Memorandum by Dr Colin Rowat, Department
of Economics, University of Birmingham
This submission comments on three issues related
to economic sanctions: their effectiveness at achieving their
stated aims; the effects of targeted and financial sanctions;
and impediments to better targeting. It addresses these topics
largely by appeal to the economics and political science literatures.
Relative to other areas of economic policy debate it is immediately
obvious that the economics literature is almost silent. Consequently,
while considerable sanctions experience has been gained since
1990, spurring both a descriptive literature and institutional
developments, policy is largely formed without the benefit of
a rich analytical literature. This, in turn, reduces their ability
to be precisely wielded.
1. ARE SANCTIONS
The mordern analytical literature on sanctions'
effectiveness dates to Hufbauer et al (1990). Published
just after Iraq's invasion of Kuwait, and therefore on the verge
of the "sanctions decade" (Cortright and Lopez, 2000),
the authors identified 166 "major" sanctions episodes
spanning the UK's imposition of sanctions on Germany in 1914 to
the United Nations' on Iraq in 1990.
The authors are interested in the effectiveness
of economic sanctions as a policy instrument. Thus, to each episode
they assign: a set of officially stated aims;
a measure of success (on a discrete scale from 1 to 4) in those
aims; and a measure of the extent to which the sanctions themselves
contributed to meeting those aims (again, on a discrete four point
scale). An overall measure of sanctions' effectiveness is formed
by multiplying their two four point scales, yielding a 16 point
scale. An episode scoring nine or higher is judged a success.
The analysis are summarised in Table 1. The
most widely cited figure from their analysis is the claim that
sanctions have only worked in 34 per cent of cases.
SUCCESS BY TYPE OF POLICY GOAL
|Policy goal||Success cases
||Success ratio (%)|
|Modest policy change
|Disruption of military adventures||6
|Other major policy changes||5
|Source: Hufbauer et al (1990, Table 5.1)
The authors also condition outcomes on various political
and economic factors on episodes' success, one factor at a time.
From these bivariate analyses, they derive seven
lessons for sanctions use:
1. the transmission mechanism between economic harm and
political will to change is often weak.
Thus, do not expect major policy changes as a result of sanctions
2. "in most instances, multilateral sanctions are
not associated with success". This follows directly from
the limitations of their bivariate analysis: senders are more
likely to build multilateral coalitions when their policy aims
3. politically or economically weak countries are more
vulnerable to economic sanctions.
4. "Economic sanctions seem most effective when aimed
against erstwhile friends and close trading partners." Greater
success against allies may
reflect the greater cost of losing close trade partners as well
as the reduced likelihood that allies will be able to draw on
third parties antagonistic to the sender for support.
5. there is "a clear association ... between the
duration of sanctions and the waning prospects of success",
reflecting: a lost of appetite in the sender countries; mobilisation
of resources in the target country; and the tendency of sanctions
episodes between "allies" to be quickly and successfully
6. "sanctions that bite are sanctions that work",
unless they attract a "black knight", a powerful third
party who stands to gain from their failure.
7. "The more it costs a sender country to impose
sanctions, the less likely it is that the sanctions wll succeed."
In most "instances, the cost to the sender country in successful
episodes is insignificant, and often the short-term result is
a net gain (usually where the sanction is in the form of a cutoff
While foundational, the Hufbauer et al (1990) conclusions
may be best seen as suggestive due to a number of basic methodological
weaknesses. Three that seem particularly significant are:
1. there is little formal discussion of their coding formulae,
and no mention made of attempts to ensure inter-coder consistency.
Thus, other researchers may reach different results.
2. "bivariate" analysis suffers from omitted
variable bias and disallows that partialing out of multiple causal
3. there is no theoretical framework; specifically, sanctions
episodes are regarded as simply occurring, rather than resulting
from the behaviour of agents with preferences.
The subsequent literature has tried to address some of these
Pape (1997), for example, re-codes the Hufbauer et al
(1990) episodes, concluding that:
An examination of the 40 cases in which HSE claim economic
sanctions were successful reveals only five clear successes. The
remainder are accounted for by 4 classes of errors: 18 were determined
by force, not economic sanctions; 8 are failures, in which the
target state never conceded to the coercer's demands; 6 are trade
disputes, not instances of economic sanctions; and 3 are indeterminate.
... sanctions have been successful less than 5 per cent of the
Of the five "clear successes", "[t]hree of
these were over trivial issues", such as embassy locations
and the release of small numbers of prisoners. Even making favourable
assumptions, Pape finds "no statistically significant relationship
between target state GNP loss and sanctions success" in what
appears to be a bivariate OLS regression.
In a subsequent exchange (Baldwin and Pape, 1998), Baldwin
criticises Pape (1997) for using a binary standard of success,
a coarser measure than the original four point scale; and for
neglecting the costs of using economic sanctions.
Theoretically, Eaton and Engers (1999) claim that, when sanctions
are the result of rational behaviour,
episodes in which senders actually take measures against targets
provide a narrow window on the role of sanctions. In a world of
perfect information, senders never actually resort to punishing.
