Economic sanctions are one of the most common coercive instruments that major powers and coalitions use to influence global politics. But they also carry risks and side effects – not just for the targeted country but also for the sanctioning state itself. In this article, political scientist Christian von Soest explores how sanctions affect not only international trade flows and relations between countries but also the wider world.
He shows that extensive sanctions have a strong impact on bilateral trade, consistently reducing it by around 90 percent. They can have a variety of different effects including restricting the export of technology, products and services, limiting imports, or cutting off access to capital markets. These may be imposed on an entire country or narrowly targeted at individuals, groups and companies. Sanctions can also include embargoes or bans on imports and exports of certain types of goods, such as arms or technology with military applications.
But he also warns that it is difficult to measure the impact of sanctions and that even if they are well-designed, their effectiveness will not be as clear as it might appear. The main reason is that sanctions do not always work as intended and smuggled goods and money continue to flow into the target country. And, he says, the United States should be careful not to set a dangerous precedent with its extraterritorial sanctions against Russia.
Using regression analysis, he demonstrates that, even when US firms are not directly sanctioned, they can experience indirect losses. This is because foreign firms may design US intermediate goods and technology out of their final products for fear of being caught up in a future sanction episode.