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51. Economic sanctions against Russia: How effective? How durable?

Author:
Jeffrey J. Schott
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Economic sanctions by Western democracies against Russia have not stopped the war and attacks on Ukrainian civilians. Together with continued economic and military support for Ukraine, however, sanctions are blocking Russian president Vladimir Putin from achieving his territorial objectives. Sanctions have contributed to a sharp compression of Russian imports; forced Russia’s military and industry to source from more costly and inefficient suppliers at home and abroad; and slowly begun to squeeze Russian government finances. The G7 countries must sustain and augment their efforts, including by confiscating frozen reserves of the Central Bank of Russia to help fund Ukraine’s reconstruction. G7 policymakers need to derive lessons from the current crisis about the utility of sanctions in conflicts between major powers. Maintaining coherent and coordinated sanctions against large and powerful target countries is critical for the effectiveness and durability of the policy. Deploying sanctions against such rivals also requires a long-term commitment to the implementation and enforcement of the trade and finance restrictions. Sanctions impose costs on both the target country and those imposing the sanctions, so Western policymakers need to offset those costs via domestic support or tax relief to sustain political support over time for sanctions in big power conflicts.
Topic:
Sanctions, Economy, Conflict, and Russia-Ukraine War
Political Geography:
Russia, Europe, Ukraine, and United States of America

52. Sanction-busting through tax havens

Author:
Kerim Can Kavakli, Giovanna Marcolongo, and Diego Zambiasi
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Financial sanctions, which aim to economically hurt a target by restricting its access to financial assets and markets, require the ability to identify who owns an asset. Although experts have long claimed that offshore financial centres that offer secrecy (‘tax havens’) undermine sanctions by hiding ownership information, so far data limitations have prevented a rigorous test of this claim. We overcome this constraint using data from the Bank of International Settlements and the Offshore Leaks Database and conduct the first systematic analysis of the role that tax havens play in financial sanction evasion. Our main finding is that sanction targets reduce their funds in sanctioning countries while increasing their funds in tax havens. This displacement effect is stronger when the sanction coalition includes the United States or comprises more FATF or OECD members. Lastly, whether a tax haven is in the sanctioning coalition does not seem to make a difference. These findings confirm that target countries evade sanctions by moving large portions of their funds from sanctioning countries to tax havens. More broadly, our paper highlights a novel and geostrategically important role of tax havens in global finance.
Topic:
Sanctions, Financial Markets, Leaks, and Tax Havens
Political Geography:
Global Focus

53. Trade sanctions and informal employment

Author:
Ali Moghaddasi Kelishomi and Robert Nisticò
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper examines how trade sanctions affect the allocation of workers across formal and informal employment. We analyse the case of the unexpected and unprecedented trade sanctions imposed on Iran in 2012. We use a difference-in-differences approach and compare the probability of working in the informal sector before and after 2012 for individuals employed in industries with pre-existing different levels of exposure to international trade. Combining employment data from the Iranian Labour Force Survey and trade data from Iran’s Customs Administration database for the years 2008–14, we find that workers employed in industries initially facing higher exposure to trade are significantly more likely to experience informal employment in the years after 2012 than workers employed in industries with lower trade exposure. This result suggests that, in the short run, the informal sector may absorb a significant fraction of workers displaced by the trade shock caused by the sanctions. We estimate that the increase in informal employment is highest for poorly educated workers, highlighting the unequal labour market consequences of trade sanctions. We exclude that industries differentially exposed to international trade were already following a different trend in the share of informal employment in the years prior to 2012, thus providing empirical support for the validity of our identification strategy. Moreover, we show that our main result holds when accounting for potential sorting issues by an instrumental variable approach. Our findings shed light on a potentially important dimension of labour reallocation whereby trade sanctions can affect the economy of the target country. They also provide important implications for policies designed to address informal employment and to assist trade-displaced workers.
Topic:
Labor Issues, Sanctions, Employment, Trade, and Informal Economy
Political Geography:
Iran and Middle East

