Introduction

International economic pressure is used by states against states for a variety of political aims,
but one general purpose that characterizes all economic sanctions is as means of coercion in
the international arena. Scholars have defined sanctions as tools that “constitute a means of
exerting international influence that is more powerful than diplomatic mediation but lies
below the threshold of military intervention”1. Hufbauer, Schott, Eliott and Oegg argue that
“the use of sanctions presupposes the sender country`s willingness to interfere in the decision
making process of another sovereign government, but in a measured way that supplements
diplomatic reproach without the immediate introduction of military force”.2

States undoubtedly have many reasons that can be considered justifiable enough to impose
economic sanctions. “Demonstration of resolve”, as a reason for economic sanctions, can be
translated into the idea the states deploy sanctions in order to reassert their position as leaders
in certain fields. The US have applied in many instances such sanctions in order to send the
signal that they are the world hegemon and that they will act as a world guardian of
democratic values. Thus the US has protested in numerous cases via economic actions against
undemocratic regimes and human rights violations. The US has done so even in cases when
the positive outcome of economically punishing certain states was highly unlikely because
the cost of inaction and the damage done to the US brand as the world`s biggest and strongest
democracy would have been to substantive to bare. Indeed, this is to show the international
community that America will fight for its values whenever the case. While it is hard to
quantify the weight in the decision making process of such psychological and moral factors,
such rationale is not to be underestimated in the analysis of economic sanctions.

The idea that sanctions can be used in order to deter the target country from pursuing
questionable policies has also been cited as reason enough for the deployment of economic
sanctions. In such cases the sender country has the purpose to increase the associated costs
with the policies in question up to the point where it would be to expensive for the target
country to continue with their implementation. One case of such sanctions would be the US
sanctions against the Soviet Union in order to punish the later for invading Afghanistan. The
1
Manfred Kulessa and DorotheeStarck, Peace through sanctions?, Policy Paper 7 of the
Development and Peace Foundation, Bonn, Germany, Presented at a Conference in Bonn,
January 15, 1988
2
Gary Clyde Haufbauer, Jeffrey J. Schott, Kimberly Ann Elliott and Barbara Oegg,
Economic Sanctions Reconsidered, 3rd edition, Peterson Institute of International
Economics, November 2007, p.5
point of the grain embargo and the threat to boycott the 1980 Olympics was to deter the
soviets from further continuing their occupation policy. The economic sanctions failed3 but
they can still be considered a case where the purpose was deterrence.

In other cases, states decide to use economic sanctions in order to satisfy domestic concerns.
In certain cases where the population has patriotic accesses or feel the need to express their
disapproval towards policies undertaken by central countries economic sanctions may have
their source in the galvanization of public support for such actions. One recent example is the
Tiananmen sanctions in the wake of the 1989 crackdown in China`s Tiananmen Square. The
US Congress passed legislation to continue the suspension of the Overseas Private
Investment Corporation, of the US Trade and Development Agency, of the export licensing
for defense articles and defense services and of many other sanction imposed prior to the
1989 even in order to express US disapproval of the Chinese government`s actions.4 Other
such cases include the Helms-Burton Sanctions against Cuba, the Iran and Libya Sanctions
Act and had as main purpose to “assuage domestic constituencies, to make moral and
historical statements, and to send a warning to future offenders of the international order”.5

All in all, economic sanctions have a triple purpose in terms of the message conveyed: the
target country is announced that from the point of view of the sender certain policies should
not be endorsed; it reassures the international community that values are important for the
sender and that actions will be taken in order to safeguard these values and last but not least
senders send the message to their people that they will take actions to protect a nation`s
interests. In any case, one cannot help but notice the similarities between the rationale for
economic sanctions and the aims of criminal law: to apply punitive measures, to prevent and
to rehabilitate. If, when and how sanctions succeed in their aim is a question of the specifics
of the context in which they are applied: in certain cases they are successful and in other their
effects may be completely ignored or even superfluous.

Types of economic sanctions

3
Stuart E. Einzanstat, Do Economic Sanctions Work? – Lessons from ILSA and other US
Sanctions Regimes, Occasional Paper, February 2004
4
Dianne E. Rennack, CRS Report for Congress, China: Economic Sanctions, Updated
February 1, 2006
5
Gary Clyde Haufbauer, Jeffrey J. Schott, Kimberly Ann Elliott and Barbara Oegg,
Economic Sanctions Reconsidered, 3rd edition, Peterson Institute of International
Economics, November 2007, p.5
Scholars have long tried to come up with a unified and unitary definition of economic
sanctions. Robert A. Pape makes several distinctions between terms related to this field: trade
wars, economic warfare, and economic sanctions. Other scholars have mentioned terms like
economic coercion, embargoes and economic aggression.

