Do economic sanctions work?

There is talk that the United States will, within days, apply some kind of sanctions to Russia.  For some analysis, shall we not turn to the work of Daniel Drezner?  Here is his piece (pdf) on cooperation and multilateral sanctions:

Intuitively, the link between international cooperation and sanctions success seems obvious.  Empirically, however, the results are rather surprising.  Repeated statistical tests show either no link or a negative link between cooperation and sanctions success.  At least four studies conclude that successful episodes of economic coercion exhibit the least levels of coercion among the sanctioning states.  No statistical test has shown a significant positive correlation between policy success and international cooperation among the sanctioning states.

This Drezner piece (pdf) indicates that applied sanctions don’t usually work, but the threat of sanctions can be effective.  Here is Dan on “smart sanctions,” (pdf)  which are not in general effective.  Here is Dan’s book The Sanctions Paradox.  Here is Dan on Twitter.  I hereby request a new article from Dan on sanctions, as they might be applied to Russia.  Here is a short BBC piece on the possible economic impact of sanctions today.

Here is a 2013 paper (pdf) which tests the Drezner sanctions model on the territories of the former Soviet Union.  Here is a piece on how zombie studies are gaining ground.

Comments

There was a good book on the subject called "the sanctions decade". Add it to your pile today ;)

Cuba is proof that sanctions do not work, and they only end up hurting people who aren't in power. (For that matter, why does Cuba receive sanctions while China gets most favored trading status? There is nothing they've done to the US that China hasn't done in a worse way.)

Cuba is only proof that sanctions don't work as much as Berlin is proof that blockades don't work.

When a tiny nation has a humongous block of larger nations supporting it merely for the purpose of defying the sanctioner, it really doesn't prove much about sanctions.

Sanctions work only to the extent that most other nations support the sanctions. This is why sanctions on South Africa worked better than sanctions on Cuba.

Sounds like a variant of the game of Chicken, which only works if the other side buys into the game. So if Russia has read Drezner's piece and understood it, 'smart sanctions' won't work. What will work is dropping an H-bomb right on Moscow from a B-52, "to save Ukraine we had to destroy the rest of the world".

Except a B-52 will never be able to penetrate Russian airspace all the way to Moscow, and even if it did, its crew will have nowhere to return to...

Aren't these results consistent with selection bias? Places that have good reason to believe that sanctions won't work against them are likely the ones to not be deterred by the threat and thus are the ones to get sanctioned. Whereas those who have reason to believe that the sanctions could work against them respond to the threat and are therefore never actually sanctioned. Even if this selection story doesn't hold up, would it not be the case that if you only threatened but never applied sanctions, the effects of threatening would go away? Am I missing something?

The second Drezner piece linked to looks at exactly that.

Wait, so you mean I'm expected to actually read the things you link to?! Thanks!

You also have a variation on Aumann's Agreement Theorem. (sp?) The US threatens sanctions and the Russian assume the US has reason to think they will work. Why else make the threat? Then the Russians go ahead with their plans and the US alters its views, thinking that perhaps the Russians know something that tells them the sanctions will not work. If this plays out long enough, you end up with a sanctions regime that actually works and alters behavior. In most cases the game ends long before that point.

Global finance probably does a better job than state inspired sanctions. The Russians are not robots (yet). They are flesh and blood people with needs and wants. If global financiers and rentiers fear their money is at risk in Russia, they will pull it out, causing asset values to decline and the currency to weaken. This has a real impact on the Russian in line to buy fake viagra and it has an impact on the oligarch playing with his miniature giraffe out at his dacha.

These concerns may not force Putin to go along with the crowd, but it puts natural limits on his range of options. He can turn the Crimea back into a semi-independent state dependent on Russia. he can't invade and annex Ukraine. Those same limits apply to everyone else too so Putin can guess at the limits of the EU and the US. Everyone is playing dodge ball in a phone booth now.

Heh, heh. "Phone booth."

