The Effectiveness of Sanctions
WNYC carried a story this morning about American companies doing business in Iran. While technically it is illegal under American law for companies to deal with Iran, business successfully lobbied to be allowed to subvert the embargo by using their foreign subsidiaries. This is how, for example, Honeywell is able to sell Iran technology to refine oil into gasoline.
The SEC used to compile a list of companies that were evading sanctions in this manner. Lobbyists fought successfully to end that practice; however, the New York Times carried a story over the weekend listing 74 companies doing business with Iran despite US laws and national security strategies that aim to stifle such business. So who is really in charge? Uncle Sam or the oil and gas corporations? (For it is mainly energy companies on the list).
What’s more, the companies in violation (in spirit, if not in letter) are also recipients of major government contracts—totaling over $100 billion in the past decade. So not only do they flout the national policies of their government, but they aren’t even ostracized for doing so. Sounds like a compelling case for the pointlessness of sanctions.
Well, sanctions are complex and it’s hard to say broadly that they are “bad” or “good”. An oil embargo would likely be highly effective on the Iranian government, but it would place a terrible burden on the Iranian population, who are generally pro-Western, young and against the regime, so that would be unwise. And yes, many companies find ways around the sanctions, and with unscrupulous countries like China willing to trade with Iran they are likely ineffective. Smart, targeted sanctions against the Revolutionary Guard might be a good idea. But I like Roger Cohen’s idea in recent column about what sort of trade we should allow the most.
http://www.nytimes.com/2010/02/19/opinion/19iht-edcohen.html?scp=2&sq=roger%20cohen&st=cse