Sanctions occupy a peculiar position in the arsenal of statecraft: more forceful than diplomacy, less destructive than war, yet often failing to achieve their stated objectives. They represent the preferred coercive instrument of powerful states—especially the United States—in an era when military intervention carries unacceptable risks. The post-2022 sanctions against Russia constitute the most extensive economic warfare campaign in history, offering a real-time test of whether sanctions can compel a great power to change course.
Definition and Taxonomy¶
Sanctions are deliberate, government-imposed restrictions on economic activity with a foreign target, intended to coerce, constrain, or signal disapproval. They differ from ordinary trade policy in their punitive intent and from blockades in their non-military implementation.
Comprehensive sanctions target entire economies. The United States maintained near-total embargoes against Cuba (since 1962), North Korea, and Iran at various times. Such measures aim to strangle economic activity broadly, imposing maximum pressure on the target regime. They are rare today due to humanitarian concerns and the recognition that they often harm populations more than governments.
Targeted or “smart” sanctions focus on specific individuals, entities, or sectors. Asset freezes prevent sanctioned persons from accessing property in the sanctioning jurisdiction; travel bans deny entry; transaction prohibitions bar financial dealings. The theory is surgical precision—punishing the guilty while sparing the innocent. Practice often proves messier.
Sectoral sanctions restrict activity in particular industries: energy, finance, defense, technology. The 2014 sanctions on Russia following Crimea’s annexation targeted specific sectors rather than the economy wholesale. Post-2022 measures added comprehensive restrictions on Russia’s financial sector and technology access.
Secondary sanctions represent the most controversial category. These penalize third parties—often in allied countries—for engaging in otherwise legal transactions with sanctioned entities. When the United States threatens European banks with exclusion from dollar markets if they finance Iran trade, it exercises secondary sanctions. Such measures leverage American financial centrality but generate substantial allied resentment.
Asset freezes and seizures immobilize property within the sanctioning state’s jurisdiction. The 2022 freeze of roughly $300 billion in Russian central bank reserves demonstrated this power dramatically—and raised questions about whether frozen assets might be permanently seized, with implications for the dollar’s reserve currency status.
Historical Evolution¶
Economic coercion predates the nation-state. Ancient sieges aimed to starve cities into submission; naval blockades isolated opponents from commerce. But modern sanctions emerged from World War I and the hope that economic pressure might substitute for military force.
The League of Nations enshrined sanctions in its covenant. The 1935 measures against Italy following Ethiopia’s invasion tested this mechanism—and failed spectacularly. Half-hearted implementation and numerous exemptions rendered them ineffective. Italy completed its conquest; the League’s credibility collapsed.
The Cold War saw economic restrictions primarily as containment tools. CoCom restricted technology transfers to the Soviet bloc; the United States embargoed Cuba. But sanctions as a primary coercive instrument awaited the post-Cold War moment.
The 1990s brought transformation. Comprehensive sanctions against Iraq devastated the civilian economy while Saddam survived. The humanitarian backlash spawned the “smart sanctions” movement—targeting regimes while ostensibly protecting populations. After 2001, counterterrorism frameworks expanded Treasury’s authorities, capacities that would later serve broader foreign policy objectives.
The American Advantage¶
No country wields sanctions as effectively as the United States. This dominance rests on structural advantages embedded in the international financial system:
Dollar hegemony ensures that most international trade and finance flows through dollar-denominated channels. Roughly 60% of global foreign exchange reserves are held in dollars; the vast majority of commodity trade settles in dollars; dollar funding is essential for most major financial institutions. This centrality means American sanctions have global reach regardless of formal jurisdiction.
SWIFT access provides critical leverage. The Society for Worldwide Interbank Financial Telecommunication, headquartered in Belgium, enables secure messaging for international payments. While nominally independent, SWIFT has repeatedly complied with American and European demands to exclude sanctioned countries—Iran in 2012, Russia partially in 2022. Exclusion from SWIFT does not make international payments impossible but makes them enormously more difficult.
Correspondent banking amplifies American power. International dollar transactions typically clear through American banks, subjecting them to U.S. law. Foreign banks depend on correspondent relationships with American institutions; losing such access effectively excludes them from dollar markets. This vulnerability gives the Treasury Department extraordinary leverage over foreign financial institutions.
The Treasury’s Office of Foreign Assets Control (OFAC) administers American sanctions with technical sophistication. OFAC maintains the Specially Designated Nationals list, issues licenses, and enforces compliance through massive penalties. Few equivalents exist elsewhere.
