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Sanctions as a Tool of Economic Warfare

The global economy is a complex and ever-changing landscape, and the relationship between economy, power, and influence is complex and multifaceted. A strong economy is essential for a nation to exercise power and influence on the global stage. Conversely, a nation's power and influence can have a significant impact on its economy. Today, as national economies rush to increase their global influence, economic warfare is seen as a major part of their geopolitical arena.


An illustration on sanctions and economic warfare

Illustration by Team Geostrata


Economic sanctions are a particularly important tool for states in international politics. Since the end of the Cold War, their use has increased rapidly. While they play a crucial role in shaping foreign policies, they can also levy huge economic costs on target developing economies.


Sanctions can range from trade agreements and asset freezes to a ban on travelling and many other financial restrictions. The choice to use sanctions as a part of economic warfare is a planned decision made by states to achieve their geopolitical goals of minimizing military confrontation.

Western democracies, particularly the United States and the European Union, are the most frequent initiators of economic sanctions. Conversely, countries like those in Latin America find themselves most commonly on the receiving end of these sanctions.

The primary motivations behind imposing sanctions include compelling target nations to act in a particular manner as expected by the sanctioning nations, such as engaging in violence or destabilizing their ruling government. In particular, sanctions can target an entire country, or they can be more narrowly targeted at individuals or groups; this latter form of sanction is sometimes called "smart sanctions".

The effectiveness of economic sanctions in terms of meeting their stated objectives is heavily disputed. Economic sanctions fail between 65-95% of the time in achieving their intended goals.

The findings by Morgan and Schwebach (1997) suggested that states impose high economic budgets on target nations, while Sen K. (2013) observed that sanctions forced on promoting human rights majorly result in the degradation of human rights conditions.

Economic sanctions have been a tool of U.S. foreign policy for many years, but their current level of popularity is unprecedented. Their purpose is to apply economic pressure on foreign governments, forcing them to do something as Washington desires.

The prime example is the sanctions that made Iran sign the 2015 Joint Comprehensive Plan of Action, under which it agreed to stringent regulations on its nuclear program.

Economies like those in Latin America and Cyprus have also been a part of this vicious cycle. While the specific circumstances and outcomes vary, the common thread is that sanctions often lead to suffering for ordinary citizens, economic stagnation, and political instability. Let's delve into the challenges faced by them against sanctions.

LATIN AMERICA: A HISTORY OF ECONOMIC STRUGGLES

Countries like those in Latin America have a long history of facing economic issues, and economic sanctions have further accelerated the situation. One significant case is Cuba, which was embargoed by the U.S. for over six decades.

The embargo has had the most disastrous impact on Cuba's economy, limiting its access to the world trade market and upcoming economic growth. While the Cuban government has altered to survive, the citizens have experienced the heat of the sanctions, facing heavy shortages in essential goods and services.

Venezuela, another Latin American nation, was also hit by the economic sanctions. In particular, sanctions were imposed for political disruption and human rights violations. However, they have had a devastating impact on the Venezuelan economy, leading to hyperinflation, food and medicine shortages, and a mass emigration of its citizens seeking better opportunities elsewhere.

One thing that is clear from sanctions' is that they may target specific governments or leaders, but the natives experience the worst. They often alter existing issues and create new ones.

CYPRUS: A DIVIDED ISLAND UNDER ECONOMIC STRAIN

The island has been divided into two parts since 1974, with the Republic of Cyprus in the south and the self-declared Turkish Republic of Northern Cyprus in the north. The international community imposed sanctions on Northern Cyprus as a means to reunite it with the southern half.

These sanctions posed powerful economic repercussions for Northern Cyprus. Its complete isolation from global markets created a substantial decline in the economy and limited opportunities for its residents.

While the political agendas behind the sanctions might be evident, the moral implications of their impact on the lives of ordinary people are a matter of concern.

XINJIANG UNVEILED: HUMAN RIGHTS ABUSES AND SANCTIONS' GLOBAL IMPACT

China has committed some severe physical abuse, among other serious human rights abuses, targeting Uyghurs, a Turkic Muslim population indigenous to Xinjiang, and other ethnic minorities in the region.

Difficulties arose when Treasury sanctions were imposed on target individuals and entities involved in Xinjiang-related issues, restricting their access to U.S. financial institutions and thereby limiting China's ability to trade and engage in world monetary transactions.

Xinjiang, already a victim of forced labour and exploitation, has been exacerbated by the EU sanctions. These sanctions have caused China to escalate its repressive policies, worsening human rights abuses. The aim is to address the issues of forced labour by the entities involved in Xinjiang, but it might end up harming local workers and individuals who rely on these jobs.