Elias Davidson has reviewed the literature defining economic sanctions in a 2003 article
entitled “Towards a Definition of Economic Sanctions” (revised version 2003). Maraget
Doxey was cited in this article in saying that economic sanctions are “penalties threatened or
imposed as a declared consequence of the target`s failure to observe international standards
or international obligations. Barry E Carter defines sanctions as “coercive economic measures
taken against one or more countries to attempt to force a change in policies or at least to
demonstrate the sanctioning country`s opinion of another`s policies”.

In an attempt to define economic sanctions a definition encompassing the available literature

would be: economic sanctions are measures in the field of economics applied by one country
(or a group of countries) against another country in order to persuade the latter to alter its
domestic or international policies.

Economic sanctions are to be distinguished from other inauspicious measures allowed under
the WTO statute such as anti-dumping actions, countervailing duties or safeguards actions as
a form of protection from surges of imports.6

Furthermore so-called sanctions that pertain to the world of economic measures but are not
intentional or predicted to damage the economy of the targeted countries are not to be
considered economic sanctions. Last but not least, diplomatic sanctions (the EU making
limitations on high-level government visits from Cuba after the Cuban administration broke a
moratorium on capital punishment7) and arms embargos do not qualify as economic
sanctions.

Trade Sanctions

Generally speaking in the case of trade sanctions, the sender can apply import controls,
export controls or both. In the analyzed cases in Economic Sanctions Revisited senders are
more prone to use export controls rather than import controls (50 uses compared with 168).

6
Understanding the WTO: The agreements – Anti-dumping, subsidies, safeguards:
contingencies, etc. – www.wto.org
7
BBC News, EU condemns Cuba over human rights, 25th June 2003
8
Gary Clyde Haufbauer, Jeffrey J. Schott, Kimberly Ann Elliott and Barbara Oegg,
Economic Sanctions Reconsidered, 3rd edition, Peterson Institute of International
Several reasons stand behind the greater use of export controls. First of all, sender countries
(generally large economies) are more probable to be in the position to be called exporters of
key products on the international market.

On the other hand if a country decides not to import from the targeted economies, alternative
importers can have a great say in the success of the sanction. In the case of export controls,
given the fact that key products such as military goods or high capital goods are/were
generally produced in concentrated geographical locations, it is easier to affect an economy
by denying it the possibility of benefitting from such goods.

Another possible reason is that import controls may deny the sender country population the
benefits of imported goods from the targeted country and public support for the sanction may
dwindle as a result, and governments (at least democratic ones) feed off the support of the
citizens.

In recent times, the production of high capital goods or military ones is not geographically
concentrated anymore. And as a result unilateral export controls may not be as efficient as it
used immediately after the 2nd World War. Even for very sophisticated good, there is more
than just one or two countries producing those goods and as a result, there is a great need for
cooperation in the case of economic sanctions based on trade-related measures.

Trade embargoes
Trade embargoes are included in the category of trade sanctions and represent prohibition of
trading with a soon to be former trading partner either in one area, or more (in same cases in
all areas of trade). One of the most cases of embargoes is the US embargo on Cuba. The trade
embargo was initiated in 1962 and will remain in place as long as the Cuban government
refuses to make reforms towards “democratization and greater respects for human rights”9.
The US embargo on Cuba is one of the most standing cases of embargo and it included not
only a trade embargo but also a financial, and economic one (this is can be cited as an
example of financial embargo).

Financial Sanctions

Such sanctions take the form of preventing the targeted economies from accessing credits or
grants from the sending countries. Financial sanctions “entail the use of financial instruments
Economics, November 2007, p.92
9
Cuban Democracy Act, 1992
and institutions to apply coercive pressure on transgressing parties – government officials,
elites who support them or members of non-governmental entities – in an effort to change or
restrict their behavior”10. Financial sanctions do not apply to the whole extent of the
populations, as in the case of trade sanctions. The recipients of such sanctions typically are
the elites and the leaders of the targeted countries or the so called “operationally responsible
individuals”. An example of such a sanction is the one applied by the EU against Croatia,
Serbia and Montenegro. Certain persons indicted by the International Criminal Tribunal for
Former Yugoslavia are not allowed to access credit facilities from the EU.11

