallenged command of the air, it could launch a rapid assault against the industrial plant and infrastructure of its adversary, destroying the people’s will to resist. Gone would be lengthy, mass-casualty wars of attrition like World War I. With command of the air, a country could achieve decisive victory quickly and at limited cost.

While World War II disproved Douhet’s core predictions—with the British resistance to the Blitz standing out as a particularly salient counterpoint—elements of his thought persist in the faith some U.S. officials place in drones and missile strikes.

And yet, there’s another area of U.S. national security policy where threads of Douhet’s thought remain even more prevalent, albeit unbeknownst to the policymakers who subscribe to them: sanctions.

Just like with airpower in the 1920s, the advent of financial warfare over the past decade has reshaped how America seeks to advance its interests in the world. U.S. leaders view sanctions as a low-cost means of projecting U.S. power without confronting enemy forces, and they use them to target the same elements of society that Douhet deemed vital: industry, infrastructure, government agencies and the will of the people. America can wield this power because it possesses something akin to the command of the air that Douhet envisioned—a command of global finance, in which the dollar’s role as the world’s reserve currency and the near-impossibility of conducting cross-border commerce without access to dollars give Washington a weapon it can deploy swiftly, unilaterally and with devastating impact. And this position of strength has proved remarkably durable: As Adam Tooze of Columbia University has observed, despite forecasts of the dollar’s demise following the 2008 financial crisis, its role in global finance has amplified in recent years.

One consequence of this growing power is that the U.S. government is using sanctions more often than ever before. But even more importantly, America is using sanctions for more ambitious purposes. The United States used to levy sanctions mainly for limited aims. It used sanctions to stigmatize foreign governments and unsavory individuals (a practice called “naming and shaming”), and it used them to check rogue regimes’ access to nuclear materials and terrorist groups’ ability to fundraise. Though America still employs sanctions for those purposes today, it increasingly relies on them to influence the decision calculus of foreign leaders on critical issues—and in the Trump administration, even to try to foment regime change. For sanctions to achieve such lofty goals, they must inflict severe damage that’s not limited to any one sector of the target’s economy, much less to individual government officials or agencies.

At the same time that the ambitions of U.S. sanctions have skyrocketed, America has used sanctions against far larger targets. When America imposed sanctions against Russia after its 2014 invasion of Ukraine, Russia’s economy was larger than the combined gross domestic product of all other countries under U.S. sanctions at the time. In its quest to unseat Venezuelan strongman Nicolas Maduro, the Trump administration imposed full-blocking sanctions on PDVSA, the Venezuelan national oil company that exported roughly 1.2 million barrels of oil per day prior to the imposition of sanctions. And in recent days, the Trump administration has reportedly been weighing sanctions against China, the world’s second-largest economy, in response to Beijing’s crackdown on Hong Kong.

Nevertheless, there’s scant evidence that U.S. policymakers’ growing ambitions for sanctions have been matched by any rise in America’s ability to achieve the policy outcomes that it seeks. On the contrary, by almost any measure, U.S. sanctions policy is failing. The Trump administration has been levying progressively harsher sanctions against Venezuela since 2017, but Maduro remains in power and there’s no reason to believe sanctions will change that anytime soon. After the Trump administration abandoned the Iranian nuclear deal and reimposed tough sanctions on Iran, Secretary of State Mike Pompeo issued a list of 12 demands that Tehran must comply with to obtain relief. While America’s unilateral sanctions have inflicted significant damage on Iran’s economy, Tehran has met none of Pompeo’s demands and is now closer to developing nuclear weapons than it was before the Trump administration reimposed sanctions. On North Korea and Russia, President Trump himself has undercut sanctions by pursuing vainglorious summits with Kim Jong Un and showering praise on Vladimir Putin. Unsurprisingly, North Korea’s nuclear development continues unabated, and America has failed to make progress on any of the various goals of its sanctions against Russia, such as restoring Ukraine’s territorial integrity, thwarting cyberattacks or curbing human rights abuses.

Just as World War II revealed as flawed Douhet’s belief that airpower could deliver decisive victory, the first three and a half years of the Trump administration have laid bare that “maximum pressure” from sanctions is not a silver bullet for achieving maximalist policy objectives. In 2017, I argued that America should prepare for an era of intensifying economic warfare by revamping its policy apparatus for developing sanctions. What I realize now is that America needs something more fundamental, too—a theory of sanctions, based on honest reflection and study of how economic pressure can and can’t induce the types of behavioral changes for which policymakers aim. Policymakers and experts need to disabuse themselves of shibboleths that sanctions are precisely targeted at government officials and spare civilian populations and accept that America’s most ambitious sanctions programs aim to cause systemic economic damage—which, by definition, is felt by most if not all members of society. If Washington is to continue wielding a tool so powerful, then U.S. policymakers owe it to both themselves and the people in the countries that confront American sanctions to think seriously about how the U.S. government can leverage economic damage to advance worthy policy goals.

