How America Learned to Love (Ineffective) Sanctions

If one policy embodies the global reach of American power today, it is the economic weapon of sanctions. As a coercive tool, it is deployed all over the world, against governments from North Korea to Venezuela and from Iran to Belarus. There is scarcely a foreign-policy crisis that arises today in which U.S. policymakers do not resort to sanctions. In the wake of its withdrawal from Kabul last year, the U.S. government froze more than $9 billion in Afghan state assets to punish the Taliban. Earlier this month, it slapped sanctions on the Serb nationalist Milorad Dodik for destabilizing Bosnia. Sanctions are also the chief instrument with which the Biden administration and its European allies are currently trying to deter Russian President Vladimir Putin from invading Ukraine.

This article is adapted from The Economic Weapon: The Rise of Sanctions as a Tool of Modern War, by Nicholas Mulder, Yale University Press, 448 pp., $32.50, January 2022

It is hard to imagine our present world politics without America’s use of such coercive tools. Yet it was not always this way. In the early 20th century, the United States shunned the use of sanctions, while Europeans were very enthusiastic about the economic weapon. Today, the tables have turned. Washington freely uses sanctions, while Europe is often reluctant to join American embargoes. The European Union’s moves to protect trade with Iran and Germany’s continued indecisiveness about the future of the Nord Stream 2 pipeline show that behind the Atlantic alliance lies a Euro-American rift over sanctions.

A striking historical reversal has occurred: The United States, the largest early 20th-century abstainer from economic sanctions, has in the last several decades become their most avid user. Policymakers in Washington have made this powerful weapon their own and extended it into new domains. The significant effects of sanctions are undeniable, as is their profound impact on the history of the international system in the twentieth century.

But their effectiveness as a means of achieving political change is limited. It is this combination of considerable material effects and low political efficacy that poses a challenge today, as sanctions appear to have left the conflicts in which they are used in a costly deadlock rather than any closer to resolution.

Leaders of the “Big Four” nations—(from left) British Prime Minister David Lloyd George, Italian Council President Vittorio Emanuele Orlando, French Prime Minister Georges Clemenceau, and U.S. President Woodrow Wilson—meet on the opening day of the Conference for Peace on Jan. 19, 1919. AFP/Getty Images

At the Paris Peace Conference in 1919, European leaders met with U.S. President Woodrow Wilson. Together they created the League of Nations, a Geneva-based world organization that would use the economic weapon of blockade against peace-threatening aggressor states. Interwar internationalists sincerely wanted to preserve peace. But since they were unable to erase the memory of civilian suffering caused by the wartime blockade, they decided to embrace this legacy instead. This was the origin of the idea of sanctions deterrence. Packaged into the procedure of Article 16 of the League of Nations Covenant, knowledge of the horrors of the past would keep future lawbreakers in check.

The most effective sanctions would be hermetic—imposed in unison by all the world’s major economies. But Wilson’s domestic U.S. campaign to secure the congressional votes for membership in the League ran into problems. The Senate rejected the Versailles Treaty, and Washington never joined the organization. One cause of political opposition to the League was that its rules required automatic participation in economic blockades against troublesome countries. Congress rejected this as an international encroachment on its exclusive right to authorize the use of force.

U.S. unease about the League thus stemmed from a fear that sanctions would embroil the nation in foreign wars. Many Americans saw economic war against civilians as a policy fit for the Old World and its imperialist ways, but they thought it unbecoming of a free republic like the United States. U.S. President Herbert Hoover, an experienced humanitarian who had organized famine relief after the blockade against Central Europe, worried that sanctions would fan the flames of nationalist resentment or cause such hunger that populations would succumb to revolutionary socialism.

There was plenty of reason to suspect that economic pressure could even have counterproductive effects. Allied attempts from 1917 to 1921 to use blockade to bring down Bolshevism in Russia failed to produce regime change. The philosopher John Dewey argued that this did not bode well for the future of sanctions, since “even nations much weaker than Russia have the power of withdrawing into themselves and enduring until the storm is spent.” He concluded that “the conception that fear of economic loss will deter any nation whose emotions are inflamed from conducting warfare is disproved by all recent history.”

Sanctions deterrence worked to keep peace in the Balkans during the 1920s. In the fall of 1921, the Yugoslav government fomented unrest in its southern neighbor Albania, launching a covert invasion to enlarge its territory. Britain led a group of League powers in threatening an economic embargo. Faced with this threat and a collapsing currency, Belgrade withdrew promptly. Another border war between Greece and Bulgaria was stopped dead in its tracks in October 1925. When the League dangled the prospect of sanctions over Greek dictator Theodoros Pangalos, he too broke off his aggressive actions. The League had shown it could use sanctions to prevent war between small states.

