This article is a review of the work Clifton Morgan T., et al. (2023). Economic Sanctions: Evolution, Consequences, and Challenges, The Journal of Economic Perspectives, Volume 37.
The term "sanctions" has become increasingly prevalent in Kazakhstani society since the beginning of 2022. Particular attention was drawn to the imposition of secondary sanctions by the United States against the Kazakhstani company TOО Elem Group on December 7. This action has sparked widespread concern among local citizens, emphasizing the threat that sanctions pose to the country's economy.
For several years now, Kazakhstan has been contending with potential secondary sanctions due to its close collaboration with Russia, rendering the country vulnerable to geopolitical pressures. Furthermore, Western media frequently associates Kazakhstan closely with Russia, adding complexity to maintaining a balance between Western interests and strategic relations with its northern neighbor. It is essential to consider that Kazakhstan has thus far managed to avoid secondary sanctions by navigating between diverse interests. However, amid global consolidation against the Russian invasion of Ukraine, the country finds itself in a challenging position. Russia, in turn, becomes the most sanctioned state, accompanied by significant negative consequences for the mineral resources market.
The imposition of sanctions against Russia represents a challenging and resolute decision, considering the country's pivotal role in the global mineral resources market. Such a measure affects not only Russia's economy but also has repercussions on countries maintaining close relations with it, including Kazakhstan. Given the current political and economic situation, it is crucial to delve into the topic of sanctions, including their terminology, history, and consequences. Morgan et al. (2023) published a study on this subject, examining the evolution of this instrument in international relations.
Sanctions are restrictive policy measures that one or more countries undertake against a specific nation with the aim of persuading that nation to alter its policies or address potential violations of international norms or conventions. There are six types of sanctions: financial sanctions, trade sanctions, sanctions on military support, arms sanctions, travel restrictions, and "other" sanctions. Additionally, sanctions are imposed with specific objectives in mind, such as policy change, destabilization of a regime, resolution of territorial conflicts, counterterrorism, prevention and cessation of warfare, protection of human rights, promotion of democracy, and others.
Researchers examine sanction cases from 1950 to 2022, dividing this period into four temporal segments due to each period's distinctive features. Figures 3 and Figure 4 visually depict these data.
The period from 1950 to 1975. This period is characterized by the total dominance of the United States in the sanctions landscape, with the U.S. being responsible for one-third of all sanctions worldwide. The most common types of sanctions during this period were trade and arms embargoes. The primary objectives of these sanctions were often regime destabilization or influence over armed conflicts. The authors also note that the United States frequently imposed sanctions on the Soviet bloc countries in Eastern Europe and nations leaning towards communism. Additionally, the U.S. resisted the integration of China into the global economy during this period..
The period from 1975 to 1990. During this period, there is a noticeable weakening of the United States' position as the primary global sanctioning authority, even though they continued to be the foremost imposers of sanctions. European states gradually increased the number of sanctions imposed on other countries. The share of trade sanctions remained stable, while the proportions of financial and military sanctions notably increased. Additionally, it is worth noting that the number of sanctions aimed at protecting human rights increased during this period. The objective of combating international terrorism also followed a positive trend towards the end of the period.
The period from 1990 to 2000. This period is singled out as it was marked by the significant hope for the establishment of a "New World Order," where democracy and liberal economic relations would continue to spread. Throughout this decade, the overall number of sanctions remained the same. The goal of changing political regimes lost its popularity, while the number of sanctions aimed at promoting democracy and human rights showed a positive trend. It is important to emphasize that during this time, the number of multilateral sanctions increased, thanks to the European Union and the United Nations.
The period from 2000 to 2022. During this timeframe, there was a substantial increase in the overall number of sanctions. Additionally, restrictions became more targeted, focusing specifically on certain individuals and companies. One explanation for this sharp rise in the number of sanctions may be the streamlining of sanction imposition procedures in the United States. This accounts for the significant proliferation of financial sanctions and travel restrictions during this period.
Source: Clifton Morgan T., et al. (2023). Economic Sanctions: Evolution, Consequences, and Challenges, The Journal of Economic Perspectives, Volume 37.
The perspectives of economists and political scientists on the effectiveness of sanctions differ. Economists assess the effectiveness of sanctions based on the magnitude of economic damage caused by their imposition, whereas political scientists deem sanctions "effective" depending on their success in achieving set political objectives. It is commonly held that sanctions exert a substantial economic impact. In total, scholars identify four main conclusions.
Sanctions exert a significant and adverse impact on economic entities, sectors, and specific occupations within the sanctioned states.
Economic sanctions exert a pronounced negative influence on the overall productivity of sanctioned countries, encompassing trade, foreign direct investments, growth, poverty, and political stability.
The impact of sanctions on economic development, trade flows, foreign direct investments, and growth is long-term and often persists even after their removal.
The consequences of imposing sanctions can vary significantly depending on their type and severity. The number of parties united against a particular country can also have an impact, as sanctions may be imposed unilaterally or multilaterally (sanctions from the U.S. vs. UN sanctions).
The third countries play a crucial role in the matter of the economic impact of sanctions. Firstly, sanctioned countries may redirect international trade and investments to third countries that do not align with the imposed restrictions. Typically, this is done to safeguard specific economic entities that play a significant role in terms of national interests. Secondly, the sanctioning parties themselves may face retaliatory measures, often prompting a redirection of their economic activities towards third, non-sanctioned countries.
There are two fundamentally different channels through which sanctions impact third countries: the "general equilibrium" channel and the "extraterritorial" channel. Consequences from the "general equilibrium" channel are often positive for third countries. This concept is intuitive and implies increased economic activity in third countries that serve as substitutes for missed opportunities due to the impossibility of operating in sanctioned conditions. A notable example is the increased volume of Russian oil imports by India and China. "Extraterritorial" sanctions (or secondary sanctions) can be seen as punitive measure against individuals, organizations, and other entities engaging in trade, investments, and other business activities with the sanctioned country. Belarus, currently facing severe sanctions from the EU, serves as an illustrative example.
Furthermore, the authors discuss the challenges and future issues related to this topic, which researchers will still need to address. The researchers also examined sanctions imposed on Russia, suggesting that these sanctions may not deter the aggressor from the invasion of Ukraine. However, comprehensive, multilateral sanctions will inflict long-term and severe economic damage on the Russian economy.
