STACEY VANEK SMITH, HOST:
Economic sanctions - these are restrictions one country will impose on another to prevent it from trading or doing business with other countries. The Treasury Department oversees them.
CARDIFF GARCIA, HOST:
Yeah, sanctions became popular after World War One as a way to pressure a country into doing something - or in some cases, into not doing something - but without resorting to war. By using a country's economy or, in the case of an individual, freezing their finances, the U.S. has used sanctions to do everything from trying to catch specific drug traffickers to undermining a particular government's regime. This is THE INDICATOR. I'm Cardiff Garcia.
VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, economic sanctions. The U.S. has sanctions in place against more than two dozen countries and more than 7,000 companies, individuals and groups. That is more economic sanctions than at any other time in U.S. history.
GARCIA: So today on the show, sanctions - do they actually work? And what impact do they end up having on the country that gets sanctioned on its economy and on its people?
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VANEK SMITH: Some of the sanctions the U.S. has in place have really deep roots. U.S. sanctions against Cuba go back decades. Some sanctions are really new. Our latest sanctions against Iran went into effect just a few weeks ago.
GARCIA: Dan Drezner is a professor of international politics at the Tufts University School of Law and Diplomacy. He's also the author of "The Sanctions Paradox." So we asked him, are sanctions an effective way to make a country do something that it doesn't want to do?
DAN DREZNER: The way - the best analogy I can always use is to think about it as batting averages, where even a really, really good baseball hitter is more likely than not going to get out. And the same is true of sanctions. Even the best sanctions have at best a 50/50 shot of working.
GARCIA: Still, Dan says, sanctions should not be used lightly because the downsides are real. Especially, he says, when you sanction a whole country. So he adds that there are four key elements that can help sanctions be successful.
DREZNER: The first is - and I know this sounds banal - but that your demand is actually specific. In other words, you make it very clear what the target needs to do in order for sanctions to be lifted.
VANEK SMITH: Oh, like stop developing your nuclear program or whatever it is.
DREZNER: Right, exactly. But there have been many cases where the U.S. in particular has imposed sanctions on another country, and it hasn't been entirely clear what they could do to get the sanctions lifted. The case of Iran is a fascinating one for example because for the longest time, the sanctions that were imposed against Iran, it wasn't clear whether the sanctions were about the nuclear program, or was the purpose of the sanctions to try to foment regime change? And you could argue that the Iranian nuclear deal wasn't negotiated until the Obama administration - and before that, the Bush administration - made it clear that the goal was not regime change. The goal was in fact to address the nonproliferation concern.
VANEK SMITH: Dan says the current demands on Iran by the Trump administration seem really unclear and really broad when he read them. And he says this might make U.S. sanctions against Iran much less likely to be effective.
GARCIA: The second rule of sanctions, Dan says, is that it helps if you are allies in some way with the country that you are sanctioning or at least that you do some business with that country. Dan says that means there's an important relationship at stake. Otherwise, there's just not as much to lose because the ties aren't that strong. So that's rule number two - sanction your friends.
VANEK SMITH: (Laughter).
GARCIA: Or at least your frenemies, I guess.
VANEK SMITH: Always sanction your frenemies.
VANEK SMITH: Rule number three - go after the money, not the products. Dan says trade-based sanctions, where a particular product is sanctioned, such as oil or natural gas, those are far less effective than cutting a country off from the U.S. financial system. Dan says financial sanctions work much better.
DREZNER: So in many ways, if you try to impose a trade embargo of some kind, as I said, you're incentivizing black market activity. And local traders are going to be perfectly happy to bust sanctions, and they're not really going to worry about - let's say - losing access to the U.S. market. On the other hand, when you talk about financial sanctions, the dollar is such an important part of global capital markets that any reputable bank does not want to risk running afoul of the United States Treasury.
VANEK SMITH: The U.S. sanctions against Iran are both trade sanctions and financial sanctions.
GARCIA: Rule number four - make sure you've got a lot of other countries on board.
VANEK SMITH: All those frenemies.
