by Dr. Bryan R. Early and Keith A. Preble

U.S. Economic Sanctions Policy

Economic sanctions are coercive foreign policy tools that work by disrupting otherwise profitable commerce between the governments imposing them and their targets. In order to be effective, governments imposing sanctions must obtain the compliance of their constituents, or the sanctions will not harm their targets as intended. Complying with sanctions is costly for companies not only in terms of the commerce they disrupt, but also with respect to the investments required to prevent unintentional violations. Thus, as policy tools, economic sanctions inherently create costly compliance obligations for companies. Given that employing sanctions appears to run counter to U.S. President Donald Trump’s goal of reducing regulatory burdens on U.S. firms, it is surprising that he has heavily relied upon threatening and imposing sanctions as part of his administration’s foreign policy.

Two years into the Trump Administration, we can begin to see evidence of how this tension in President Trump’s policy preferences has affected the implementation of U.S. sanctions. Despite the fiery rhetoric directed at the targets of U.S. sanctions, our research indicates that the U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) has adopted a softer stance on sanctions enforcement during the Trump Administration than during his predecessors’ administrations. The major area in which OFAC’s recent enforcement policies have been more stringent is in punishing foreign sanctions violators. This suggests that OFAC has resolved the tension between reducing regulatory burdens on U.S. firms and President Trump’s sanctions preferences by focusing more of its attention on punishing foreign firms instead of American ones for violating sanctions. Continue reading →