Why Countries Use Economic Sanctions to Prevent Conflict

On Feb. 21, 2022, Russian President Vladimir Putin gave an hourlong speech where he not only recognized the independence of two Russia-backed territories — Donetsk and Luhansk — in eastern Ukraine, but also delegitimized the sovereignty of Ukraine itself, a nation of 44 million people. Putin expanded the idea that Ukraine's borders were drawn up by the Soviet Union's founder, Vladimir Lenin, and still exist only because of the fall of the Soviet Union in 1991.

"Ukraine is not just a neighboring country for us. It is an inalienable part of our own history, culture and spiritual space," Putin elaborated. "These are our comrades, those dearest to us — not only colleagues, friends and people who once served together, but also relatives, people bound by blood, by family ties." After the speech, Putin ordered troops into Donetsk and Luhansk under the guise of them being "peacemakers."

Many experts in global geopolitics were concerned — if not horrified — by the speech and invasion, suggesting it was Putin's way of rewriting history, as well as of providing a reason to launch what could become the largest battle in Europe since the end of World War II.

The speech came after Putin has spent months building up Russian military forces surrounding Ukraine — as many as 150,000 troops are now situated near Ukraine's borders. He also has demanded Ukraine not be allowed to join NATO, the defensive alliance that currently includes 30 countries.

So how is the world responding? The NATO-Ukraine Commission met in Brussels Tuesday, Feb. 22, 2022, to address the situation. NATO Secretary Jens Stoltenberg said it stands by Ukrainian sovereignty and that NATO has "over 100 jets at high alert and there are more than 120 Allied ships at sea, from the High North to the Mediterranean," but hoped Russia would still choose diplomacy. "[This] is the most dangerous moment in European security for a generation," Stoltenberg said.

So aside from a full-on war, what else are world leaders doing to deter Putin from invading Ukraine? Imposing sanctions. But you might be wondering what sanctions are and how they imposed? But also what are sanctions supposed to accomplish and do they even work?

What Are Sanctions?

Basically, sanctions are sort of economic versions of bombs and bullets, designed to turn up the pressure on another country and its regime's leaders by hitting them in their wallets.

"Sanctions are any penalty or disruption in the normal economic relations between two countries," Ellen Laipson said when we spoke to her in 2020. She is the director of the Master's in International Security degree program and the Center for Security Policy Studies at George Mason University's Schar School of Policy and Government, and a former vice-chair of the U.S. government's National Intelligence Council.

"Usually, sanctions are supposed to target a particular bad behavior or send a signal to an unfriendly country," Laipson said.

Sanctions often involve freezing any of the target's assets — such as real estate or funds in bank accounts — that happen to be inside the U.S., and threatening to punish any financial institution inside or outside the U.S. that does transactions for the adversary or helps in some other way.

But as Laipson explained, sanctions also can take a variety of other forms as well, from interrupting international trade to closing a border to suspending arms sales. Sanctions can even be tailored to hit a specific industry or part of another nation's economy. Either way, it's a form of what's called coercive diplomacy.

Sanctions come down to this. How do you get their attention so that they're feeling some pain, and give them incentives to change their behavior?

Who Has the Authority to Use Sanctions?

The U.S. president has sweeping authority to impose sanctions on other countries and leaders under the International Emergency Economic Powers Act of 1977, often referred to as IEEPA for short, which allows him or her to impose them "to deal with any unusual and extraordinary threat."

Congress also has the power to hit other nations and people with sanctions as well. Back in 2012, for example, legislators passed the Magnitsky Act to impose sanctions against Russia. (The law is named after a corruption-exposing lawyer named Sergei Magnitsky, who died in a Russian prison cell in 2009.) Congress imposed additional sanctions against Russia for an invasion of Ukraine in 2014, as detailed in this Congressional Research Service report.

Given the current Russia-Ukraine crisis, President Joe Biden announced Feb. 22, 2022, the U.S. would impose sanctions that extend further than those implemented in 2014, including sanctions that will prohibit American financial institutions from processing transactions for Russian bank VEB. This will effectively inhibit VEB from banking transactions involving U.S. dollars.

Congress often resorts to sanctions to avoid having tensions with another country explode into armed conflict, Laipson said. "Congress often believes, let's go carefully up the escalatory ladder. Let's express our disapproval in a resolution. If they don't pay attention, we'll then threaten sanctions," she explained. "If they still don't pay attention, we'll impose sanctions. And then we'll impose more sanctions. It's a longer continuum from peace to war."

Either way, once sanctions are imposed, the Treasury Department's Office of Foreign Asset Control enforces the restrictions. Here's the lengthy list of U.S. sanctions programs currently in force, against countries ranging from Belarus to Zimbabwe.

Other countries can impose sanctions as well, though nobody utilizes the economic weapon as frequently as the U.S. does, according to Laipson. Instead, most only want to participate in multinational sanctions, such as those imposed by the U.N. Security Council, which have included economic and trade sanctions, as well as arms embargoes and travel bans. Since 1966, the U.N. has used such measures 30 times punishing regimes ranging from Apartheid-era South Africa to North Korea.

A Ukraine army soldier walks in the town of Schastia, near the eastern Ukraine city of Lugansk, one day after Russia recognized the eastern Ukraine separatist republic and ordered the Russian army to send troops there as peacekeepers. Recognizing Donetsk and Lugansk republics effectively destroys the peace process regulating the conflict in eastern Ukraine known as the Minsk Accords.
ARIS MESSINIS/AFP via Getty Images

Do Sanctions Actually Work?

"There's always this range of opinion about whether sanctions work or not," Laipson said. "It depends on what your intentions were. If your intention was to punish, then just measuring the economic pain on another country is a way of saying the sanctions are working. If your intention is to truly change the behavior of the other country, you have to use a very different metric. And in that case, most sanctions fail. Because countries become resistant — they are willing to absorb the pain for nationalistic reasons. They don't want to concede to a more powerful country."

Instead of giving in, for example, a targeted nation may find another, more powerful nation to act as its patron. After the U.S. imposed a sweeping embargo on the communist regime of Fidel Castro in Cuba in 1960, the island nation relied upon trade with the Soviet Union, which for years bought Cuban sugar at five to six times the world market price as a way of tweaking the U.S., its Cold War adversary.

There's also increasing political pushback against the sort of sanctions that broadly target a nation's economy, out of concern that they punish the population rather than an adversarial government. As Laipson explained, that's led to a shift toward so-called smart or targeted sanctions, which might be designed to target a regime's leaders but allow the country to import needed medicines. Targeted sanctions might also include arms embargoes, financial sanctions on the assets of individuals and companies, travel restrictions on the leaders of a sanctioned state and trade sanctions on particular goods.