Collateral Damage

Is there such thing as economic sanctions that don’t hurt ordinary people?

Mahmoud Ahmadinejad. Click image to expand.
Iranian president Mahmoud Ahmadinejad

As the U.N. Security Council prepares to consider sanctions against Iran in response to its nuclear program, China said on Thursday that any punishment shouldn’t affect ordinary Iranians. Is it possible to sanction a country without hurting its people?

Yes. The more targeted a set of sanctions—that is, the more precisely they’re directed at individual or corporate malefactors—the less it hurts everyone else. For example, the U.N. could impose travel restrictions on a country’s leaders or freeze their overseas bank accounts without affecting the general population. Another common punishment is to figure out which local businesses provide resources to the rogue regime and isolate those companies. If an Iranian car manufacturer contracts with the Iranian Revolutionary Guard, say, the U.N. could ban companies in other countries from doing business with the automaker. It could also prevent international banks from lending the Iranian business money or performing cash transfers. If the car company wanted to buy auto parts from France, for instance, the U.N. could prohibit French banks from facilitating the transaction.

Generally speaking, the broader the sanction, the greater the collateral damage. The United States currently bans Iranian exports except carpets and such foods as dried fruit. It also prohibits Americans from buying Iranian oil or doing anything else to help Iran’s petroleum industry. Such blanket bans damage entire industries—and thus have a ripple effect on the economy at large. Sanctions on Iranian banks, likewise, make it more expensive for ordinary Iranians to borrow money.

Then again, it’s arguably the purpose of broad sanctions to hurt ordinary citizens, who then—at least in theory—force the leadership to comply with the foreign government’s demands. In practice, it doesn’t always work this way. Sanctions may help regimes amass broader public support. For example, the U.N. oil-for-food program enabled Saddam Hussein to play the benevolent leader while he was president of Iraq, distributing free food to his people. A 1997 study published in the journal International Security found that of the 115 sets of sanctions imposed by the United States, only five achieved their goals, including ending apartheid in South Africa. Another study conducted in the 1990s by the Peterson Institute for International Economics found that 23 percent of sanctions are successful. The United States currently has 19 active sanctions programs.

Explainer thanks Hossain Askari of the George Washington University, Robert Pape of the University of Chicago, and Jeffrey Schott of the Peter G. Peterson Institute for International Economics.

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