Everything you need to know about economic sanctions

Economic sanctions are measures imposed by one or more countries to influence the behaviour of another country, often for political or security reasons. These measures are designed to put pressure on the targeted country by restricting its access to certain resources, goods or services, with the goal of encouraging it to change its policies, behaviours or activities. In the world of ongoing conflicts amid the threat of nuclear power, sanctions can - in certain circumstances - be a powerful tool for positive change. 3Cube Property Solutions takes a deep dive into the goals, types and results of economic sanctions.

Goals of economic sanctions

The ultimate goal of economic sanctions, as explained by the World Economic Forum, is to deter bad behaviour. It inflicts economic punishment on the targeted country and thereby attempts to force changed behaviour or rehabilitation. For sanctions to be effective, it is often important for man countries to work together, as poorly implemented sanctions can fail to have the desired effect.

A brief history of economic sanctions

For centuries, economic sanctions have been used as an alternative or an addition to physical warfare. Since the 17^th century, economic sanctions have been implemented in Europe, typically including prohibitions on trade, the closure of ports to enemies and bans on the trade of certain commodities.

In the age of globalisation, geopolitics and nuclear power, rivalries between world powers will be shaped by economic warfare rather than combat. This is due to two factors: the desire to avoid the use of nuclear weapons and the ability to use market factors rather than physical force to pressurise the offending party.

Various types of sanctions

Sanctions take many forms and Investopedia provides a simple breakdown of the main ones. Trade embargoes are broad bans on trading with a country, although food and medicine supplies are often excepted on humanitarian grounds. Export controls restrict goods such as weapons, military tech and intellectual property from being supplied to the country being sanctioned. Capital controls can restrict investment in targeted countries while trade sanctions can impose import controls for specific countries, regions or industries. On a more personal note, travel restrictions may be imposed on officials and their immediate families - or to the general public - denying them travel to the regions issuing the sanctions.

An example of sanctions in action: The US and Russia

The World Economic Forum cites the example of the US's sanctions against Russia in response to the war in Ukraine. After Russia's initial invasion in February 2014, the US imposed a series of sanctions against Russia. However, these sanctions failed to deter further aggression. Fast forward several years to the current invasion, and the United States and the European Union have combined their efforts to put in place severe and coordinated sanctions unprecedented in their severity.

The mixed results of sanctions

Many South Africans will likely remember the sanctions that were levelled against the Apartheid government. The late great Nelson Mandela asserted that these economic sanctions played a significant role in bringing Apartheid to an end, thereby showing the efficiency of sanctions as a political and economic tool. On the flip side of the coin, the sanctions against Iraq issued by the United States are frequently cited as one of the factors behind the 9/11 terrorist attacks.

While politics and macroeconomics are factors out of a company's direct control, other factors such as having the right premises can help to create a stable and profitable business. If your business needs a home in Gauteng or the Western Cape, get in touch with the 3Cube Property Group today.