The imposition of sanctions is one of the most common—and commonly debated—tactics of modern diplomacy. Many nations across the world, from North Korea to Iran, to Russia, are under intense sanctions regimes imposed by dozens of countries. Their overall effectiveness as a means of deterring violations of international law, however, has been called into question. Some view sanctions as a way for countries to resolve conflicts without the use of military intervention, while others view them as a measure that is at best economically ineffective and easy to bypass, and at worst a tactic that does nothing other than burn bridges between nations that would otherwise be willing to come to a resolution.
On October 8th, Michael Wain—who worked at the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”)—came to address these questions and give an overview of how sanctions are implemented in the first place. Wain, a UVA alum, has extensive experience working with sanctions, including helping to formulate a strategy for the US government following Russia’s invasion of Ukraine. Wain’s talk was moderated by Gerard Alexander, a politics professor at UVA, and hosted by the Blue Ridge Center and the Econ Club.
Professor Alexander began with an illustration of one of the major critiques observers have made about sanctions. He showed a graph of exports from various European countries to Kyrgyzstan, which indicated that exports shot up exponentially after 2022, when Russia invaded Ukraine. In essence, countries in Central Asia, such as Kyrgyzstan, were becoming middlemen for transactions between Europe and Russia to avoid sanctions.
Wain then introduced himself, noting that, coincidentally, he had been to Kyrgyzstan before as part of his work with the Treasury Department. He began with a brief history of sanctions as a concept: some believe that what we think of as sanctions today came about in the prelude to the Second World War, when the American government placed restrictions on American businesses conducting transactions that involved assets in German-occupied Europe. Later, during the Cold War and the 1990s, sanctions generally took the form of “dumb sanctions,” or sanctions with broad scope and few specifics, generally intended to punish human rights violations or create a substitute for military action. In recent years, most sanctions have become “smart,” or specific and targeted against a listed set of companies or people.
The next part of the conversation dealt with more of the specifics of what happens when sanctions take place and how the Treasury Department helps to enforce them. Wain explained that the most common form of sanctions right now are “blocking” sanctions, which order individuals and companies in the United States not to buy from a particular list of people, companies, or products. While companies and individuals do occasionally attempt to plead ignorance about violations of sanctions, OFAC has a variety of resources to track compliance; most banks, for example, cooperate with OFAC to monitor bank transactions. Additionally, Wain noted, domestic sanctions violations by banks and large corporations are actually quite rare, as they tend to be so cautious with their investments in sanctioned countries that they will pre-emptively stop trading with non-sanctioned assets the moment other sanctions are implemented.
Following that, Wain and Alexander discussed international evasion of sanctions and evasion during the shipping process. Wain explained that while OFAC does have some authority to, for example, inspect shipping containers that may contain sanctioned goods, that authority is limited, and the frequent lawsuits that OFAC faces can make enforcement difficult. He also discussed “transshipment,” the process described above in the case of Kyrgyzstan, in which a company in one country ships to a middleman that has not agreed to a sanction regime, which in turn ships goods to a sanctioned country that it would not be able to acquire directly. Wain explained that while transshipment can, in theory, be used to evade sanctions, there is not much of a practical way to legally treat it as a violation.
Alexander then asked for a specific example of a country that has successfully avoided sanctions. Wain gave North Korea as his example: North Korea faces numerous sanctions imposed by the United Nations and various other entities, but has been able to effectively bypass some of them through the use of a “shadow fleet” of ships located in international waters that are vaguely registered at best, which then transfer resources such as Petroleum back to shore.
Finally, Alexander directly asked Wain the “big question” of the talk: are sanctions genuinely effective? Wain acknowledged that imposing sanctions can be a bit like playing a game of Whac-A-Mole: putting sanctions on one country often just leads to them getting the same resources from another place or simply evading the sanctions, which leads to a need for even more sanctions. Still, he noted that sanctions genuinely do at least partially accomplish their intended purpose, and that individuals, companies, and banks have historically cooperated with the US government in enforcing them.
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