One of the most used types of financial sanction is the cessation of official development
assistance (OED). Even though political goals have been used as rationale for economic
sanctions (e.g. in support of the opposition movement of building the Three Gorges Dam in
China), the vast majority of cases of financial sanctions involve the “manipulation of bilateral
economic and military assistance to developing countries” according to Economic Sanctions
Revisited, 3rd edition. One such example includes Japan stopping official development
assistance to China in several instances: in the aftermath of the 1989 Tiananmen Square
massacre, the 1995-1996 freeze of grant aid after China`s underground nuclear tests etc.12

Asset Freezes

Asset freezes are characterized by freezing the assets the target country holds in the sender
country. Such sanctions are important because they inhibit financial flows and also hurt trade.
Everything that a national from the target country owns in the sender country is in peril of
being frozen once such a sanction is passed; such assets include everything from property,
accounts receivable, bank accounts, merchandise, and inventories.

One example of an asset freeze sanction is the one proposed by the UN Security Council
Resolution 1390 (2002) against Al Qaeda, Osama Bin Laden and the Taliban Regime in
Afghanistan. The resolution infers that “All states […] [should] freeze without delay the
funds and other financial assets or economic resources of these individuals, groups,
10
The Swiss Confederation, United Nations Secretariat, Watson Institute for International
Studies, Target Financial Sanctions, A manual for Design and Implementation 2001
11
European Commission, Restrictive Measures (Sanctions) in force, updated 5th January
2010
12
Mary McCarthy, The Role of the Japanese Media and Public Opinion in Aid Sanctions
Against China, paper presented at the annual meeting of the International Studies
Association, 2006
undertakings and entities, including funds derived from property owned or controlled,
directly or indirectly, by them or by persons acting on their behalf or at their direction…”.13

According to Hufbauer, Schott, Eliott and Oegg, the US asset freezes against Iran in 1979
(with the purpose of setting expropriation claims and releasing hostages) and UK freezes
against Argentina in 1982 (with the aim of withdrawing troops from the Falkland Islands)
greatly contributed to rendering Iran and Argentina unable to buy weapons and ammunition
and thus leasing to the resolution of the disputes. Other cases involve the freezing of Kuwait
assets during the Gulf war in order to prevent Iraqi forces from controlling them for their
benefit during the war.

Economic Mechanism of Sanctions

Obviously, the purpose of any sanction is to convince a foreign government to change its
behavior in relation to the demands of the sender government (the government imposing the
sanctions. Ideally, weakening the economy of the target country would enable its leaders to
change their policies. This is supposed to work by preventing leaders of the target countries
from supplying basic commodities, services and work to the population. Such shortages are
expected to result in domestic constituencies being unsatisfied with their rulers and this
public discontent is expected to create an incentive to the target citizens to desire the change
of government of the change in certain policies. Thus the mechanism of economic sanction is
based on a transference power that such measures may have: social discontent and suffering
in theory should be translated into political change.

Comparative Advantage and Economic Sanctions

The theory of comparative advantage can provide states with an economic model meant to
pinpoint the potentially productive sectors of the economy. The theory is based on
comparative advantage and explains how countries should specialize in the production of
goods in which they have a comparative advantage compared to other countries. In other

13
United Nations Security Council, Resolution 1390 (2002) – www.un.org
words, countries should produce goods in the production of which they have a lower
opportunity cost than other countries.14

Even if the theory of comparative advantage based on endowments of resources can be used
for the benefit of countries involved in the trade process, it can also be used in the process of
designing economic sanctions. Needless to say, economic sanctions can prove to be costly for
all the parties involved – export markets are lost, investment opportunities are forsaken and
the cost of developing and implementing the sanctions can prove to be high as well. There are
some states, however, that can better cope with the costs of such policies. Beginning with the
second half of the 20th century, sanctions have been mainly imposed by the wealthiest of the
states. This has happened partly due to the fact that wealthier economies can “afford the
opportunity costs of imposing sanctions and can more efficiently calibrate their sanctions to
impose significant costs on the target” 15. On the other hand, less rich economies that pertain
mostly to developing countries that do not have sophisticated systems to regulate their
economic issues are more prone to being hurt. The denial to have access to certain strategic
goods in which they do not have a comparative advantage can result in disproportionate costs
for the recipients of economic sanctions.