If the measure works, the target shapes up in anticipation. If
not, the sender never threatens it initially. Hence, the very
imposition of measures means that something went awry ... [I]ncomplete
information (about senders or targets) can generate episodes in
which measures are actually imposed, but these episodes constitute
a very unrepresentative tip of an iceberg.
More specifically, if the target's resilience is not known
to a sender, sanctions may only be imposed on targets which, deeming
themselves insensitive to sanctions, refuse to comply when threatened.
In these cases, simply observing actual episodes might lead one
to "conclude that sanctions are futile".
On the other hand, if the sender's resolve is unknown but
mutable over time, imposing sanctions may signal the sender's
toughness, ushering in "an era of hegemony", and lead
one to "conclude that punishment is extremely effective."
with more than one period of interaction, "[a] variety
of outcomes can emerge" in which "[s]uccess is usually
Dresner (2003) explores the possibility of downward bias.
Noting that information on sanctions threatened as well as those
actually imposed can be hard to find (only five of the 116 Hufbauer
et al (1990) cases end at the threat stage), he works with
US datasets on trade policy, core labour standards and environmental
Table 2 displays the results. Rows display the number of
episodes in which sanctions were merely threatened, as well as
those in which they were actually imposed. In all three policy
areas, sanctions merely threatened are more successful than those
actually imposed. In the first area, this just fails to be significant
at the 10 per cent level, while the difference is significant
at the one per cent level in the remaining two areas.
THREATS AND SANCTIONS IN US POLICY
||Total||Success rate %
|Core labour standards
2. TARGETED AND
Interest in targeted, rather than comprehensive, sanctions
was given impetus in the 1990s by concern at the human cost of
the comprehensive sanctions on Iraq.
Interest in targeted financial sanctions, in turn, has been given
particular impetus after the 11 September attacks.
This recent interest means that the already small analytical
literature on economic sanctions has even less to say about targeted
and financial sanctions. Cortright and Lopez [2002a] apply a "back
of the envelope" version of the Hufbauer et al. 
approach to 14 cases of UN sanctions applied over 1990-2001. They
classify four as general or comprehensive, three of which they
score as at least partially successful. Of the remaining 10 targeted
or selective cases, they score two as successes, and all five
of the pure arms embargoes as failures. They conclude that "the
effeciveness of UN financial sanctions is uncertain. To date there
is no case in which assets freezes and financial restrictions
have been imposed on their own."
Insight from the EU sanctions against the Federal Republic
of Yugoslavia from 1998-2000, the US sanctions against Iran and
the UN sanctions against Iraq are now presented. The FRY sanctions
represent an example of careful efforts at targeting; the Iran
sanctions have yielded a variety of cost estimates; the Iraq sanctions
saw very slow reform of comprehensive sanctions in the direction
The EU's sanctions' coordinator during the late 1990s FRY
sanctiosn is cautious in his assessment of their success [de Vries,
2002]. His remarks recognise a lack of evidence about very basic
aspects of the targeted sanctions:
A basic requirement for judging the effectiveness of sanctions
is whether such measures deny targets the fulfillment of what
they may consider an important or essential need. Evidence to
that effect in this case is not available. Also unknown is the
extent to which the targeted individuals were able to and actually
did use false passports .... The freezing of funds may have been
more effective in pressuring the regime although here again one
should guard against strong conclusions. ...It was claimed that
the financial sanctions had a major impact on trade between EU
member states and the Federal Republic of Yugoslavia, but the
evidence in support of this claim is ambiguous.
de Vries also describes Yugoslav authorities' frequent use
of their power to redirect measures targeted at them onto the
population more broadly: the oil embargo created rents which the
elite were in the best position to capture; Yugoslave authorities
threatened retaliation against EU airlines in response to the
initial targeted flight bans; "white" companies exempted
by the EU from asset freezes were "hit by retaliatory measures
by the FRY regime"; these firms were also indirectly harmed
through their economic links to targeted firms; cities receiving
EU fuel under the "Energy for Democracy" initiative
lost their regular state supplies; foreign currency could not
practically be transferred to non-regime individuals given the
regime's control of the banking system.
Table 3 shows annual costs of US sanctions to Iran around
the year 2000 as estimated by four different analyists. That presented
in Torbat  crudely estimates trade losses based on pre-sanctions
bilateral trade between Iran and the US, and financial losses
based on the political risk premium paid by Iran. It and the Askari
et al.  study both find the financial sanctions to
be more damaging than the trade sanctions; Preeg  is ambivalent,
and an Institute for International Economics case study finds
the trade sanctions more harmful (in part by considering fewer
aspects of the financial sanctions).
That financial sanctions may be more harmful than trade sanctions
is consistent with Iraqi evidence. While the sanctions imposed
on Iraq following the invasion of Kuwait, are frequently billed
as the most comprehensive in the modern era they seem to impose
very few barriers to trade, even as early as 1991.
Based on research conducted in Iraq in the autumn of 1991,
Dréze and Gazdar  noted that:
the present price of wheat flour is in fact close to the price
that prevails in Jordan, which is Iraq's main trading partner.