54. Authoritarian kleptocrats are thriving on the West’s failures. Can they be stopped?

Author:
Francis Shin and Ben Judah
Publication Date:
01-2023
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
A hidden web of power revealed itself to Internet users in early 2022. Following a brutal government crackdown in Kazakhstan in January, anyone using open-source flight-tracking websites could watch kleptocratic elites flee the country on private jets. A little more than a month later, Russia’s invasion of Ukraine brought a new spectacle: social media users were able to track various oligarchs’ superyachts as they jumped from port to port to evade Western sanctions. These feeds captured a national security problem in near real time: In Eurasia and beyond, kleptocratic elites with deep ties to the West were able to move themselves and their assets freely despite a host of speeches by senior officials, sanctions, and structures designed to stop them. Kleptocratic regimes—kleptocracy means “rule by thieves”—have exploited the lax and uneven regulatory environments of the global financial system to hide their ill-gotten gains and interfere in politics abroad, especially in the United States, the United Kingdom, and the European Union. They are aided in this task by a large cast of professional enablers within these jurisdictions. The stronger these forces get, the more they erode the principles of democracy and the rule of law. Furthermore, the international sanctions regime imposed on Russia in response to its invasion of Ukraine has little hope of long-term success if the global financial system itself continues to weaken. The West still has a long way to go to rein in the authoritarian kleptocrats who have thrived on the institutional dysfunction, regulatory failure, and bureaucratic weakness of the transatlantic community for far too long. We need to rethink not just how we combat kleptocracy, but also how we define it. Policy makers need to understand that authoritarian regimes that threaten transatlantic security are closely linked to illicit financial systems. As it stands, our thinking about how foreign corruption spreads is too constrained by stereotypes about kleptocratic goals and actions.
Topic:
Corruption, Diplomacy, Intelligence, Politics, Sanctions, Authoritarianism, Reform, European Union, Regulation, Finance, Economy, Rule of Law, and Russia-Ukraine War
Political Geography:
Russia, United Kingdom, Europe, Ukraine, Canada, and United States of America

55. Impact of economic sanctions on net commodity-producing and net commodity-consuming countries

Author:
Sergio R. Vale and Eduardo Viola
Publication Date:
01-2023
Content Type:
Journal Article
Journal:
Revista Brasileira de Política Internacional (RBPI)
Institution:
Instituto Brasileiro de Relações Internacionais (IBRI)
Abstract:
The war in Ukraine has had a marked economic impact. However, since Russia is a net producer of important commodities, the impact of sanctions on its economy was less than expected. But what would happen if there was a war involving a country that was a net importer of commodities? In the case of a possible China-US conflict over Taiwan, the impact on the world economy would be different, with a deeper recession around the world, but the impact on the Brazilian economy would still be positive on account of the possibility that would remain of agricultural exports to China.
Topic:
Agriculture, Economics, International Trade and Finance, Sanctions, Commodities, and Exports
Political Geography:
Russia, China, Europe, Ukraine, Taiwan, Asia, North America, and United States of America

56. Alternative Aid Modalities: Community development

Author:
Scott Guggenheim and Charles Petrie
Publication Date:
04-2023
Content Type:
Special Report
Institution:
Center on International Cooperation (CIC)
Abstract:
Economic sanctions and restrictions on development aid in fragile and conflict-affected states have become an increasingly prominent part of the international toolkit for dealing with regimes that violate international norms and rules or are beset by conflict. However, there is a well-known problem: sanctions and cessations of development aid often end up hurting the poor more than the rich, particularly the political elites who the sanctions are most meant to target. Donors try to limit the impact of sanctions on the poor through humanitarian assistance, usually run by United Nations (UN) agencies and non-governmental organizations (NGOs). However, in all but the smallest countries, this is extremely expensive as well as a major organizational and logistical challenge. Most recently, situations such as those in Myanmar and Afghanistan have thrown the spotlight on the complexity of the discussion. In a world of no first-best solutions, a close look at empirical experience will show (provided certain pre-conditions can be met) that donors can partially bridge the challenge of simultaneously upholding human rights values and protecting the poorest from the economic fallout caused by sanctions. These solutions require close attention to unpacking complex environments and using a difficult-to-wield set of tools spread over diplomacy, economic power, and development aid. While not all risks can be eliminated, a variety of flexible tools already exists so that donors can help the poor in sanctioned and conflict-affected countries without undermining diplomatic goals of shunning the government elites or inadvertently financing insurgencies. With a growing number of donor-funded community programs in fragile or conflict-affected states, there are also donor concerns about legitimating national authorities, risks of financial diversion, and capture by armed combatants or local elites (full list of major concerns listed below). This paper highlights and addresses these concerns in detail and offers a series of recommendations, which in addition to good donor program design and management could mitigate some of the risks (but not fully eliminate them). This paper aims to present a case on how to use one tool—community-based approaches for delivering and monitoring aid—in fragile or sanctioned contexts, as community-based local governance type development models have been used successfully in a variety of fragile, conflict, and sanctioned countries. Additionally, this paper will extract real-world illustrations of how these approaches can address donor concerns on providing post-humanitarian aid to poor people without unintentionally undermining sanctions on illegitimate regimes. Because the case literature on delivering aid under sanctions is small, the brief includes illustrations taken from aid delivery in conflict-affected countries, where governments may not be under sanction, but deep concerns remain about aid capture or aid further fueling conflict. Finally, in addition to selections from the literature, the report draws from the personal and professional experiences of the two authors, who have overseen or managed large-scale community-type humanitarian, peacebuilding, and development programs in Afghanistan, Burundi, East Timor, Gaza, Indonesia (including Aceh and West Papua), Myanmar, Rwanda, Sri Lanka, and Syria, and have been part of discussions over development options for countries under sanction in Ethiopia and Sudan. In this paper, authors propose ten recommendations for donors coming out of this research on how they can incorporate community-driven approaches for aid in sanctioned and fragile states situations.
Topic:
Development, Humanitarian Aid, Sanctions, and Community
Political Geography:
Afghanistan, Myanmar, and Global Focus

