A Leftist Foreign Policy Should Reject Economic Sanctions

A Leftist Foreign Policy Should Reject Economic Sanctions

A Leftist Foreign Policy Should Reject Economic Sanctions

The United States should use its financial powers to bust oligarchs, end tax evasion, and create a fairer world economy. 


In the last six months alone, the Trump administration has imposed new economic restrictions on the governments of Russia, Iran, China, Venezuela, and Turkey. This is not a new phenomenon, but it marks an acceleration in the decades-long expansion of the American sanctions state. The Treasury’s Office for Foreign Asset Control (OFAC) currently administers 26 country-specific sanctions programs, from Cuba to North Korea. It also maintains a registry with more than 6,000 individuals, companies and groups that are barred from doing business with US entities or foreign companies operating in the United States.

These include Colombian cartel heads, Syrian spies, South Sudanese generals, and, as of last week, Saudi officials involved in the killing of journalist Jamal Khashoggi. The absurdity of using the instrument of sanctions in such a wide range of disparate situations is evident: Some of the Saudis barred from access to the US economy may be facing execution by beheading in their own country.

Sanctions aren’t an American invention. The United Nations and the European Union administer their own regimes of economic pressure—the UN Security Council, for example, maintained a near-total commercial and financial embargo on Iraq from 1990 to 2003—and altogether, one-third of the world’s population now live in a country under sanctions. Yet Washington’s control of the economic weapon is unrivaled: Because it can seize assets that pass through domestic banks and institutions, the US government can withhold access to Wall Street and dollar financing, effectively blackmailing foreign firms into stopping trade with the country under embargo. This makes many of its sanctions regimes extraterritorial in reach.

After World War I, economic sanctions emerged as liberal internationalists created a new way to exert pressure that would replace armed conflict. Determined to avoid a return to the horrors of the trenches, they proposed to turn techniques such as blockades, asset freezes, and blacklisting into instruments to enforce peace. Since economic warfare had starved hundreds of thousands in Central Europe and the Middle East, the creators of the League of Nations hoped that in the future the threat of economic isolation would deter governments and civilian populations from disruptive behavior and war.

This founding idea that sanctions promote peace persists. Yet one century into this experiment, a realistic appraisal must confront the fact that sanctions fail much more often than they succeed, and that their unintended consequences are rarely worth the meager gains. The left in the United States and abroad needs to challenge the sanctions orthodoxy of liberal internationalism, reinventing the power of economic pressure for progressive purposes while reducing its dangerous excesses in world politics. A serious left foreign policy that addresses the problems of war and inequality in the 21st century must recast this flawed instrument and move beyond it.

Because the overuse of sanctions has become a major source of international instability. Instead of diminishing international rivalry, sanctions are now exacerbating it. Iran sees the re-imposition of sanctions as creating a “war situation.”; Russian officials have likened them to “economic war” and vowed to respond “by other means.” North Korea views US and UN sanctions as a “declaration of war” and has increased its own bellicose rhetoric in return (the Trump-Kim romance notwithstanding.) China, for its part, has responded to weaker but similar pressure through tariffs.

There is an enormous opportunity here for the left to confront this tangle of unproductive measures, and propose alternatives that maintain its tradition of opposing war and increasing democratic control over foreign policy. Amid today’s geopolitical and economic upheavals, it is insufficient to focus on reining in military excesses alone. An intelligent progressive foreign policy will not prevail unless it confronts the hard edge of American economic hegemony.

The first fact to consider is how destructive sanctions can be: Regardless of their political outcome, economic sanctions seriously damage the long-term growth trajectory of the societies they target. From 1976 to 2012, UN and US sanctions have on average reduced by 25 percent the per capita GDP of the countries they targeted. American sanctions in particular have been found to play a strong role in widening the poverty gap in target countries. Sanctions also worsen economic inequality; a 2016 study of 68 sanctions regimes between 1960 and 2008 found that they significantly increased income disparities.

This damage appears all the more senseless when we consider how often it is politically futile. It’s true that sanctions contributed to South Africa’s giving up its nuclear weapons in the 1980s and ending apartheid in the 1990s. They also helped to attain the Joint Comprehensive Plan Of Action (JCPOA) that restricted Iran’s nuclear capacities in 2015.

But even these two relative successes were not due to sanctions alone. Actual war or the threat of it loomed large behind negotiations, and fortuitous political shifts in Pretoria and Tehran as well as constructive international developments—the end of the Cold War in southern Africa and the involvement of European and Asian countries in the talks with Iran—were key to the success of these sanctions. When used against large countries that were not US allies, or over questions of vital national interest to them, though, sanctions have proven disappointing. They have rarely prevented military action, brought down opposing governments, or incited populations to successfully revolt against their rulers.

Economic sanctions have instead tended to consolidate rather than weaken the position of regnant elites. Closing off entire economies from global markets has increased the possibilities for the abuse of power and privilege. Oligarchs and political elites in Iran and Russia have benefited handsomely from recent US sanctions as they have gained followers and extracted monopoly rents from a population that is deprived of access to foreign goods, services, and news. Reduced interaction with the outside world has broadened and hardened their nationalist fervor. Declining economic prosperity, the loss of foreign trade and general stagnation experienced by societies under sanctions harm the poor and innocent above all. Whether on economic, political, humanitarian, moral, or prudential grounds, the case for reducing the use of sanctions is strong.