GARCIA: (Laughter) Yeah, exactly. Because otherwise, the country being sanctioned can more easily find other ways to do business. Or even worse, they might start to cut you out of the system. So in the case of Iran, says Dan, this is potentially a problem down the line. Europe did not sign on to the sanctions with Iran. The sanctions are still powerful, he says, because the dollar and the U.S. banking system are so crucial to doing international business. But, he says, now there are quite a few major countries with big economies who have a strong incentive to work together.
VANEK SMITH: Suddenly, China, Russia and the European Union all have a strong motivation to find a way around the dollar and the U.S. financial system.
DREZNER: The problem isn't so much every individual case of sanctions. It's that we're sort of approaching the point where if you step back, it seems that we're using this tool an awful lot. And here, the concern becomes if the United States continues to abuse the privilege that it possesses because of the dollar's centrality to global capital markets, you're going to start incentivizing actors to find alternatives to the dollar.
VANEK SMITH: We'll lose our leverage, in other words.
DREZNER: Yeah, exactly.
GARCIA: One downside of sanctions is that the more places you sanction, the harder it gets to effectively sanction. But there's another downside, one that's a lot more human. Branko Milanovic as an economist at the City University of New York, and he specializes in inequality. He says sanctions against countries often make inequality in those countries worse because the sanctions tend to hit the people who have the least power and are the most economically vulnerable the hardest.
BRANKO MILANOVIC: Blanket sanctions, I think, actually are fundamentally wrong. Their objective is ostensibly to change the behavior of a certain government. But what they do - they punish people who actually don't have any influence or very small influence on what the government does.
VANEK SMITH: Branko says, in the case of a country like North Korea, the sanctions have had this kind of effect. Kim Jong Un, the leader of North Korea, is of course still able to get anything he wants, and so are the North Korean elite. The rest of the population, though, has really suffered under his leadership, and sanctions have made that terrible situation even worse.
GARCIA: Yeah. And so Branko worries that something similar will happen in Iran, where people were already protesting a lack of drinking water and problems affording basic food staples, like eggs. Sanctions will likely drive down the value of the local currency and make food and other products even more expensive. But the leaders in Iran, the ones actually setting the policy that the U.S. opposes, they probably won't have trouble affording food or affording anything at all, really.
VANEK SMITH: Of course, there's also this idea that sanctions will make conditions in a country really bad and cause the population to revolt and overthrow the leadership or at least pressure leadership to change its policies. But that can backfire, says Branko.
MILANOVIC: Rather than creating a cleavage between the government and the people, they have the opposite effect of people have greater solidarity with the government because they're - everybody is being affected by them.
GARCIA: Dan Drezner says this happens quite a bit. The sanctioner becomes kind of like a common enemy to the people inside the country being sanctioned. Not only that, Dan says, but a country's leadership will often worry about an uprising and preemptively crack down on the population, which makes their lives even harder.
DREZNER: When you impose these kinds of sanctions, countries are much more likely to enact repressive measures that - obviously, it disproportionately affects the bottom half of the population. And also, sort of all the sort of human development metrics start to go south as a result of sanction impositions.
VANEK SMITH: Ultimately, Dan says, the best kind of sanction, the most effective kind of sanction, is often the sanction that never actually happens.
DREZNER: The ideal outcome - which is easy for me to say because I'm not in charge - is to threaten but not impose sanctions. Ideally, they will acquiesce without anything ever being made public, which is better for everyone because it's better for the target country because it's not seen like they're acquiescing in the middle of a crisis, which makes them look weak. And it also is better for the sending country in that you never actually had to impose the sanctions, which means you don't necessarily incur the cost of it.
VANEK SMITH: It's like a horror movie. It's better if you don't actually ever see the monster. You just sort of...
VANEK SMITH: Because once you see it...
VANEK SMITH: ...You know, you can fight it off, things like that.
MILANOVIC: And it's more menacing when you don't see it.
VANEK SMITH: THE INDICATOR is produced by Darius Rafieyan and edited by Paddy Hirsch.
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