Debating US Sanctions in Venezuela and Ethiopia

The latest from our “Adults in a Room" series.

Adults in a Room” is a series in collaboration with The Atlantic Council’s New American Engagement Initiative (NAEI). The series stems from NAEI’s monthly networking events that call on analysts to gather virtually and hash out a salient topic. The goal of this series is to give you a peek into their Zoom room and a deep understanding of the issue at hand in less than the time it takes to sip your morning coffee, without the jargon, acronyms, and stuffiness that often come with expertise.

What were the experts talking about this November? When a country or individual does something that the US disapproves of, the go-to tool for policymakers is economic sanctions. The US banking and financial system is so central to the global economy that the US can inflict significant damage through unilateral sanctions alone. Are sanctions, however, being used effectively? What are some of the unintended consequences of sanctions that we’re overlooking?

The Atlantic Council’s New American Engagement Initiative’s (NAEI) November networking event brought together a number of experts to discuss US sanctions policy and how they are applied in the specific cases of Ethiopia and Venezuela. Ethiopian groups have recently been the target of sanctions due to the civil conflict happening there, while Venezuela represents a case of longer-term application of US sanctions.

The participants generally agreed that US sanctions policy was in need of reform, but there was debate over whether the sanctions review conducted by the Biden administration would lead to meaningful change. Overall, the group saw a need for sanction cases to be reassessed, to avoid administrations putting sanctions in place but not removing them if they achieved their goals or became outdated. While cases of successful sanctioning were discussed, the prevalent view was that policymakers too frequently reach for sanctions to demonstrate they are doing something, without having clear plans for how sanctions will actually change the behavior of the target.

Four participants expanded on their thoughts on how the United States uses sanctions and how the practice might be improved: 

Daniel Drezner, Professor of International Relations, The Fletcher School at Tufts University

The trouble with sanctions is that they are the fast food of American foreign policy: Easy to order, cheap, and tasty in the moment. Yet, with the passage of time they do not feel as good. Over the past generation, US policymakers have worked hard at making economic sanctions more painful to the targeted actors. They have largely succeeded in this task through the weaponization of financial networks rather than relying on trade embargoes. At the same time, however, policymakers have expanded America’s use of economic coercion against more powerful actors like China and Russia. The result is that the success rate has not appreciably improved.   

Venezuela offers an example of the limits of economic statecraft. When the Trump administration ramped up pressure in early 2019, Venezuela seemed ripe for successful statecraft. The Maduro government was running the Venezuelan economy into the ground. Civil society opposition to the Bolivarian regime was organized. The sanctions were multilateral. The probability that sanctions would nudge Maduro out of power was far from zero. And yet, nearly three years later, Venezuela is even more of an economic basket case, Maduro is still in power, and in the words of Daniel DePetris, President Joe Biden is pursuing a policy of “prolonging the status quo and hoping for different results.” 

Emma Ashford, Senior Fellow, New American Engagement Initiative

The Biden administration’s recently released sanctions review was emblematic of a core problem faced by advocates of sanctions reform. To the surprise of many, the review laid out extremely clearly some of the problems with existing sanctions frameworks. It then created a clear, if vague, set of guidelines for implementing future sanctions that are more likely to be effective, and less likely to have substantive humanitarian impacts. In a town where it can be hard even to get people to acknowledge that a policy has failed, this should be viewed as a win for reformers. At the same time, the review did not address the question of existing sanctions regimes. 

The existing sanctions regime either does not meet the new standards or, in some instances, has clearly failed, probably because such fixes would require either legislative changes or executive action. This leaves existing sanctions regimes — such as draconian Trump-era sanctions on Venezuela — in place indefinitely, with no clear answer as to how or when they might be removed. With US sanctions currently in place on 37 countries, this is no small problem. Ultimately, this is a missed opportunity for the Biden administration: Without reconsideration of existing sanctions regimes, any streamlining and improvement of US sanctions policy will be at best a half-measure.