China's denial of the mass detention of Uyghurs in Xinjiang is further escalating the issue, as other nations such as the U.S. and the UK have joined hands with the EU to impose sanctions, causing significant problems for both individuals and the economy.

THE IMPLICATIONS

  • Humanitarian Crisis

One of the most devastating impacts of economic sanctions on developing countries is the humanitarian crisis. The most vulnerable sections of developing countries are most affected by sanctions, which can disrupt the flow of essential goods and services, leading to food and medicinal shortages, malnutrition, and inadequate healthcare.

  • Economic Stagnation

Sanctions can lead to economic stagnation, affecting development and prosperity. By limiting trade and investment opportunities, these actions can encourage poverty and unemployment, making it difficult for developing countries to rise above the clouds of underdevelopment.

  • Political Instability

Sanctions can sometimes create political instability. When the government is going through adversity created by sanctions under economic crises, it may develop repression by engaging in international conflicts and avoiding domestic ones.

  • Diplomatic Challenges

Sanctions have the potential to create tensions in diplomatic relations, which may further prevent the nations from having peaceful negotiations. At times, sanctions can pose an obstacle to resolving conflicts by erecting a barrier to dialogue.

  • Unintended Consequences

Sanctions often have some unintended consequences, such as the rise of black markets, corruption, and smuggling. These actions can additionally affect the credibility and stability of governments in developing countries.

Economic sanctions, whether they target specific countries, entities, or individuals, have ripple effects that can impact the entire world, including a country as significant as India.

IMPACT ON THE WORLD

  • Global Economic Stability

Economic sanctions can disrupt global economic stability. These disruptions can have far-reaching consequences that can create uncertainty in financial markets, affect currency exchange rates, and lead to decreased international trade, harming countries that rely on the global economic system.

  • Supply Chain Disruptions

In this global era of interdependence, sanctions can disrupt the flow of goods and materials, affecting the supply chain and industries worldwide. For instance, restrictions on the trade of key components or raw materials may affect the production of products globally, impacting consumers and industries in various countries.

  • Energy Prices

Sanctions imposed on oil-producing nations can lead to fluctuations in energy prices. Any significant increase in oil prices and energy costs can cause a ripple effect on various industries, including the cost of living for people worldwide.

  • Financial Institutions

Sanctions often involve limitations on financial transactions with specific organisations, which can have consequences for international banks and financial institutions. This can impact their operations, causing concerns about the stability of the worldwide financial system.

IMPACT ON INDIA

  • Trade and investment

India plays a significant role in global trade and investment. Sanctions imposed on countries or entities dealing with India can disrupt trade relationships and investment opportunities, affecting Indian businesses and economic growth.

  • Energy Security

India is a major importer of energy fuels like oil and gas. Sanctions imposed on oil-producing countries can impact India's energy security, causing higher prices and supply disruptions, or affecting the economy.

  • Geopolitical Positioning

India, like many countries worldwide, has a complex geopolitical sphere. The implications of sanctions can affect India and its diplomatic relations with other countries, making it difficult to choose its foreign policy to align with the international community.

  • Financial Institutions

Economic sanctions can affect the Indian financial sector if they are linked to the targeted nations. Abiding by international norms can be challenging as well as costly for Indian financial organisations.

  • Security and defence

Sanctions can be disruptive to India's defence procurement and coordination with other nations. Restrictions on the sale of military equipment or technology can affect India's defence capabilities.

CONCLUSION

In general, economic warfare seems to be able to do more harm than cure. Sanctions are often imposed on countries to end wars, human rights violations, or to restore democracy. It is unclear whether the side effects of sanctions are worse than the population’s fate if the international community fails to act.

The impact of sanctions on targeted individuals, such as leaders and social business elites, often differs significantly from that experienced by the common masses. While the intended goal of sanctions is to exert pressure on those in power, it is often civilians who bear the burden of the consequences.

These measures can lead to economic hardship, reduced access to essential services, and increased suffering among the most vulnerable in society. The disproportionate burden placed on everyday people, from economic hardships to limited access to basic necessities, underscores the need for a reevaluation of the effectiveness and ethics of such punitive measures.

It is significantly important for global powers to carefully examine the humanitarian and economic consequences of sanctions, especially when targeted at developing countries. Balancing diplomatic goals with the well-being of vulnerable populations is a complex challenge, but one that is crucial for achieving lasting peace and stability in a rapidly evolving global landscape.


 

BY KANAN GANGWAR

TEAM GEOSTRATA

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