The theory of comparative advantage can be used to pinpoint in which areas economic
sanctions should be applied. States can designs cross-border sanctions that are efficient by
placing export restrictions on sectors where they provide a relatively larger proportion of the
exports in goods/services than other sectors of their economies. In the event where
multilateral sanctions would be applied this would further reduce the ability of the target to
find alternative exporters of strategic goods and as a result, the sanction would be more likely
to succeed. One example of such coordination is the period corresponding to 9/11 when US
and other rich countries have used their comparative advantage in fields like financial
services, investment capital, in order to impose controls on international investments and
international business opportunities that could benefit the culprits.16

Comparative advantage cannot be used as the sole basis for designing economic sanctions.
Other factors come to play an important role in the success of a sanctions episode. The 3 rd
edition of Economic Sanctions Reconsidered provides several factors that can inhibit or on
the contrary potentiate the effect of economic sanctions.

14
Paul Krugman, Maurice Obstfeld – International Economics – Theory and Policy, 11th
edition, Pearson
15
Kern Alexander, Economic Sanctions, Law and Public Policy, 2009, Palgrave Macmillan,
p 39
16
Idem 15.p 40
Size of Involved Economies

Generally speaking, the sender economy is larger than the target economy. According to
Hufbauer, Schott, Eliott and Oegg in the majority of cases (80%), the ratio between the
sender economy and the target economy is greater than 10. This does not go to say that
because an economy is bigger than another, if the richer economy decides to deploy a
sanction on the weaker one, the punitive policy will be successful because size matters. The
fact that in the majority of cases, large economies impose sanctions conveys the message that
in the view of both rich and poor nations, a large GNP is a prerequisite for the success of a
sanctions episode (even though a big GNP is not sufficient).

In the 2nd part of the past century countries have managed nonetheless to convince equally
potent economies to alter their behavior according to their demands. One example is the US
threatening to provoke a crisis of the Pound Sterling (by not allowing UK to access IMF short
term credits or dollar loans from US banks).

Some “courageous” states like China have convinced more powerful economies like France
in the 90s to stop selling arms to Taiwan even though its economy measures at the time a
mere third of the French one.17

All in all size matters and it is easier for larger economies to impose sanctions, but size is not
the only important factor driving the success of economic sanctions.

Trade linkages

The trade relations between countries are also an important factor that can affects the success
of a sanctions episode. If a given country does not exchange many goods or services with
another country, then the likelihood of success is diminished since it cannot really affect the
economy of the target. As stated previously, since large economies impose sanctions, it is
only expectable that the target`s trade relations with the sender accounts usually for at least
10% of the target`s total external trade.18 The message that is sent to the target is such cases is
simple yet accurate: if you do not change your policies, the effects on your economy can be
even greater than this since I am one of your major trading partners. In cases that were
classified as successes, the sender accounts for almost 30% of the target`s total external
17
Gary Clyde Haufbauer, Jeffrey J. Schott, Kimberly Ann Elliott and Barbara Oegg,
Economic Sanctions Reconsidered, 3rd edition, Peterson Institute of International
Economics, November 2007, p.89
18
Idem 17, p 90
commerce, but as in the case of size ratios this is not the only governing factor of efficiency,
since in failed cases, the average trade linkage was only a bit smaller, incurring 29% of the
target`s total external trade.19

There are cases when trade linkages were very small and yet the sanctions were successful. In
1998, Turkey deployed economic sanctions on Italy in order to persuade it to extradite one of
the leaders of the Kurdish Worker’s Party (PKK), Abdullah Ocalan. Turkey instituted
sanctions against Italian products and accused it of supporting trouble in Turkey. Italy on the
other hand, accused Turkey that it fails to live up to its European expectations20. The episode
was successful even if Turkey accounted for only 2% of Italian exports and less than 1% of
its imports.

Economic health and political stability of target country

The economic and political environment of the target countries can influence the outcome of
a sanctions episode. Even though I will dedicate a part of this paper to a study of the political
conditions, since political conditions often generate economic ones, political stability is worth
mentioning in the study of economic health of a nation.

As expected, a weaker economy that is characterized by lower growth and a high rate of
inflation is more likely to suffer more from the effects of economic sanctions and as a result a
weak economy is more likely to alter its policies in order not to expose itself to the effects of
economic sanctions.

On the other hand, the sample size of sanctions used in Economic Sanctions Revisited, 3rd
edition, seems to associate higher political stability with success of economic sanctions. The
reason may be explained by the fact that feeble regimes are not particularly able to respond or
because they perceive the costs of changing their policies as being higher than do more stable
regimes. This may also be caused due to the fact that weak regimes that are characterized by
often government changes needs to reasserts its people that it is powerful on the international
arena, while stronger regimes already have a position and are not afraid to make
compromises when needed.

