Sanctions - A Mixed bag

 Whenever the world goes through a political crisis perpetrated by any country the inevitable consequences of suffering and destruction follow. But there is another consequence which follows, and that is imposition of sanctions. Sanctions are a prerogative of the rich countries which can deny the poor ones something that is essential to them. It could be finance, market access, trade access, currency exchange facilities, the list is long.

There are many instances where nations have faced sanctions for years due to getting into the bad books of a rich country’s government. The US is the principal mover and shaker in this domain. Europe has been somewhat reluctant to impose sanctions on countries. Europe has far less political, military and financial clout than the US and Europeans do not like to upset their own apple cart which could possibly lead to reduced trade with the consequent pains that follow.

Whether sanctions have worked or not is a moot point. It has been a mixed bag so far. A good example would be Iran. After the death of the pro-US Shah of Iran, the Iranian government’s wish to acquire nuclear technology especially after the rise of Ayatollah Khomeini did not help matters. A typical Islamic fundamentalist regime came into being and Iran has been under US sanctions for more thirty years for one reason or the other. Even so the US objective has still not been achieved. Iran has found ways to circumvent the sanctions. Experts say it has developed a vast network of clandestine money laundering agencies which enable it to avoid the legitimate and monitored international banking system.  This network has rendered some of the sanctions ineffective.

India also has been under sanctions for various reasons. After the nuclear tests of 1974 and 1998, sanctions kicked in and there was technology denial by the Americans. Most of Europe followed suit with the exception of France. But apart from delaying acquisition of some crucial military and space technology, it did not deter India from achieving its goal, which was to demonstrate nuclear deterrence against China. In fact sanctions have forced India to become more self-reliant in certain advanced technologies.

Similarly, the on-going Russia -Ukraine conflict has also triggered sanctions against Russia. But European dependence on Russian oil and gas has prevented a consensus from being achieved on banning Russian energy products. Hungary and some other countries have objections to banning Russian oil completely. Moreover, the Russian demand to pay in Rubles is now being met by most of the European countries.  Besides restricting purchase of oil, it will be more difficult for Europe to switch from Russian gas due to technical and economic reasons.

In this interdependent world room to wriggle and lessen the effects of the sanctions can always be found as the current Russia – Ukraine conflict demonstrates. There is some daylight between nations of the EU. Their oil purchase policies are not fully aligned

Also, today, there are too many sanctions on too many countries in the world. Iran, Venezuela and Russia are under sanctions. Their oil supplies have been severely curtailed, which has played havoc with oil prices.

One other fallout of this war which has not attracted much attention is the arms supplies to Ukraine.  European and American arms manufacturers and merchants are making billions by selling arms to their governments which are then given away to Ukraine. So sanctions or no sanctions, somebody has already started making money on this war.

While Russia is definitely feeling the bite of the sanctions, it is also one of the largest producers of food grains (wheat) , and energy (oil and gas) which has given it considerable leverage over Europe. The sanctions are not biting hard enough to make Russia change its policies. Russia is also luring countries with discounted oil.  This conflict as a result could drag on for a long time.

Sanctions are now perceived an outdated instrument of foreign policy to get perceived wayward countries to fall in line. There is also collateral damage to other countries which could be avoided. A revisit is urgently needed.