Financial History 142 Summer 2022 - Page 16

as guaranteeing certain sites to “ round the clock ” access to ensure compliance .
In May 2018 , President Donald Trump withdrew the United States from the agreement and executed a Presidential Memorandum ordering sanctions to be re-imposed . In late 2018 , Iran was kicked off of SWIFT , and throughout the remainder of the Trump Administration financial measures targeting senior Iranian political officials , scientists and financial institutions were put in place . Notwithstanding , in mid-July 2022 , Iran announced it had achieved the “ technical ability ” to build a nuclear weapon .
North Korea
Technically speaking , the United States and North Korea are still at war . The 1953 armistice represents a ceasefire , rather than a peace treaty , and military forces remain arrayed along the demilitarized zone between North and South Korea .
The United States has had a sanctions program in place against the “ hermit kingdom ” since 1950 , but in the subsequent decades North Korea has continually engaged in small-scale military harassment and cyberattacks against its South Korean nemesis . Further , agents of the North Korean government have engaged in terrorism against Japan including abductions , espionage and a 1987 airline bombing . All of this was troubling enough , but after demonstrating its nuclear capability in 2006 , an international array of sanctions was unleashed . The United Nations has passed no less than 20 Security Council resolutions against the fledgling nuclear power , to seemingly little avail . The third generation of the Mount Paektu bloodline is in command of North Korea , and its Intercontinental Ballistic Missile ( ICBM ) testing program restarted in May 2022 . Additionally , in mid-June 2022 , a new underground tunnel at its Punggye-ri Nuclear Test Facility was apparently being prepared .
( In fairness , many political scientists point to the end of apartheid in South Africa as a success story where sanction campaigns are concerned .)
A Flawed Implement
Empirically , it seems clear that sanctions are at best an ineffective device . Gabriel Felbermayr et al offer several explanations in their 2019 paper , “ On the Effects of Sanctions on Trade and Welfare ”:
President Joe Biden met with the other members of the G7 on February 24 , 2022 to discuss President Putin ’ s attack on Ukraine and agreed to move forward on packages of sanctions and other economic measures against Russia .
First , the types of sanctions used may be “ inadequate ” for the specific objective ( s ) considered . Second , the imposition of sanctions may prompt vociferous opposition in the target country by uniting citizens and domestic interests in “ rallies behind the flag .” Third , powerful allies of the sanctioned country may intervene ( as “ black knights ”) to counteract the damaging effects of sanctions . Fourth , uneven sharing of the costs of sanctions among the sender ’ s allies and business interests may impair unity in multilateral relationships thereby “ undermining ” their effectiveness . Last , but not least , those policy leaders may choose to deploy sanctions because they perceive them as a less damaging substitute for military interventions .
Despite frequently employed metaphors , punitive economic policies are not a precision weapon . Even those which target specific individuals — such as oligarchs , high-ranking military officers or political officials — can be evaded without much difficulty . Internationally dispersed assets , bank accounts and real property held in other ’ s ( indeed , false ) names and the artful use of non-governmental organizations ( in particular , those ostensibly focused upon poverty relief ) make the impact of targeted economic punishment somewhat easily deflected . For example , Iran has reportedly adopted cryptocurrencies to skirt international financial restrictions .
Additionally , a world characterized by scarce resources amid unlimited wants and needs will tend to see opportunistic relationships form . A newly anointed pariah state may be an enviable trade partner , especially if the sanctioning powers are viewed as unreasonable or biased . While the degrees of connection may have varied , none of the most reprehensible moments of the 20th century were undertaken by a state acting completely alone . And often , they backfire :
[ S ] ome sanctions may unintentionally benefit targets by causing “ siege morality ” and mobilizing people , thereby contributing to the growth of domestic productive sectors ( as reportedly happened in Iran ) or possibly stimulating industrialization ( Zimbabwe )… [ T ] he pre-2014 sanctions on North Korea “ deepen [ ed ]” business relations between Korean and Chinese companies and made their interactions more efficient .
Shifting back to the specific case of Russia ’ s assault on Ukraine , the University of Wisconsin Law School recently offered five points regarding the prospects for sanctions . They are , out of order :
1 . Sanctions are less likely to work on authoritarian regimes that can easily shift blame and transfer the economic burden ;
14 FINANCIAL HISTORY | Summer 2022 | www . MoAF . org