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How do sanctions hurt ordinary people?
Neither the U.S. government nor its enemies want you to understand how sanctions actually impact society.
As I wrote yesterday, the recent earthquake in Turkey and Syria has highlighted the political barriers standing in the way of humanitarian aid. The disaster has kicked up a heated debate on whether U.S. sanctions hurt ordinary Syrians, and Washington insists that there will be no change in its sanctions policy.
Economic sanctions are a complicated topic, and political actors purposely confuse people on what sanctions do. Sanctioning countries like to insist that the sanctions are precisely targeted at evildoers, and any other damage is the target state’s fault. Sanctioned countries like to insist that every problem they have is the fault of foreigners’ sanctions.
The question of whether sanctions hurt civilians is really several different questions. First of all, do sanctions prevent “humanitarian” goods from getting through? (Sometimes, by accident.) Second, do sanctions broadly hurt people’s well-being? (Yes, on purpose.) Finally, it is important to distinguish between sanctions on individuals and broader sanctions programs.
Basically, an economic sanction is a law or regulation banning someone from a certain type of international trade. Some sanctions are targeted at individuals, preventing criminals or warlords from putting money in foreign banks. Others are targeted at entire sectors of a country’s economy, or the entire country period.
Because most international trade is settled in U.S. dollars, U.S. sanctions are the most important in the world. Cutting a country off from American banks can essentially ban it from trading with any other country — during the early coronavirus pandemic, Iranian importers had to pay for Turkish medical supplies with bundles of cash — and even trap billions of dollars in that country’s own money abroad.
Colombia and Mexico would appear to be some of the most sanctioned countries in the world, because there are hundreds of Colombian and Mexican citizens on the sanctions list. But those sanctions are almost all against individuals accused of corruption or drug trafficking. A one-line sanctions order against a country’s central bank can have far more impact than listing dozens of criminals on a financial backlist.
U.S. sanctions cover large parts of the North Korean, Iranian, Russian, Venezuelan, and Afghan economies, as well as any trade with Cuba or Syria.
In theory, U.S. sanctions law includes an exemption for “humanitarian” trade, meaning that transactions involving food and medical supplies are allowed.1 The U.S. Treasury also issues general exemptions for certain activities, like coronavirus relief or publishing educational materials, in certain countries. In the Syrian case, there are also blanket exemptions for rebel-held areas.
In practice, sanctions deter businesses and charities from dealing with heavily-sanctioned countries. Even nuns shipping boxes of baby formula to an orphanage have to pay for certain services along the way, and so they have to file reams of paperwork to prove that they are not violating sanctions. Some banks will just avoid any transactions in sanctioned countries, a phenomenon known as “overcompliance.”
“Either U.S. authorities do not understand how international trade works, or they are being dishonest about the situation,” one business expert said about moving medical supplies during the coronavirus pandemic. “Banking, insurance, and shipping — they’re all sanctioned.”
Then there’s the refrain that any humanitarian aid should not be done “through the regime.” Societies don’t work like that. (Just try running an untaxed business or an unregistered charity.) Independent organizations have to deal with the authorities in some capacity, or they will not be allowed to exist at all.
Sometimes, the U.S. government’s definition of a “humanitarian” good is stricter than what charities and rescue services actually need to help people. Certain types of hazmat gear and breathing equipment are considered “dual-use” items with potential military applications. U.S. sanctions on Syria ban “construction or engineering services” for the Syrian government.
All the quibbling over “humanitarian trade” misses the point, though. Countrywide sanctions work by making a country poorer. They deprive the government of resources by depriving the entire society of resources. There is literally no way to do that without hurting citizens. Whether food donations are allowed is only the difference between a destructive siege and a genocidal one.
Unlike the blockages of humanitarian trade, these effects are on purpose. U.S. officials have bragged about causing massive inflation in Iran and Russia. In everyday terms, “inflation” means “your paycheck and bank account are suddenly worth less,” as Americans have been learning recently.
Sanctions architect Richard Nephew wrote an entire book laying out how U.S. sanctions were designed to tear at the fabric of Iranian society. As another expert summarized:
In Nephew’s retelling, the U.S. tweaked the sanctions program to sustain Iran’s dependence on imports at a time when the country’s currency was experiencing a sharp devaluation. Sanctions were not imposed on food or medicine imports. But they were also not imposed on luxury goods—suggesting altruism wasn’t the sole basis for exemptions. “With Iran’s population technically able to purchase such goods and imports still flowing in, but with the exchange rate depriving most people of the practical benefit of being able to purchase these goods, only the wealthy or those in positions of power could take advantage of Iran’s continued connectedness,” explains Nephew.
This strategy took advantage of inelastic demand—the poor would continue to need food and medicine while the rich would continue to yearn for luxuries. Every dollar or euro spent on luxury goods served to increase the cost of imported food or medicine. “Hard currency streamed out of the country while luxuries streamed in, and stories began to emerge from Iran of intensified income inequality and inflation.” In this way, the Obama administration sought to exacerbate inequality and inflation in order to “to drive up the pressure on the Iranian government from internal sources.”
The real political power of sanctions comes from the difficulty of separating their effects from other economic factors. While some officials analyze the effectiveness of sanctions in clinical academic works, others can go on Voice of America to shout that the brutality, corruption, and incompetence of the enemy government is really to blame for the people’s misery.
On the flipside, the unclear nature of sanctions makes them a convenient excuse for governments under siege. Authorities can blame foreign interference for problems that have nothing to do with sanctions, or are related to sanctions but could be avoided with better planning.
For example, U.S. sanctions have prevented Venezuelan government from borrowing money, which any modern government needs to function, but Venezuela is in a financial hole to begin with because its leaders had wrongly assumed that oil exports could keep financing the system indefinitely.
Or consider Syria itself, where government supporters had promised to “burn the country” rather than let the opposition win. They followed through on that threat, which is why “reconstruction” is necessary on the first place.
Both sides benefit from confusing broad economic sanctions with sanctions on individual leaders. The sanctions preventing Syria from rebuilding its oil refineries are not the same as the sanctions preventing Bashar al-Assad’s son from vacationing in Disney World, but neither Assad nor the U.S. State Department want you to understand that.
There is an argument to be made that the suffering caused by sanctions will cause less suffering in the long run, because the hated regime has to fall before things can get better. Civilian pain is necessary to fight a greater evil.
Exiled Iranian crown prince Reza Pahlavi said that Iranians will “tighten the belt” if they realize that “economic hardship” is in fact “part of their deliverance.” More pointedly, Iranian actress and opposition spokeswoman Nazanin Boniadi has compared sanctions to “chemotherapy.”
That argument can also apply to goals short of regime change. Proponents of sanctions on Russia argue that inflicting a cost on the regime’s support base helps build public pressure to end the invasion of Ukraine.
But that is not the argument that U.S. officials make. Instead, it’s that the sanctions are simultaneously super-effective, and do nothing. Or in simpler terms: Why are you hitting yourself? Why are you hitting yourself?
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This blog is not legal advice. Please consult with a lawyer before conducting any potentially-sanctionable transactions.