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5 August 2021, Gateway House

Are counter-sanctions effective against sanctions?

Sanctions are an important foreign policy tool, used especially by the West against its adversaries. Now, these rivals are retaliating with counter-sanctions. Are these effective? How does this impact global politics? Where does India stand in this free-for-all sanctions era?

Fellow, International Security Studies Programme

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For decades, U.S. and the European Union (EU) have imposed sanctions to coerce their adversaries, most prominently China and Russia, to change their foreign and domestic policies. There’s been a stream of recent sanctions from the West on Russia for its frequent cyberattacks and its treatment of the opposition leader, Alexei Navalny and on China for its human rights violations against the Uighurs in Xinjiang.

Now, Russia and China have imposed counter-sanctions on the U.S. and the EU. On June 10, China passed a new domestic law to counter Western sanctions which mandates travel bans, asset freezes, and commercial restrictions against those individuals and entities involved in designing and implementing the U.S. and EU sanctions. Earlier in March, China had sanctioned the EU and British parliamentarians, academics and think tanks alleging their complicity in spreading “lies and disinformation.” Likewise in April, Russia placed travel bans on EU officials and, most recently, on Canadian officials in retaliation to their sanctions against Russia.

The new sanctions and counter-sanctions regimes reflect a paradigm shift in post-Cold War international politics. In contrast to the previously preferred and accepted multilateral sanctions, legitimised through the United Nations (UN) Security Council, countries are now imposing their own unilateral or autonomous sanctions to fulfil their foreign policy objectives. A key feature of these is the secondary sanctions, which seek to penalise third parties which commercially engage with the sanctioned countries.

What are sanctions, and in today’s context, how do they impact global politics?

Sanctions are simply restrictive economic measures imposed to counter various situations such as military action or armed intervention in another sovereign state and multiple destabilising actions like cyberattacks, nuclear proliferation, human rights violations, support to terrorist activities, military coups, etc. A series of sanctions imposed on a country or individual is called a sanctions ‘regime’.

There are three types of sanctions:

  • Comprehensive sanctions that block all trade and financial operations with countries;
  • Sectoral sanctions covering specific sectors and groups of people; and
  • Targeted sanctions, also described as ‘smart sanctions’, limiting such operations to particular individuals and/or companies.

Who can impose sanctions?

  • The United Nations, multilaterally
  • Countries, individually

The U.S. is the world’s No. 1 sanctioning country. Between 1990 and 2015, from the Bush Sr. to Obama administrations, the U.S. imposed approximately 150 sanctions regimes. Under subsequent administrations, the sanctions multiplied, as evident in the three sanctions regimes applied through new domestic legistlation, the Countering America’s Adversaries Through Sanctions Act (CAATSA) on Russia, Iran, and North Korea in 2017.

These sanctions have been successful –because of the centrality of the American dollar in the global financial system which ensures broader compliance, even from those opposing them. Ivan Timofeev of the Russian International Affairs Council observed at a recent seminar organised by Gateway House and the Konrad Adenauer Stiftung that Russian companies abide by American sanctions, notwithstanding the negative attitude of their government. Chinese companies too have complied with the U.S. sanctions while doing business with Russia.

Does it mean that sanctions are no longer effective?

Yes, and No.

Yes because the experience of sanctions over the past few decades, shows  they are more effective against smaller countries with limited abilities, as in the case of Libya in 2003, where UN and U.S. sanctions forced its government to dismantle the weapons of mass destruction programme.

No, because they are effective today only in that they now shame countries. They provide a façade of action for domestic consumption. The recent sanctions on China, for instance, did little to deter China’s actions. And Russia and Iran have been sanctioned for so long, that they have learned to become self-sufficient – Russia now has a good-sized agriculture sector, after importing foods from Europe for decades. Iran has its own versions of global products, especially in e-commerce and fintech.

India too was subjected to sanctions and other restrictive measures like formation of the Nuclear Suppliers Group which sought to control nuclear technology and Japanese sanctions denying financial assistance after the nuclear tests in 1974 and 1998. There were some setbacks, but mostly they benefitted the country which achieved self-reliance in space and nuclear technologies.

In short, targeted countries adapt and attain self-reliance in critical sectors of the economy.

Where do counter-sanctions come in?

With China on the economic and geopolitical rise, it has the heft to counter sanctions. When the U.S. imposed sanctions on Chinese officials for human rights abuses in Xinjiang, China hit back by sanctioningEuropean parliamentarians, academics and think tanks. China is also an alternate pole: After UN and U.S. sanctions were imposed on North Korea for its nuclear programme and G20’s Financial Action Task Force grey listed Pakistan for its complicity in terrorist financing, they found a new benefactor in China to bypass global sanctions. Chinese banks and companies don’t all work through global economic ecologies, and now China is even creating an alternate financial system.

Counter-sanctions, then, are only retaliatory. They are tit for tat.

And sanctions are only one type of restrictive measures. There are several others, which states use against their adversaries. Accordingly, countries classify non-tariff barriers, quarantines, selective purchases and state-led consumer boycotts, as sanctions.

In this free-for-all sanctions era, where does India stand?

The India-U.S. bilateral has been growing ever closer, especially defence ties. TK% of India’s new defence equipment is U.S. sourced. A thorn in this deepening bilateral is India’s imminent purchase of the S-400 missile system from Russia and its involvement in the Chabahar port of Iran. Fraternising with the U.S. enemy could subject India to secondary sanctions under CAATSA, jeopardising India’s military modernisation programme. New Delhi has a selective exemption for Chabahar port and may get a similar waiver for the S-400 purchase, but already the U.S. sanctions on Russia and Iran have adversely affected New Delhi’s ties with Moscow and Teheran.  India isn’t immune to imposing its own restrictive measures, even though does not favour unilateral sanctions. In the aftermath of the 2019 Pulwama attack and last year’s border stand-off and Galwan Valley clash with China, India  banned Chinese apps, restricted Chinese investment in Indian start-ups, and withdrew Most Favoured Nation status from Pakistan.

Will India too consider becoming a sanctioning nation, imposing full-fledged sanctions on China or Pakistan for their destabilising actions? Probably not.

Is the era of sanctions past?

Unlikely. Despite the debate on their efficacy, countries have found sanctions useful as a middle path between diplomatic measures and military action. Sanctions are imposed to tackle issues outside the UN framework. For instance, EU sanctions have addressed issues such as upholding the territorial integrity of Ukraine in the case of Russia, against Turkey’s drilling activities in the eastern Mediterranean Sea and China’s human rights violations against the Uighurs.

More likely is a proliferation of unilateral sanctions, at the cost of the UN-blessed multilateral sanctions, when the P5 countries are unable to build consensus to impose sanctions in tackling challenges to international security.

Sameer Patil is a Fellow, International Security Studies Programme, Gateway House.

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