You can hardly enter a discussion on foreign policy today without encountering the topic of China’s seemingly inevitable global rise. In December 2021, I helped to host an event attended by international trade experts hailing from Indonesia to Mexico and everywhere in between. During our meetings throughout the week, how to handle China’s rise was a constant topic of interest. Even with crucial issues, such as the ongoing Iran nuclear negotiations or threats of Russian aggression in Eastern Europe, China continues to dominate the discussion.
In recent months there have been numerous proposals by US policymakers to oppose China, from boycotting the Winter Olympics to authorizing military force to defend Taiwan from a Chinese invasion. However, there is another way the US can counter China’s global rise without resorting to military action or performative diplomatic gestures. Undertaking serious, tangible reforms of American sanctions policy would provide the US with further strategic tools to counter China both economically and diplomatically.
China has achieved significant success with its Belt and Road Initiative by funding development projects around the world, massively increasing its economic and diplomatic footprint in the process. For many emerging economies skeptical of the International Monetary Fund and the World Bank, China has presented an alternative avenue for countries wishing to initiate crucial development projects. Even as these loans have often proven to be predatory, as the case of a Sri Lankan port repossessed by China exhibits, the Belt and Road Initiative remains a success story for China. So much so, that the European Union just announced its own $340 billion counter to China’s global development strategy.
The US on the other hand is the global leader in Official Development Assistance (ODA), with around $35 billion funded in 2020, according to the Organization for Co-operation and Development (OECD). Yet, as the world’s leader in economic sanctions, the US also severely hinders global development and American interests in regions where sanctions are levied.
Undertaking serious, tangible reforms of American sanctions policy would provide the US with further strategic tools to counter China both economically and diplomatically.
Since 9/11, the use of American economic sanctions has increased significantly. Secondary sanctions, or sanctions that prevent both American and foreign entities from doing business with sanctioned targets, have skyrocketed since 2018. That year, the number of foreign businesses targeted with secondary sanctions was two. By the end of the Trump administration, that number had reached 102.
These sanctions are incredibly damaging to the countries and businesses targeted by the US. Due to the might of the American financial system, these sanctions effectively cut the sanctioned entities off from the global financial market, as around 88% of all foreign currency transactions over the past 20 years have involved the US dollar. Losing access to the dollar is a critical blow for any economy. While American policymakers will maintain that these sanctions do include humanitarian exemptions, if countries lack the funds to purchase crucial goods such as food and medicine, then these items may as well be sanctioned.
The humanitarian costs of American sanctions are well documented. These sanctions also work against American interests in numerous ways. Following the implementation of sanctions against the Assad regime in Syria beginning in 2011, a report found that numerous armed groups, including terrorist organizations, had profited from the sanctions. By setting up effective smuggling networks, these groups managed to rake in increased revenues by smuggling necessary goods to civilians in need.
These sanctions also gutted the Syrian middle class, pushing many civilians into poverty and leaving them even more reliant upon the Syrian state. If the stated aim of these sanctions was to punish human rights violators and serve as a catalyst for regime change, they are having the opposite intended impact. To add insult to injury, these sanctions have further exacerbated the serious Lebanese economic crisis due to Lebanon’s intricate ties with Syria. As a result, Lebanese civilians have suffered greatly due to no fault of their own, as they face consistent electricity shortages after being cut off from their largest energy supplier. When combined with an inflation rate of 137.8%, the situation is dire indeed, underscoring how US sanctions often end up impacting innocent bystanders far more than their intended targets.
US sanctions against Venezuela have had a similar impact, pushing millions of civilians into extreme poverty, while the Maduro regime has consolidated its position by serving as a key provider of basic goods. As the US Chamber of Commerce notes, once European companies left the lucrative Venezuelan oil market, PDSVA, the Venezuelan state-owned oil company actually increased its assets by absorbing these companies’ previous holdings. And by cutting Venezuela off from the US, once its largest purchaser of oil, these sanctions have pushed both Venezuela and Iran closer to China, as it has begun purchasing record amounts of oil from both countries.
Some would argue that the US should resort to yet more sanctions to tighten the stranglehold American sanctions have on these economies. That would be an ill-advised move, as the evidence is clear that not only are sanctions often ineffective, but they have also proven counter-productive. Three years after President Donald Trump left the Joint Comprehensive Plan Of Action, Iran is closer to acquiring a nuclear weapon than ever before, despite the strategy of “maximum pressure” his administration claimed would bring Iran back to the table. Instead, these sanctions harm both American and its allies’ interests, while providing an opening for China to increase its global diplomatic and financial footprint.
Punishing human rights abusers is an admirable foreign policy objective, yet the US strategy to achieve this is spotty at best. Even as the US targets Syria and Venezuela, it continues to sell weapons to documented human rights abusers including the Philippines, Egypt, and Israel. An American-made Raytheon bomb utilized by Saudi Arabia killed 80 people and injured over 200 in Yemen. While the US levies sanctions on coup leaders in Myanmar, it continues to train foreign military leaders who later attempt coups themselves. In fact, since 2008, American-trained military officers have attempted at least nine coups in countries including Burkina Faso, Guinea, and Mali. These instances highlight the inconsistency in US foreign policy, a trait that significantly hinders American strategic interests.
SANCTIONS SHOULD NOT BE THE FIRST STEP
Last year the Biden administration released its much-anticipated review on American sanctions policy, which ultimately proved quite underwhelming. One of the more notable recommendations from the US Department of Treasury included the bold idea of “adopting a structured policy framework that links sanctions to a clear policy objective.” That this was not already a key component of American sanctions policy should be a real cause for alarm.
While this is certainly a worthwhile goal, much more is needed. There are several steps the Biden administration could take to instantly improve American sanctions implementation. Notably, initiating bi-annual reviews of sanctions to ensure their effectiveness and to mitigate unintended consequences, transitioning to more targeted sanctions rather than broad, comprehensive ones, and coordinating with allies on targeted sanctions should be crucial steps for serious reforms.
Sanctions should not be used as a first resort anytime a country runs afoul of the US or international norms. Instead, diplomatic measures, economic incentives, and coordinated actions through multilateral institutions are much better initial steps. For policymakers, sanctions have become the go-to tool to portray themselves as taking action, when much more effective and less harmful tools are available for a country as influential as the US. And if all else fails, sanctions should be utilized with more precision, targeting only the intended actors, with regular assessments to ensure that they do not result in unintended consequences.
If the Biden administration truly wishes to improve American sanctions policy and simultaneously counter China’s geostrategic rise, then taking significant steps to reform antiquated sanctions policies should be a no-brainer.
Adam DuBard is a graduate of the Johns Hopkins School of Advanced International Studies and a former Marcellus Policy Fellow.