Effectiveness of Economic Sanctions in Achieving American Foreign Policy Goals

February 24, 2022
3:38 pm

Are economic sanctions an effective strategy to achieving American foreign policy objectives?


This paper explores the relevance and use of economic sanctions, as well as the consequences and effectiveness of limiting trade to compel changes in behavior among other countries. The factors that determine the effectiveness of economic sanctions and the specific ways that the United States, as a sanctioning nation, is impacted by its own attempts to use embargoes and other trade and financial restrictions as a tool for accomplishing its foreign policy objectives.


Economic sanctions include trade barriers or other travel, commercial, or financial  penalties imposed against one or more foreign countries or its citizens. These restrictions may be placed on nations in the form of embargos on imports and exports, foreign aid reduction, and closing embassies and other diplomatic relations, etc. Bans may also be placed on individuals and groups within target countries through travel bans and freezing financial assets.

Economic sanctions (herein alternatively referenced simply as “sanctions”) are used to ‘turn up the heat’ when diplomacy has failed to produce the desired results. Sanctions are viewed as a middle-point between the extremes of diplomacy and war and are used to 1) compel a change of behavior, or 2) avoid an undesirable future situation. Examples of desired outcomes often include stimulating popular demands for political change internally, banning arms-related exports or the trade of other specific critical technologies, combating terrorism, genocide, human trafficking, and narcotics, and preventing the development of weapons of mass destruction.

Current international conflicts that have or may warrant U.S. economic sanctions include Russia’s invasion of Ukraine; China’s threats of taking Taiwan, Hong Kong, and other activity in the South China Sea; China’s Uyghur/Muslim internment camps; Iran’s nuclear weapons programs and threats to destroy Israel; Myanmar and the Rohingya genocide/ethnic cleansing; North Korea’s behavior as a rogue state; Cuba and human rights violations; and many other smaller issues that may warrant our attention. The United States must determine whether economic sanctions may be relied on as an effective tool for navigating conflicts and crises.

Using several empirical and theoretical evaluations of current and past implementations of economic sanctions by the U.S. and foreign nations, this paper seeks to answer the question, “Are economic sanctions an effective strategy to achieving American foreign policy objectives?”


How, where, and when have economic sanctions been used?

The Embargo Act of 1807 was a retaliatory act passed by Thomas Jefferson to avoid the molestation of American merchant ships by the quarreling French and British nations. The embargo was a massive failure which hurt the United States economically as our trade decreased substantially, as well as politically due to our apparent inability to effectively wage economic warfare. Economic sanctions received little use or attention in the United States through the 19th century until Woodrow Wilson expressed interest in using embargoes during World War I (Ip, 2021). World War II also created a climate that made sanctions a tempting strategic tool. By this point, the United States was far more relevant economically than it had been in the early 1800s.

The use of economic sanctions have escalated during and since the Cold War (O’Quinn, 1997). Today, the United States has implemented ~32 sanctions programs on more than 20 countries (Chatzky, 2019, see Table 4). Recent sanctions have targeted unfriendly nations, particularly those experiencing war and uprisings, such as Syria, Venezuela, and Cuba (O’Grady, 2021). Other sanctions target nations considered to be rogue and volatile, such as Iran and Russia, or North Korea which “spends more on its military, as a ratio of gross domestic product, than any other of the 170 countries tracked by the U.S. State Department” (Martin, 2021).


Have economic sanctions been successful at reaching their stated goals?

Use of economic sanctions in the 1980s and 1990s by U.S. presidents, such as Ronald Reagan and Bill Clinton, stimulated lasting discussion and debate regarding the effectiveness of economic sanctions as tools for achieving American foreign policy objectives (Talley, 2017). In 1992, a report was commissioned by the Senate’s Committee on Foreign Relations to investigate the very question (Committee on Foreign Relations, 1992). Additional analyses have been conducted by economic think-tanks and research organizations, such as the Heritage Foundation (1997) and the Peterson Institute for International Economics (1997).