But after the Great Depression, as ideological and military rivalry mounted, the power of sanctions to deter came under strain. Larger states were able to take countermeasures and resist economic isolation. The Norwegian internationalist Christian Lange worried in 1933 that “where it was possible to use the threat of Article 16 as a preventive of war against small States … there was no possibility of using this threat against powerfully-armed States.” The problem that increasingly plagued the 1930s was that amid rising economic nationalism, peacetime sanctions became more difficult to distinguish from the wartime blockade that had inspired them. In these conditions, sanctions did not stop political and economic disintegration but accelerated it. The English international affairs analyst Helena Swanwick pointed out in 1937 that this meant preparing for war: “If we insist on pursuing a policy of sanctions in Europe as it now is, we must re-arm. … What sanctionists will not realize is that the theory of sanctions ties the whole League up to the Balance of Power.”

Benito Mussolini and Italian fascists take part in the the March on Rome at the Piazza del Popolo on Oct. 28, 1922, by which the Italian dictator’s National Fascist Party came to power through a coup.Publifoto/AFP/Getty Images

Still, the risk of destabilization did not prevent the League from trying out its sanctions weapon at scale. In November 1935, 52 of its members imposed economic sanctions against Italy’s Benito Mussolini as a punishment for his aggressive invasion of Ethiopia, a sovereign state and member of the League. Still, the worry about war was present. European leaders did not push the sanctions against Mussolini as far as they could have for fear of sparking a war with the fascist regime in Rome. Britain and France realized that any sanctions with real bite would be so invasive as to risk escalation into open war—the exact opposite of their pacific purpose.

Such concerns were widely shared in the American political and business elite. Throughout the interwar years, Americans remained wary of sanctions in international politics. Foreign policy intellectuals could not convince Hoover to punish Japan for its invasion of Manchuria in 1931. Four years later, his successor Franklin D. Roosevelt refused to join the League’s embargo on Italy, and U.S. oil companies continued to supply the fascist war machine.

Only when Adolf Hitler’s armies swept across Western Europe in the spring of 1940 did Roosevelt begin to think differently about sanctions. In July he briefly cut off oil shipments to Francisco Franco’s Spain, a rightist regime tempted by the idea of entering the war on the side of the Axis powers. A petroleum famine threatened to choke the Spanish economy. Still reeling from three years of civil war and now faced with a preview of the economic consequences of joining the fascist war effort, Franco chose to remain neutral.

Convinced of this approach’s success, U.S. policymakers imposed a more severe oil embargo against Japan one year later to restrain Tokyo’s military expansion. But against a much larger and well-armed state, economic coercion backfired. As it began to run out of raw materials and fuel, Japan chose to attack across Southeast Asia and the Pacific instead. Its attack on Pearl Harbor showed how severe the unintended consequences of sanctions could be.

After World War II, the newly created United Nations inherited the League’s sanctions weapon. With the United States now the world’s dominant economic and military power, the interwar risks of using sanctions subsided. This also allowed the aims of economic pressure to expand. Interwar sanctions were focused narrowly on the external goal of stopping interstate war. Multilateral and unilateral sanctions after 1945 began to focus more on internal goals: addressing human rights violations, convincing dictatorships to give way to democracy, smothering nuclear programs, punishing criminals, pressing for the release of political prisoners, or obtaining other concessions.

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The rising incidence and widening aims of sanctions under U.S. hegemony also reflect important shifts in global economic history. Roosevelt’s sanctions on Spain and Japan in 1940-1941 were made possible because he governed what was then the largest oil-producing economy in the world. This power slipped from America’s grasp due to the rise of OPEC in the 1960s and 1970s. The most notable U.S. attempt to manipulate export power was the underwhelming 1980 embargo on grain exports to the Soviet Union. This did not cause a change in policy in Moscow, which continued to occupy Afghanistan, while the embargo destroyed Midwestern farmers’ support for U.S. President Jimmy Carter in his 1980 reelection campaign against Ronald Reagan.

