Economic sanctions are a global curse

Political leaders in the United States have touted economic sanctions as being less costly and more humanitarian than wars to affect the objectionable policies of an adversary. I beg to differ.

Prolonged sanctions can inflict pain, physical destruction and death, disrupt global supply chains, force sub-par and costly restructuring of the global economy, and reshape global alliances with fallouts that can last much longer than most conventional wars. It is a Neo-colonial instrument available to an exclusive club of two or three economic powers who also have a strong military to enforce their will. The United Nations and the global community must rein in sanctions before the world becomes fractured and adversarial beyond repair. 

For America, sanctions are a silent weapon with little visible and immediate hardship. No soldiers going to war or shedding blood. No horrific images on TV screens. A sanitized war! The U.S. is seen as doing ‘something’ to take on an adversary. It is a weapon that the U.S. can use more than any other country because it has the biggest economy with the deepest financial sector and the dollar is the global currency for asset accumulation and trade. It is a weapon which can have dire and unknown fallout for many years to come.

A brief look at Iran, Venezuela and Russia may shed some light on some of the results of sanctions. The U.S. has sanctioned Iran longer than any country except Cuba, more heavily than any other country, including cutting off all its financial institutions from SWIFT (the international financial network), sanctioning the office of its Supreme Leader, its Revolutionary Guards Corps (IRGC), all foreign investments, exports of its oil, gas and oil products, imports of all military equipment, of commercial aircraft and parts, exports from the United States, and imposing secondary sanctions on entities and countries who help Iran evade sanctions. Iranians have suffered shortages of life-saving medicines. This undeclared war on Iran has gone on for over 40 years with no positive result for the United States. 

The fallout of sanctions on Iran have reverberated around the world. This is most visible in the availability and price of natural gas (piped and liquefied), oil and petrochemicals. Iran is the logical competitor to Russian piped gas to Europe. The possibility of Iranian piped gas for Europe and expanded liquefied natural gas (LNG) output was killed by President Clinton in the mid 1990s; Iran had invited Bechtel (the company that developed Qatar’s LNG plants) for discussions to develop Iran’s North Pars Field, to pipe the gas and ship the LNG, but the enactment of the Iran-Libya Sanctions Act (ILSA) prevented this by limiting investment in and cooperation with Iran’s oil and gas sector. ILSA also prevented the development of Iran’s oil fields (at that time, specifically the giant Azadegan field by CONOCO). The U.S. “brain trust” understandably failed to see the future, such as Russia’s invasion of Ukraine and the acceleration of climate change. All the U.S. could see was its desire to isolate Iran there and then. 

To gauge the impact of sanctions on alliances, the sanctions on Russia, along with those existing on Iran and Venezuela, should make the point. Principally, China, Iran and Venezuela have bonded with Russia. This alliance could adversely affect U.S. commercial and political interests for years to come. Russia has the largest reserves of natural gas (24 % of world reserves) followed by Iran (17%). This will result in a mighty global alliance in gas. China has the biggest reserves of rare earth metals (35%); Venezuela has the largest oil reserves in the world (18% of the total) with Iran ranking fourth (9.5%). China is the biggest manufacturer in the world. The combination of Russia, China, Venezuela and Iran poses an existential threat for U.S. interests in West Asia, the Far East, and Latin America and even in Africa. What we see is that U.S. sanctions can affect national interests and change alliances that could in time boomerang to hurt the United States. Why can’t we see this coming? Do we care?

A much ignored consequence of sanctions is that the fallout continues for years to come. Again, Iran provides a case in point. Today after over 40 years of sanctions, no matter what a U.S. president does, Iran will be effectively under the sanctions cloud for years to come. Today the United States is in negotiations to ‘lift’ some sanctions if the JCPOA, the nuclear agreement that the U.S. abrogated, is restored. Sadly this will do little for Iran besides providing some short-term relief. No international financial institution, no multinational corporation and no private investor is likely to make a massive investment in Iran for years, if not decades, to come. The reason is simple, they cannot trust the United States not to re-impose sanctions, in turn adversely affecting their investment. Iran has been severed from the global community for years to come. Wars, after they are over, have no such reverberations—witness Germany, Japan and Vietnam.

Yes, there’s no doubt, wars are horrific in term of loss of life, injuries, refugees and physical and economic destruction and loss. The loss associated with sanctions may be silent and opaque, but they are just as real and the fallout is not limited to the sanctioned country and the sender of sanctions because sanctions affect global supply chains, restructure the global economy and increase uncertainty and risk for years. Yet, there has never been a comprehensive accounting of the global economic cost of sanctions, in part because the fallout goes on for decades and may not yet be over. Sanctions that last for years poison relations between the U.S. and the sanctioned country for years, if not for decades. While wars must be avoided at all cost, sanctions are not a good substitute and don’t provide a sharp finality to the conflict.

It is urgent for the world to come together at the United Nations to rein in sanctions. To restrict sanctions beyond the import and export of military equipment. If we don’t act now, the world will become more divided, adversarial, uncertain and vulnerable to economic shocks with economic prosperity and scientific cooperation in peril.  

From our partner Tehran Times