Research conducted by the Peterson Institute (1997) found that 35 percent, among a sample of 115 cases of U.S. involved sanctions, were at least partially successful between WWI and 1990. Among successful sanctions, the average cost to target country GNP was ~2.4 percent. For the remaining unsuccessful sanctions, the average cost to target country GNP was ~1 percent. According to the stated objectives of the economic sanctions used, there has been a declining effectiveness of U.S. economic sanctions as a foreign policy tool, especially when used unilaterally. The Peterson Institute found that there was at least partial success in 53 percent of the cases analyzed for U.S.-involved sanctions prior to the 1970s (see Table 2). However, the effectiveness of U.S.-involved sanctions decreased to a mere 21 percent success rate between 1970-1990. Unilateral sanctions proved to be at least partially effective in only 13 percent of the cases at achieving U.S. foreign policy goals since 1970 compared to 21 percent for multilateral sanctions as stated above. This shows that increased global economic integration makes U.S. trade replaceable, and our sanctions are losing coercive power. Interestingly, the threat of additional sanctions is often far more powerful at pushing change than the actual damage of standing sanctions (Radcliff, 2021).


What are the economic and political costs and risks of using sanctions?

Sanctions come with a steep price for the imposing nation. The U.S. experiences a loss of $15-19+ billion in potential American exports annually (Elliot, 1997) resulting in a loss of 200,000+ American jobs in the lucrative export sector. The U.S. Department of Commerce estimated that $1 billion of goods exported by the United States supported 15,500 jobs. That can be extrapolated to represent nearly a quarter-million lost jobs ($15-19 billion * 15,500 = 200,000-260,000 jobs). These jobs in the export sector pay 12-15 percent better than comparable jobs in other sectors (Elliot, 1997). The Heritage Foundation makes the case that sanctions against friendly nations may cause a loss of international confidence in U.S. supply chain reliability (O’Quinn, 1997). Increased barriers to trade results in decreased competition and increased costs of commerce as expensive supply chains are overhauled. There is also a risk of retaliatory sanctions from powerful countries with untold economic consequences. Deadweight losses are incurred as trade barriers are inflicted on both foreign and American producers (see Table 1). Embargos consistently and negatively impact domestic trade as well (see Table 2).

The political consequences of failed economic warfare include a loss of credibility and leverage due to repeated failure (such as that experienced during the Embargo Act of 1807) and unintended adverse impacts on non-target demographics that can cause bitterness and animosity towards the United States. Economic warfare is often too broad and far-reaching to effectively manage the scope of the impact. Unintended effects can channel resentment towards the U.S. in ways that may create additional problems in our future. According to the Heritage Foundation, “Unilateral economic sanctions applied against friendly countries because of single-issue disputes… may reduce cooperation on other more important issues and damage broader U.S. interests” (O’Quinn, 1997).


What are the conditions for successful economic sanctions?

A relatively simple way to increase the likelihood of success is to have relatively modest goals that require little multilateral cooperation. The more a sanction depends on multilateral cooperation, the less likely the sanction is to be successful. Sanctions are most likely to be at least partially effective when the target country is smaller, economically weak, and politically unstable (i.e. when there is strong internal political opposition to the target government) and the target nation cannot easily replace American trade relations with that of another country. The sanctioning and target country should previously be friendly toward one another and engage in significant trade and prior to the sanctions. This causes the target nations to desire a return to the “normal” relations of the past, rather than starting over by developing new allegiances and trade relations with other nations. National pride of the target nation, the duration of sanctions, and the degree of economic integration are critical determinant elements to the success of economic war.

The problem currently facing the United States is that most of these essential conditions do not apply to the most relevant cases where the U.S. seeks to compel change without war. Target nations are often large, powerful, and economically integrated with other countries. “Smart sanctions” that target key individuals may be a more effective policy (O’Hanlon, 2019).



