By Elizabeth Rosenberg and Jordan Tama
Sanctions occupy a strange place in U.S. national security. For many years, they were derided as mostly ineffective. The received wisdom was that sanctions generally did not work, and critics would point—with some justification—to the Cuba trade embargo as the perfect example of a failed sanctions policy. As result, for many years sanctions were used somewhat sparingly, albeit not sparingly enough for the critics.
But then things changed, and quite dramatically so. The advent of targeted financial sanctions, particularly focused on terrorist financing, led the way. These restrictions focused on severing the financial lifeline that terrorist groups required to plan, organize, and execute their attacks. Implemented aggressively after the al Qaeda terrorist attacks in September 2001, these sanctions have been credited—again, with some justification—for helping to prevent al Qaeda and other terrorist organizations from attacking again in the United States.
At the same, the United States, led by the Department of the Treasury, deployed targeted financial sanctions to manage an ever-broader array of security threats, perhaps most effectively to impede Iran’s development of its nuclear program. Like the measures targeting terrorist financing, these had a particularly acute impact on international financial institutions, which quickly came to understand that it was in their best interest to prevent not only terrorist financiers, but also those supplying Iran’s nuclear program, from making use of their services. When these targeted financial sanctions were paired with measures designed to isolate Iran from the international financial system and prevent Iran from monetizing its oil, the Iranian regime came to the table to negotiate on its nuclear program. Whether one believes that the Joint Comprehensive Plan of Action reached in 2015 was a good or bad deal (I, for one, believe it was a very good deal), almost everyone agrees that the combination of targeted and broad-based sanctions created crucial leverage in the negotiations.
And this led us to today’s view of sanctions, which is an almost complete reversal from the received wisdom of a generation ago. As Elizabeth Rosenberg and Jordan Tama note in this timely and valuable paper, “economic sanctions have become the tool of choice for U.S. policymakers to influence international affairs.” Far from being derided as ineffective, sanctions now seem to be viewed as capable of delivering success on national security problems as diverse as malicious cyber activity, election interference, trade in conflict diamonds, and bribery and corruption. Indeed, the repeated invocation by the Trump administration of “maximum pressure” to describe its sanctions strategy involving Iran, North Korea, and Venezuela suggests a view that more sanctions invariably yield more success.
But this view of sanctions—as a magic elixir that can cure any foreign policy ill, particularly if applied copiously—is as mistaken as the view that sanctions never work. Such measures are not a universally effective tool of foreign policy. They are never effective on their own, and for many of the national security problems we confront as a country, sanctions are not particularly well suited to the task.1
A realistic view of when sanctions are effective and, even more important, how to make them more effective, is sorely needed. This paper makes a significant contribution toward that effort.
Rosenberg and Tama highlight the importance of credibility and calibration in the application of sanctions, clear communication to the regulated community, and deterrence-based enforcement. In so doing, they provide a very useful and sensible roadmap for policymakers and sanctions administrators to follow when considering whether, and in what way, to use sanctions to advance U.S. foreign policy goals. If measures such as these are employed more sensibly, they will be more effective; and if they are more effective, sanctions ultimately may come to be viewed in their proper place in our national security tool box—as neither ineffectual nor omnipotent, but powerful complements to other tools when used in the right way against the right targets.
Executive Summary
Economic sanctions have become the tool of choice for U.S. policymakers to influence international affairs. On issues ranging from nuclear nonproliferation to human rights, the United States typically imposes sanctions with the goal of inducing a government to change its behavior. Yet sanctions often have more potential to deter unwanted actions than to compel policy reversals, and the greatest impact of sanctions sometimes involves the signals they convey about likely future U.S. steps.
Maximizing the overall effectiveness of U.S. economic pressure therefore requires concerted efforts by policymakers in the executive branch and Congress to make sanctions more effective instruments of deterrence and signaling. Doing this will also have positive knock-on effects, helping to limit the unintentional escalation of international competition and preserve the utility of sanctions as a vehicle for addressing security challenges and protecting universal norms.
