Lecture: Economic Sanctions, 2013-14

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Lecture 5:

Economic Sanctions

Andreas Warntjen

Department of Public Administration

European External Political Relations

2013-2014

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Structure of the Lecture

• Introduction

– Defining economic sanctions

– The logic of threats

• Do economic sanctions work?

• When are economic sanctions successful?

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Why Economic Sanctions?

• ‗The European Union is a military dwarf

and an economic giant.‘

• Coercive diplomacy=‗humanitarian war‘

(e.g. debates prior to NATO bombing in

former Yugoslavia)

• Democracies and body counts

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Examples of Economic Sanctions

• World War I (and II): UK (Allies) vs.

Germany (and Japan)

• Indonesian Independence: US vs. The

Netherlands

• Nuclear Non-Proliferation: US and EU vs.

North Korea and Iran

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Defining economic sanctions

‗Economic sanctions seek to …

• … lower the aggregate economic welfare

of a target state …

• … by reducing international trade …

• … in order to coerce the target govern-

ment to change its political behavior‘

(Pape 1997: 93-4)

Current EU sanctions:

Iran and Syria • Travel restrictions and freezing of funds for

certain individuals (―targeted sanctions‖)

• Arms embargo

• Embargo on technology for oil and natural

gas industries (economic sanctions)

• Restrictions on financial transfers

(economic sanctions) Source: Euroean Commission, Restrictive Measures in Force, 29.1.2014,

http://eeas.europa.eu/cfsp/sanctions/docs/measures_en.pdf

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Causal Mechanisms of Successful

Economic Sanctions

1. Change of target government

2. Change of cost-benefit calculations of

target government

– Directly (benefits of current international

policy vs. effect of sanctions on ‗policy

satisfaction‘)

– Indirectly (benefits of current international

policy vs. effect of sanctions on ‗personal

security‘)

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What economic sanctions are not

• Trade Wars: seeks to change economic,

not political, behavior

• Economic warfare: seeks to reduce

economic/military capabilities of a target

state

► Logic of Threats

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Changing Behaviour

Coercive? Direct?

Persuasion No Yes

Force Yes Yes

Rewards/

Punisment

Yes No

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The Logic of Threats

‗The imposition of sanctions represents a

deadweight loss of utility for both the

sender and target, in the form of disrupted

economic exchange. Therefore, the actors

have an incentive to reach an agreement

before imposition.‘ (Drezner 2003: 644)

• Conditionality of behavior

• Anticipation and credibility (lecture on

game theory)

[email protected]

Any questions?

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Structure of the Lecture

• Introduction

– Defining economic sanctions

– The logic of threats

• Do economic sanctions work?

• When are economic sanctions successful?

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The failure of economic sanctions?

‗… economic sanctions have little

independent usefulness for the pursuit of

noneconomic goals.‘ (Pape 1997: 93)

‗Economic coercion is a more useful tool

than the conventional wisdom believes.‘ (Drezner 2003: 645)

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The case against sanctions

Change of cost-benefit calculations of target government

• Resistance to external pressures/ high utility attached to current policy (e.g. due to nationalism)

• Substitution (internal, external) mitigates effects

• Shifting burdens to opponents or marginal groups

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Criterias for successful sanctions

• Significant concessions

• Economic sanctions were threatened or

applied (before concessions)

• No alternative explanation fits better

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US Sanctions against Castro I

• 1961: Foreign Assistance Act passed,

Eisenhower enforces partial trade ban

• 1962/3: Kennedy extends trade ban, Foreign

Assistance Act is tightened

• 1981/2: Reagan tightens trade ban

• 1992: Cuban Democracy Act extends ban to

foreign-based subsidiaries of US companies

• 1996: Helms-Burton Act imposes penalties on

foreign companies doing business in Cuba

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US Sanctions against Castro II

‗It should be the policy of the United States …

(6) to maintain sanctions on the Castro regime so

long as it continues to refuse to move toward

democratization and greater respect for human

rights;

(7) to be prepared to reduce the sanctions in

carefully calibrated ways in response to

positive developments in Cuba‘

Cuban Democracy Act (1992)

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US Sanctions against Cuba III

‗U.S. officials said Tuesday that Castro's

decision to step down on his own

terms leaves little hope for real

democratic transition in communist

Cuba during Bush's final year in office… ‗

AP, 19 February 2008

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World War II

• Economic sanctions were threatened or

applied (before concessions)

– Yes, allied blockade of Germany and Japan

• Significant concessions

– Yes, (unconditional) surrender of both

• No alternative explanation fits better

– Military force

– (Threat of) atomic bombardment

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Interpreting the evidence

Economic sanctions 1949-1990 (115 cases)

• 34% successful (Hofbauer, Schott and

Elliott 1990)

• 4% successful (Pape 1997)

– HSE include trade negotiations and economic

warfare

– HSE ignore other explanations (military force)

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Interpreting the evidence II

• Theoretical prediction: successful

sanctions are threatened but not imple-

mented (safe uncertainty/ miscalculation)

• Empirical studies: include very few of

these crucial cases

► Selection bias of empirical studies

[email protected]

Any questions?

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Structure of the Lecture

• Introduction

– Defining economic sanctions

– The logic of threats

• Do economic sanctions work?

• When are economic sanctions

successful?

Economic sanctions reconsidered

(Hufbauer et al. 2007)

• Dependent variable: Success

– Policy change (sought by sender country)

achieved

– Due to sanctions (not military action, etc.)

• Cases: 204 sanction episodes (due to

changing goals, etc.), 1914-2000

• Method: Case studies and quantitative

analysis

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Success by policy goal

Policy goal Success rate

Modest policy changes 51%

Regime change and democratization 31%

All cases 34%

Source: Hufbauer et al. (2007: Table 6.1)

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Succes by previous relations

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Policy goal Cordial Neutral Antagonistic

Modest policy changes 50% 68% 13%

Regime change and

democratization

46% 22% 15%

All cases 46% 33% 19%

Source: Hufbauer et al. (2007: Table 6.2b)

International cooperation and

succesful sanctions Policy goal Successful cases Failed cases

Modest policy changes 1.5 1.9

Regime change and

democratization

2.0 2.2

Disruption of military

adventures

2.5 2.2

Military impairment 2.9 2.4

Other major changes 2.5 1.8

All cases 2.1 2.1

Source: Hufbauer et al. (2007), Table 6.9.; bold print indicates higher levels of international

cooperation

Nb.: Cell entries denote the average value for an index for international cooperation. 1=no

cooperation; 2=minor cooperation; 3=modest cooperation; 4=significant cooperation

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Main results

• Economic impact of sanctions can be

overshadowed by other factors (e.g., high

political costs of compliance)

• Strong trade links make sanctions more likely to

succeed

• Democracies are more likely to respond to

economic sanctions

• A broad coalition does not necessarily make

success more likely

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[email protected]

Any questions?

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References

Drezner, Daniel (2003) The Hidden Hand of Economic Coercion,

International Organization 57, Summer 2003, pp. 643—659

Hufbauer, Schott, Elliott (1990) Economic Sanctions Reconsidered,

Washington, Peterson Institute for International Economics

Hufbauer, Schott, Elliott, Oegg (2007) Economic Sanctions

Reconsidered, Washington, Peterson Institute for International

Economics

Pape, Robert A. (1997) Why Economic Sanctions Do Not Work,

International Security, Volume 22, Issue 2, pp. 90-136

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