US economic sanctions are losing effectiveness

While the use of sanctions remains a valuable tool for pursuing U.S. interests abroad, their efficacy is slowly diminishing and could spur unintended consequences amid a changing global balance of power, according to Richard Nephew, a former official in Barack Obama’s administration who was instrumental in devising current sanctions against Iran.

The United States’ immense economy allows it to apply pressure on it foes, Nephew writes in the new paper (PDF) released Thursday by the Center on Global Energy Policy at Columbia University. “But it is not certain that this advantage will persist in the future or that it will be as strong as other countries expand and develop economically,” he writes.

While at the State Department in 2013 and 2014, Nephew helped coordinate sanctions policy against Syria and Russia. He was also the National Security Council’s Iran expert when sanctions on the country reached their apex before the resumption of nuclear talks between Iran and six world powers in 2013.

Sanctions remain a valuable tool, says Nephew, and he believes they were successful in getting Iran to the negotiating table over its nuclear program. But he warns that they cannot be leaned on too heavily.

“The United States may find over time that its ability to impose its will upon the international system by economic means has been dramatically reduced,” he writes.

The rise of the Chinese-led Asian Infrastructure Investment Bank, according to Nephew, is a clear example of dwindling U.S. economic influence. Most analysts see the bank as a counter to the U.S.-supported International Monetary Fund. The U.S. has campaigned against countries joining up to the bank, but those efforts have been largely unsuccessful.

He says that economic sanctions could not only be less effective but could also be turned against U.S. interests. He mentions two possible future scenarios.

One concerns U.S. relations with China, whose GDP is predicted to surpass the United States’ at some point from 2020 to 2030. Unhappy with U.S. policy in Taiwan, which continues to be a source of tension between Washington and Beijing, China could eventually take action against U.S firms that operate on the Chinese-claimed territory.

Nephew also cites the example of European Union policy toward Israel. While the U.S. and EU are major trading partners and have largely aligned economic interests, EU diplomats have sometimes taken a tougher line on Israeli settlements in the West Bank than their U.S. counterparts. He argues that it is not inconceivable that should negotiations between the Israelis and Palestinians fail to resume, the EU could embrace a policy of targeted sanctions against Israel. In that case, he says, U.S. firms with interests in Israel and Europe could face a difficult choice between the two markets.

He remains an advocate for the United States’ use of sanctions but says, “There is a danger in that convenience.”

“By creating sanctions precedents and a permissive global norm to their use nationally, the United States may have also laid the foundation for a counteroffensive from its strategic adversaries and economic competitors that will seek to use their own asymmetric advantages in furtherance of their own aims,” he writes.