Sanctuaries from Sanctions

So, here’s the headline: as much as political leaders and angry voters like sanctions against rogue nations, like tariffs, they seldom work. First, sanctions are generally applied against nations with autocratic leaders, whose lifestyle remains unaffected, citizens are brutalized for blaming their leadership and there are no elections. Second, sanctions are usually used by autocratic leaders to point blame at outsiders in order to rally their population into populist rage at the imposing nation. Third, citizens from the nation pushing those sanctions are often exposed to higher prices (a consumer tax). Lastly, most nations figure out to backdoor and work around sanctions anyway, since there are always takers if the benefits are sufficient (they usually are).

You can start with the obvious: Russia may have been pushed around by Western sanctions, but with a lot of help from China, those two nations have found viable workarounds from Western sanctions and even the more powerful deterrent, US control of the flow of international trade via its SWIFT codes as sophisticated currency exchanges and models. There is a double whammy danger here, which would be accelerated if Trump were reelected: one, these workarounds would accelerate, and two, there would be an international push to remove the US dollar as the overwhelming reserve currency (the global measuring and pricing currency). US consumers would pay dearly for that reality.

Russia can still sell its oil, trade internationally through China, if necessary, purchase weapons from other nations facing sanctions (hence Russia’s purchase of drones from North Korea and Iran), and still maintain a fully functioning economy with little consumer sacrifice. While the ruble and the Russian GDP have been hurt, life in Russia has not changed much.

And that brings me to Iran. Back in 1979, when the current Islamist theocracy took over, American policymakers were certain that it would not take much to topple that repressive regime. They assumed the Ayatollah-governed nation would rail at the repression and restore Western-friendly democracy. It was not until the Obama administration that US policymakers realized Iran was not only unlikely to topple but was very likely to have viable nuclear weapons. That opened the door, with a moderation in Western sanctions against Tehran, for détente and a 2015 nuclear containment treaty that was working until, in 2018 and bowing to Israeli pressure, Donald Trump pulled the US out of that treaty. He reimposed sanctions and watched Iran reignite its nuclear program. Despite those sanctions, which helped spike oil prices globally, modern Iran has never been stronger. If there is a full-blown war between Israel and Iran, Iran could trash global commodity prices by sealing off the Strait of Hormuz, the entry-point for the Suez Canal.

And sure, nations that are subject to sanctions always ask for their removal to further diplomatic solutions. Kim Jong-Un always required a removal of sanctions as a condition for détente. He played Trump, and Kim has only accelerated his nuclear program. He has lots of nukes! Soon, I suspect, so will Iran, unless Israel is able to delay that development with a strike against Iran’s nuclear facilities. That would cause a few additional major problems, however.

As Venezuela has been our major leftist autocratic sore spot in the Americas, we did negotiate a reduction in our sanctions against that oil producer pending a restoration of genuine democratic elections. Free elections? Hell no! So, do we restore sanctions? “The Biden administration is leaning away from reimposing sanctions on Venezuela’s oil industry despite President Nicolás Maduro’s moves to bar leading opposition candidates from the country’s July elections, said people familiar with the matter.

“U.S. officials are concerned that reverting to Trump-era sanctions that accelerated the decline of Venezuela’s oil production would raise the price of gas at U.S. pumps and prompt more migration from Venezuela as President Biden campaigns for re-election in November. Restricting Western oil companies would tighten global energy supplies and open the way for Chinese investment in Venezuela, they say… Biden administration officials have said they didn’t think that the oil sanctions—leveled against Venezuela in early 2019 in former President Donald Trump’s effort to force Maduro from power—was constructive.” Wall Street Journal, April 18th.

When economic sanctions are imposed, the first response of the sanctioned country is how to get around them. And while there is a negative impact from sanctions, you might be surprised at how folks try to avoid them, even those from the country imposing sanctions and trade barriers. Here’s a story, from the April 15th Wall Street Journal that just may shock you. Not only are nations around the world ignoring US sanctions and trade restrictions against China but so are many major US institutions. “Chinese companies are feeling a cold shoulder in the U.S.—except at universities, where they are welcomed as customers.

“American universities sign contracts around the world to sell their research and training expertise, and some of their most lucrative agreements have been with companies based in China. The decadeslong trade thrives despite a deepening U.S.-China rivalry and rising sensitivities about Beijing’s influence on American campuses… Nearly 200 U.S. colleges and universities held contracts with Chinese businesses, valued at $2.32 billion, between 2012 and 2024, according to a review by The Wall Street Journal of disclosures made to the Education Department. The Journal tallied roughly 2,900 contracts.

The extensive trade in American expertise presents a quandary for universities and policymakers in Washington: Where’s the line between fostering academic research and empowering a U.S. rival?... ‘It seems clear that when the Chinese contract with U.S. universities they are getting a capability they can’t get anywhere else,’ said Daniel Currell, a Trump administration Education Department official who has tracked foreign influence in higher education. ‘The big question is, what [contracts] should be legal, what should be legal and disclosable, and what should be illegal?’ he added.” If the ability to punish offending without military attack weren’t so popular, we wouldn’t have sanctions at all. But the philosophy of that punishment sounds so good, like so many other popular myths (like that “a rising tide floats all boats” falsehood), we just keep doing it.

I’m Peter Dekom, and I suspect there is a national insanity in repeating the use of sanctions, which simply do not work, and hoping for a different result.