A Brief Review of the Effectiveness of Economic Sanctions

This paper gives a brief review of the use of economic sanctions and their impacts. While economic sanctions such as trade embargoes have a long history reaching back hundreds of years, their use has increased since World War II, and over recent decades sanctions seem to have become an increasing feature of foreign policy, but their effectiveness has been declining. Nevertheless, sanctions can have significant impact on the sanctioned countries, but can also negatively affect the sanctioning country. Their impact on firms in sanctioning countries is very heterogenous which implies that it is difficult to soften the blow on domestic firms from sanctions on other countries. This is becoming more important than ever with the increasing use of sanctions and arguably increased geopolitical tensions mitigating the potential effects of sanctions. One way to achieve this would be to reorganise supply chains to rely more on trade with ‘friendly’ countries or domestic production, which ultimately comes at a cost.