Cost of sanctions to targets

19
Idem 17, p 90
20
Tzvi Fleicher, Apo-calypse now, The Australia/Israel Review, 9-31 December 1998
Framework for analyzing the effectiveness of economic sanctions
Hufbauer, Schott, Eliott and Oegg have designed a relatively simple to use index system in
order to evaluate the efficiency of economic sanction. In order to judge if such measures of
international coercion are successful one has to quantify the contribution of economic
sanction and the policy result. As such, the Policy Result category can receive a maximum
score of 4 and the Sanction Contribution category likewise. These scores will be multiplied
and the scale obtained – from 1 to 16 measures how successful economic sanctions are. The
above mentioned scholars have illustrated how sanctions should be marked.21

Policy Result

1. Failed outcome: The lowest possible score is to be received by sanctions that have not
attained their goal in any way. Typical examples include USSR`s attempt to
destabilize Yugoslavia during the reign of Tito.

2. Unclear but possibly positive outcome: This is can be illustrated by the 1978-1983
Chinese sanctions Albania with the purpose of punishing anti Chinese rhetoric.

3. Positive outcome, meaning the sender`s goals were partly realized: e.g. 1986 French
sanctions against New Zealand with the purpose of repatriating 2 French Agents. The
agents were indeed expatriated on French territory, but on an isolated island outside
Europe22.

4. Successful outcome: the highest possible score - the sender`s aims were realized in a
large proportion: This can be exemplified by the 1991-1995 USSR/Russian sanctions
against Turkmenistan with the purpose of increasing the rights of the Russian
minorities in Turkmenistan.

Sanctions Contribution

1. Negative Contribution: Such a contribution of sanctions is the 1961-1965 sanctions

against Albania in order to punish Chinese-Albanian alliance and to destabilize Xoxha

21
Idem 17, p 49
22
United Nations, Reports of International Arbitral Awards, Case concerning the
differences between New Zealand and France arising from the Rainbow Warrior affair, 6
July 1986, Volume XIX, p199.
 government. The sanctions probably partly contributed to the Albanian withdrawal
from the Warsaw Pact in 1968.23

2. Little or no contribution: UN against Sierra Leone with the purpose of stopping the
civil war. Hufbauer, Schott, Eliott and Oegg have most likely given a 2 score to the
case against Sierra Leone because the UN interventions and the disarming of the
rebels have contributed more to the process of ending the war rather than the
economic sanctions.

3. Substantial contribution: 1996-1998 sanctions against Columbia with the aim to

reduce drug trafficking and improve human rights. The sanctions were lifted after the
US was certain that Colombia was cooperating in the drug war; it was not classified
as fully cooperating24, but the US considered that the level of cooperation was
sufficient.

4. Decisive contribution: 1992-94 EU sanctions against Algeria are credited to have a

substantial role in promoting democracy in the country25.

The authors of Economic Sanctions Revisited, 3rd edition state that, by multiplication of the
scores of the 2 categories, a value from 1 to 16 will be obtained. They claim that a score
greater than 9 indicates that a certain economic sanction receiving this mark can be
considered as successful.

This scale system may however, underestimate the effectiveness of sanctions. Some authors
claim that the fact only economic sanctions that have taken place constitutes a selection bias
since the in some cases only the threat to deploy an economic sanction can act as a coercion
method.26 In the majority of cases, a state threatens the recipients of economic sanctions
before the sanctions are usually deployed. Where such measures constitute an actual threat
for the target state, the recipient will change it behavior before the actual implementation of
the sanctions. If the target does not change its behavior when the threat is made, then this is
23
Jan Palmowski, A Dictionary of Contemporary World History, 2004 –
www.encyclopedia.com
24
Associated Press, US waives sanctions against Colombia, 28 February 1998
25
Gary Clyde Haufbauer, Jeffrey J. Schott, Kimberly Ann Elliott and Barbara Oegg,
Economic Sanctions Reconsidered, 3rd edition, Peterson Institute of International
Economics, November 2007, Table 3A.2, p 81
26
John Hovi, Robert Huseby, Tales of the Unexpected: When do Economic Sanctions
Work?
probably a signal that they are willing to resist economic pressure and thus this may
constitute a good reason for the sanctions to fail. The above cited article explains how another
scholar (Drezner) provided a study of 1975-1994 threats the US made under Section 301 of
the US Trade Act. Drezner documents 84 cases of threats and in more than 80% of the
instances the targeted country altered its behavior according to US demands. In only 33.33%
of the cases when sanctions actually worked they were successful.

For the purpose of this study, I will mainly analyze the efficiency of imposed economic
sanctions using the 1-16 scale provided in the Economic Sanctions Revisited, 3rd edition.