Foreign-policy realists like to invoke the urgency of geopolitical threats and the lack of any alternative to sanctions. How else, they will argue, should America respond to events such as the Russian annexation of Crimea, or Iran’s pursuit of nuclear weapons, short of going to war? Most diplomats admit the relative inefficacy of sanctions, all while defending their communicative value; certain forms of misconduct, they argue, demand sending some kind of signal of disapproval, no matter how ineffective. Even dedicated progressives like Bernie Sanders find it difficult to resist this reasoning. While he has been an outspoken supporter of the Iran deal, the Vermont senator has been entirely conventional in his support for sanctions on Russia and North Korea in recent years.

It’s time to turn the conversation around. Over the past decade, the left has successfully politicized policies such as austerity and mass incarceration, to the point of convincing even some on the right. Those interested in a leftist foreign policy should take the same approach with sanctions. Decades of US economic hegemony and a national-security apparatus that expanded significantly after 9/11 have created a pro-sanctions bias among policy-makers. The left can invoke the instrument’s bad empirical record—a history of repeated failure, backlash, unintended consequences, and unnecessary policy inertia—and should propose more positive approaches to induce countries to change their behavior.

Often, the most realistic approach to a foreign policy standoff will involve negotiation and bargaining, with hard power kept in reserve: What made the 2015 JCPOA with Iran more productive than other sanctions episodes was the willingness of President Obama and Secretary of State John Kerry to engage Tehran in dialogue, and the support of a multilateral framework, the P5+1 arrangement, which brought together the five permanent UN Security Council members (the United States, the United Kingdom, France, China, and Russia) plus Germany as negotiating partners with Iran.

Multilateralism depends on networks, and suspension or expulsion from international organizations can be a powerful gesture: South Africa’s ban from international sports tournaments in the 1980s had a strong impact on the willingness of the white population to continue supporting the apartheid system, even as the country weathered decades of economic sanctions without much trouble.

Similarly, Russia’s ejection from the G8 in 2014 was a significant blow to Putin, denying Moscow a place at the table of the world’s leading powers. But by folding this symbolic action into a wider package of economic sanctions, the G7 members allowed Putin to depict Russia as the victim of Western duplicity, instead of confronting Russians with their leader’s own failure to attain international respect.

The left should not evade or deny the political disagreements that plague US relations with countries such as Cuba, Russia, and North Korea. But it can insist that these animosities should be dealt with on their own terms; that is, politically, instead of being diverted into the economic realm where the costs of intransigence are incurred by citizens and often by the very weakest in the socioeconomic order.

Currently, sanctions regimes prohibit trade and financial flows of several billions of dollars every year. This hurts the countries exposed to them, but it does little to further the socioeconomic priorities of the left, as it seeks to end offshore tax avoidance, reduce economic inequality, and redistribute wealth and political power more equally.

A progressive foreign policy should reorient America’s sanctions-enforcement capabilities to do three things. First, financial surveillance powers should be used to begin an international campaign to counter oligarchic power and reduce tax evasion. Second, long-standing sanctions regimes should be removed, and replaced with the promise of increased trade, economic aid, and assistance to reward good behavior by other countries. Third, a left sanctions policy should focus on the international oligarchy as the connecting link between domestic economics and foreign policy.

Just as militaries perpetuate international conflict, transnational corporations and international capital shape global patterns of poverty and inequality. These political and economic actors, whether they are Apple or Lockheed Martin, should be explicitly recognized as key players in the 21st-century world. A new American internationalism should hold them accountable, domestically through taxation and regulation, and internationally through multilateral agreements.

The US authorities have become adept at tracing, isolating, fining, and expropriating sanctions-busting firms and banks. In 2006, for example, the Treasury found that the Macau-based Banco Delta Asia was managing $25 million of Pyongyang’s foreign assets, and closed it down. By 2014, the French bank BNP Paribas was fined for violating sanctions on Iran and Sudan to the tune of nearly $9 billion, the fifth-largest fine in US corporate history. But these capabilities would be much more potent and legitimate if they were used instead to tackle the urgent problem posed by the $8 trillion in private wealth kept in international tax havens. Shell companies and secrecy jurisdictions would be no obstacle: Just imagine if US policy-makers decide to go after tax cheats operating through countries like Panama, the Cayman Islands, and Luxembourg with even a quarter of the fervor that they have shown in blockading North Korea.

On this front, the left can use the realities of international economics to break away from the reductive faux-realism that characterizes foreign policy debates. And to make citizens aware of these problems, it should draw attention to the negative impact of sanctions: by bringing the responsibilities of the United States into public view, a debate can ensue about where sanctions can be lifted and where they can be replaced by better inducements to change the behavior of opposing governments. The prospect of real economic benefits is often a far better stimulus than the threat of coercion and isolation.

Progressives of various stripes may have legitimate differences of opinion on how to move forward on long-standing foreign disputes such as the future of the Korean peninsula or the geopolitical balance in the Middle East. What matters is that they move beyond the dominant consensus on how to deal with foreign policy problems as framed by the establishment, in which there are only two flavors: the mild option of sanctions and the radical option of war, neither of which works particularly well.

At the moment, the interests of the bipartisan foreign-policy establishment are strongly arrayed against such a progressive foreign economic policy. Yet without confronting and politicizing the use of sanctions and developing progressive uses for this economic arm of the national security state, the left misses an important opportunity.

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