By Morgen Makombo Sikwila
Sanctions have become a prominent tool in the realm of international relations, often used by powerful nations to influence policies and behaviors of so-called outposts countries.
While sanctions are intended to serve as diplomatic leverage and tools for promoting change, their impacts on developing countries can be profound and complex. One of the most immediate and visible consequences of sanctions on developing countries is their economic impact.
Sanctions can take various forms, including trade restrictions, financial penalties and investment prohibitions, which can literally freeze the economic growth of a nation. Developing countries, often lacking the diversified economies of developed nations, are particularly crippled by economic pressures.
The basic idea behind economic sanctions is that it is expected to create a major and sudden adverse economic shock. It assumes that when this shock is large enough, and the target country cannot anticipate or mitigate the costs, the target government is more willing to accept the demands of the sending country. Economic sanctions hurt the economic performance of the targeted economy through various channels including hampering international trade. The complete economic impact of sanctions goes beyond these direct effects related to the future domestic production. Sanctions increase political uncertainty in a target country which, in turn, will be again reflected in the economic performance by influencing domestic investment and consumption.
The imposition of sanctions decrease the target state’s annual real per capita GDP growth rate. Economic growth rates over time becomes more unstable due to political events, especially in developing countries, and these breaks in growth rates lead to distinct patterns. Ignoring these structural breaks gives a distorted picture of the factors that play a role in a country’s economic performance. Economic sanctions, therefore, seem a good candidate in the list of factors that cause the patchiness in economic growth, but instigators and opposition politicians primarily ignored them.
Economic sanctions increase the likelihood of an economic growth deceleration. Trade sanctions, multilateral sanctions, and sanctions aiming at the business sector are successful in creating a major economic shock.
The definition of economic sanctions which will be adopted in this article reads, “coercive measures imposed by one country, an international organization or as coalition of countries against another country—the government or any group within the country—with the aim of bringing about a change in a specific policy or behaviour.” Therefore, an economic sanction involves at least one sender state trying to make one target state comply with some political objective(s) by using economic pressure. Economic sanctions are utilized for different reasons, including cases of war, human rights abuses, support of terrorism, nuclear weapons development, or only as an instrument of economic warfare. Economic sanctions are intended to impose a serious restrain on the economic welfare of the target country—especially on the ruling elite and its supporters—and thereby make its leadership change its policies in order to avoid any further damage. The target government will act according to a “straightforward cost-benefit calculus” and will want to comply with the sender’s demands to avoid
more costs.
The hardship endured due to the sanctions by the citizens in the target state makes them pressure their government to agree with the requirements and conditions of the sending state(s) or organization(s). Sanction episodes may start with a threat by the sender(s), which, if not effective, maybe followed by implementation. Perhaps the sender and target come to a settlement without the need for the actual imposition of sanctions. If sanctions are actually imposed, a bargaining process will start. In particular, the outcome of this bargaining process can go in two opposite directions. First, the bargaining is successful, and a target country starts to cooperate. Consequently, ‘carrots and sticks’ may be provided by the sender state, like the partial lifting of sanctions or providing financial support. Second, the bargaining process is a failure, and the target nation does not cooperate at all. Trade sanctions on import or export restrictions are imposed on one or more specific goods, often including strategic items, by the sender that reduces the gains of economic growth on the target country.
Sanctions, once imposed, do have detrimental effects on international trade. In particular, the imposition of a sanction decreases the international trade of the target country. Trade sanctions influence the economic performance of a target country mainly in three ways. First, there exists a positive relationship between the volume of export and the growth of the economy. This implies that export restrictions will harm the economic performance of the target economy. Second, an import ban limits access to intermediate products, physical capital, and technology. The economic consequences of an import ban are less straightforward compared to export restrictions. On the one hand, as import restrictions are likely to hamper domestic production due to a shortage of inputs, it will also reduce the export performance of the target state. On the other hand, domestic import-competing firms may reap the benefits of an import ban due to higher production. However, when imports are being replaced by less competitive domestic production, it will lead to higher domestic prices and, therefore, cause inflation. Consequently, the real exchange rate will appreciate due to a rise in the inflation rate of the target country and make goods more expensive to purchase by foreigners. This will reinforce the negative sanctions’ effects on exports some further.
In the past decades many sanctions have been aimed to decrease technology transfer. These technology sanctions often aim to hurt the target’s military capacity or hinder it from developing nuclear weapons. . In this light, a technology import ban may lower growth because the target country misses the benefits of foreign technology, including learning. A subsequent effect is that the target country will fall behind in technical efficiency compared to rival countries.These rivals will exhibit a comparative advantage in the export product. The target country cannot compete internationally and misses out on export returns.
