Does Punishing Sanctions Busters Work? Sanctions Enforcement and U.S. Trade with Sanctioned States

• Author: Bryan R. Early,Timothy M. Peterson
• DOI: http://doi.org/10.1177/10659129211025620
• Published date: 01 September 2022
• Date: 01 September 2022
• Subject Matter: Articles

https://doi.org/10.1177/10659129211025620

Political Research Quarterly

© 2021 University of Utah

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/10659129211025620

journals.sagepub.com/home/prq

Introduction

Given the scarce resources that governments devote to

implementing economic sanctions, how can the agencies

responsible for enforcing sanctions enhance their effec-

tiveness? The strategies that sanctions enforcement bod-

ies employ vis-à-vis firms can play an important role in

shaping the severity of the costs that sanctions’ targets

experience. Increasing the consequences firms face for

sanctions violations and their perceived risks of being

caught are both mechanisms by which senders can influ-

ence firms’ responses to sanctions (Early and Preble

2020a; Morgan and Bapat 2003). Sender governments

can influence the risks their firms perceive in doing busi-

ness with partners in sanctioned states via the penalties

they impose against sanctions violators. Importantly, the

positive relationship between the economic costs sanc-

tions impose on targets and the success of sanctioning

efforts is one of the strongest empirical findings in the

sanctions literature (Bapat et al. 2013; Akoto et al. 2020).

Improved sanctions enforcement can thus contribute to a

higher likelihood of sanctions succeeding. Our study

seeks to uncover how the penalties imposed against sanc-

tions violators by enforcement bodies within sender gov-

ernments affects sanctions’ disruptive effects on trade

with target states.

While intuitive linkages exist between the enforce-

ment, consequences, and effectiveness of economic

sanctions, the topic of enforcement has received sur-

prising little attention (Bapat and Kwon 2015; Morgan

and Bapat 2003). Efforts to study how governments

obtain private sector compliance with their sanctions

have provided initial insights into what kinds of

enforcement strategies governments can employ (Bapat

et al. 2020; Early 2016; Early and Preble 2020b;

Morgan and Bapat 2003). To date, however, no empiri-

cal studies have examined how the use of specific

enforcement policies affects the behavior of the private

sector actors whose behaviors sanctions are intended to

alter. One of the key reasons why enforcement-related

variables have not been included in many of the major

sanctions datasets (e.g., Hufbauer et al. 2007; Morgan,

Bapat, and Kobayashi 2014) is that few governments

make robust investments in enforcing sanctions.

0

25620PRQXXX10.1177/10659129211025620Political Research QuarterlyEarly and Peterson

2

021

1University at Albany–SUNY, NY, USA

2Arizona State University, Tempe, USA

Corresponding Author:

Timothy M. Peterson, Arizona State University, Coor Hall 6664, 976

S. Forest Mall, Tempe, AZ 85281, USA.

Email: tim@timothypeterson.org

Does Punishing Sanctions Busters

Work? Sanctions Enforcement and

U.S. Trade with Sanctioned States

Bryan R. Early1 and Timothy M. Peterson2

Abstract

How can the government agencies responsible for enforcing economic sanctions enhance their effectiveness? This

study explains how and why sanctions enforcement actions undertaken by sender governments can discourage their

firms from trading with the states they sanction. Specifically, we examine how the penalties imposed against sanctions

violators by the U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) affect U.S. firms’ trade with

target states. We argue that because U.S. firms are responsive to the risk of being penalized and the disruptions that

penalties create, U.S. trade with sanctioned states will be lower in the aftermath of OFAC enforcement actions. The

penalties’ frequency and severity will magnify those negative effects. We hypothesize that OFAC enforcement actions

taken against both U.S. and foreign sanctions violators will negatively impact U.S. trade with targets. Analyzing data

from 2003 to 2015, we find that OFAC’s sanctions enforcement actions decrease U.S. trade with sanctioned states

in numerous ways.

Keywords

sanctions enforcement, international trade, U.S. foreign policy

2022, Vol. 75(3) 782–796

Article