UN Photo/Annick Roulet

Few foreign policy issues excite such passionate and disparate feelings in the United States as proposals to impose economic sanctions in order to try to influence the behaviour of other countries. The business community hates sanctions which cost American firms in terms of lost sales and business relationships. Meanwhile, many politicians love sanctions; how else to take "tough" action against a foreign country without risking American blood or treasure?

The domestic debate, which concerns largely ineffective unilateral sanctions, is mirrored internationally by a similar intellectual trench warfare over multilateral sanctions. On one side, critics line up to deride the use of sanctions without admitting those instances in which these measures work. On the other side are those who view sanctions as the default option, with little regard to the type used or the manner in which it is employed. The end result is that sanctions are seen as primarily symbolic gestures. In fact, if done right, they can be useful, though limited, diplomatic tools.

The problem is that even multilateral economic sanctions, which have a much better chance of achieving diplomatic goals, are rarely done right.

As a result, sanctions are often worse than ineffective. In many cases, they have proven highly counterproductive, creating changes in the target country's economy, which make the offensive behaviour that brought sanctions to bear even more difficult to reverse. Yet, sanctions have met with success in more than a few instances. The key to their more effective use is understanding what they are, and how and why they can produce such divergent results. At the most basic level, there is a distinction between trade sanctions on commodities and financial sanctions aimed at impeding the flow of capital to a target country. Trade sanctions can be further divided into those which prevent the target country from being able to import goods (export sanctions) and those which block exports from a country (import sanctions).

Why are these distinctions important? Because, while financial sanctions tend to raise the cost of capital to an offending country, export sanctions tend to induce import substitution. Even if multilateral sanctions are effective in blocking the flow of goods to a particular country, the target State will respond, if possible, by producing substitutes. The 1977 UN-imposed arms embargo on South Africa, for example, prompted the creation of a vast military industrial complex there. The result was that South Africa not only became self-sufficient in weapons, but also became a major exporter of sophisticated arms. Employing nearly 140,000 people at its peak in the 1980s, the South African arms industry was the sixth largest weapons exporter in the world. Even today, it is a major supplier of weapons to other African countries. Although import substitution is an expensive and economically inefficient practice, it is well worth the cost, especially when sanctions demand significant changes in the target country's policies or behaviour. More importantly, trade sanctions have political ramifications. Refusing to sell to a country gives it the functional equivalent of a protective tariff. This benefits producers capable of making substitutes and provides a reason for them to support the policies and leaders whose actions keep sanctions in place. In other words, export sanctions tend to create groups within the offending country with a material incentive to see that sanctions remain, and these groups try to influence the target country's Government to maintain the policies that prompted the sanctions.

In the 1990s, trade sanctions imposed on Yugoslavia enriched a criminal elite closely tied to paramilitary organizations and arch-nationalist political parties. The loosely enforced blockade on gasoline produced an extremely profitable black market controlled by these criminals, including the leader of an infamous Serbian paramilitary group responsible for much of the violence and ethnic cleansing in Bosnia. He is a wealthy man, thanks to sanctions and the illegal profits from the black market.

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