How Economic Sanctions Work - Deepstash
How Economic Sanctions Work

How Economic Sanctions Work

Curated from: investopedia.com

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Economic Sanctions

Economic Sanctions

Economic sanctions are penalties levied against a country, its officials, or private citizens, either as punishment or in an effort to provide disincentives for the targeted policies and actions.

  • Economic sanctions can range from travel bans and export restrictions to trade embargos and asset seizures.
  • They provide a policy tool short of military force for punishing or forestalling objectionable actions.
  • Economic sanctions can also be a blunt and ineffective policy tool, imposing insufficient costs on the targeted governments and disproportionate ones on their most vulnerable populations.

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Sanctions Can Take Many Forms

  • Embargoes: broad bans on trading with a country
  • Export controls bar the supply of specified products, services, and intellectual property to targeted countries
  • Capital controls can restrict investment in targeted countries or industries, or broadly bar access to international capital markets for a country's issuers
  • Trade sanctions can include import controls for specific countries, regions, or industries
  • Asset freezes: Assets within sanctioning jurisdictions can be seized or frozen, preventing their sale or withdrawal
  • Travel restrictions: Officials and private citizens, as well as immediate family members, may be denied travel access to sanctioning jurisdictions. 

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The Success of Sanctions

The success of sanctions can be measured by the achievement of the desired policy goals, or simply by their cost to the targeted countries and individuals if punishment is the aim. They can also impose costs on the targeted country's citizens as well as the sanctioning country's companies.

If the goal is to change the behavior of targeted countries and individuals, their incentives and options will ultimately matter at least as much as the sanctioning powers' leverage.

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