Author: Shahlar Ibadzade, LLM in Saarland University: Europa-Institut – European and International law, 2019-2022
Editor: Bobbie Smith, MA Geography University of Aberdeen 2016-2020 / Graduate Diploma in Law University of Exeter 2020-2022
Abstract
Briefly, there is a wide variety of financial sanctions, some of which include the freezing of assets, the limitation of trade, and the imposition of financial fines. The legal and financial implications of the various types of sanctions are distinct from one another. The individuals and organisations that are subject to financial sanctions may face significant repercussions as a result of these sanctions, including limitations placed on their ability to engage in certain financial activities, reputation damage, and financial loss.
On the other hand, there is a continuing discussion concerning whether or not such financial punishments are effective in attaining the aims that they were designed to achieve. This discussion will be investigated, and an objective analysis of the benefits and drawbacks of employing financial sanctions to combat unlawful acts will be presented in the article in a manner that is intended to promote understanding.
Meanwhile, sanctions for financial crime are also widely applied as an instrument of foreign policy. This article will also analyze how these sanctions fit into the larger context of international relations and will look at how they are utilized. In addition to this, it will feature a discussion of how sanctions for financial crime are used in conjunction with other forms of sanctions, such as freezing assets or imposing diplomatic sanctions.
Introduction
Sanctions, at the international level, are an essential component of the collective response mechanism that is activated in response to violations of international legal norms, which are responsible for the maintenance of international peace and security.
The use of force is characterised by a number of unique features. The nature of interstate relations and the techniques used to regulate them are the primary factors that influence these characteristics. In the absence of a centralised authority, it is implemented by states in a decentralised (individual) manner through the use of countermeasures, and in a centralized (collective) manner through the use of international sanctions within the institutional mechanism of international organisations.
It is possible to differentiate between economic sanctions, military sanctions, and diplomatic sanctions by looking at the characteristics of coercive measures in the arsenal of the United Nations Security Council, such as their nature, direction, application, implementation, and termination mechanism, as well as the actual results of their application.
What is a Sanction?
Within the context of international law, the concept of a sanction lacks a universally accepted meaning. It is possible to propose several different meanings of the sanction depending on the nature of the offence. In light of this, when we consider the spectrum of sanctions, we find that the UN Security Council envisioned numerous sanctions ranging from preventive advice all the way up to the use of force, making reference to articles 39 and 42 of the UN charter. It has been proposed as a way of punishment for the breach of international law by the Security Council, by imposing measures such as restitution, among other coercive measures that do not lead to war.[1]
However, in order to achieve an understanding of the sanction regime in international law, it is necessary, in the meantime, to investigate the forms of sanction.[2]
The Forms of the Sanctions
As it’s highlighted above, there are 3 (three) different forms of Sanctions which are:
- Diplomatic sanctions;
- Military sanctions and;
- Economic sanctions.[3]
Beginning with the diplomatic sanctions, Complete or partial severance of diplomatic relations, or a reduction in the number of diplomatic staff, are two examples of the methods used to execute diplomatic sanctions. Other forms of diplomatic sanctions include the cancellation of diplomatic visas, the recall of diplomatic representatives from the sanctioned country, and the prohibition of travel by certain individuals or groups.
Meanwhile, Military sanctions are used as a final step in the maintenance and restoration of peace as a more serious means of force. They are only applied when the measures provided for in Articles 40 and 41 of the UN Charter do not ensure the achievement of the desired results. This is because military sanctions are a more serious form of sanction. Moreover, the primary objective of imposing military sanctions is to achieve victory over the aggressor, to compel the state to cease its aggressive behaviour and to hold the state accountable for its actions.[4]
In the end, when it comes to economic sanctions, economic sanctions take the form of restitution, compensation, and substitution; all three of these concepts fall under the umbrella of international responsibility. Additionally, the cutting off of all or part of a country’s economic links is defined as an economic sanction in Article 41 of the United Nations Charter. The execution of economic sanctions, whether they are total or partial, includes the classification of these restrictions into trade and financial categories.
It should be mentioned that sanctions on the economy can be imposed either collectively or unilaterally. So, sanctions that are imposed unilaterally by nations can be used for political reasons without infringing on individuals’ rights, in contrast to collective sanctions, which are only one of several ways to bring the responsibility for an offence back to the state that committed it.[5] Nevertheless, there are lots of norms and different categorizations relating to the sanctions, and the effectiveness of such sanctions is still doubted. Therefore, the effectiveness of sanction will be discussed as a next step.
