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What are Economic Sanctions? How They’re Used, and Why

What are Economic Sanctions? How They’re Used, and Why

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Economic sanctions: In the wake of the war that was recently sparked by Russia’s attack on Ukraine, it’s a term that you’re like to hear a lot going forward. While they’re typically a tool used by diplomats and politicians, it’s important to understand just what economic sanctions are, how they’re used, why they’re used, and if they work.

So, what are economic sanctions, and why are most countries levying them against Russia after it invaded Ukraine? We’ll run you through it.

Economic sanctions: What are they?

Economic sanctions are tools that governments use to achieve certain foreign policy goals. They can take many forms, too, such as travel bans or trade restrictions. Essentially, you can think of economic sanctions as a way to use money, or economic power, as a weapon.

We mentioned a couple of examples of what economic sanctions may look like, but here are some others:

  • Arms embargoes
  • Asset freezes
  • Asset seizures
  • Travel bans
  • Trade restrictions
  • Tariffs
  • Financial transaction restrictions

This isn’t an exhaustive list, but it should give you an idea of what economic sanctions may look like in practice. An example can help, too. Let’s say that Country A has some issue with Country B, and decides to use economic sanctions to try and prod Country B into making a change.

If Country B’s primary export is timber, Country A may impose trade restrictions on timber from Country B. If Country A had previously purchased a lot of timber from Country B, Country B’s economy would likely feel the impact in a big way. It’s essentially Country A’s way of flexing its economic muscle.

While the U.S. and many other countries are currently levying all sorts of economic sanctions against Russia, the U.S. also sanctions other countries, too, like China, and Cuba.

Why and when are economic sanctions used?

Economic sanctions usually have a desired outcome: To change another country’s behavior. That’s why, as of early March 2022, Russia is the target of many economic sanctions. It’s because many other countries in the world (including the U.S.) are trying to pressure Russia into ceasing its invasion of Ukraine.

Effectively, countries like the U.S. are using economic sanctions (and hefty ones, too) instead of military force to try and get Russia to change course. 

But again, this is only a very recent example. And it’s an example involving an entire country. Economic sanctions can also be used against certain industries, institutions, businesses, or even individual people. The common denominator is, however, an attempt to get the target of the sanctions to alter its behavior—or to enact some sort of punishment for past behavior.

Certain countries or organizations (like terrorist groups) can be the target of sanctions from different countries or organizations at the same time, too. Here’s an example of how some groups and nations are the targets of U.S. sanctions, EuropeanUnion sanctions, and United Nations sanctions, and how they all intersect:

Source: The Council on Foreign Relations

Do economic sanctions work?

So, using economic pressure to try and get another country or person to do something—does it actually work? It’s tough to give a blanket answer, as sanctions can have drastically different forms and goals. But in general, the answer is yes.

Well, partly yes. Some countries simply learn to live with sanctions or to evade them. It’s also important to realize that sanctions not only hurt the target, but they can hurt the sanctioner, too. They’re powerful, sometimes effective, but can have their downsides. 

While the world currently targets Russia with sanctions, it’s good to know what they are, how they work, and why they’re important. You’ll likely hear about them more and more as time moves on, and economies become more global and entangled. 

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