This report highlights several areas for action by U.S. policymakers:
Make U.S. sanctions-removal assurances more credible: U.S. offers to lift sanctions on a country if it makes certain concessions send an effective signal only if the United States has a track record of backing up its commitments. In recent years, this signal has been severely weakened by U.S. failures to follow through on some significant sanctions-removal agreements, notably with Iran and Cuba.
Congress and the president should seek, to the greatest extent possible, to uphold diplomatic agreements that involve the lifting of U.S. sanctions in return for concessions by the target of the measures, providing the target has complied with the agreement.
Treasury and State Department officials should more clearly delineate a credible path for delisting every sanctions designation, and should consult closely with congressional leaders when negotiating with a target for delisting.
Congress should mandate analyses of the effects and effectiveness of sanctions, and should design pertinent legislation bearing in mind the results of those analyses and the credibility of U.S. threats and assurances.
Rethink the escalation ladder: During the Cold War, the threat of nuclear Armageddon shaped the development of deterrence theory and the notion of an “escalation ladder” detailing how policymakers could calibrate military coercion, from low-level threats to the conduct of nuclear war. This military-centered conception of an escalation ladder needs rethinking in an era when some types of economic pressure can be more devastating than some uses of conventional military force. Creating a common understanding of a whole-of-government escalation ladder would also clarify the signals sent by different types of military and non-military coercive action, thereby reducing the likelihood of dangerous misunderstandings that lead to unintentional conflict escalation.
The National Security Council staff should coordinate an interagency effort that draws on independent expertise to develop a new whole-of-government escalation framework, should work with international allies to build common understanding of a new escalation framework, and should incorporate the new framework into U.S. national security planning.
In sanctions enforcement, spear big and small fish: The United States lacks the capacity to penalize every firm or other entity that violates U.S. sanctions policy. The goal of sanctions enforcement should therefore be to deter the greatest number of violations. The best way to do this is to impose penalties on a wide variety of private sector actors, so that firms of all kinds perceive a risk that they too could become penalized if they engage in violations.
The Treasury Department should adopt an enforcement strategy that targets small and large firms, as well as corporations and other entities in a range of industries, based in and outside of the United States.
Recognize that information-sharing and transparency are necessities: For understandable reasons, the U.S. government often shrouds important aspects of sanctions enforcement in secrecy. But this lack of information and transparency frequently gives firms and other entities inaccurate perceptions of U.S. policy. Greater transparency about sanctions priorities and the legal and policy basis for designations would generate clearer signals to would-be violators about what actions will earn them a place on a U.S. sanctions list, while providing them with a clearer incentive to alter their behavior.
The Treasury Department should publish its sanctions enforcement priorities, publicize extensively its major enforcement actions, and conduct more direct outreach to the private sector.
Introduction: Rethinking Coercion
Coercion is an essential element of contemporary international competition, used to address an array of security challenges, from violations of territorial integrity and interference in electoral processes, to acts of terrorism and the proliferation of weapons of mass destruction.2 For the United States, coercion is a key feature of military and economic statecraft, and is considered a high-impact way to advance the national interest in circumstances where diplomacy is insufficient and the use of military force would be inappropriate or foolhardy.
Coercion can take two forms. In the words of Thomas Schelling, “There is typically a difference between a threat intended to make an adversary do something (or cease doing something), and a threat intended to keep him from starting something.”3 Schelling coined the term “compellence” to describe the former effort, while the term “deterrence” describes the latter effort. An example of compellence would be an effort to induce a country to dismantle a nuclear weapons program, while an example of deterrence would be an effort to dissuade a country from beginning a nuclear weapons program.
A related concept, “signaling,” refers to the revealing of information about intent, resolve, or capabilities in an effort to influence the decisions of an adversary or other international actor.4 In practice, this can involve public statements, the imposition of diplomatic or economic consequences, or even a show of military force. For instance, if the U.S. president criticizes a government or cancels a diplomatic visit after the government in question has taken an objectionable action, the president may be signaling that further such steps by that government will result in more substantial penalties.
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