In the modern world, money is as dangerous a weapon as bullets or bombs, but... if it is as effective as they make it out to be.

![imagen.png](https://images.hive.blog/DQmSaR7AcBQuwrWNZR6LbxKVG8ff89hiLHxr1JGwfNHcZhg/imagen.png)

Source Hello dear friends of leofinance, I hope you are all very well, today I want to talk to you about a topic that you have surely heard many times in the news, usually when it comes to the relationship of the United States with one of its geopolitical rivals, although it is not limited only to these countries. I am referring to Economic Sanctions. But although we hear them mentioned all the time, they are rarely explained to us exactly what they are, so we will do just that today, first with the basics, and then with more elaborate examples.

What are Economic Sanctions.

Economic Sanctions are not something new, since they are basically any economic or commercial movement with the purpose of pressuring an individual, institution or country to act differently or more in line with the objectives of the country, individual or institution that imposes the sanctions, this concept can cover many activities, price wars, boycotts, blockades, even if Don Pedro decides not to trust Doña Juana who sells empanadas on the corner because she sells soft drinks, which hurts Pedro's sales, it can be said that Don Pedro applied economic sanctions to Doña Juana, that's why friends, economic sanctions are as old as the economy itself.

![imagen.png](https://images.hive.blog/DQmV8ZfEQNEnWCeFx6YtJjTREex8QR8RGCFrZD4mduJ4dsS/imagen.png)

Source [It can be said that the war of independence of the United States, and many others in the Americas began as trade wars with economic sanctions and counter-sanctions]. Now, today we will focus on economic sanctions at the international level, the famous ones that we hear about all the time in the news. There are many types of sanctions, which can be categorized according to their impact on a country's economy and the amount of force that the country imposing them needs to make them effective. Among the mildest we can categorize those that target particular individuals within a country or institution, such as a ban on travel to certain countries or on certain airlines, the freezing of assets in international banks or the prohibition of that person from operating in a particular economic market. These sanctions are usually targeted at important individuals in the governments or institutions they are intended to punish, and although for the individual in question the impact may be strong, in general there are many ways and shortcuts to avoid sanctions. These are usually executed by those who impose them by calling attention to the institutions or businesses that may have dealings with the targeted person that if they continue to do business with them they could be subject to sanctions themselves, or as happens in many cases, companies decide to follow the policy of the strongest country, which is usually the one that can impose sanctions, and carry them out without complaint, after all, what is the point of losing large spaces in the US market, just because of a dozen Russian politicians and businessmen? [It can be said that the war of independence of the United States, and many others in the Americas began as trade wars with economic sanctions and counter-sanctions]. Now, today we will focus on economic sanctions at the international level, the famous ones that we hear about all the time in the news. There are many types of sanctions, which can be categorized according to their impact on a country's economy and the amount of force that the country imposing them needs to make them effective. Among the mildest we can categorize those that target particular individuals within a country or institution, such as a ban on travel to certain countries or on certain airlines, the freezing of assets in international banks or the prohibition of that person from operating in a particular economic market. These sanctions are usually targeted at important individuals in the governments or institutions they are intended to punish, and although for the individual in question the impact may be strong, in general there are many ways and shortcuts to avoid sanctions. These are usually executed by those who impose them by calling attention to the institutions or businesses that may have dealings with the targeted person that if they continue to do business with them they could be subject to sanctions themselves, or as happens in many cases, companies decide to follow the policy of the strongest country, which is usually the one that can impose sanctions, and carry them out without complaint, after all, what is the point of losing large spaces in the US market, just because of a dozen Russian politicians and businessmen?

![imagen.png](https://images.hive.blog/DQmWg8z8RmgeGBbTR9wTvaJ9W1otYKpfGBEfGLs68gwNyux/imagen.png)

Source [Example of pro-boycott propaganda against Chinese products in the United States]. An example of economic sanctions that apply all of the above was the economic sanctions applied by China to Australia after the Australian government requested an independent investigation into Covid in the Asian country. In this case China reduced Australia's imports in many areas, imposing tariffs, promoting boycotts and in some cases resorting to embargoes. All in order to put pressure on Australia to stop talking about the origin of Covid and the lies of the WHO and the Chinese government. https://www.cnbc.com/2020/12/18/australia-china-trade-disputes-in-2020.html Although an embargo is a difficult decision to make, there is a group of measures that we can call the true Nuclear Option of economic sanctions. These would be the freezing of assets, reserves and the freezing of a country's businesses abroad. The economic blockade, preventing the target from being able to conduct business on international markets such as the stock exchange or take the country and banks operating in the international financial telecommunication society [SWIFT]. This can be said to be an economic catastrophe for anyone targeted by such sanctions, not being able to operate on the stock exchange means being blocked from international investment, which is indispensable for the survival of an economy in the modern world, and being cut off from the banking communications system means that a country would have to do business 1800s style.