Why Sanctions Are Failing

U.S. sanctions today are failing for three primary reasons: They are too convoluted, too static and too incremental. While these factors are interrelated and often reinforce one another, each of them contributes to dulling the efficacy of sanctions, and each requires its own theoretical and practical solutions.

Let’s start with the first problem—sanctions have become too convoluted. Put simply, it has become the norm, not the exception, that the policy goals of U.S. sanctions are, at best, opaque and, at worst, entirely unarticulated. At face value, this is a serious problem, as it’s inconceivable that sanctions will work (that is, achieve the behavioral change that the U.S. government seeks) if the target doesn’t understand what it must do to free itself from sanctions. Clear communication is a necessity for any form of coercive diplomacy to succeed, but when America turns to sanctions, it is almost never clear in laying out its aims.

There are both structural and epistemological reasons for this phenomenon. For starters, U.S. adversaries tend to do many things that Washington perceives as unacceptable. North Korea develops nuclear weapons, but it also tramples on human rights, commits cyberattacks and deals in illicit arms. Russia runs roughshod over Ukraine’s sovereignty, but it also interferes in U.S. elections, violates chemical weapons agreements and launches airstrikes in Syria. This may seem banal, but from the perspective of sanctions policy, it leads to an important consequence: The United States imposes sanctions in reaction to a variety of misdeeds, making it virtually impossible to understand what the adversary must do to disentangle the web of sanctions.

Historically, Washington has sought to manage this situation through “compartmentalization”—a process in which each sanction is tied to a specific legal authority, which in turn is linked to a specific cause. Sometimes, the U.S. government does this reasonably well. In December 2014, for instance, President Obama signed Executive Order 13685, which established a standalone U.S. sanctions program for Crimea. The benefit of this move was that it compartmentalized the objectives of U.S. sanctions against Russia—America could lift the broader economic sanctions on Russia if Moscow implemented the Minsk agreements and withdrew its troops from the Donbas, while maintaining penalties for Russia’s illegal annexation of Crimea. The reason it worked was because the goals of the Crimea sanctions were limited. They were not to coerce Russia to reverse the annexation—that was rightly judged too tall of a task for sanctions to achieve—but rather to stigmatize Russia’s land grab and frustrate Moscow’s efforts to build infrastructural links to Crimea. As Dan Fried, my former colleague and then U.S. coordinator for sanctions policy, used to say, the policy’s goal was to “turn Putin’s war prize into a liability.”

But compartmentalization can take U.S. policy only so far. While it works relatively well when a U.S. sanctions program has just one or two objectives—and especially well when American sanctions have only one coercive objective while the others are symbolic or attritional—it breaks down quickly as the list of American goals grows longer. As years have passed and U.S. sanctions against Russia expanded beyond Ukraine-related objectives to cybersecurity, election interference, and more, this is exactly what has occurred. It has also happened in U.S. sanctions programs against Iran and North Korea.

Additional structural factors contribute to making sanctions convoluted. Most significant is the fact that there are multiple issuers of sanctions. It’s not just the executive branch. The U.S. Congress also creates new sanctions programs via legislation. Though occasionally this dynamic is helpful—with Congress playing a “bad cop” as the administration pursues diplomacy—more typically, it leads to mixed messaging. Even within the executive branch, the State Department and the Treasury Department administer different sanctions authorities, and they aren’t always as coordinated as they should be. Sanctions enacted by the U.N. Security Council add another layer of complexity. Moreover, as the legal authority that underpins most U.S. sanctions, the 1977 International Emergency Economic Powers Act, gives the executive branch sweeping powers—think of it as a kind of blanket authorization for any sanctions program the president wants to create—there’s a tendency for the White House to reach for sanctions in response to every international crisis, regardless of whether it has a well-defined theory of success.

There is also an epistemological factor that contributes to making sanctions convoluted: All too often, diplomats and sanctions experts struggle to find common language. While sanctions are an instrument of foreign policy, they are also a component of domestic financial regulation. And there are sparingly few diplomats steeped in the minutia of financial regulation or sanctions experts with experience in foreign policy. When I served at the State Department, I frequently participated in sanctions meetings in the Situation Room in which State and Treasury officials talked past each other: State officials fixated on the diplomatic implications of sanctions, while Treasury officials prioritized the regulatory implications. To be sure, the resultant compromises sometimes created innovative policies, such as the Sectoral Sanctions Identifications List that the Office of Foreign Assets Control (OFAC) debuted in 2014. But more commonly, the consequence is a policy insufficiently robust to advance American goals.