Adem Abebe, Program Officer, International IDEA The Biden administration has been pursuing two distinct, and potentially inconsistent, roles vis-a-vis the conflict in Ethiopia. First, it has been trying to serve as a neutral mediator to urge and support the parties to the conflict to resort to ameliorate the humanitarian costs of the conflict, while also encouraging negotiation to find agreeable and sustainable solutions. It has also taken the role of Big Brother to try to force the federal government and its allies to change behavior, using punitive measures, including sanctions, suspension of aid, discontinuity of favorable market access, etc., along with public blaming and shaming. The dual role has not only complicated the relationship with Ethiopia, but more damagingly entrenched both popular and government positions in Ethiopia.

Policymakers reach for sanctions too frequently to demonstrate that they are doing something, without having clear plans for how sanctions will actually change the behavior of the target. Ethiopia and Venezuela both are examples of this folly.

A second key point is the “straight-jacket” nature of any sanctions regime that assumes that sanctions are a principled way of disciplining a state that is misbehaving. The Biden administration must recognize when sanctions could be effective and should take into account the attitude and psychology of the government and actors on the receiving end. Ethiopians, for example, are extremely proud people who hate to be told what to do. The TPLF-led government rejected foreign interference when it was in power. Abiy’s government is doing the same. In fact, Prime Minister Abiy Ahmed is using the sanctions to rally both his supporters and critics, who are united in criticizing foreign interference that undermines the pride and dignity of Ethiopians. In this regard, discreet (but firm) engagements are more likely to work in Ethiopia than sanctions, which are so public and seen as humiliating. In combination with Western media obsession with reporting daily events, in contrast to the more historical and long-term horizon of local actors in judging what is right and wrong and just and unjust, the sanctions — and broadly US engagement — have overall failed to achieve their intended goal. US sanctions may even have caused more harm.

The third key point is how the Biden administration may have effectively failed to consider the costs of compliance with sanctions. Actors on the receiving end will always calculate the costs of compliance with sanctions, with the costs of non-compliance. In Ethiopia, if Abiy untimely complies with the pressure to negotiate, he risks fracturing the already fragile unity in the ruling prosperity party. More significantly, compliance to external pressure is generally seen as not worth it, both among leaders and the populace. In this regard, serious but discreet threats are more likely to have an impact, and may force domestic actors to try and seek broad consensus on possible concessions.  

Luisa Palacios, Senior Research Scholar at Columbia University’s Center on Global Energy Policy and former Chairwoman of Citgo Petroleum Corporation (2019-2021)

The sanctions regime toward Venezuela could offer some valuable lessons for policy. First, the type of regime might make a difference to assess the effectiveness and risks of sanctions. In the case of Venezuela, sanctions deepened the kleptocratic nature of the regime. Some of the oil flows migrated to informal and illicit hands — even if this meant huge pricing discounts and loss of revenues for the nation. This suggests that not only sanctions, but the regime’s adjustment to them, might have contributed to accentuating Venezuela’s humanitarian crisis. 

Second, the sanctions’ intended and unintended consequences create new political problems of their own. Sanctions have not led to regime change nor have they managed to change the regime’s kleptocratic nature. They have, however, prevented and/or contained this harmful behavior from further contaminating the US financial system. Also, others argue the only reason why the Venezuelan regime is negotiating with the opposition is because of the pain to the regime caused by sanctions.

Sanctions have also helped to protect Venezuela’s assets abroad from both the regime’s abuse and from seizure from defaulted creditors. Those counterfactuals, however, are measured against the more visible and immediate unintended consequences given the collateral damage in a country suffering a complex humanitarian crisis. While sanctions did not cause this crisis, at the very least they do not help the situation — and the regime uses it as part of its narrative to shift blame. One collateral damage of the sanctions is the overcompliance of economic actors, particularly the financial system. The sanctions regime has impacted the Venezuelan private sector as well as some humanitarian organizations despite the fact that humanitarian activities are exempted from the sanctions. 

Third, Venezuela also offers valuable lessons in the use of licenses and renewal of those licenses, as a way to create flexibility, potentially reducing the risk of entrenchment of sanctions. By needing renewals, these licenses can function as a control mechanism to ensure a continuation of appropriate behavior. Examples of these are the licenses awarded to Chevron[EC2], which has a joint-venture operation with national oil company PDVSA, itself a sanctioned entity. Another example of an innovative use of sanctions relates to Citgo Petroleum Corporation, a US refinery property of PDVSA. Citgo has an 18-month license that renews automatically every month.