The “Effectiveness” of Sanction in the International Environment
Economic sanctions are divisive because of their effectiveness, in addition to being politically appealing as a policy tool. How much do these measures contribute to the policy changes which are their primary goal? If economic sanctions are unsuccessful, their objective is defeated, and they may even be detrimental. This paragraph argues that the use of sanctions by governments displays a serious intent to act beyond mere rhetoric. Governments, to their credit, are willing to back up their talk with action. While it has been established that they are a powerful instrument that causes economic costs, it has also been suggested that these costs are two-sided. Furthermore, third people are frequently ready to take advantage of the circumstance and breach the sanctions. As a result, it may result in a change in trading partners or the establishment of new alliances, both of which would increase costs for at least one of the parties involved. That’s why economic sanctions’ effectiveness has been weakened further by changes in trade throughout time, such as the globalization of industry and increasing dependency on trade relations between states.[6] In order to review such weaknesses regarding the effectiveness of the sanctions, the advantages and disadvantages of the sanctions will be discussed further.
The Advantages and the Disadvantages of the Sanctions
As it’s discussed throughout the article, targeted sovereign states, groups/organizations, and individuals may be subject to economic sanctions imposed by a single nation or an international body. Internationally significant political actors have frequently employed them to further domestic agendas or achieve desired outcomes in international relations. Although the forms that such sanctions have, such as the bans on travel and other migration restrictions are on the low end of the spectrum, other examples include increased trade barriers and export restrictions as well as embargoes, asset seizures, and limits on access to financial markets, the main focus of this paragraph will be on the drawbacks and advantages of such sanctions.
On one hand, there are different advantages of sanctions to be used by nations/international bodies. One of the main advantages is that economic sanctions can be incorporated into a country’s overall international policy or worldwide relations plan. Furthermore, sanctions have been used to promote a variety of foreign policy goals or to penalize entities or actors that breach international laws.[7] As a means of dealing with other countries, the USA has imposed lots of different sanctions. The Embargo Act of 1807, which sought to compel Britain and France to protect Americans’ rights, and the limits on Chinese firms involved in Iran’s nuclear programme, as well as the sanctions imposed on North Korea to reduce the threat presented by that country’s nuclear programme are all good examples.
Economic sanctions are also advantageous because the international community can deploy penalties as a means to respond to military threats or preserve international peace and security without resorting to direct military action. Countless incidents and problems involving potential aggressors and war are indicative of this rule. Similarly, Russia was subjected to international sanctions after the acquisition of Crimea and throughout the duration of the conflict between Russia and Ukraine that began in February 2014. In response to the Russian military’s invasion of Ukraine in February 2022, the United States and the European Union imposed further sanctions as well.
Frequently, sanctions against a country’s economy can be utilized to give it a leg up in international trade. Trade embargoes and limitations are a common form of this kind of sanctions. For instance, in 1973 and 1974, the United States and other nations were hit with an oil embargo imposed by the OPEC (Organization of the Petroleum Exporting Countries). Actually, the Oil Embargo was directed at nations that had backed Israel during the Yom Kippur War, although that wasn’t its only function. Through the embargo, OPEC was able to show the world its combined power and influence in the oil market and the wider global economy.
As evidenced by the aforementioned grounds, the advantages of economic sanctions are numerous and only three of them have been covered in this paragraph. However, as there are many advantages of the sanctions, there are also the drawbacks of such sanctions that are needed to be focused on.
Conversely,, economic penalties have been criticized for being irrelevant. Their efficacy has been questioned by a number of detractors. Sanctions have been shown to be ineffectual in achieving the desired results of the sanctioning country or supranational body, or in influencing targets, in a number of actual incidents. Burma remains a prime illustration of how ineffectual economic sanctions can be. Considering the fact that early in 1962, this country was governed by a military regime. U.S. and British sanctions against the government were a direct result of reports of government harassment of political dissidents and an effort to exert influence over the military government’s domestic policy. The Myanmar government, however, showed no remorse as economic sanctions hit the country and the political repression persisted at high levels. The military had violently repressed peaceful demonstrators. In addition, the abuse of human rights seemed to be everywhere you examined. In 2011, a new political system was implemented. In 2020, Aung San Suu Kyi would assume the roles of State Counselor and President of the Win Myint. However, the military overthrew the government in 2020 because of widespread voter fraud, or so the story goes. Then the two leaders, Aung San Suu Kyi and Win Myint put under house arrest. Additionally, it has proclaimed a state of emergency and begun to restrict entry. Therefore, based on the current political climate in Myanmar, it is clear that international sanctions have little to no effect.