This "arbitrage" suggests that quantity constraints
on import (and hence supply) are no longer binding. Comparing
market prices of other staple goods between Jordan and Iraq, we
also find almost complete arbitrage at the unofficial exchange
In spite of various reform proposals over the years,
Iraq's borders remained under the control of it and its neighbours.
In both the Iranian and Iraqi cases, denial of capital market
access may have been particularly harmful given their previous
After the passage of Security Council Resolution 1409 (May
2002), the Iraqi sanctions were advertised by American and British
authorities as "smart" sanctions. However the careful
thought about how to target individual regime members, and how
to increase or relax pressure in response to regime behaviour
that typified the EU approach to FRY was absent in the Iraqi case:
SCR 1409 may largely have served to streamline administrative
procedures for exporting goods to Iraq [Rowat, 2002]; it did nothing
to help finance them, thus failing to ease one of the sanctions;
most harmful constraints [Rowat, 2001]. Finally, the ambiguity
dating back to April 1991 regarding what steps Iraqi authorities
should take to lift the sanctions remained unaddressed.
COSTS OF US SANCTIONS ON IRAN (ANNUAL US$ MILLION)
|Preeg  (judgment)
||Askari et al.  (gravity model, judgement)
||Institute for International Economics (welfare loss)
||Torbat  (welfare loss; price leadership; judgment)
|Trade sanctions' costs||700-1,300
|Financial sanctions' costs||800-1,300
|Total sanctions' costs||1,500-2,600
3. IMPEDIMENTS TO
Crafting well targeted sanctions policies requires both the
existence of the institutional capacity to do so, and the political
will to use those institutions.
In minor disputes between "erstwhile friends and close
trading partners", these conditions are likely to be satisfied.
When disputes are large relative to the perceived benefits of
a relationship, less emphasis will be place on minimising harm
to third parties in a target country. This section mentions two
resulting political impediments to reducing harm to civilians.
First, the Security Council is unusually free of legal constrains,
not explicitly accountable by the UN Charter either to other organs
or to treaty law.
Perhaps its most important attempt to professionalise its sanctions
administration, design, and implementation, under the Chowdhury
working group (2000-01) failed even to issue a final report in
the face of disagrerements among the Permanent Five.
Second, tailoring sanctions to reduce civilian harm requires
the target government's cooperation. The effects of any significant
sanctions are difficult to assess without access to good data
collected in the target country. The target government may have
strong incentives to hide these data. Further, it has an incentive
only to release data, or allow international organisations to
release their own research, when it is in its interests; this,
in turn, gives opponents grounds for dismissing any reports as
Additionally, many measures must be agreed by both the sender
countries and the target country. The conflict evidenced by the
imposition of sanctions reduces the set of feasible measures:
sender governments may resist proposing measures that they expect
to benefit the target government; the latter, in turn, may reject
those felt not to benefit it.
This last episode is omitted from the authors' analysis as its
outcome was not known at the time. An updated third edition has
been forthcoming for some years, but has yet to emerge. Back
This authors are aware of a weakness of this approach, nothing
that "Sender countries do not always announce their goals
with clarity. Indeed, obfuscation is the rule in destabalisation
cases". [Hufbauer et al, 1990, p 39] Back
Two of the three authoris presented preliminary extensions of
the results above to the 1990s [Elliott and Hufbauer, 1999], when
50 new cases were launched. Sanctions in the 1990s seemed "about
as successful | as the crop dating from the 1970's and 1980's". Back
Five cases are classified under two different policy goals |
Since all but one of these cases are failures, double-counting
them adds a small negative bias to the success ratio." Back
We omit the rather obvious "lessons" that: military
policies are more apt to be used alongside sanctions when military
aims are pursued; a sanctions policy should be carefully designed
before being deployed. Back
This is especially likely to be the case in dictatorships. Back
Statistical significance is not considered. Back
See Hovi et al , which refers to Hufbuaer et al 
as giving a "somewhat more positive" view of sanctions'
efficacy, for mention of some of this literature. Back
Eaton and Engers  address the repeated environment in greater
depth, albeit under complete information. Back
Unicef's 1999 child mortality study was particularly influential,
estimating on the basis of a 40,000 household survey that "if
the substantial reduction in child mortality throughout Iraq during
the 1980s had continued through the 1990s, there would have been
half a million fewer deaths of children under five in the country
as a whole during the eight year period 1991-1998." Back
The subsequent chapter in Cortright and Lopez [2002b] notes that
the 116 cases in Hufbuaer et al  only contain 13 cases of
assets freezes. Elliott begins her own chapter in the same volume
by claiming that: "With the exception of Libya, the results
of UN targeted sanctions have been disappointing." Back
A UK-Dutch draft of Security Council Resolution 1284 (December
1999) would have brought Iraq's trade with Turkey under Security
Council control. Back
This view was succinctly expressed by a former US Secretary of
State: "The Security Council is not a body that merely enforces
agreed law. It is a law unto itself." Back
See http://www.casi.irg.uk/info/scwgs140201.html for the last
draft of its reprot and further background. Back
The Iraqi "oil for food" debates and recriminates from
1991 to the present day illustrate this with brutal clarity. Back