1.1 Comprehensive sanctions
Sanctions have not always been the weapon of choice in international relations. Until the end of the Cold War, they were sparsely used because they were considered to have inferior âpersuasiveâ value to that of the alternative option of military deployment.1 It was only in the 1990s that they were seen as a policy tool furthering the aim of the UN to settle differences among states in a non-military manner.
Τhe aim of sanctions is ultimately to rehabilitate non-compliant states through a process of negotiation and bargaining. The argument is that they have the potential to change the behaviour of the targeted states without incurring the devastating humanitarian effects of war. Not surprisingly, the UN made extensive use of this tool in the 1990s, with more than a dozen mandatory sanctions regimes imposed in the course of the decade.2
At that time, the UN regularly made use of comprehensive sanctions, namely, measures that aimed âto prevent the flow to and from a target of all commodities and productsâ as well as financial resources.3 They were heavily criticised for their adverse humanitarian impact:
[T]he civilian suffering caused by such measures often overshadow their potential political gains; moreover, comprehensive sanctions complicate the work of humanitarian agencies, cause long-term damage to the productive capacity of target nations, and unfairly penalize their neighbors (who are often their major trading partners).4
The Iraqi âoil for foodâ scandal is brought up repeatedly as an example of what can go spectacularly wrong in the enforcement of comprehensive sanctions. It was a humanitarian relief programme intended to halt the humanitarian crisis caused by the comprehensive sanctions against Iraq, but in the end, it simply contributed to the enrichment of the domestic political regime.5
Three major lessons were learned from the unsatisfactory experience of imposing comprehensive sanctions. First, sanctions should be targeted sanctions; they should aim at âthe architects of the policies opposed by the international communityâ,6 be they individuals, businesses and/or entire business or administrative sectors, in order to minimise the possibility of humanitarian crises among the general population. Second, the robust enforcement of sanctions was key to changing political behaviour. Enforcing states had to be required to âstick to the scriptâ, actively policing their implementation by commercial and state entities. Third, sanctions needed to provide a carrot together with the stick: as Ban Ki-Moon put it, â[t]he target must understand what action it is expected to take. And partial or full compliance should be met by reciprocal steps from the Council, such as easing or lifting sanctions as appropriateâ.7
1.2 Targeted financial sanctions
There is consensus that targeted sanctions got off to a rocky start with those imposed against the Haitian government in 1993 and 1994, and since referred to as one of the lowest points in their history8:
[T]he sanctions were applied erratically in most instances: first to the leaders only, then to their families, and still later to the elite supporters of the regime. By the time all the targets were publicly identified, they had ample time to move and protect their financial assets.9
Despite this experience, their use gained popularity. The blunder in Haiti was dismissed as a problem of implementation, with the failure of the Iraqi and former Yugoslavian comprehensive sanctions accelerating their use as an alternative instrument of coercion. The UN reformed its sanctions philosophy early in the present century to reflect these lessons and proceeded to make more frequent use of targeted financial sanctions. In that respect, it followed the example of the USA, which used its central role in global finance to impose targeted financial sanctions, often with extraterritorial effects, following the demise of the USSR.10
What, however, brought targeted financial sanctions to the attention of a broader international audience was the aftermath of 9/11. What the UN did was to use the financial world as one of the main means of pressure and to widen the scope of sanctions to cover ânon-state actors that include individuals, business entities, political organizations and the third parties who provide their supportâ.11 Coincidentally, the first time the UN imposed financial sanctions on a stand-alone basis was against the Taliban by means of Security Council Resolution 1267 of 15 October 1999. This required states to â[f]reeze funds and other financial resources, including funds derived or generated from property owned or controlled directly or indirectly by the Taliban, or by any undertaking owned or controlled by the Talibanâ.12 Following 9/11, their use was generalised against various terrorism-related and WMD-related targets.13
The common feature of post-9/11 financial sanctions regimes is an aim to cut-off the access to capital of targeted states, individuals, businesses or business sectors. In that sense, financial sanctions put the burden for changing the behaviour of the targets on the global financial system via vigorous monitoring, reporting and due diligence requirements. The enforcing states police the provider of the capital rather than the target itself. In addition, the transparency requirements imposed in the aftermath of the recent financial crisis incidentally enable the closer monitoring of financial institutions for sanction breaches.14
It is not a coincidence that between 2010 and 2018, the USA imposed a string of hefty fines against several international banks for sanctions violations.15 Their prevalence was based on the belief that targeted financial sanctions remedy the drawbacks of comprehensive and trade sanctions:
Firstly, financial sanctions target only the rogue-partyâs assets, or the assets of a given organization whose policies are inconsistent with international norms. Secondly, financial sanctions are, in theory, easier to enforce than traditional trade sanctions, which call for blockades, massive enforcement costs, monitoring costs, etc. In addition, sanctions aimed at delaying/denying credit, or monetary grants to targets are theoretically much easier to monitor.16