Sanction: A Buzzword, a Band-Aid, a Bureaucratic Black Box

Paul Esau, July 17th, 2023

The word “sanction” is a problem. It can mean to provide official approval (for example, “the president sanctioned the wealth tax”), or to impose penalties (“the president sanctioned the generals involved”). Technically, the second definition should only apply to financial restrictions imposed on people, companies, or countries, yet it’s generally used to include trade restrictions as well. In other words, it’s possible to both impose “sanction” on banks and on arms exports, as well as Russian oligarchs, foreign travel, Walmart, and aluminum. It’s also possible to “sanction sanctions,” which, I would complain, seems intentionally confusing.

The word itself is only the beginning of riddle wrapped in a mystery inside a donut, to misquote both Churchill and Benoit Blanc. The U.S. Government imposes sanctions through three different departments -Commerce, Treasury, and State- which curate lists of individuals and organizations (entities), and governments, sanctioned under one of dozens of different programs. The Entity List is for foreign entities who can’t be exported to. The Denied Persons List is for entities who’ve lost their exporting privileges. The SDN List is for terrorists, traffickers, or other targets whose assets are frozen and shouldn’t be dealt with. The ISN List is for proliferators of WMDs, and the MEU List for foreign parties producing arms or supplying military goods for rogue states. Of course, other states (like Canada) or multilateral organizations (like the U.N.) have their own lists with their own titles and criteria. Responsibilities for obeying these sanctions is often offloaded to industry and the financial sector, who engage in increasingly complex “export compliance” protocols to screen transfers of assets, goods, and software.

And then there’s “comprehensive” sanctions, “sectoral” sanctions, “secondary” sanctions and other arcane forms of economic warfare, which, like cricket or K-pop, are incomprehensible to the uninitiated.

I’ve been furiously studying sanctions since arriving in Washington, D.C. in April. My host organization, the Wisconsin Project on Nuclear Arms Control, specializes in working with governments to improve their export control systems. Initially, my understanding of sanctions was pretty limited. I knew they filled a convenient middle-ground in foreign policy between “thoughts and prayers” abstinence and robust military interventionism, and, from the eagle’s eye, sanctions were a bloodless, allegedly casualty-free mechanism for imposing pain on other states and incentivizing behavioral change. I knew that the U.S., by virtue of the ubiquity of the American dollar and the global importance of U.S. trade, could apply sanctions extraterritorially by coercing third parties into obeying U.S. sanctions. I also knew the impact of sanctions was mixed – they had helped Obama achieve the JCPOA with Iran in 2015 but hadn’t been able to deter North Korea’s pursuit of a nuclear deterrent.

Yet the ocean of what I didn’t know was vastly greater than the pond of what I did, especially once I began to get down into the (sea)weeds. In the first month of my fellowship, I learned to find and interpret the legal documents (in several languages) which list additions and revisions to national and multinational sanctions programs, as well as the court cases, government alerts, trade databases, and business registries used in open-source research to track people and companies engaging in export control evasions. In the second, I travelled to Thailand to help my colleagues train Thai government officials on the Project’s Risk Report database – a helpful tool for researching customers, companies and commodities involved in export transactions. In the third I began trying to connect the dots, reading articles on breakdowns of Russian tech salvaged in Ukraine, general introductions to sanctions strategy, and criticisms of the ever-expanding American controls.

Three months of work has not made me an expert. Yet, I’ve been struck by how many aspects of the general peace and security environment are impacted by sanctions policy. Just in the time that I’ve been working at the Wisconsin Project, sanctions have been imposed on military producers in Sudan, human rights violators in Iran, terrorists in Somalia, Russian dredging fleets, North Korean universities, and a human smuggling operation in Mexico. Sanctions and trade controls are used to combat WMD proliferation and missile development, to degrade military industry, to combat the illicit financing of terrorists, warlords, and drug traffickers, to preserve the U.S. lead in semiconductor manufacturing, and to penalize human rights violators. They are a hammer in a world that, if you squint, looks increasingly like a forest of nails.

I’ve also been struck, as a Canadian, by the aggressive expansion of the scope and enforcement of U.S. sanctions. Washington is now attempting to strangle the Russian, Iranian, Venezuelan, Cuban, and North Korean governments at the same time, while also engaging in strategic competition with China. It’s using expanded Foreign Direct Product (FDP) rules to argue that goods produced abroad (but using U.S. technologies) are subject to U.S. sanctions, and that foreign companies who do business with sanctioned companies are themselves subject to sanctions. The threat of American penalties is catalyzing an explosion of export compliance to interpret complex new regulations around “voluntary self-disclosure” and “aggravating factors” in export violations. For example, 15% of the staff of most major banks work in compliance departments devoted to ensuring obedience with (primarily U.S.) restrictions. Sanctions, it turns out, have a tendency towards the absolute – towards entrapping an ever-expanding series of people, companies, countries, and goods in the name of national security. This has translated to grinding impoverishment in places like Cuba and Venezuela, and devastating cycles of starvation in places like Iraq, without accomplishing the intended policy goals.

I’m now in my fourth month at the Wisconsin Project and almost halfway through my time as a Scoville Fellow. I’m becoming familiar with the cycles of the workplace – the almost daily Slack updates on Russian sanctions, the monthly Iran Watch newsletter from my colleague JK, and the occasional reports exploring specific proliferation networks (like this one on Pakistan). I’ve learned how to research and write profiles for the Risk Report on smugglers, shell companies, and sanctions evaders, and to consider what information an export control official in one of the Project’s 40 partner countries might need to know about that entity if it appears in a transaction. I’ve gotten a glimpse at the complexity and consequences of sanctions, and (thankfully) finally begun to recognize the army of acronyms involved.

The Risk Report’s logo is a boomerang, a symbol chosen in the 1990s to reflect the potential consequences of engaging in risky exports of strategic goods. In fact, there’s a boomerang nailed to the wall in the office under a doomsday-esque clock. However, I can’t help but think the boomerang also symbolizes the potential consequences of abusing sanctions – of incentivizing the rest of the world to reduce their reliance on the American dollar, American suppliers, and American technology. The peace and security toolbox relies on sanctions and trade controls to prevent atrocity, uphold the rule of law, and combat proliferation. These goals are critical to preventing long-term consequences in an increasingly unpredictable world. Yet sanctions overreach has its own long-term consequences, especially when leveraged primarily in American rather than international interests.

In other words, the riddle at the heart of the donut is that the boomerang cuts both ways. Or, in other other words, the popularity of sanctions as a policy tool is undermining their effectiveness, even as the opacity of sanctions policy deflects popular scrutiny. As somebody with a background in arms control, I firmly believe in the importance of sanctions and trade controls as policy tools, yet my work at the Wisconsin Project is forcing me to become more thoughtful and less reactionary about where and when they should be implemented.

Paul Esau is a Spring 2023 Scoville Fellow with the Wisconsin Project on Nuclear Arms Control.