The second problem that hinders U.S. sanctions is that they are too static. Once America imposes sanctions, they tend to remain in place long beyond their useful life. OFAC administers more than 30 unique sanctions programs, including Balkans-related sanctions that date back 28 years, Zimbabwe-related sanctions that date back 17 years and Lebanon-related sanctions that date back 13 years. Part of the reason for this is that U.S. sanctions rarely entail a natural “end date.” While the president must renew the national emergency that underpins each sanctions program every year, this tends to be a pro forma exercise, as the consequence of allowing a national emergency to lapse is the termination of all sanctions related to that national emergency. Moreover, presidents rightly fear political blowback from being seen to remove sanctions before U.S. goals have been met, regardless of whether those goals remain viable.

Static sanctions have the insidious tendency to become both less impactful and more static over time, creating a kind of vicious cycle. They become less impactful because target countries assimilate them into their sense of economic normalcy while finding workarounds where possible. They become more static because U.S. businesses affected by sanctions—typically the most important domestic interest group that opposes them—reconfigure supply chains and shift their focus to different markets.

The static nature of sanctions not only makes them toothless; it also produces harmful effects on U.S. policy. Because sanctions are rarely lifted, they tend to accumulate over time at a steady, if intermittent, pace. As sanctions snowball, so do their objectives, worsening the convoluted problem outlined above. The net result is that, almost by default, nearly every sanctions program eventually aims for regime change. (It’s hardly surprising that one of the only times America has ended a sanctions program in recent history—when President Obama did so with respect to Burma in 2016—came after Aung San Suu Kyi’s National League of Democracy won a majority of seats in Burma’s parliament.) With a tortuous web of sanctions and policy objectives, most adversary regimes rightly assess that the only way out of sanctions is to call it quits. But no government will commit political suicide to undo sanctions.

The final contributing factor to America’s failing sanctions policy is that it is too incremental. Instead of deploying sanctions with overwhelming force, America usually ratchets up pressure gradually. That’s because the details of sanctions programs are born of bureaucratic compromises between not only the diplomats and sanctions experts mentioned above, but also officials who manage domestic economic affairs and energy policy—and these latter officials generally urge caution, as they worry most (and know most) about their own areas of responsibility. It’s also because the U.S. government rarely collaborates with international partners to design sanctions until crises have already begun. While multilateral sanctions can be more impactful than unilateral sanctions, the lack of pre-planning adds denominators to a policy process that trends toward the lowest common denominator.

The problem with incremental sanctions is that they are seldom strong enough to affect the policy calculus of the target government. The ordinary pattern is that America imposes a set of moderately impactful sanctions, then the target government incorporates them into its new normal and finds workarounds where possible, then America issues additional moderate sanctions, and the cycle repeats. So, instead of confronting progressively tightening pressure, the adversary experiences a zig-zagging course, in which pressure tightens a bit, then relaxes, then tightens a bit, then relaxes again. It’s little wonder U.S. sanctions almost never stimulate substantial policy shifts.

Even when the U.S. government breaks this mold and ratchets up sanctions sharply, it often backs down when the economic consequences of its actions become apparent. For example, in April 2018, the Trump administration imposed sanctions on Rusal, a Russian aluminum company that produced 7 percent of the world’s aluminum at the time. Shortly after the sanctions were imposed, aluminum prices jumped 10 percent. Pressure from U.S. corporations and fears about consequences for the domestic economy led the Trump administration to retreat: It quickly issued licenses that negated the impact of the measures and eventually withdrew sanctions from Rusal entirely. The implications of this episode for U.S. sanctions policy were not pretty—it signaled that U.S. sanctions policy was ill conceived, that America lacked the stomach for truly tough sanctions, or both.

Making Sanctions Work

These flaws in U.S. sanctions policy have created a tragic irony: While policymakers view sanctions as a low-cost, high-impact means of advancing American goals, they more commonly function as a low-impact tool that comes at a high cost to U.S. foreign policy. The situation calls to mind the history of antibiotics over the past several decades. Antibiotics work extraordinarily well against certain bacterial infections, but by using them even for infections that they can’t treat, humanity has contributed to creating antibiotic-resistant bacteria that kill tens of thousands in the United States each year. Like with antibiotics, treating sanctions as a panacea and imposing them indiscriminately have compromised what otherwise would be a purely valuable tool.

