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Seven fallacies of economic sanctions

May 16,2019 - Last updated at May 16,2019

By Hassan Hakimian

LONDON — The sanctions imposed on Iran by US President Donald Trump have begun to bite the country’s economy hard. Inflation, seemingly defeated by President Hassan Rouhani, has returned with a vengeance, hitting 31 per cent in 2018. According to the International Monetary Fund, the economy is poised to shrink by 6 per cent this year, and inflation could reach 37 per cent. Many industries are experiencing severe difficulties, and unemployment is mounting. Aiming to cut Iranian oil exports to zero, Trump is threatening to sanction countries, like China, India and Japan, that continue to buy Iranian oil.

Given the pain that Trump’s unilateral sanctions are causing Iran, are they really the “silver bullet” policy that his administration hopes they will be?

Since World War I, governments have increasingly used economic sanctions to achieve their international political objectives. Despite a century of experience, however, the rationale for such measures remains far from compelling.

Economic sanctions have become even more popular in recent decades. In the 1990s, for example, sanctions regimes were introduced at an average rate of about 7 per year. Of the 67 cases in that decade, two-thirds were unilateral sanctions imposed by the United States. During Bill Clinton’s presidency, it is estimated that around 40 per cent of the world’s population, or 2.3 billion people, were subject to some form of US sanctions. In fact, the great majority of sanctions are imposed by large countries against small countries. Currently, the US has nearly 8,000 sanctions in place worldwide, with Iran by far the largest state target. 

In addition, since the 1960s, the United Nations Security Council has established 30 multilateral sanctions regimes under Article 41 of the UN Charter. The most successful of these arguably played a key role in ending the apartheid regimes in South Africa and Southern Rhodesia, today’s Zimbabwe. In addition to targeting specific countries, the UN has also imposed sanctions on non-state entities such as Al Qaeda, the Taliban and, more recently, Daesh.

But it remains highly doubtful that Iran will change its policies, let alone its regime, in the face of Trump’s sanctions. The simple truth about economic sanctions is that, though widely used, they often fail. A comprehensive study of 170 20th-centuny cases in which sanctions were imposed concluded that only one-third of them attained their stated objectives. Another study estimates the success rate of sanctions regimes to be lower than 5 per cent.

Such a high failure rate suggests that governments often use flawed arguments to justify imposing sanctions, tainting our understanding of their rationale and effectiveness. Seven misconceptions or fallacies stand out. Each needs to be debunked.

First, sanctions are justified as a gentler and more humane alternative to war. But this underestimates the potential for international diplomacy to resolve conflicts. And in reality, sanctions often pave the way for wars rather than averting them: 13 years of international sanctions against Iraq were followed by the 2003 US-led invasion, for example.

A second argument is that “if sanctions are hurting, they must be working”. But this criterion of effectiveness fails to define what would constitute success. Worse, it flies in the face of evidence suggesting that, even when essentials such as food and medicine are excluded, sanctions hurt large swathes of the civilian population. They stymie economic growth, undermine production and cause businesses to fail, resulting in higher unemployment. Sanctions can also fuel inflation by restricting imports and fueling currency crises.

Third, sanctions are often said to be “smart” and “targeted”. In practice, however, comprehensive economic sanctions are collective punishment. They squeeze the middle classes and impose a disproportionate burden on the poorest and most vulnerable, who are arguably the biggest victims of the very regimes that sanctions are designed to punish.

Fourth, some governments justify sanctions as a way to uphold and promote human rights. But evidence suggests that civil-society entities and NGOs are generally among the biggest losers under sanctions. By portraying sanctions as foreign aggression and economic warfare against their country, authoritarian regimes often accuse human-rights activists of being allied with the enemy. From there, it is a short step to a national-security crackdown on such organisations.

Iran is following that pattern. Trump’s withdrawal of the US from the 2015 Iran nuclear deal last May, coupled with the imposition of a new round of sanctions, has emboldened Iran’s hardliners, who now claim that their distrust of the US was justified and are pushing back against Rouhani’s centrist administration. Similarly, sanctions against Saddam Hussein’s Iraq in the 1990s led to the wholesale destruction of civil society there, helping to stoke the identity politics and sectarianism that continue to bedevil that country and the wider region.

A fifth claim is that sanctions are necessary and effective in bringing about regime change. The cases of South Africa and Zimbabwe notwithstanding, this is probably the weakest of the seven arguments, as the longevity of sanctioned regimes in countries such as North Korea, Cuba and Myanmar indicate. Even the blockade imposed on Qatar by Saudi Arabia, UAE, Bahrain and Egypt since June 2017 has boosted the emir’s popularity and led a significant part of the population to rally behind him.

Sixth, sanctions are said to weaken the targeted governments. But by worsening the business and investment climate, economic sanctions take their toll primarily on the private sector. If anything, power becomes more centralised and concentrated as governments increasingly control supplies of strategic commodities given the shortages they cause.

Finally, sanctions are supposedly effective in containing nuclear proliferation. Here, too, their record is demonstrably poor. Since the Non-Proliferation Treaty entered into force in 1970, four countries have acquired nuclear weapons: Israel, India, Pakistan and North Korea. Three of them did so while under sanctions.

Ultimately, the success or failure of economic sanctions is judged by whether they bring about regime change or change a government’s behavior. Given the prevailing misconceptions about their rationale, it is not surprising, as we are likely to see again in Iran, that they so often achieve neither goal. What is more certain is that destabilising Iran will make the region more dangerous than ever.

 

Hassan Hakimian, director of the London Middle East Institute and Reader in Economics at SOAS, University of London, is a co-editor of: “Iran and the Global Economy: Petro Populism, Islam and Economic Sanctions”. Copyright: Project Syndicate, 2019.

www.project-syndicate.org

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