Economic sanctions remain a valuable tool—albeit one of diminishing strength—for compelling change when all or most conditions are right. However, it must be recognized that sanctions are a two-edged sword that should be utilized sparingly and with careful deliberation. Standard economic sanctions come with a cost on the sanctioning nation. In implementing sanctions, the United States has historically paid a high economic price with a tragically low success rate. Moving forward, “smart sanctions” that target key individuals and their assets may be a more effective, less costly tool in future conflicts. When sanctions are used, they should be imposed quickly and decisively while avoiding excessive repercussive costs to Americans.


Chatzky, Andrew. “What Are Economic Sanctions?” Council on Foreign Relations. Council on Foreign Relations, August 12, 2019. https://www.cfr.org/backgrounder/what-are-economic-sanctions. 

Committee on Foreign Relations, and Allan I. Mendelowitz, Economic Sanctions: Effectiveness as Tools of Foreign Policy (1992).

Elliot, Kimberly Ann. “Evidence on the Costs and Benefits of Economic Sanctions.” Peterson Institute for International Economics, October 23, 1997. https://www.piie.com/commentary/testimonies/evidence-costs-and-benefits-economic-sanctions. 

Ip, Greg. “Global Economic Warfare Intensifies as Military Conflict Recedes.” The Wall Street Journal. Dow Jones & Company, September 8, 2021. https://www.wsj.com/articles/global-economic-warfare-intensifies-as-military-conflict-recedes-11631109600.

Martin, Timothy W. “North Korea’s Missiles and Nuclear Weapons: Everything You Need to Know.” The Wall Street Journal. Dow Jones & Company, September 15, 2021. https://www.wsj.com/articles/north-koreas-missiles-and-nuclear-weapons-everything-you-need-to-know-11610712018.

O’Grady, Mary Anastasia. “Opinion | the Root Causes of Cuban Poverty.” The Wall Street Journal. Dow Jones & Company, July 25, 2021. https://www.wsj.com/articles/cuba-protests-poverty-communists-11627238910.

O’Hanlon, Michael. “Opinion | Defending the Periphery of the West without Going to War.” The Wall Street Journal. Dow Jones & Company, June 2, 2019. https://www.wsj.com/articles/defending-the-periphery-of-the-west-without-going-to-war-11559507259.

O’Quinn, Robert P. “A User’s Guide to Economic Sanctions.” The Heritage Foundation Backgrounder. No. 1126, June 25, 1997. 

Radcliffe, Brent. “How Economic Sanctions Work.” Investopedia. Investopedia, July 26, 2021. https://www.investopedia.com/articles/economics/10/economic-sanctions.asp. 

Talley, Ian. “Economic Sanctions Have Limited Reach.” The Wall Street Journal. Dow Jones & Company, September 10, 2017. https://www.wsj.com/articles/economic-sanctions-have-limited-reach-1505059344.

Zschaepitz, Holger. Twitter Post. April 15, 2018. 7:16 AM. https://twitter.com/schuldensuehner/status/985507220124299265?lang=ga



Table 1

(Source: Zschaepitz, Holger. Twitter Post. April 15, 2018. 7:16 AM. https://twitter.com/schuldensuehner/status/985507220124299265?lang=ga)


Table 2

(Source: Elliot, Kimberly Ann. “Evidence on the Costs and Benefits of Economic Sanctions.” Peterson Institute for International Economics, October 23, 1997. https://www.piie.com/commentary/testimonies/evidence-costs-and-benefits-economic-sanctions.)


Table 3

(Source: Elliot, Kimberly Ann. “Evidence on the Costs and Benefits of Economic Sanctions.” Peterson Institute for International Economics, October 23, 1997. https://www.piie.com/commentary/testimonies/evidence-costs-and-benefits-economic-sanctions.)


Table 4

(Source: Chatzky, Andrew. “What Are Economic Sanctions?” Council on Foreign Relations. Council on Foreign Relations, August 12, 2019. https://www.cfr.org/backgrounder/what-are-economic-sanctions.)

Jacob Householder

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