I do agree it is the global finance has the real power here so the threat of sanctions has an effect on the individual investors. Once the sanctions are placed that limits the effect of global finance.

The problems with theory's like this is that a ruler might go for a bigger piece of a smaller pie. Depending on what the power base of a leader is the well being of the people interest him more or less.

The problem with sanctions applied by the US only is that we have very little trade with Russia. The EU countries trade much more but have very little interest in sanctions or targeted financial controls (i.e., messing up the oligarchs' Western bank accounts). No doubt some of the EU reluctance has to do with Russian natural gas.

Wouldn't the EU have much more interest than the US in stopping the Ukraine from becoming a vassal of Russia?

The fact that Europe gets a lot of natural gas from Russia has a dual: Russia sells a lot of its natural gas to Europe. Gas pipelines are hard to move. How quickly could Russia build a new pipeline (to China, I guess)? What would be the new price they could sell at? What's the total bill for them? Can they afford it?

How many additional Europeans die from lack of heat in sub zero temperatures?

Where there is a real trade reliance, the effects go both ways.

This directly addresses your question, if not conclusively. I still doubt that the Europeans would play hardball in this respect, but I'd guess the US is trying to put that on the agenda. http://www.foreignpolicy.com/articles/2014/03/03/gas_attack

This post, and many of the comments (but not Dave's above), are naive in the extreme.

http://blogs.discovermagazine.com/imageo/2014/03/03/follow-the-carbon/#.UxaTov2KjHj

Makes sense. Trade is itself a form of negotiation, and it would be rather surprising if shutting off all negotiations in one area led to great leaps forward in another area. A nomination for a question that's rarely asked: "Why doesn't California want to succeed from the Union?"

Well, a classic example of economic sanctions not working was provided by FDR. But then, how many people are honestly worried today about the Russians destroying an American fleet at anchor? OK, more than were worried about it 1941, admittedly.

And anyone who thinks the Europe will not continue to buy Russian provided natural gas is being unrealistic.

Though the Russians are apparently playing the game in reverse fashion, as Gazprom has cancelled the rebate they previously provided to Ukrainian purchasers -

'Russia’s gas giant Gazprom has announced it would cancel a price discount for gas supplies to Ukraine. The move follows the overthrow of Moscow-backed president Viktor Yanukovych with whom Gazprom agreed the deal.

Ukraine was unable to pay its gas bill for February and owed Gazprom $1.5 billion (1.09 billion euros) for earlier gas supplies, Russia's state-controlled natural gas producer Gazprom announced Tuesday.

Therefore, Gazprom would cancel a contract that had granted the government in Kyiv a 30-percent discount on market prices for gas, currently standing at $400 per 1,000 cubic meters, Gazprom Chief Executive Alexei Miller said.' Russia’s gas giant Gazprom has announced it would cancel a price discount for gas supplies to Ukraine. The move follows the overthrow of Moscow-backed president Viktor Yanukovych with whom Gazprom agreed the deal.

Ukraine was unable to pay its gas bill for February and owed Gazprom $1.5 billion (1.09 billion euros) for earlier gas supplies, Russia's state-controlled natural gas producer Gazprom announced Tuesday.

Therefore, Gazprom would cancel a contract that had granted the government in Kyiv a 30-percent discount on market prices for gas, currently standing at $400 per 1,000 cubic meters, Gazprom Chief Executive Alexei Miller said.' http://www.dw.de/russias-gazprom-scraps-gas-price-rebate-for-ukraine-offers-loan-to-pay-bills/a-17472357

However, I am sure that this web site applauds this demonstration of Russians using the free market to allow the Ukrainian economy to grow stronger without being propped up by distorting subsidies.

@PA--"Well, a classic example of economic sanctions not working was provided by FDR " - not according to the Japanese, as every Japanese schoolchild knows from reading their history books: the FDR economic boycott was making rice, a staple, so scarce in 1941 that it had to be rationed. Japan was *forced* to go to war, and repeat their surprise attack that they first employed on the Russians in 1904.