57. The Value of Reporting: National Reporting Practices under the UN Sanctions Regime on North Korea

Author:
David Atwood, Gian Giezendanner, and Sophie Timmermans
Publication Date:
04-2023
Content Type:
Special Report
Institution:
Small Arms Survey
Abstract:
The UN Security Council has imposed a broad range of sanctions on the Democratic People’s Republic of Korea, requesting member states to report on how they are implementing these measures. Many factors affect the national reporting practices of states, with some having failed to submit any reports. Reporting serves as an important measure of transparency and trust-building concerning state compliance with international commitments in general. The frequency and depth of reporting on national implementation of the sanctions by UN member states help to discern the regime’s effectiveness. Failure to meet reporting deadlines, the use of vague language, and limited information on national implementation all dampen the usefulness of reporting on the implementation of the DPRK sanctions regime. The Value of Reporting: National Reporting Practices under the UN Sanctions Regime on North Korea—a report from the Survey’s Strengthening Implementation and Enforcement of the Arms Embargo on North Korea (SAENK) project—highlights factors that affect reporting, providing a more nuanced picture of national practices. The report also examines national DPRK sanctions regime reporting in relation to reporting on other international arms control instruments, with the aim of revealing potential mutually beneficial synergies.
Topic:
Arms Control and Proliferation, United Nations, and Sanctions
Political Geography:
Asia, North Korea, and Global Focus

58. MILITARY SANCTIONS: THE WAR ON TERROR AND THE CASE OF UZBEKISTAN

Author:
Jonathan Honig
Publication Date:
03-2023
Content Type:
Journal Article
Journal:
Journal of Liberty and International Affairs
Institution:
Institute for Research and European Studies (IRES)
Abstract:
States frequently find themselves disbursing or receiving military aid, cooperation, and access to military products. Using foreign policy options like "military sanctions" (the suspension of military projects, aid, cooperation, and access) is a desirable, widely publicized way for one state to express its discontent to another while presumably influencing desired policy changes in the client state. However, the small amount of evidence on military sanctions indicates that they are ineffective, short-lived, and may even be counterproductive. This analysis attempted to elucidate this subject by advancing a theory stating that states will impose military sanctions in response to domestic audience pressures shortly after high-profile examples of undesirable behavior by client states. However, military sanctions will be eased as time progresses and public attention has waned. This analysis qualitatively examined Uzbekistan and its relationship with the US, finding support for this theory. It concluded that following high-profile incidents and periods of undesirable behavior by an aid-recipient state, military sanctions would likely be employed by the state providing the military aid and programs. Further, military sanctions are eased or scrapped as time moves from public incidents and attention involving human rights abuses.
Topic:
Foreign Policy, Sanctions, Conflict, War on Terror, and Military
Political Geography:
Central Asia and Uzbekistan

59. To Russia with Love? The Impact of Sanctions on Regime Support

Author:
Robert Gold, Julian Hinz, and Michele Valsecchi
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Do economic sanctions affect internal support of sanctioned countries’ governments? To answer this question, we focus on the sanctions imposed on Russia in 2014 and identify their effect on voting behavior in both presidential and parliamentary elections. On the economic side, the sanctions significantly hurt Russia’s foreign trade — with regional-level variation. We use trade losses caused by the sanctions as measure for regional sanction exposure. For identification, we rely on a structural gravity model that allows us to compare observed trade flows to counterfactual flows in the absence of sanctions. Difference-in-differences estimations reveal that regime support significantly increases in response to the sanctions, at the expense of voting support of Communist parties. For the average Russian district, sanction exposure increases the vote share gained by president Putin and his party by 13 percent. Event studies and placebo estimations confirm the validity of our results.
Topic:
Globalization, International Trade and Finance, Sanctions, Economy, and Russia-Ukraine War
Political Geography:
Russia and Eurasia

60. Blowback: The Effect of Sanctions on Democratic Elections

Author:
Matthieu Crozet and Julian Hinz
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Sanctions are meant to coerce political adversaries through economic measures. However, evidence for their effectiveness is scarce. In this paper we assess the impact of sanctions on a democracy — France — by studying the electoral consequences of the sanctions and countersanctions imposed between Russia and Western countries. Contrary to most of the existing literature we find clear evidence for exposure to the sanctions to cause an increase in the vote share for pro-Russian (and far-right) candidates during the French 2017 presidential election. Locally, the impact on voting is substantial. Back-of-the-envelope calculations indicate that about 16,300 votes for the main far-right candidate can be directly attributed to the sanctions’ impact. This is the total number of votes cast in a medium-sized French city. It is however not nearly enough to have affected the outcome of the election at the national level.
Topic:
Globalization, International Trade and Finance, Sanctions, and Elections
Political Geography:
Russia, Europe, and France