![imagen.png](https://images.hive.blog/DQmYAwzb8dmSY2mS6P9DmJ6pfmXEo5gEz6desdxTYqH4VW6/imagen.png)

Source And finally we will mention the naval or air blockade... which means preventing the passage of goods from inside and outside a country, which is practically a siege without shooting... Rarely in history has this type of sanctions been resorted to since they usually entail great costs not only for the target country, but also for its people, unleashing humanitarian crises, in addition to bringing a cost for the other countries or institutions with which it had business, and the deployment of an air or naval fleet for a blockade is an expensive affair and is frowned upon internationally. It should be stressed that economic sanctions are usually an intermediate measure between diplomacy and the declaration of war, when one country wants to put pressure on another, but diplomatic options have run out, and war is inadequate either for reasons of cost or feasibility, economic sanctions are resorted to.

But how effective are these sanctions?

In terms of numbers the effect is undeniable, studies show that a moderate package of economic sanctions can reduce a country's growth by 2.5% per year, that's more than many countries grow per year, a current example of the effects of moderate sanctions would be the case of the Russian economy, which is struggling to stay afloat https://www.reuters.com/article/us-russia-cenbank-rates-poll-idUSKBN2C61OY and has seen inflation of over 50% since sanctions were imposed in 2014. But the real goal of sanctions is not usually to hurt a country's economy, that is the means, the end is usually political, military or social. And on this point sanctions are not that effective, indeed it can be said that sanctions are not effective at all. In fact, of all the examples of sanctions I have cited in this article, none had the desired consequences, trump's tariffs on Chinese imports ended up damaging the U.S. economy, a damage that is perceived even today with unemployment and little faith of the people in the economic system. And China continues its expansionist policy as before. China's de facto embargo on Australian imports was avoided by China turning to the European Union and the United States for buyers, countries that were happy to help Australia just to punish China a little. Australia's rapprochement with the United States is of particular importance to the latter because of military tensions in the region. Counting on Australia in a possible war in Asia is a great advantage. https://www.news.com.au/finance/economy/australian-economy/how-chinas-trade-war-with-australia-backfired/news-story/45175246c2cf0111fb6bfd4e3af690fe And the case of Russia is especially curious, since it also involves the so-called counter-sanctions, not only sanctions against the Russian aluminum industry, which exported aluminum for the automotive industry had to be lifted because they were making aluminum too expensive in the North American country due to low supply. https://www.cbc.ca/news/business/sanctions-aluminum-rusal-lifted-1.4995470 these sanctions were part of a package targeted at businessmen close to Putin. In the Russian case it can apply counter sanctions if they go too far, for example, if the U.S. decides to apply an embargo on Russian gas in Europe, it can say.... Ok... More than 30% of the gas consumed in Europe comes from Russia, but this figure is a percentage for all of Europe, some countries are much more dependent on Russian gas than others.

![imagen.png](https://images.hive.blog/DQmXVgLsdJH38B8L9XXKFLvXZKJv7BW7ZGqsgJtah8NA9U9/imagen.png)

Source Russia has been preparing for this eventuality for years and has amassed a foreign currency reserve in excess of $400 billion for such an eventuality. In the meantime, Europe would have to turn to other countries that will surely sell gas at a higher price, with higher operating costs and will also ask for political and economic concessions. The cost for the population, especially in winter, would be tremendous; in countries like Germany or France it could cause social outbursts, as it has already done before.

Sanctions and regime change.

The cases of Venezuela and Cuba are clear examples of how economic sanctions do not destabilize a government, but rather radicalize it, making them resort to criminal activities to obtain resources to stay in power, while they use sanctions as an excuse for their failed economies, sanctions do not affect much those in power, because even with sanctions they can live luxuriously, maybe they cannot go to New York for a walk. But they can send someone to Colombia and then to New York to buy and bring them everything they want. In the end the price is paid by the civilian population. Studies affirm that in only 4% of the cases studied have sanctions led to a change of regime in a country.

So why do they continue.

There is another side of the coin in the sanctions, and that is that among all the disaster there are always some who take advantage, for example, with the sanctions on the oil industry in Venezuela, the price of oil was affected, and exports from other countries in the region increased to meet the demand. https://www.wola.org/wp-content/uploads/2020/10/Oliveros-report-summary-ENG.pdf In the event of an eventual package of sanctions on the Russian gas industry, US companies are preparing to launch themselves to conquer the European market with great possibilities of profit. https://www.reuters.com/business/energy/exclusive-us-talks-energy-firms-over-eu-gas-supply-case-russia-ukraine-conflict-2022-01-15/ This may be one of the reasons behind the continued use of economic sanctions, the other is that, besides declaring war, what else could countries like the US or China do to contain their adversaries, so at least now, and for a while, until other tools of coercion are created, we can assume that we will continue to see economic sanctions and counter sanctions come and go, while the powerful play their power games, and ordinary civilians like you and me pay the price.

Recommended Bibliographic Reference

[1] economic santions asp [2] international sanctions during the Russo Ukrainian [3] ooliveros report summary eng [4] Economic santions

Topics