Extraterritorial reach distinguishes American sanctions from others. The United States routinely applies sanctions to foreign persons and transactions with no direct American connection, relying on dollar clearing or U.S.-origin technology to claim jurisdiction. Courts have generally upheld such claims; foreign governments have protested but mostly complied.
Major Sanctions Regimes¶
Several long-running sanctions programs illustrate the instrument’s application and limitations:
Iran has faced American sanctions since 1979, with varying intensity. Nuclear-related sanctions from 2010-2015 contributed to the JCPOA negotiations. The Trump administration’s “maximum pressure” campaign reimposed devastating restrictions but failed to achieve renegotiation or regime change. Iran’s economy contracted sharply; its nuclear program advanced.
Russia experienced incremental sanctions following the 2014 Crimea annexation. These measures restricted technology transfers, limited capital market access, and targeted individuals close to Putin. They imposed costs but did not reverse Russian policy. The 2022 invasion triggered qualitatively different measures, discussed below.
North Korea faces the most comprehensive sanctions regime, with UN Security Council backing. The hermit kingdom persists nonetheless, pursuing nuclear weapons while its population endures deprivation—demonstrating that determined regimes can survive extraordinary isolation if a major power provides lifeline support.
Venezuela and Cuba illustrate sanctions’ limits against Western Hemisphere targets. The Maduro regime has survived since 2017 despite oil sector restrictions; Cuba’s Castro regime outlasted six decades of embargo and ten American presidents—exemplifying how sanctions can become embedded in domestic politics and persist beyond any realistic effectiveness.
The Effectiveness Debate¶
Do sanctions work? The scholarly consensus suggests: sometimes, under specific conditions, partially.
Comprehensive studies find sanctions “succeed” in roughly one-third of cases—with success defined as achieving at least partial policy change. But this headline number obscures crucial variations. Sanctions work better when:
The demanded change is modest. Compelling a government to release a political prisoner succeeds more often than forcing regime change or abandoning core security programs. Iran negotiated over its nuclear program; it will not negotiate over its existence.
The target is economically vulnerable. Small, trade-dependent economies feel sanctions more acutely than large, diversified ones. Serbia under Milosevic proved more susceptible than Russia under Putin.
International coordination is strong. Unilateral American sanctions can wound; multilateral measures that close alternative sources hurt far more. The difference between 2014 Russia sanctions (Western only) and hypothetical comprehensive measures including China would be enormous.
The sender demonstrates credible commitment. Targets that believe sanctions will lift quickly have less incentive to comply. Sustained pressure over years changes calculations.
Domestic opposition exists. Sanctions may strengthen reform factions arguing that current policies are too costly. Where regimes face no internal challenge, external pressure may simply be absorbed.
The humanitarian costs of sanctions have attracted increasing scrutiny. Comprehensive measures demonstrably harm civilian populations—raising medical goods prices, disrupting food supplies, degrading infrastructure. Even targeted sanctions create unintended hardship as risk-averse institutions over-comply, blocking legitimate humanitarian transactions. The tension between pressure and suffering remains unresolved.
Evasion and Adaptation¶
Sanctioned states do not passively accept their fate. Extensive evasion infrastructure has developed:
Sanctions-proofing involves restructuring economies to reduce vulnerability before measures take effect. Russia spent years after 2014 building foreign exchange reserves, reducing dollar dependence, developing domestic payment systems, and cultivating alternative trade partners. These preparations cushioned the 2022 shock.
Shell companies and front organizations obscure beneficial owners of transactions. Elaborate corporate structures spanning multiple jurisdictions make tracing sanctioned actors extremely difficult.
Cryptocurrency offers potential circumvention, though less than initially feared. Large-scale evasion still requires complicit financial institutions willing to convert holdings to usable currency.
Alternative payment systems reduce dependence on Western infrastructure. China’s Cross-Border Interbank Payment System (CIPS) processes yuan-denominated transactions outside Western systems. Russia’s SPFS provides domestic alternatives. None yet rivals dollar-based efficiency, but they offer options.
China’s role deserves particular attention. As the world’s largest trading nation with strategic interest in checking American power, China provides crucial breathing room for sanctioned states. Chinese banks have maintained Russia ties; Chinese firms have backfilled Western departures; yuan-ruble trade has expanded dramatically. Beijing calibrates carefully, avoiding violations that would trigger American retaliation while ensuring Washington cannot achieve total isolation of its targets.
The Russia Case Study¶
The 2022 sanctions on Russia following the full-scale Ukraine invasion constitute the most extensive economic warfare campaign ever undertaken against a major economy. Their implementation and effects illuminate both the power and limits of sanctions:
Unprecedented scope characterized the response. Within days, Western nations froze Russian central bank reserves, excluded major Russian banks from SWIFT, banned technology exports, restricted Russian airspace access, and targeted oligarchs’ assets. Subsequent measures added oil price caps, further financial restrictions, and comprehensive export controls on advanced technology.
