Sanctions are coercive or punitive actions initiated by one or more states toward another state to force or induce the target state to comply with it's legal obligations (such as those deriving from treaties), to maintain international peace and security or to achieve humanitarian goals.   Some element of political posturing by politicians to please national/domestic constituencies can also play a role in the imposition of sanctions.

Types of sanctions :

• Economic Sanctions
  • Trade Related: export and import limitations, tariffs, embargoes (including arms and weaponry), revocation of most favored nation (MFN) trade status
  • Aid and Investments: foreign assistance reductions and cut-offs, asset freezes, prohibitions on credit, financing, and investment
• Diplomacy and state relations: negative votes in international financial institutions, withdrawal of diplomatic relations, restrictions of relations with third parties
• Transportation and movement:  cancellation of air links, visa denials

Economic sanctions are imposed on nations, groups, individuals or on certain types of economic activities in order to alter the behavior of the targets of such sanctions by restricting or denying their access to trade and financial systems with a particular nation, regionally or globally.

Economic sanctions can be imposed by:

• National governments such as the US (Department of Treasury through the Office of Foreign Assets Control) to promote its national and security interests;
• International bodies such as the United Nations and European Union to coerce, deter, punish, or shame entities that violate international norms of behavior or to promote further policy objectives such as counterterrorism, counternarcotics, nonproliferation, democracy and human rights promotion, conflict resolution, and cybersecurity;
• Member states or treaty signatories of international organizations are obligated to follow policy objectives, including imposition of economic sanctions as mandated by such international organizations or treaties. Member States may impose more stringent economic sanctions than that mandated by such international organizations but the sanctions cannot be less restrictive.

Sanctions can be categorized into four broad categories:

1. Comprehensive Sanctions: Economic sanctions or embargoes that are country or activity based—for example Sudan, Cuba, Iran and Syria are covered by comprehensive OFAC Sanctions;
2. Targeted Sanctions: Sanctions or other measures that are targeted against specific individual and/or entities;
3. Hybrid Sanctions: A combination of Comprehensive or Broad sanctions with targeted sanctions against specific individuals or entities;
4. Secondary Sanctions: In effect this is derivative sanctions. For example, a foreign financial institution conducting business in the US will be subject to US sanctions for its extraterritorial activities (with a jurisdiction under US Sanctions) even if no US person or entity is involved;

Although critics have contended that sanctions are often poorly conceived and rarely successful, Economic Sanctions in conception and in enforcement have become more effective in the recent years. Sanctions maybe utilized as alternatives to military force and are preferable from the perspectives of cost outlays and other attendant risks which are lower compared to military action.  Sanctions can be regarded as middle course of action between diplomacy and war. As such they have become essential tools (some say “weapon”) in the foreign policy arsenal of governments.  See also: Smart Sanctions

As balance of power gets distributed between multiple great-powers, sanctions may gain even more prominence for nations enjoying relative advantage of power to implement sanctions measures to promote national interest. Although the US is in the forefront of using sanctions, other countries–seeing the use of sanctions–have increasingly used sanctions to achieve their own national interests. Examples include Russia sanctions on Turkey. UAE coalition sanctions on Qatar.

The advantages of sanctions are:

1. Financial sanctions are hard to evade and can hit high level politicians and business people harder;
2. Diplomatic protests and action are insufficient to induce certain behavior as compared to sanctions or threat of sanctions;
3. Effective to stigmatize foreign leaders and human rights abusers such as North Korean Leader, Zimbabwean leader and the people involved in the killing of lawyer Sergei Magnitsky;
4. Effective To deny terrorists, drug traffickers, nuclear weapon proliferators and other bad actors their ill gotten money and to deny them tools to further perpetuate their actions;
5. Military actions are massive, unwieldy, unpopular, unpredictable and costly;
6. Sanctions are relatively less costly
7. Because of the above, it can be comparatively easier to shore up the political will to impose sanctions through use of the media (for example by showing images of humanitarian conditions or the prospects of ICBs and nuclear weapons etc)

Shortcomings of economic sanctions:

1. Formulation and implementation shortcomings:
   • US Sanctions are designed and implemented until crises are already underway and as such the measures tend to be rushed and ill-considered or too slow to deter the adversaries.
   • They are also not negotiated with allies in advance
2. Counter-measures by governments:
   • Governments around the world have gotten wiser so in the future they may implement their own sanctions or devise methods and processes to insulate them from or circumvent US sanctions.
   • With the power being more distributed other countries may impose sanctions on the US. China has threatened US with sanctions.
3. Populist backlash:
   • Sanctions can create a backlash especially when the humanitarian toll becomes too big such as the case in Iraq sanctions
4. Impact on first line of defense:
   • Banks and companies function as the first line of sanctions implementers at the risk of regulatory actions, including fines and criminal prosecution.
   • So they may reasonably de-risk and cease doing businesses with the sanctions target. This will make sanctions ineffectual and also impose humanitarian toll on civilians. This happened with banks de-risking doing business with money remitters to Somalia.
5. Counter-strategy by targets of sanctions: they may move to illegal and alternative means to conduct their businesses (hawala/hundi etc.) and escape the scrutiny of the regulators all together rendering sanctions ineffective.
6. Humanitarian Toll: In the supremacy of the US as the lone super power, sanctions came to be seen as an efficient means of advancing US interests without resorting to military force. But there have been downsides too such as the humanitarian toll in Iraq.