In the long run, commodity control was not where Washington’s advantage was greatest. The end of the Cold War didn’t just remove the only remaining bloc capable of challenging U.S. power. It also coincided with a renewed wave of financial globalization that expanded the reach of U.S. banks and the dollar. Finance has been a particularly potent conduit for American pressure. British strategists and economists in the 1920s and 1930s saw London as an essential sanctionist hub. In a similar way, the pivotal role of Wall Street in the global financial system—supercharged by neoliberal deregulation since the 1980s—has provided significant levers for policymakers to exploit. Because the dollar is the premier reserve currency and the most popular medium for global trade and debt issuance, a vast segment of international markets and firms falls under U.S. jurisdiction in some way or other.

This “weaponized interdependence,” as the political scientists Henry Farrell and Abraham Newman have described it, has been deepened by the unprecedented interventions of the U.S. Federal Reserve since the 2008 global financial crisis. Today, global banks and corporate finance are the front line of sanctions implementation and compliance. The limits on Washington’s use of this financial power are political rather than infrastructural in nature. U.S. policymakers have shown remarkable ingenuity at mapping and mastering the plumbing of economic globalization. But the challenge that they face is translating these technical capabilities into real-world political and strategic successes. In this they have proved much less successful.

U.S. President Joe Biden removes his face mask before giving remarks on his administration’s response to the surge in COVID-19 cases from the  Eisenhower Executive Office Building in Washington on Jan. 13. Anna Moneymaker/Getty Images

Today, the United States has an unrivaled ability to use its dollar hegemony against its adversaries, even against the wishes of its European and Asian allies. But its ability to impose steep costs on rival states has not been matched by a corresponding success in changing their behavior. This should not come as a surprise. At a basic empirical level, the odds are stacked against sanctions achieving their goals. Economic Sanctions Reconsidered, the canonical empirical investigation of their use in the 20th century, finds that only 1 in 3 uses of sanctions was “at least partially successful.” Cases of unmitigated success that can clearly be attributed to sanctions are even rarer. Setting more modest goals gives sanctions better chances of working. But the data suggests that the history of sanctions is largely a history of disappointment.

What is striking is that this limited usefulness has not affected frequency of use. To the contrary: Sanctions use doubled in the 1990s and 2000s from its level in the period from 1950 to 1985; by the 2010s it had doubled again. Former U.S. President Bill Clinton used economic pressure to go after human rights violators. His successor George W. Bush deployed them against rogue states, terrorists, and nuclear proliferators. And then Barack Obama turned to sanctions as an easier-to-use form of hard power that did not carry the domestic political costs of the increasingly unpopular interventions in Iraq and Afghanistan. Yet while in the 1985-1995 period, at a moment of great relative Western power, the chances of sanctions success were still around 35 to 40 percent, by 2016 this had fallen below 20 percent. In other words, while the use of sanctions has surged, their odds of success have plummeted.

For a long time, the falling effectiveness of sanctions was not a major issue for the United States, as the risks of use had also diminished. But since the global financial crisis, economic globalization has encountered more serious headwinds. Simultaneously, the persistent strength and growing heft of autocracies have increased the risks of using them. Dewey’s warning in 1932 that due to economic isolation “old resentments are renewed and the temper which makes for future war is fostered” has a newfound resonance today. In his first year in office, U.S. President Joe Biden tried to navigate a recovery from the COVID-19 pandemic while also confronting the power of Russia, China, North Korea, and Iran with webs of existing sanctions and threats of further sanctions.

For much of the Cold War, U.S. policymakers avoided the interwar mistake of using tough sanctions against larger states. They focused economic coercion against smaller countries with a limited ability to strike back. Against larger powers such as communist China and the Soviet Union, the main tools used were Western agreements to limit technology transfer. Attempts to go beyond these gentle strategic restrictions with more invasive sanctions risked blowback and struggled to secure consent from allies. When Reagan placed sanctions on pipeline construction ferrying Soviet gas to Europe in 1982, he encountered widespread resistance among European leaders from Germany’s Helmut Schmidt to Britain’s Margaret Thatcher. The Siberian pipeline dispute showed the same dynamic that was on display in the Nord Stream 2 affair last summer, when the Biden White House backed down to avoid splitting the Atlantic alliance.

The United States once took over the sanctions instrument from European states, but those same countries now hesitate to embrace it fully. The risks of using economic sanctions and the limits of what they can achieve first became manifest in the interwar period. For much of the post-World War II era, and especially since the 1990s, these issues seemed to have been overcome. But the shifts and shocks of the last decade suggest that the twin problems of diminishing effectiveness and blowback risk have returned with a vengeance. What began a century ago as an antidote to war has degenerated into an alternative way of waging it: a tool of endless economic war, with few victories within reach and no peace in sight.