The status quo is unsustainable. Not only adversaries but even U.S. allies are searching for ways to evade the reach of American sanctions. While these efforts have not yet succeeded, it would be folly for America to increasingly deploy ineffectual sanctions whose primary influence on other governments’ policies is to push them toward alternatives to the dollar-based financial system.

Some observers have argued that the core problem is “overuse of sanctions”—which implies that using sanctions less might be a good solution—but a better label for today’s situation is “misuse of sanctions.” Sanctions aren’t necessarily being used too frequently. They are certainly being used unwisely.

What the United States needs is a coherent theory of sanctions, just as intellectually robust as the theories that generations of practitioners and scholars have developed for nuclear weapons and other instruments of military power. Sanctions do hold tremendous promise as a relatively low-cost, high-impact means of advancing U.S. interests—far more efficient and humane than military force could hope to be. But policymakers and experts must first probe the conditions that can make sanctions successful, whether levied unilaterally or multilaterally.

The first task is to deal with the most fundamental problem: Sanctions are too convoluted. A simple framework could help policymakers address it. For sanctions that aim not merely to stigmatize or constrain but to influence a foreign government’s policy calculus, the U.S. government should divide objectives into two categories—coercion and deterrence. Coercive sanctions aim to compel a foreign government to take a proactive action, which often involves undoing at least one action it has previously taken. For instance, potential goals of coercive sanctions include compelling Iran to cut ties with Hezbollah and other proxies, North Korea to shutter its nuclear program or Russia to pull all weapons and troops out of the Donbas. Deterrent sanctions, by contrast, leverage the threat of economic damage to discourage a foreign government from taking some future action. Examples of possible objectives include deterring Iran from producing highly enriched uranium or Russia from interfering in a U.S. election.

It is important to understand the differences between coercive and deterrent sanctions, because their unique properties have implications for how policymakers ought to use them. Because deterrent sanctions are inherently forward-looking, it is appropriate for U.S. policymakers to attach multiple goals to them. There are many Russian actions short of invading a NATO country that America would like to deter, from cyberattacks to disinformation to human rights abuses, and it would be sensible for America to seek to use the threat of sanctions to discourage these actions. However, for the threat of sanctions to achieve deterrence, Washington must be crystal-clear about the tripwires that will trigger sanctions and the type of sanctions that it will impose should Russia cross them. Vague threats will not suffice.

To provide the requisite clarity, the United States should implement legal processes that force swift decisions on both triggers and sanctions. For instance, America could institute a process by which, in the days following each federal election, it determines whether Russia did or did not interfere. If a judgment is made that Russia interfered, the president would have to choose from a predetermined list of harsh sanctions to impose in short order. This is similar to the approach that Sens. Chris Van Hollen and Marco Rubio proposed in the Defending Elections from Threats by Establishing Redlines Act, which is currently stalled in the Senate. America could apply this process intelligently to a variety of U.S. deterrence objectives across multiple sanctions programs.

Coercive sanctions are fundamentally different from deterrent sanctions, as they seek to leverage pressure that’s already in place to coax a foreign government to accede to U.S. demands. Because they require proactive action on behalf of a foreign government, they are also inherently less likely to succeed. Unlike deterrent sanctions, coercive sanctions should not be tied to multiple objectives. On the contrary, they are best aimed at just one goal (for example, ending Iran’s pursuit of nuclear weapons). That’s because, after sanctions are imposed, they become part of a holistic system of economic pressure that an adversary confronts. Though sanctions on one Iranian company may have been the result of its nuclear development, and sanctions on another Iranian company may have been the result of Tehran’s support for proxies, the effects of the sanctions combine. From the perspective of the adversary, it’s not useful if one set of sanctions is removed while the remaining sanctions leave its economy in shambles. To the adversary, there’s only one meaningful carrot: the alleviation of economic pressure.

Consequently, America would be best served by articulating one clear goal for each of its existing sanctions programs. For Russia, it could be Moscow’s implementation of the Minsk agreements and restoration of Ukrainian control of the Donbas. For Iran and North Korea, it could be ending the countries’ nuclear programs. Importantly, this would not preclude America from threatening additional sanctions for future actions (for example, even if Russia were to implement the Minsk agreements and the United States lifted existing sanctions, Washington could make clear that it will impose fresh sanctions if Moscow interferes in a future U.S. election). But once new sanctions are imposed, Washington should incorporate them into the package of relief that the adversary could receive if it accedes to America’s central demand.

