Sanctions Can’t Spark Regime Change

In the last several decades, financial and economic sanctions have become a key tool of U.S. foreign policy. The Trump administration has made particularly heavy use of this tool, especially in its efforts to induce regime change in Venezuela and Iran. On March 21, for instance, National Security Adviser John Bolton tweeted that unless Venezuelan President Nicolás Maduro relinquishes power, “he and his cronies will be strangled financially.” The next day, the White House announced sanctions against one major Venezuelan bank and four of its subsidiaries, stating that the United States “will continue to take steps to pressure Maduro, his regime, and those who support him, until they step out of the way and allow a democratic transition to occur.”

And although the administration has been more oblique in its call for the overthrow of Iran’s clerical regime, the demands it has issued to Tehran are so onerous that, as former U.S. Ambassador Robert Blackwill has argued, they are “effectively impossible for Iran to accommodate without fundamentally changing its leadership and system of government.” U.S. President Donald Trump, in other words, “is requiring regime change in Iran without calling it that.” On April 22, the United States took the latest step in this direction by announcing that it would refuse to issue waivers allowing other countries to purchase Iranian oil—an effort to drive “Iran’s oil exports to zero,” according to White House Press Secretary Sarah Sanders. The Venezuelan and Iranian people surely deserve better governments, and such a change would serve U.S. interests. But the Trump administration’s use of sanctions in this pursuit will probably fail. Moreover, it will likely weaken the force of sanctions as a U.S. foreign policy tool.

HOW SANCTIONS WORK

Used properly, sanctions can help persuade a target to change its behavior. But for sanctions to work in this manner, they must be aimed at behavior that the target can, however reluctantly, change. The targeted party must also believe that sanctions will be lifted if it abandons the behavior in question.  

Sanctions designed along these lines have worked time and time again. They have been effective in persuading financial institutions around the world to cease doing business with those financing terrorism or engaging in nuclear proliferation—a major focus of the targeted sanctions under the George W. Bush, Obama, and Trump administrations. U.S. sanctions also weakened the grip of the military in Myanmar, inducing it to finally hold elections in 2015. Perhaps most notable, U.S. sanctions on Iran under the Obama administration—backed by Washington’s international partners—helped persuade the Iranian government to agree to the Joint Comprehensive Plan of Action, according to which it would cease developing nuclear weapons.

In each of these cases, those threatened with or subjected to sanctions clearly understood what they needed to do in order to avoid or end the pressure. In each case, the sanctioned parties were willing and able to make the necessary changes, even if doing so was financially or politically painful. Finally, in all of these cases the United States removed (or chose not to implement) sanctions when the target adjusted its behavior.

AN IMPOSSIBLE GOAL

The logic of coercive sanctions does not hold, however, when the objective of sanctions is regime change. Put simply, because the cost of relinquishing power will always exceed the benefit of sanctions relief, a targeted state cannot conceivably accede to a demand for regime change. 

The calculus is particularly clear for revolutionary regimes, such as those in Iran and Venezuela, whose claim to domestic legitimacy relies in part on their public defiance of the United States. No matter how intense, U.S. sanctions pressure will never convince autocrats such as Iran’s Ayatollah Ali Khamenei or Venezuela’s Maduro that they or their countries would be better off if they abandoned their revolutions in exchange for sanctions relief. Indeed, this is one key lesson of Washington’s half century of futile efforts to oust the communist regime in Cuba.

The logic of coercive sanctions does not hold when the objective of sanctions is regime change.

One of this essay’s authors, David Cohen, worked in the Treasury Department during the Obama administration. As the sanctions pressure on Iran intensified in 2013 and 2014, some, especially in Congress and think tanks, argued that instead of offering sanctions relief in exchange for policy concessions, Washington and its international partners should dial up the pressure until the Iranian regime collapsed. But not only were there no indications that the regime was anywhere close to collapsing, there were no historical precedents for governments falling as a direct result of long-term sanctions pressure.

There is little reason to expect a different outcome today in Venezuela or Iran. U.S. unilateral sanctions are taking a severe toll, but this economic impact should not be confused with policy success, especially when regime change is the objective. Despite their declining economies, both Venezuela and Iran continue to prioritize investment in their internal security services, which are practiced in crushing dissent. Venezuela may be closer to a change in government than Iran, owing in part to the Trump administration’s effective efforts to rally international support for the opposition. Even so, the Maduro regime—with a loyal military, a ruthless internal security apparatus, Cuban advisers, and critical financial support from Russia—shows no signs of stepping aside willingly.

AMERICAN OVERREACH

Even if sanctions are unlikely to spark regime change in Venezuela and Iran, one might ask: “What’s the harm in trying?” Although there are benefits to noncoercive sanctions—for example, depriving the targeted regime of resources for malign activities—the downsides are significant.

By their nature, sanctions impose costs on innocent third parties, and the more complex the sanctions, the greater the cost and the more likely they are to result in unintended harm. U.S. sanctions on Venezuela and Iran are extraordinarily complex: primary sanctions prohibit parties within the United States from engaging in a range of business and financial activities with entities in both countries. Secondary sanctions, meanwhile, prevent American individuals, banks, and other businesses from transacting with foreign entities that do business with Iran. Such sanctions impose significant compliance costs and legal risks on both U.S. and foreign businesses. They can also unintentionally roil markets, as demonstrated by the recent episode with U.S. sanctions on the Russian aluminum giant Rusal—the Trump administration was forced to issue a series of sanction waivers to prevent the global aluminum market from collapsing before finally agreeing to lift sanctions on the company.

Nor is it possible to devise sanctions so precise as to avoid collateral harm to the target country’s population. Sanctions designed to fundamentally alter a government’s policies usually take aim at the core of the target country’s economy. And although U.S. sanctions always exempt trade in food, medicine, and medical devices, the sanctions against Venezuela and Iran have plainly exacerbated both countries’ crises, causing economic activity to recede and inflation and unemployment to spike.

These collateral harms are justifiable when sanctions are deployed in pursuit of a proportionate and plausibly achievable policy goal, such as creating leverage for nuclear negotiations with Iran or persuading Russia to respect the Minsk process. But when broad-based economic sanctions are imposed in the quixotic pursuit of an impossible goal such as regime change, they are, in effect, purely punitive. The Venezuelan and Iranian regimes may well deserve to be punished for their deplorable conduct; their people do not.

Finally, when the United States imposes punitive sanctions, it not only weakens the sanctions regime but breeds resentment and alienates would-be international partners. The power of U.S. sanctions depends largely on the dollar’s status as the global reserve currency and preferred means of exchange for international commerce, which gives the U.S. financial system an outsize role in business transactions around the world. But the dollar’s global dominance is relatively recent and by no means permanent or preordained.

In response to what they perceive as U.S. overreach—particularly on secondary sanctions that target entities from third-party countries—other actors, including China and the European Union, are actively looking for ways to limit their exposure to the dollar and the U.S. financial system. The more the United States uses sanctions to pursue policies that lack international support, the more other countries, including U.S. allies, will seek alternatives to the dollar and the U.S. financial system. If they find such alternatives, it will be a blow not only to U.S. sanctions policy but to the United States’ position in the global financial system.

Ultimately, the use of powerful sanctions in the misguided attempt to provoke regime change in Venezuela and Iran is not only likely to fail in its own right—in the long run, it works against U.S. foreign policy interests and threatens the American economy.