On October 18, the US Department of the Treasury released its "2021 Sanctions Review", evaluating the effectiveness of sanctions as a foreign policy tool.
The review did not evaluate specific sanctions programs, but instead looked overall at: "(1) the framework guiding imposition of economic and financial sanctions and (2) potential operational, structural, and procedural changes to improve Treasury’s ability to use sanctions now and in the future." It incorporates feedback from various stakeholders and data from Treasury's own review to provide recommendations going forward.
The review concluded that overall, sanctions remain an effective - and essential - foreign policy tool. Successes, in Treasury's view, include getting Iran to the negotiating table in 2015, targeting terrorist financing since 9/11, dismantling the Cali Cartel, and protecting Libyan assets from misappropriation following the 2011 fall of the Qadhafi regime.
However, Treasury concludes, new emerging challenges threaten the efficacy of sanctions and require careful program design. Such challenges include: new payments systems, the growing use of digital assets, and cybercriminals. Together these elements provide opportunities for bad actors to hold and transfer funds outside of the traditional financial system and require new program design. There is also the need to design sanctions to mitigate humanitarian impacts.
Treasury recommends five steps to "modernize" sanctions:
1) Adoption of a structured policy framework that links sanctions to a clear policy objective. Treasury will seek to offer a standardized set of factors for use of sanctions. This will help professionals assess the potential for new actions and assess the ongoing alignment of sanctions with evolving policy priorities.
2) Multilateral coordination wherever possible. The review underscores that sanctions are most effective when coordinated with allies. Multilateral coordination with allies and through the UN is also key to mitigating unwanted economic impacts on US citizens and firms.
3) Calibration of sanctions to mitigate unintended economic, political, and humanitarian impact. According to Treasury, this factor refers not only to humanitarian aid in heavily sanctioned jurisdictions, but also the cost of compliance on small businesses.
4) Ensuring sanctions are easily understood, enforceable, and, where possible, reversible. Treasury concludes that it should enhance its messaging and engagement with stakeholders, and ensure that it uses plain language to improve public access and understanding of sanctions.
5) Investment in modernizing Treasury’s sanctions technology, workforce, and infrastructure. Treasury concludes that it needs to invest in staff and technology, in particular to ensure that its website is easy to navigate and use.
Sanctions authorities come both from Congress and executive orders, vested in the President, Treasury as well as other federal agencies. Since 2000, sanctions have fairly consistently emanated 60-65% from executive orders.
Nevertheless, improvement in the consistency of sanctions will require careful coordination across the US government. Treasury concludes that it will coordinate next steps closely will the National Security Council, Department of State, Department of Justice, and U.S. Agency for International Development and other interagency partners.
Treasury’s review found that while sanctions remain an essential and effective policy tool, they also face new challenges including rising risks from new payments systems, the growing use of digital assets, and cybercriminals, as well as situations where careful calibration can help limit the impact of sanctions on the flow of legitimate humanitarian aid to those in need.