The second broad group of economic sanctions are financial sanctions. Financial sanctions are primarily aimed to interrupt the in and outflow of capital to the target. Financial sanctions compromise a wide set of coercive financial measures, including lending restrictions, restrictions on international money transfers, capital controls, or the withdrawal of foreign aid or foreign direct investments. The economic shocks caused by financial sanctions can be rather diverse. Financial sanctions could also interrupt trade flows without explicit trade sanctions involved and thus have similar economic effects. The target’s assets can be either frozen or vested, the latter meaning that ownership of the assets is transferred from the target to the sender. Already the threat of sanctions may discourage new foreign investors as they create an uncertain business climate.
The removal of loans or aid hinders access to hard currency and can even increase the debt burden of the target government. The prospect of sanctions shakes consumer confidence and adversely affect stock market returns.
The other broad category of sanctions is diplomatic sanctions. These policy measures are primarily aimed at decision-makers, the legislator or the political elite and its supporters. Diplomatic sanctions may take the form of seizure of assets, like physical property, securities, and bank accounts of diplomatic personnel or politicians, travel bans on government diplomats, ordering diplomats of the target to leave the territory of the sender government, recalling the sender’s own diplomats to return from the target country, temporary closing of embassies, ending diplomatic contact, and the suspension of an economic agreement or protocol.
Since diplomatic sanctions precisely aim to hurt the ruling regime and its elite supporters, it has been frequently argued that they are more effective in reaching the end goal than other sanctions. They are imposed in preference to trade and financial sanctions, whose effects are regarded as more indiscriminate. The complete economic effect of sanctions goes beyond the direct effect on drivers of economic growth. The main end goal of a sanction is to enforce a change in political behaviour that often is preceded by political instability. Political instability is apparent when sanctions are used as a tool to destabilize the target government. Political instability, in turn, affects international trade and foreign capital flows. Import flows are reduced because of low expected returns to investment or because of increased import costs due to inefficient or suboptimal trade policies. An unstable macro-economic environment reduces production by firms and thereby their exports. Economic deterioration caused by sanctions can also fuel a revolution of the public, adding to political chaos. Economic sanctions fuel corruption, unemployment, cronyism and unfair distribution of natural national resources.
Sanctions can in fact inadvertently lead to more state repression in target countries. Target leaders often feel threatened by foreign pressure as they interpret sanctions as a direct threat to their political survival. They therefore resist sanctioning country demands for policy reforms to avoid looking weak in the eyes of own supporters.
Leaders targeted by sanctions also have more incentive to curtail basic human rights and democratic freedoms. The use of repressive means against citizens is one way for a regime to communicate to its support base and the broader public that it remains defiant against domestic or external challenges to its authority. Even in cases where sanctions incite anti-regime protests and violence, target governments may respond to dissent using repressive means such as violent crackdowns on protests and political imprisonments. Some leaders might even use sanctions as a pretext to justify restrictions on human rights. Leaders paint sanctions as an infringement of their sovereignty and national integrity and defend the suppression of domestic dissent under the pretence of maintaining domestic unity.
In some cases, sanctions can also contribute to the deterioration of human rights in target countries by undermining the state’s ability and willingness to monitor and screen its bureaucratic agents. Since target leaders operate with less resources under sanctions, they might change spending priorities at the expense of certain government programs. This can include budget cuts to the oversight capabilities of security, police and other bureaucratic agencies. Left unmonitored, it is more likely that security and police forces will commit human rights abuses such as torture or the use of excessive force against peaceful demonstrators.
Sanctions can limit a developing country’s ability to import medical supplies and equipment, resulting in inadequate healthcare services. Sanctions can also disrupt food supply chains and agricultural production, causing food shortages and increased food prices. Sanctions can affect food security and exacerbate hunger in developing nations. Developing countries often employ various strategies to mitigate the impact of sanctions. These strategies may involve seeking assistance from international organizations, diversifying their economies or pursuing diplomatic negotiations. Many developing countries turn to international organizations such as the United Nations or Non-Governmental Organizations for humanitarian aid and support during periods of sanctions. These organizations can provide critical relief to affected populations. Some developing countries attempt to diversify their economies to reduce their dependence on sanctioned goods and services. By investing in alternative industries, they can cushion the economic blow of sanctions. Diplomatic negotiations and dialogue with the sanctioning countries can be a means of resolving conflicts and lifting sanctions
While sanctions can serve as diplomatic tools for change, their effects on developing nations can be profound, often leading to unintended consequences. Balancing diplomatic objectives with humanitarian concerns remains a crucial challenge in the realm of international relations. Developing countries continue to employ various strategies to mitigate the adverse effects of sanctions, emphasizing the importance of adaptability and resilience in the face of external pressures. A holistic approach is necessary to ensure that sanctions do not exacerbate the challenges faced by developing nations but instead contribute to meaningful and positive change.
Morgen Makombo Sikwila
MSc Peace and Governance
BSc Counselling
Diploma in Environmental Health
Certificate in Marketing Management
email address: morgensikwilam@gmail.com
Phone Number: 0772823282
