Sanctions, as described in Agathe Demarais’ timely new book Backfire: How Sanctions Reshape the World Against U.S. Interests, have become the policy de jure for multiple presidential administrations, with more than 9,000 individuals, companies, and economic sectors targeted through 70 different sanctions programs.[2]
Even as the U.S. expanded its military profile overseas through a string of bases and foreign deployments, it has doubled-down on what historian Nicholas Mulder calls “the economic weapon,” deploying export controls and other measures against states it views as potential threats or violators of international norms.[3] Yet, as Demarais argues, the sanctions tool has served as a cudgel, rather than a scalpel, and changes in the international economic system and shifts in global geopolitics may bring the age of sanctions’ efficacy to an end.
Demarais, currently the global forecasting director at the Economist Intelligence Unit and formerly a policy advisor to the French Treasury, has worked at the forefront of sanctions policy for the last decade. This gives her unique insight into how U.S. sanctions have reshaped the global economic order. In a series of short, engaging, and clearly written chapters, Demarais breaks down why the U.S. found sanctions such an appealing policy instrument; how their widespread use in the 1990s and 2000s triggered changes and upheavals, as countries around the world coped with the issues of challenges of compliance; and, finally, how sanctions implementation has generally backfired, imposing costs on the U.S. and its allies while encouraging targeted states towards policies and strategies designed to insulate their governments and economies from U.S. pressure.
The main actor in Demarais’ story is the Office of Foreign Assets Control (OFAC), the division of the U.S. Treasury Department that oversees sanctions policy. Demarais details how early sanctions, operated through trade embargoes, were ineffective. An experiment at imposing financial constraints on a bank in Macau used by North Korea in the early 2000s formed the basis of future sanctions policy. Rather than restrict traded goods into or out of targeted countries like North Korea, Iran, Russia, or Cuba, the United States would target the country’s access to the dollar-based global financial system and go after specific actors tied to distinct economic sectors or industries.
The immediate purpose of sanctions is to limit the target’s access to dollar banking, which in turn limits their ability to access international credit or make deals with other entities. As Demarais explains, the key to the power of sanctions is the risk associated with non-compliance. It is easier for companies and governments to shun sanctioned targets rather than running afoul of OFAC. International financial institutions “could either stop conducting business” with Pyongyang, Moscow, or Tehran, “or be kicked out of the US financial system…for banks, this amounts to a death sentence, given the greenback’s global clout.”[4]
Sanctions are often effective at pushing actors out of the global financial system. But the long-term goal of sanctions policy—changing the behavior of states or punishing actors perceived to be damaging U.S. interests—is where things get complicated. As Demarais illustrates, the power of sanctions is often deployed unevenly, with unpredictable consequences. Bestriding the world like a colossus, the United States has angered or alienated allies while pushing competitors and enemies toward policies designed to avoid sanctions, all while damaging its own economic interests.
Sanctions are often effective at pushing actors out of the global financial system. But the long-term goal of sanctions policy—changing the behavior of states or punishing actors perceived to be damaging U.S. interests—is where things get complicated.
Demarais deploys countless examples to support her argument. In the case of sanctions against Iran, she notes first how the imposition of heavy sanctions in 2012-2014 seemed to yield a positive result. The Iranian people facilitated a response to sanctions policy, through the election of relative moderate Hasan Rouhani in 2013. Rouhani made a nuclear deal designed to reduce the sanctions burden a top priority of his government.
Yet even after the nuclear deal was reached in 2015, foreign companies were wary of signing agreements with Iran—both because they worried the deal would not last and because they feared running afoul of OFAC’s secondary sanctions and the penalties of non-compliance. Such fears proved well-founded, as the sanctions window closed again following the U.S. exit from the nuclear deal in 2018.