Well, a classic example of economic sanctions not working was provided by FDR ”

That seems to be a pretty epic fail. Or at the very least, all of the WW2 books I've read have indicated the economic sanctions were a primary reason for the attack. Ergo, they were effective and the Japanese responded with aggression.

"And anyone who thinks the Europe will not continue to buy Russian provided natural gas is being unrealistic. "

Now this is a good point. Particularly since the Germans shutdown their nuclear reactors.

Also, there's a lot of double posting in that comment.

You are right about the doubling - I thought it had been deleted.

And the comment about FDR was meant ironically - the sanctions were highly effective in their own terms.

The problem being that those terms did not include having much of the the Pacific Fleet destroyed at anchor, leading to America's entry into WWII.

As for Germany - it isn't especially reliant on natural gas at this point, though obviously it plays a major role in the country's energy/petrochemical mix. But since German brown coal is nasty to burn, particularly compared to natural gas, it is likely that as long as the Russians are selling, the Germans will be paying cash. Unlike the Ukrainians.

"As for Germany – it isn’t especially reliant on natural gas at this point, though obviously it plays a major role in the country’s energy/petrochemical mix."

The evidence would indicate that Germany is heavily reliant on Russian natural gas.

Germany accounts for fully 25% of Russian natural gas exports: http://blogs.discovermagazine.com/imageo/2014/03/03/follow-the-carbon/#.UxZFts4hnzZ

14% of Germany's electricity is generated from natural gas. http://topforeignstocks.com/wp-content/uploads/2012/10/Germanys-Power-Sources-2011.png

*If* Germany would be willing to impose really hurtful sanctions on Russia and stop importing Russian gas it could do so without risking domestic supply shortfalls. Its reserves are quite sufficient to handle several months – more than enough time to find another source, e.g. importing LNG from the Middle East. This is especially true at the current moment, because this year's winter was very mild: here we hadn't _any_ snowfall at all, something I've literally never experiences before.

So is Obama going to convince the Europeans to not buy natural gas? How, by giving a speech. Deny his glorious presence at some conflab?

Give me a break. Putin has the advantage here. China is happy with them, they figure the arguments the Russians are making about the Ukraine fit perfectly for Taiwan. Lots of opportunity for trade there.

Putin recognizes he has a short window of opportunity that will not be seen again for possible a generation. A weak feckless president who nobody, especially his allies, believes. Their natural gas monopoly is going to shrink within a few years, so they have leverage now that they won't have in a short while. He is going for it, and will push until someone stops him. So far no one is willing to even consider stopping him.

"How, by giving a speech. Deny his glorious presence at some conflab?"

Bet the world leaders now figured out what Pelosi did a couple years ago. Just put him on mute while the grown ups discuss business.

'weak feckless president': yes, we really should be going to war over this. Syria too.
When real men were in charge we invaded everyone.

If his policy is isolationism, so be it. His talk and his actions tell two different stories. In a world where what the US says and does matters, I consider this dangerous.

Would it be ok if Putin ran his tanks into Latvia? Where is the line? Is the line US interests? What are US interests according to the President? What is the line?

And anyone who says, oh he wouldn't do that, has wide company and were wrong so far.

I honestly think that he doesn't have a clue. There is a line, and it will be crossed simply for the reason that some people want to know where it is.

All I know is that if Obama is going to give the Ukraine and more to Putin, he better come back with something more than a transitory feeling of 'peace in our time'. Does he actually know where that term comes from and what it represents?

So your points are:

1) We don't know what's really going on.

2) We definitely know what is going on inside Putin's head.

Ok.

Well, I was more rebutting your points

1. No we really don't

2. I was only theorizing about Putin's thoughts, as you were ("Putin recognizes he has a short window...")

So re 2), neither of us knows, but we're free to speculate, that's kinda what this blog is about. I'm just saying Obama is doing the right thing staying out of it, and that those who criticize him as 'weak' for that would be criticizing him equally for getting belligerent. Because for many, anything the guy does = bad. It was tiresome when the left did that with W as well.