Addressing the second problem—that sanctions are too static—will require the United States to implement legal mechanisms that encourage dynamism. One way to do this would be for the Office of Foreign Assets Control to issue each new sanction with a built-in expiration date. Like a criminal sentence, sanctions could come with terms—say, one year for minor offenses, and up to 10 years for more egregious misdeeds. Such time limits would force the U.S. government to regularly review sanctions and assess whether they are advancing U.S. policy goals. To be sure, the United States should retain the flexibility to lift sanctions sooner or renew them after a term has expired, but such a process would provide an easier path for phasing out sanctions that no longer serve any purpose.

The U.S. government should make use of a similar tool for providing more dynamic sanctions relief: time-limited general licenses. In 2015, after President Aleksandr Lukashenko of Belarus pardoned six political prisoners and held violence-free elections, the Obama administration provided six months of sanctions relief to all Belarusian companies on the Specially Designated Nationals and Blocked Persons (SDN) List. By setting a time limit to the relief, the administration designed a built-in process for retaining leverage over Minsk—as Lukashenko knew that the relief would continue only if his good behavior persisted. At the same time, the Obama administration demonstrated to Minsk that good behavior does, in fact, come with real economic benefits. As U.S. relations with Minsk have continued to improve, OFAC has renewed the general license multiple times, extending the term from six months to a year and, most recently, to 18 months. Without such time limits, sanctions relief can seem like an all-or-nothing decision, discouraging U.S. policymakers from seriously considering it. Making them a normal feature of general licenses would go a long way to adding much-needed dynamism to U.S. sanctions policy.

Another way to encourage dynamism is to require OFAC to perform so-called “sanctions maintenance”—updating the SDN List to close loopholes and check workarounds—on every sanctions program, every year. Sanctions maintenance is critical to maintaining efficacy of sanctions, which is why the Obama administration set a precedent of performing maintenance on the Russia sanctions program at least twice a year. Such actions, however, are labor intensive and require significant time and energy from staff at OFAC and in the intelligence community. As such, it makes good sense to increase OFAC’s budget and staffing. But a requirement of yearly maintenance for each sanctions program could also have a disciplining effect: OFAC would resist pouring resources into futile sanctions programs, creating a powerful incentive to end them instead of leaving them on the books.

Solving the third problem—that sanctions are too incremental—comes down to building mechanisms that require policymakers to plan ahead. As discussed, the incrementalism so prevalent in U.S. sanctions policy is not typically the result of strategic calculus but rather a consequence of bureaucratic and diplomatic compromises forged hurriedly in response to crises. In the early months of the Russia sanctions program, many of the most cautious U.S. officials were ones responsible for financial and economic policy, not sanctions or U.S.-Russia relations. Over time, however, these officials became more comfortable with tough measures as they discovered that blowback to the U.S. and European economies could be contained.

A straightforward way to resolve this problem would be to create more regular processes for developing new sanctions ideas and forecasting their impacts on both the target economy as well as the U.S. and allied economies. Instead of hastily coming up with new sanctions proposals in response to every crisis, U.S. officials should create off-the-shelf sanctions plans that they can utilize in different contingencies, the same way the Department of Defense does with military plans.

To avoid the tendency toward incrementalism with multilateral sanctions, the United States should bring together a standing group of allies for regular sanctions-planning dialogues. This group could be either sanctions specific, including the members of the G-7 plus other close U.S. allies such as Australia and South Korea, or it could be subsumed under a new council of democracies, whose mandate would be broader than just sanctions policy. In either case, America should use this international group to socialize new sanctions ideas long before events necessitate their use.

The final task is tackling the epistemological problem and developing a cohort of practitioners with fluency in both diplomacy and sanctions. Years of war in Afghanistan and Iraq helped forge a generation of American diplomats and military officers who understand each other’s vocabulary, equities and institutional touchstones. Sanctions and diplomacy work hand-in-hand; the former are worthwhile only insofar as they aid the latter. Consequently, it’s critical to build common language between diplomats and sanctions experts. The U.S. government can do this by encouraging State Department officials to complete temporary assignments at the Treasury Department and vice versa, and by incorporating more cross-functional training into professional education programs. Universities also have an important role to play: Scholarly work on sanctions, as well as courses that educate students on sanctions, should become a central emphasis of public policy, political science and international history programs. After all, the United States uses sanctions more regularly than it uses military force, yet scholars of international relations spend far more time studying missiles than the SDN List.

U.S. sanctions are failing. They rarely achieve discernible policy goals, and far too often they’re counterproductive. But the problem is not the tool itself; it’s the execution. There’s still time to right the ship before it veers irreversibly off-course.

Topics: