Do Sanctions Work? Financial Alternatives to War Explained

Nations are increasingly turning to financial measures as a way to avoid military conflict. The impact of these weapons, generally called sanctions, can be hard to predict, and they can inflict collateral damage. They tend to be more effective when a group of countries comes together to target an offending state, as the U.S., European Union and others have following Russia’s all-out invasion of Ukraine. The sanctions against Russia — ratcheted up since it annexed Ukraine’s Crimean peninsula in 2014 — are the most far-reaching imposed on a major power since World War II. At the same time, because Russia is a major commodities exporter, hitting it hard also means pain for the global economy.

Sanctions are economic penalties designed to hurt a target — a person, a company, a group or an entire country — through restrictions on trade, access to financial assets or the ability to process transactions in U.S. dollars or euros. Sanctioned individuals may face travel bans and the seizure of property, such as the yachts owned by Russian billionaires that have been impounded since the war in Ukraine. Companies or industries may be blocked from certain exports or imports. Governments can find themselves unable to tap capital markets. In what are known as secondary sanctions, third parties can face penalties for doing business with sanctioned people or entities.