Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they may also be imposed for a variety of political, military, and social issues. Economic sanctions can be used for achieving domestic and international purposes.
Economic sanctions generally aim to create good relationships between the country enforcing the sanctions and the receiver of said sanctions. However, the efficacy of sanctions is debatable and sanctions can have unintended consequences.
Economic sanctions may include various forms of trade barriers, tariffs, and restrictions on financial transactions. An embargo is similar, but usually implies a more severe sanction, often with a direct no-fly zone or naval blockade.
An embargo (from the Spanish embargo, meaning hindrance, obstruction, etc. in a general sense, a trading ban in trade terminology and literally "distraint" in juridic parlance) is the partial or complete prohibition of commerce and trade with a particular country/state or a group of countries. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, to elicit a given national-interest result from the country on which it is imposed. Embargoes are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war. Embargoes can mean limiting or banning export or import, creating quotas for quantity, imposing special tolls, taxes, banning freight or transport vehicles, freezing or seizing freights, assets, bank accounts, limiting the transport of particular technologies or products (high-tech) for example CoCom during the cold-war. In response to embargoes, a closed economy or autarky often develops in an area subjected to heavy embargo. Effectiveness of embargoes is thus in proportion to the extent and degree of international participation. Embargoes can be an opportunity to some countries to develop faster a self-sufficiency. However, Embargo may be necessary in various economic situations of the State forced to impose it, not necessarily therefore in case of war.
Economic sanctions are used as a tool of foreign policy by many governments. Economic sanctions are usually imposed by a larger country upon a smaller country for one of two reasons: either the latter is a perceived threat to the security of the former nation or that country treats its citizens unfairly. They can be used as a coercive measure for achieving particular policy goals related to trade or for humanitarian violations. Economic sanctions are used as an alternative weapon instead of going to war to achieve desired outcomes.
Hufbauer, Schott, and Elliot (2008) argue that regime change is the most frequent foreign-policy objective of economic sanctions, accounting for just over 39 percent of cases of their imposition. Hufbauer et al. claimed that in their studies that 34 percent of the cases were successful. When Robert A. Pape examined their study, he claimed that only five of their forty so-called "successes" stood up, reducing the success rate to 4%. Success of sanctions as a form of measuring effectiveness has also been widely debated by scholars of economic sanctions.[vague] Success of a single sanctions-resolution does not automatically lead to effectiveness, unless the stated objective of the sanctions regime is clearly identified and reached.
According to a study by Neuenkirc and Neumeier (2015) the US and UN economic sanctions had a statistically significant impact on the target country's economy by reducing GDP growth by more than 2 percent a year. The study also concluded that the negative effects typically last for a period of ten years amounting to an aggregate decline in the target country's GDP per-capita of 25.5 percent.
Imposing sanctions on an opponent also affects the economy of the imposing country to some degree. If import restrictions are promulgated, consumers in the imposing country may have restricted choices of goods. If export restrictions are imposed or if sanctions prohibit companies in the imposing country from trading with the target country, the imposing country may lose markets and investment opportunities to competing countries. Critics of sanctions like Belgian jurist Marc Bossuyt, however, argue that in nondemocratic regimes, the extent to which this affects political outcomes is contested, because by definition such regimes do not respond as strongly to the popular will.
British diplomat Jeremy Greenstock suggests sanctions are popular not because they are known to be effective, but because "there is nothing else [to do] between words and military action if you want to bring pressure upon a government".
Sanctions have been criticized on humanitarian grounds, as they negatively impact a nation's economy and can also cause collateral damage on ordinary citizens. Peksen implies that sanctions can degenerate human rights in the target country. Some policy analysts believe imposing trade restrictions only serves to hurt ordinary people as opposed to government elites, and others have likened the practice to siege warfare.
The use of economic sanctions became much more common in the 20th century, particularly with the formation of The League of Nations in 1919. The Abyssinia Crisis resulted in League sanctions against Mussolini's Italy in 1935 under Article 16 of the Covenant. Petroleum supplies, however, were not stopped, nor the Suez Canal closed to Italy, and the conquest proceeded. The sanctions were lifted in 1936 and Italy left the League in 1937. After World War Two, the League was replaced by the more expansive United Nations in 1945. Sanctions have become a commonly used foreign policy tool in the 21st century in countless situations ranging from disputes to hostile confrontations.
Companies must be aware of embargoes that apply to the intended export destination. Embargo check is difficult for both importers and exporters to follow. Before exporting or importing to other countries, firstly, they must be aware of embargoes or risk facing unintended punitive measures for violating sanctions. Subsequently, firms need to make sure that they are not dealing with embargoed countries by checking those related regulations. Finally, they probably need a license in order to ensure a smooth export or import business. Sometimes the situation becomes even more complicated with the changing of politics of a country.[example needed]
Embargoes keep changing. In the past,[when?] many companies relied on spreadsheets and manual process to keep track of compliance issues related to incoming and outgoing shipments, which takes risks of these days help companies to be fully compliant on such regulations even if they are changing on a regular basis. If an embargo situation exists, the software blocks the transaction for further processing.[example needed]