Our goal in launching the Economic Security and Technology Department’s series is to promote debate about ideas that do not get adequate attention in Washington policy circles. As a bipartisan community of scholars, our expectation is thatBack & Forthwill model the art of thoughtful disagreement about unexplored solutions to our biggest challenges on economic security and technology. That, in our opinion, is the crying need of democratic governance in polarized times.
— Navin Girishankar, President, Economic Security and Technology Department, CSIS
Why Sanctions Fail
Nick Kumleben, Director (Energy), Greenmantle
Over the last two decades, the U.S. government has made sanctions its primary tool of economic statecraft. The United States has become the world’s sanctions superpower due to the far-reaching impact of the dollar on the global financial system and its increasing reluctance to engage in kinetic warfare and risk U.S. lives. As a result, the United States adds thousands of entities to sanctions lists every year, imposes three times as many sanctions as any other country, and has sanctioned a historically unprecedented share of key global markets like crude oil.
Sanctions have a simple and appealing promise. Sanctions cut off the target entity from trade altogether or reduce its revenues by forcing it to accept discounts on its sales. The United States is able to engage in offensive action toward its adversaries without placing boots on the ground. Moreover, the economic cost to the United States is often tiny, as sanctions generally affect smaller, poorer countries that do not constitute a significant share of global markets or U.S. imports. The goal of a sanctions program—like any offensive action—is to change the behavior of the target, by causing it enough economic pain to force it into negotiation or surrender.
Yet all too often, the elegant logic of sanctions does not translate into real-world impact. The world’s largest sanctions program—the U.S.-led attempt to cripple Russia’s economy as a result of its invasion of Ukraine in 2022—provides a good example of why sanctions fail. The United States and its partners have sanctioned Russia’s exports, its central bank, and many entities linked to Putin’s regime. Yet Russia’s economy remains robust, and its economic strength is translating into success on the battlefield. This is the case because of weaknesses inherent in sanctions: Sanctions in global markets require multilateral enforcement, and sanctions only provide limited deterrence.
Effective use of sanctions requires multilateral buy-in, and more importantly, multilateral enforcement. Sanctioning globally traded commodities like energy and metals cannot be done unilaterally. Thus, the United States and G7, comprising Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, have attempted to sanction Russian commodities together, via explicit sanctions on some products and a price cap on Russia’s crude oil and petroleum products. This program has had only a limited impact—Russia still exports roughly as much oil as it did before the war, and its exports may rise in the coming months as members of the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing nations, known as OPEC+, production caps increase. Around 80 percent of Russia’s oil exports are taking place above the price cap, traveling on shadow fleet ships and offloading to shell companies in Asia. Sanctions fail to change the economic reality that importers of Russian commodities still need the same quantity of oil, metals, and gas.
Multilateral sanctions coordination may only have been possible in an era of unchallenged U.S. leadership. Perhaps the best example of multilateral sanctions enforcement during the era of Pax Americana was the 1990s program of UN sanctions on Iraq as a result of Saddam Hussein’s invasion of Kuwait. This program reduced Iraqi oil exports to near zero and then imposed an oil-for-food program in which Iraq could export select amounts of oil in exchange for aid shipments. It worked because it had buy-in from across the United Nations, led by the United States.
Today’s world is quite different. The United States faces a meaningful challenge from another great power, China. China can ignore U.S. sanctions and actively assist sanctioned countries to continue exporting, as it does in Russia, Iran, and Venezuela. This assistance generally takes place with the assistance of third countries—for instance, Iranian oil is reflagged as Malaysian oil to get around U.S. sanctions and offload at Chinese ports, leading to the farcical situation in which Malaysia exports far more crude than it produces. Without multilateral enforcement, sanctions only cause serious economic pain when the sanctioned country is dependent upon economic relations with the country imposing sanctions, as was the case in apartheid South Africa after the congressional imposition of sanctions in 1986. And countries rarely sanction their allies and trading partners.
Moreover, sanctions have failed to deter hostile nations from acting in ways detrimental to U.S. national interest. Russia faced significant sanctions after its annexation of Crimea in 2014 yet still invaded Ukraine in 2022. Cuba remains a dictatorship 67 years after the imposition of a U.S. embargo. The failure of sanctions on Venezuela is probably the most egregious example in recent history. U.S. sanctions have failed to remove the Maduro regime from power, deepened a humanitarian crisis, and led to a mass exodus of Venezuelans to the United States and its regional partners.