 

Although critics have contended that sanctions are often poorly conceived and rarely successful, Economic Sanctions in conception and in enforcement have become more effective in the recent years.  Sanctions are viewed as an alternative to military force and preferable because a lower-cost, lower-risk, middle course of action between diplomacy and war.  As such they have become an essential tool (some say “weapon”) in the foreign policy arsenal of governments. 

The advantages of sanctions:

1. Diplomatic protests and action are insufficient to induce certain behavior as compared to sanctions or threat of sanctions;
2. Military actions are massive, unwieldly, unpopular, unpredictable and costly;
3. Sanctions are relatively less costly
4. Because of the above, it can be comparatively easier to shore up the political will to impose sanctions through use of the media (for example by showing images of humanitarian conditions or the prospects of ICBs and nuclear weapons etc)
5. Financial sanctions are harder to evade and can hit high level politicians and business people harder

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The evolution of Economic Sanctions into a potent tool of foreign policy for a particular powerful government or a tool of global governance can be tied into two developments since 2000. 

1. The enactment of affirmative obligations on financial institutions (domestic as well as international), by powerful governments.  These obligations are backed by powerful enforcement measures, including monetary penalties, revocation of company charters, attendant adverse impact on institutional reputation, and fines and imprisonment for decision makers.    
2. Computing technology proliferation, capability and costs associated with such technology have made feasible software capable of granular surveillance/monitoring and interdicting of transactions as well as prompt reporting of objectionable transactions to the responsible authorities.

1. Comprehensive Sanctions: Are comprehensive, for example sanctions applied to countries as a whole such as Iran and North Korea (except for certain humanitarian exception and licensing provisions)
2. Targeted Financial Sanctions: Tailored sanctions which are more effective and palatable because comprehensive sanctions tend to impose undue humanitarian burden on innocent civilians.  More appropriate on targets who can easily relocate across country borders.  Certain targeted financial sanctions are mandatory under UN Security Council resolutions relating to Terrorism and Proliferation. Targeted Financial sanctions can be aimed at:
   1. individuals or entities
   2. certain types of activities
   3. certain sectors of the economy
3. Secondary Sanctions:
   1. Can apply extra-territorially on individuals and entioties who have no nexus to the sanctioning authority (e.g. US) but whose actions in , aiding, abetting or facilitating actions prohibited by sanctions currently effective;
4. Cooperative Sanctions:
   1. Are different sanctions imposed by different countries, but based upon the same or similar values, such as Magnitsky sanctions in the US and sanctions styled after Magnitsky adopted by the EU and the UK, to discourage corruption and protect human rights;
5. Retaliatory Sanctions:
   1. As opposed to cooperative sanctions, retaliatory sanctions are enacted in response by the target country against the implementation of sanctions against it; For e.g. China's "anti-foreign sanctions law"
   2. Although not retaliatory, blocking statutes such as those enacted by the EU, are intended to counteract certain impact of the sanctions

 

In particular, the US Office of Foreign Assets Control (OFAC) which administers the US Sanctions Programs has assessed sizeable fines to financial institutions from around the world in recent years. 

Some examples (may include joint figure with other regulatory agencies).

	Year	FI Name	Country	Amount (USD)
1	2009	Credit Suisse	Switzerland	$536 Million
2	2009	Lloyds	UK	$217 Million
3	2010	Barclays	UK	$298 Million
4	2010	RBS (ABN Amro)	UK	$500 Million
5	2011	JP Morgan	USA	$88.3 Million
6	2012	HSBC	UK	$1.9 Billion
7	2012	Standard Chartered	UK	$667 Million
8	2012	ING	Netherlands	$619 Million
9	2012	Bank of Tokyo Mitsubishi	Japan	$8.6 Million
10	2013	RBS	UK	$100 Million
11	2013	Intesa Sanpaolo	Italy	$3 Million
12	2014	BNP Paribas	France	$8.9 Billion
13	2014	Clearstream Banking	Germany	$152 Million
14	2014	Bank of Moscow	Russia	$9.5 Million
15	2014	Bank of America	USA	$16.6 Million
16	2014	Bank of Tokyo Mitsubishi	Japan	$315 Million
18	2015	Commerzbank	Germany	$1.45 Billion
19	2015	Credit Agricole	France	$329 Million
20	2015	Paypal	USA	$7.6 Million
21	2016	Barclays	UK	$2.48 Million
22	2018	JP Morgan	USA	$5.26 Million
23	2018	Societe General	France	$54 Million
24	2019	Standard Chartered	UK	$657 Million
25	2019	Unicredit Bank	Germany/Italy	$611 Million
26	2019	British Arab Commercial	UK	$4 Million