Generally speaking, there are four types coercive measures which are imposed in an economic sanctions regime:
- Diplomatic & Political Measures
- Cultural & Communications Measures
- Economic Measures
- Measures relating to status within International Organizations
The most relevant coercive measures to companies and exporters are the communication and economic measures, as these have the biggest impact to international trade.
During the 1990’s, in an attempt to limit the unintended collateral damage to the civilian populations of Targets, Senders have generally switched from imposing comprehensive sanctions regimes (e.g. boycotting a total country- U.S. Cuba boycott, United Nations sanctions against Iraq (1990-2003)) to so-called Smart Sanctions, i.e. Target Sanctions.
Target sanctions emerged in the mid 1990’s as a result of:
- Firstly, intense criticism regarding the collateral damage caused by comprehensive sanctions regimes, which was especially visible in Iraq.
- Secondly, because economic sanctions were applied to new security threats, e.g. conflict-resolution arrangements, supporting the prosecution of suspects of war-crimes (Rwanda or former-Yugoslavia), anti-proliferation and counter terrorism.
- Thirdly, to new economic activities which facilitated, i.e. enabled, particularly nasty characters to further their repugnant activities. For example, the certification of rouge diamonds (e.g. Kimberly Process) or the trade in high value timber EU Action Plan for Forest Law Enforcement, Governance & Trade (FLEGT)).
In order to minimize the collateral damage to local civilian populations, target sanctions are designed to only impact specific individuals and entities, which are held to be responsible for repugnant conduct or policies, e.g. dictatorial regimes (political leaders, their proxies, families), human rights violators, war lords or global terrorists.
Target sanctions can cover the freezing of financial assets or economic resources (both are usually interpreted very broadly), travel bans or the denial of specific goods which can facilitate, i.e. enable the continuing of noxious conduct (conventional weapons) or can benefit blacklisted, i.e. designated Targets.
However noble the concept of target sanctions is, they are just as destructive as comprehensive sanctions regimes. This is because target sanctions are extremely effective. For instance, mature sanctions regimes, e.g. from the U.S. and EU countries, also apply wartime trading with enemy concepts whereby target sanctions extend to entities owned or controlled by targeted entities (so-called cloaks). This can have a crippling economic effect in countries where owned or controlled entities of targeted political elites or governmental agencies are the dominant economic actor.
For example, a water-board authority, which is owned or controlled by a targeted political leader, may be unable to procure essential foreign-made equipment to purify water due to sanctions, although in theory Senders can and do license humanitarian related activities. Note that financial institutions can also refuse to facilitate such transactions, given their current total risk aversion policies regarding economic sanctions.
This example, illustrates that in some cases, the difference between target and comprehensive sanctions regimes is not always clear. Therefore, complying with the law is not always moral or ethical…
The problem of unintended collateral damage is so sensitive, that governments have publicly stated that they will do their utmost to prevent the unintended suffering of innocent bystanders.
For instance in 1995, the Permanent Members of the United Nations Security Council issued a policy statement in which they declared “[that] further collective actions in the Security Council within the context of any future sanctions regime should be directed to minimize unintended adverse side-effects of sanctions on the most vulnerable segments of targeted countries. The structure and implementation of future sanctions regimes may vary according to the resource base of the targeted country.”
Senders implement their economic sanctions either individually or collectively (together with other countries).
Generally speaking, economic sanctions are implemented as follows:
- individual countries (based on specific foreign policy or national security policies without the authorization of the United Nations Security Council, often referred to as unilateral sanctions),
- collectively, together with other countries, e.g. ad hoc coalitions of the willing or through regional mechanisms with or without the authorization of the United Nations Security Council (often referred to as multilateral sanctions),
- by the global community, i.e. with authorization of the United Nations Security Council (often referred to as universal supranational sanctions)
NB The role of the United Nations Security Council regarding economic sanctions can be accessed here.
Note that in reality the above-listed distinctions are not fixed. Depending on the circumstances, the design of a sanctions regime can be a cocktail of different measures or the political goals can evolve over time to suit the needs of the countries imposing sanctions. For instance, the sanctions against Iran evolved over time; from a unilateral sanctions regime (imposed by the U.S. during the 1980’s) to a universal supranational sanctions regime once the United Nations Security Council also decided to impose sanctions against Iran.
Primary sanctions are restrictive measures which a Sender imposes on persons subject to its jurisdiction (citizens, permanent residents, individuals in their territory and companies and their foreign branches – registered under their laws) to do business with a Target, e.g. a rogue regime, terrorist group, or proliferators of weapons of mass destruction.
In contrast, secondary sanctions, go a step further, namely they are designed to block or restrict persons subject to the jurisdiction of third-countries, outside the territory of the Sender, from engaging in business or investing with Targets of their primary sanctions (e.g. U.S. Iran and Cuba sanctions regimes). This is why secondary sanctions are often referred to as sanctions regimes with extra-territorial jurisdiction effect. In effect, secondary sanctions supplement primary sanctions.
Secondary sanctions, although rare, are imposed when primary sanctions are deemed to be ineffective or the adoption of multilateral (universal supranational) sanctions regimes can’t be imposed.
The origins of secondary sanctions are based on the wartime application (modern variant are both World Wars) of trading with enemy laws, which aim to restrict the ability of enemies (and persons under their control) access financial/economic resources and certain types of goods (vital for their wartime economy).
Wartime secondary sanctions were mainly applied against neutral countries, as belligerents wished to deny all types of economic benefits to their enemies. They were also applied extra-territorially against so-called cloaks, entities or individuals of third-countries acting on behalf of enemies (sometimes under the coercion of belligerents). In this context, similar to the twenty-first century, governments published lists of blacklisted entities or individuals whereby they prohibited their citizens or companies to engage in any business activities (directly or indirectly). These concepts are now applied during peacetime, as an enforcement tool, although under new names and concepts, e.g. U.S. concept of Specially Designated Nationals (SDN’s).
In peacetime, secondary sanctions are extremely controversial and have proven to be politically counter productive (e.g. U.S. boycott against Cuba) because they are deemed to violate the sovereign rights of countries (e.g. the freedom to decide with whom their chose to trade with and the prohibition that countries interfere with the internal affairs of other countries).
In this context, secondary sanctions are most effective if they are imposed by powerful countries on targets, e.g. allies, which have close economic ties with the Sender. These Targets have potentially the most to lose, especially if they have significant economic ties to the Sender. For instance, if one looks closely at the U.S. Government’s sanctions enforcement actions, one will note that financial institutions of allies have been severely penalized.
From a political perspective, they are unpopular because secondary sanctions are usually only imposed by powerful countries, which frequently leads to the belief that secondary sanctions are a form of bullying small and weaker countries.
Senders of secondary sanctions argue that they are essential to respond to certain national security threats, e.g. global terrorism or nuclear weapons proliferation. Note that before the U.S. ascended to is super-power status, it also fiercely opposed secondary sanctions (especially before it entered the First World War as a belligerent). Further, they often contend that third-countries have a choice not to comply with their secondary sanctions, although this argument is hollow if one takes into account the dominant position of powerful Senders in the modern global economy and financial markets.
For industry, secondary sanctions are problematic as they can be confronted with trade restrictions which are perfectly legal in their own jurisdictions.
Despite the legal and political objections, the concept of secondary sanctions are, from a law enforcement perspective, an essential tool to combat certain types of Targets, e.g. global terrorists as these are increasingly unaffiliated with established jurisdictions. They are also sometimes necessary when the United Nations Security Council is unable to adopt supranational sanctions. In this context, one can argue that they are an instrument to fill gaps of the imperfect United Nations collective security system.
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