Sanctions are often the policymaker’s tool of choice in the modern day, and it is easy to understand why. They are relatively easy to impose operationally, costless in terms of lives, and near costless in terms of economic damage to the United States. Yet as in markets, there are no free lunches in economic statecraft. The evidence from the past 30 years points to sanctions as a relatively limited tool, because they fail to deter bad actors and they fail without buy-in from partner countries, an especially acute problem in an era of great power competition.
Why Sanctions Work
Philip A. Luck, Director, Economics Program and Scholl Chair in International Business and Andrea Leonard Palazzi, Research Associate, Economic Security and Technology Department
Nick Kumleben’s analysis of “Why Sanctions Fail,” seen above, brings a long-debated issue to CSIS’s Back & Forth series: Do sanctions work? While scholars and policymakers have debated this for decades, Russia’s full-scale invasion of Ukraine, the prospect of a ceasefire, and the looming specter of a Taiwan contingency have reignited the discussion.
Using Russia as his primary case study, Kumleben argues that “the elegant logic of sanctions does not translate into real-world impact.” He attributes this failure to their ease of circumvention—primarily through trade with third markets like China—and their inability to deter bad actors. He rightly highlights how China and other non-sanctioning economies have helped Russia blunt the effects of coalition sanctions by acting as transshipment hubs, replenishing critical supplies, and providing alternative markets for Russian commodities, including diamond, gold, and oil. He also correctly points out that multilateral sanctions are more effective than unilateral measures.
However, his overall assessment of coalition actions against Russia, multilateral sanctions enforcement, and sanctions deterrence fails to fully account for the true impact of these measures. By underestimating both the direct and indirect influence of sanctions on state and non-state actors alike, he overlooks their full potential as a tool of geopolitical leverage.
Kumleben’s assertion that sanctions often fail to produce tangible results is based on the claim that “the goal of a sanctions program—like any offensive action—is to change the behavior of the target, by causing it enough economic pain to force it into negotiation or surrender.” But this is a narrow and incomplete understanding of sanctions. In the case of Russia, the objectives evolved from deterrence before the full-scale invasion to constraining the Russian economy, principally the degradation of the Kremlin’s ability to wage war until the present day.
By overlooking the degradation objective, Kumleben misses the larger reality of sanctions’ effectiveness. While he correctly observes that Russia’s economy has not collapsed, his analysis fails to acknowledge how sanctions have significantly weakened Russia’s war-making capacity and shielded Ukraine from greater destruction. Sanctions have deprived Russia of more than $500 billion in potential war funds and restricted its access to key industrial components, forcing it to pay exorbitant markups for crucial inputs—in some cases, more than 10 times the global market rate. Even the petroleum sector, which has been a lifeline for Putin, is showing serious signs of strain. In 2023, Gazprom reported roughly $7 billion in losses, which the company’s own internal reports attributed almost entirely to the impact of sanctions. As a result, Russia has been forced to cannibalize its own machinery for spare parts, and the quality of its military capabilities has noticeably deteriorated. Additionally, despite massive fiscal stimulus exceeding 10 percent of its GDP, Russia’s economy remains below its prewar growth trajectory, limiting its ability to sustain prolonged warfare.
He also argues that Russia’s economic resilience has translated into success on the battlefield, but this framing is misleading. First, defining “success” in a grinding war of attrition is problematic; Ukraine remains outgunned, but Russia’s military ranks are significantly depleted. Second, while Russia’s economy has not collapsed, its perceived robustness masks deep structural imbalances. In 2022, Russia’s GDP contracted by 2.1 percent, and although it has since rebounded, much of this growth stems from an artificial war economy centered on arms production. This unsustainable model, which is based on manufacturing and then rapidly destroying weapons, does not equate to long-term economic health. Furthermore, Russia has had to tap into its sovereign wealth fund at an accelerated rate, further illustrating its financial strain.
His argument on multilateral enforcement is similarly missing the bigger picture. He maintains that coordinated sanctions efforts were only possible under unchallenged U.S. leadership and that, in a multipolar world, countries like China and other third-party actors can help sanctioned economies continue trading. While it is true that Russia has rerouted large portions of its trade to emerging economies—which are gaining influence in global commerce (Figure 1)—his conclusion ignores the power of financial sanctions, the core of modern sanctions programs.