Initial shock was severe. The ruble collapsed temporarily; Russian financial markets closed for weeks; inflation spiked; Western companies fled. Predictions of economic collapse circulated widely.
Adaptation followed. Russia imposed capital controls, stabilized the ruble, and redirected trade toward China, India, and other non-aligned states. Oil exports continued, albeit at discounted prices; energy revenues funded the war. The economy contracted modestly in 2022 but returned to growth in 2023—far from collapse.
Energy carve-outs revealed the limits of Western resolve. Europe’s dependence on Russian gas, especially Germany’s, precluded immediate comprehensive energy sanctions. The phased approach to oil restrictions and the price cap mechanism aimed to balance pressure on Russia with avoiding energy market disruption. Russia exploited these compromises.
Technology restrictions may prove more consequential over time. Export controls on semiconductors, advanced manufacturing equipment, and dual-use technology constrain Russian military production and economic modernization. These effects compound gradually rather than producing immediate crisis.
The fundamental question—whether sanctions can compel Russia to end its war—remains unanswered. Sanctions have imposed substantial costs, degraded Russian military capacity, and complicated economic management. They have not broken Russian will or capability to continue fighting. The disconnect between economic pain and political capitulation that characterized earlier sanctions failures persists.
Secondary Sanctions and Allied Tensions¶
The extraterritorial application of American sanctions generates persistent friction with allies. European resentment peaked during Trump’s Iran policy—having negotiated the JCPOA, European governments sought to maintain it despite American withdrawal. Secondary sanctions rendered this nearly impossible; European banks would not risk dollar access regardless of EU preferences.
The EU’s blocking statute formally prohibits compliance with specified extraterritorial sanctions, creating impossible conflicts for firms in both jurisdictions. But practically, American market access almost always trumps alternatives; firms comply. The broader pattern suggests that American sanctions power, while formidable, generates resentment that gradually undermines it. Each extraterritorial application increases incentives to develop alternatives.
De-dollarization and Alternatives¶
Sanctions weaponization has accelerated efforts to reduce dollar dependence. BRICS discussions have intensified regarding payment alternatives and reserve diversification. The 2023 summit expanded membership to include Iran, Saudi Arabia, and UAE—countries with varying interests in sanctions-proofing.
Yuan internationalization advances gradually. China promotes bilateral currency swaps, yuan-denominated settlement, and CIPS expansion. Full reserve currency status would require capital account liberalization Beijing has resisted, but partial internationalization provides alternatives for targeted states. Digital currencies could eventually enable circumvention through direct central bank settlement outside commercial systems.
Structural obstacles constrain alternatives. Network effects favor incumbents; the dollar’s liquidity and legal infrastructure create powerful lock-in. Predictions of imminent dollar collapse have proven repeatedly premature. Yet the direction of travel matters. Marginal reductions in dollar dependence compound over time. The more aggressively the United States weaponizes financial centrality, the stronger the incentives to escape it. Weaponized interdependence contains the seeds of its own erosion.
The Future of Economic Statecraft¶
Sanctions have become so central to American foreign policy that their use will certainly continue. But their future effectiveness faces mounting challenges:
Target adaptation means each successive campaign faces better-prepared adversaries. Russia studied Iran; future targets will study Russia. Sanctions-proofing is becoming standard practice.
Alternative infrastructure will improve and expand. The period of unchallenged American financial dominance is ending, even if alternatives remain inferior.
Alliance management will constrain application. The 2022 response succeeded partly because Russia’s aggression was flagrant. Lesser provocations will generate less unity.
Normative questions persist. When sanctions demonstrably harm civilian populations while failing to change regime behavior, are they ethical?
Escalation risks deserve attention. Economic warfare can spiral. The assumption that sanctions provide safe alternatives to war deserves scrutiny.
The honest assessment is that sanctions will remain useful but limited tools. They can impose costs, signal disapproval, and occasionally compel marginal behavioral changes. They rarely achieve transformative objectives against determined adversaries. They work best in combination with diplomacy, offering both pressure and offramps. The fantasy that sanctions can substitute for strategy—that sufficient economic pain will automatically produce desired political outcomes—has failed repeatedly.
States facing American sanctions have learned to endure. The United States may need to learn that endurance as well—accepting that economic coercion, like military force, operates within limits that adversaries can exploit. The era of unchallenged sanctions dominance is closing. What comes next remains to be written.