Moreover, non-military initiatives, such as sanctions, have not always been successful in preventing conflict or countering security threats in the past. Remembering that the success of economic sanctions depends entirely on how dependent they are on the economy of the penalizing countries. Additionally, economic sanctions were found to be ineffective as a military force based on research conducted in the 1960s and 1970s. So, 40 cases were analyzed by American political scientist Robert A. Pape and his research revealed that 18 conflicts required the use of force, either directly or indirectly, to resolve and that 8 target countries were unresponsive.[8] The Russia-Ukraine War is a great example of a situation in which international pressure led to the imposition of sanctions on the Russian economy and on Russian businesspeople in the United States, the United Kingdom, and numerous other European Union member states. However, the Russian Armed Forces did not retreat after a number of sanctions were brought out following the strike in February 2022.[9]
The most devastating of all the drawbacks of economic sanctions is the fact that they might have unforeseen implications for countries and parties that aren’t the intended targets, as well as for regular residents and aspects of the target countries. In this regard, the issue of whether sanctions would encourage governments to protect human rights or not, has been analyzed.
Economic sanctions appear to have the opposite effect, as suggested by the results. Additionally, the research showed that the government’s respect for physical integrity rights, freedom from disappearances, extrajudicial executions, torture, and political imprisonment, all declined as a result of the sanctions.[10]
As an example, the Ukraine-Russia War can be highlighted. Briefly, the conflict between these two countries demonstrated that economic sanctions can have unintended consequences. As a result of the embargo on Russian hydrocarbon goods, oil prices rose dramatically over the world. Inflation rates and business slowdowns have become a danger in several economies that are still recovering from the effects of the COVID-19 epidemic.
In the end, the aforementioned grounds relating to the drawbacks and advantages of economic sanctions make their results self-evident. The economic sanctions clearly present substantial risk in case of any unforeseen consequences; however, they are also effective in scenarios of non-military effect.[11]
CONCLUSION
From what has been discussed, it is clear that the sanctions have been employed as part of the national strategy of a country, as an instrument of foreign policy, and as a way to affect international relations and manage conflicts without resorting to military action. As demonstrated by the fact that sanctions continue to be utilized in contemporary global politics, they are seen as a helpful measure by some nations.
However, the problems with the sanctions are demonstrated by their drawbacks, including their negative repercussions and the limitations of their effectiveness. These problems range from the fact that it is unable to influence the domestic policies of a target country and push leaders or actors to modify their actions, to the fact that it has a tendency to cause unexpected consequences. Therefore, in implementing any sanctions, the consequences should be elucidated and analyzed deeply in order to prevent any unforeseen outcomes.
[1] Süleyman, D. O. S. T, Korkmaz, Z. (2015). “Compensation and Some Practices as a Way of Coercion Not Leading to War”, Journal of Suleyman Demirel University Faculty of Law, 5(2), 111-157.
[2] ALIPOURVAGHASLOU, B. (2022). “General Principles and Characteristics of the Sanction Regime in International Law” , Van 100th Year University Journal of the Faculty of Economics and Administrative Sciences, Van YYU 40th Year Special Issue, 157-186.
[3] Malone D, “The UN Security Council: From the Cold War to the 211st Century”, Lynne Rienner Publishers, 2004.
[4] Gardam J., “Necessity, Proportionality and the Use of Force by States”, Cambridge University Press, 2005
[5] Keshner M. V. “Economic Sanctions in Modern International law” Prospekt, 2015
[6] WTO, Marten Smeets, “Can Economic Sanctions Be Effective?” March 2018, <https://www.wto.org/english/res_e/reser_e/ersd201803_e.pdf> accessed on 30 January 2023
[7] J. Masters, “What Are Economic Sanctions?” August 2019, < https://www.cfr.org/backgrounder/what-are-economic-sanctions> accessed on 31 January 2023
[8] Pape, R. A. “Why Economic Sanctions Still Do Not Work.” International Security” 1998, < https://web.stanford.edu/class/ips216/Readings/pape_97%20(jstor).pdf > last accessed on 31 January 2023.
[9] WTO, Marten Smeets, “Can Economic Sanctions Be Effective?” March 2018, <https://www.wto.org/english/res_e/reser_e/ersd201803_e.pdf> last accessed on 30 January 2023
[10] Peksen, D.,“Better or Worse? The Effect of Economic Sanctions on Human Rights.”, 2009 <https://www.researchgate.net/publication/249706403_Better_or_Worse_The_Effect_of_Economic_Sanctions_on_Human_Rights> last accessed on 31 January 2023
[11] Matthew E. Pinada “Advantages and Disadvantages of Economic Sanctions” 24 March 2022 < https://www.profolus.com/topics/advantages-and-disadvantages-of-economic-sanctions/> last accessed 31 January 2023
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