If Bush didn't deter Putin from invading Georgia than why do you blame Obama for not deterring Putin from invading Ukraine?

Bingo. And if Obama had somehow deterred him by threatening war over it, he'd be getting crap from these same posters for warmongering.

The threat of withholding is more effective than going through with it, is what my wife said.

You can counter-threat the wifey; a fit 1%er like you could relocate to the Philippines and lease a girlfriend for cheap, according to a frequent commenter here .

The Parallels between Russia and Nazi Germany can be quite startling don't you think?

- down and out nation, beaten in previous conflict (Germany -WWI , Russia -Cold War)
- seeks strong leader to unify nation and restore national pride. (Hitler , Putin)
- rebuilds economy , hosts Olympics. (Berlin 1936 - Sochi 2014)
- passes laws discriminating against certain groups: (Jews , gays.)
- expands empire by using the premise of protecting ethnic minorities. (Sudetenland or Crimea)

If I lived in Poland I would be nervous.

Peter D

I have polish expat neighbors, and they are very nervous. They recognize the smell.

Do economic sanctions work?

Are the Castro brothers still in charge of Cuba?

Bluffing works, until you get called.

People are stubborn. Sanctions probably do more to bring out their stubbornness than to achieve stated goals. And that's why we target leaders with sanctions, not broader sanctions which affect the general public.

But if it keeps the folks at home thinking that we're "doing something" and helps reduce the ability of stubborn people to mix with and network among the world's elite, then imo it's worth it, even if the link to the desired outcome of them doing what we tell them to do doesn't tend to appear.

Sanctions are far more peaceful than many other options, and can be face saving all around, while buying us time to weigh options and for diverse parties to see where we can/should go.

However, I would argue that the situation of women and children, in particular with respect to access to food and medicines, should always be a paramount consideration. We do not want any repeats on Iraq, where many estimates put the "dead children due to GWB" at somewhere around the 1 million mark.

Sometimes sanctions work, sometimes not. They have totally failed in Cuba, but they played a role in the ending of apartheid in South Africa, and it appears that they have played a role in bringing Iran to the table in nuclear talks.

I doubt they will affect Putin's Russia. What may matter more is the falling stock market and rouble, with the central bank having just raised interest rates sharply to defend the currency. This is likely to sharply slow the economy down and will have more impact on public opinion than any sanctions to the extent people put two and two together and realize the link between invading Crimea and these economic outcomes.

Hasn't Putin already called back most of the troops to their bases? He made his point, this is another -geddon that's not going to happen.

The author is looking for benefits of sanctions at the wrong end. The inner logic of sanctions is mostly something like this: "Sure, thousands of Iraqi children have died because of the sanctions, while the behavior of the regime has not changed; however, the sanctions made me feel good about myself and my power, and I can always pin those excess deaths on the regime that 'caused' the sanctions to be imposed on it. The cost to me was, therefore, zero. So, it was totally worth it."

And your logic is, what, either do nothing or go to war? What else besides 'sanctions' is there?

The Dalai clique has been treated coldly frequently while it is still willing to be a pawn for the U.S, it said. Over the past 60 years, the Dalai clique has colluded, taken advantage of and supported each other and internationalized the "Tibetan issue," the article said.

I feel like this post (and quote) misrepresents the conclusion of Drezner's piece on cooperation. He finds that building an ad-hoc coalition of sanctioning states is costly and ineffective primarily because states are highly prone to backslide and drop out of the coalition as domestic political pressures mount. However, he also finds that building a coalition through an organized institution (i.e. UN, NATO, etc.) does increase the effectiveness of sanctions because it enhances the effect and prevents backsliding. Although I'm not sure what the success rate is even with institutional support given that Pape has noted that success rates are dismally low in the first place.

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