How Sanctions Became Washington's Favourite Tool — and Its Most Overused One

The Office of Foreign Assets Control, a division of the U.S. Treasury Department that most Americans have never heard of, maintains a list of individuals, companies, and governments subject to American economic sanctions. In the year 2000, that list ran to roughly 900 entries. Today it exceeds 3,800 — a quadrupling that has occurred with remarkably little public debate and almost no systematic evaluation of whether the sanctions are achieving their stated objectives.

Sanctions have become, by a wide margin, Washington's preferred instrument of coercion. They are cheaper than military action, faster than diplomacy, and — crucially — they allow policymakers to demonstrate that they are "doing something" about a problem without committing troops or treasure. In the two decades since the September 11 attacks accelerated their use, sanctions have been deployed against narcotics traffickers, human-rights abusers, weapons proliferators, election manipulators, cyber attackers, and the governments of more than twenty countries. "If you have a hammer," said Eleanor Riggs, a former senior Treasury official, "everything looks like a nail. Sanctions are Washington's hammer."

The theory behind sanctions is elegant. By cutting a target off from the global financial system — freezing assets, blocking transactions, denying access to dollar clearing — the United States can impose costs severe enough to change behaviour without firing a shot. The dollar's dominance in global trade gives Washington unique leverage: because so much of the world's commerce passes through American banks or is denominated in American currency, a U.S. sanctions designation can effectively exile a target from the international economy.

The evidence that this leverage produces policy change, however, is considerably weaker than the theory suggests. A comprehensive study by researchers at the Peterson Institute found that fewer than one in three sanctions episodes achieved even partial success in altering the target's behaviour. A more recent analysis by the Government Accountability Office concluded that most sanctions programmes lacked clearly defined objectives, making it difficult to assess whether they were working at all. "We are very good at imposing sanctions," said Thomas Brennan, a former State Department official who now studies sanctions policy. "We are much less good at explaining what they are supposed to accomplish, and worse still at measuring whether they did."

Targets, meanwhile, have become adept at adapting. Sanctioned governments have built parallel financial networks, diversified their trade away from dollar-denominated markets, and developed sophisticated evasion techniques involving shell companies, cryptocurrency, and third-country intermediaries. Each new sanctions regime prompts a new round of adaptation, and the adaptation, once developed, is available to every future target. "The playbook for evading American sanctions is now well understood," Riggs said. "We wrote it, one designation at a time."

There is a deeper concern, one that officials acknowledge only reluctantly: the overuse of sanctions may be eroding the very source of power that makes them effective. The dollar's dominance is not a law of nature; it is a network effect, sustained by the willingness of governments, banks, and companies around the world to use the dollar because everyone else does. Every time Washington uses that dominance as a weapon, it gives the rest of the world an incentive to build alternatives. Central banks in China, Russia, India, and Brazil have been steadily diversifying their reserves away from dollars and building bilateral payment systems that bypass the American financial network. The shift is gradual, but it is measurable — and it is a direct response to the perception that the dollar has become a tool of American foreign policy rather than a neutral medium of exchange.

The political economy of sanctions makes reform extraordinarily difficult. Imposing a new sanction is easy — it requires only an executive order and generates a news cycle of resolve. Lifting a sanction is hard — it invites accusations of weakness, rewards a bad actor, and produces no political benefit for the official who does it. The result is a ratchet effect: sanctions accumulate but rarely come off, creating an ever-growing thicket of restrictions that imposes costs on American businesses, strains diplomatic relationships, and occupies an increasing share of the Treasury Department's bandwidth.

"We have sanctioned ourselves into a corner," Brennan said. "The list is so long, and the political cost of removing anyone from it is so high, that we have effectively made sanctions permanent for most targets. And permanent sanctions are not sanctions at all — they are just the baseline. The target has already absorbed the cost and moved on. We are punishing ourselves as much as them."

None of this means that sanctions are never appropriate. In narrowly targeted cases — against specific individuals engaged in specific abuses — they can be precise and effective. But the indiscriminate expansion of sanctions to cover every foreign-policy problem Washington encounters has diluted their impact, accelerated the development of alternatives to the dollar, and created a bureaucratic apparatus that is far easier to expand than to reform. The hammer is wearing out, and the nails are learning to bend.