US puts squeeze on Myanmar generals but sanctions regime needs review
15 Feb 2021|

The imposition of US sanctions on the generals of Myanmar last week suggests that economic coercion will remain the first resort for President Joe Biden when confronting international crises.

Sanctions are a clear expression of US disapproval; however, former president Donald Trump’s greatly increased use of economic coercion failed to achieve any broader foreign policy objectives and left his successor with difficult decisions about which economic wars he wants to keep waging and how to retreat from those he does not.

The Trump administration imposed 3,900 separate sanction regimes during its four years in office, which was almost as many as Barack Obama’s administration ordered in twice the time.

The character of US sanctions changed. Whereas previous administrations targeted powerful individuals and entities, seeking to avoid widespread hardship on populations, Trump’s ‘maximum pressure’ campaigns on Iran and Venezuela sought to do as much economic damage as possible by threatening to bar anyone trading with a sanctioned nation from using the US dollar.

The range of targets was broadened and a wider set of coercive tools was deployed.

China has become a major focus of US coercion, particularly over the last 12 months, with sanctions imposed on officials associated with repression in Xinjiang and the security crackdown in Hong Kong. US citizens have been banned from buying securities in Chinese companies deemed to have military connections, and far-reaching export controls have been imposed. The Trump administration also sought to ban Chinese technology applications, including Tik Tok and WePay, from the US market.

It is a sprawling and uncoordinated conflict, with decision points scattered across the departments of Treasury, Commerce, State, Homeland Security and Defense, while Congress has imposed its own sanctions.

The US has taken aim at some new causes. It has sanctioned key officials of the International Criminal Court, freezing their US assets, over investigations of alleged US war crimes in Afghanistan. It has also imposed tough sanctions on any business involved in the construction of a gas pipeline from Russia to the European Union.

Legal firm Gibson Dunn notes that the pace of coercive action intensified in the Trump administration’s final days—175 sanction measures, along with a spate of technology-related measures, were enacted after the November election. It said this was ‘an ostensible attempt to force the hand of the incoming Biden–Harris administration on a number of key national security policy decisions’.

The New York Times has suggested that ‘sanctions fatigue’ has set in, with the frequency of their use diluting their efficacy. It cited the US ambassador to NATO under the Obama administration, Ivo Daalder, saying, ‘We have fallen into this trap that sanctions are the easy answer to every problem. They demonstrate that you care, and they impose some price, though usually not sufficient to change behavior.’

The Trump campaigns against Iran and Venezuela have certainly caused great hardship for those nations’ citizens.

There was popular unrest in Iran in late 2019 and early 2020 over fuel price increases; however, the main political fallout from the economic siege following the US withdrawal from the nuclear deal has been to strengthen the position of the hardliners.

Iran’s oil exports are recovering in defiance of the sanctions. A service based on the satellite tracking of oil tankers suggests exports have risen from a low of 695,000 barrels a day to 1 million. China is the major buyer, although widespread transhipment of oil cargoes to evade detection means Iranian oil could be being sold more widely.

The World Bank expects Iran’s economy to return to growth this year after three years of deep recession. As a result, Iran’s leaders will enter any negotiations with the Biden administration believing that they have survived the worst that the US can inflict through economic warfare and have nothing to fear.

Biden has indicated that he would like to return to the nuclear deal dumped by Trump but, for the moment, inertia is carrying the Trump policy forwards.

In the dying days of the Trump administration, the US Justice Department was notified by the owner of a Greek supertanker that its 2-million-barrel cargo, which was loaded in the belief that it had come from Iraq and was destined for China, may instead have come from Iran.

Shortly after Biden’s inauguration, the US took court action to seize the oil, worth around US$120 million. The shipowner complied, diverting from China to a US port, in order to avoid US sanctions. The US will sell the oil, directing proceeds to a fund for victims of terrorism. Iran has previously claimed such actions amount to high-seas piracy.

The Venezuelan economy is yet to show any signs of recovery, but the regime of Nicolas Maduro has been similarly unyielding to US pressure and consolidated its control of the national legislature in December’s elections.

Secretary of State Antony Blinken has said the US will continue to recognise exiled politician Juan Guaido as Venezuela’s legitimate president but will seek to make sanctions ‘more effective’. There has been a limited rollback of sanctions targeting Venezuelan ports and airports already. Removal of sanctions on oil and financial transactions would ease widespread hardship, but Biden would be unlikely to get the free and fair elections he seeks in return.

Biden will also tread a difficult path over Cuba, wanting to ease some of the restrictions imposed by the Trump administration without going back to the level of openness offered under Obama. Trump allowed Cuban exiles to sue companies making use of property that had been expropriated following the 1959 revolution, implementing a long-waived provision in the Helms–Burton Act. This has set in train conflict with the European Union that Biden will have to manage, with several legal actions targeting European companies.

The Biden administration has reportedly been negotiating on the most direct conflict with Europe over the sanctions attempting to halt completion of the gas pipeline with Russia. There’s a suggestion of a deal under which Europe would shut the pipeline if Russia halted shipments through Ukraine.

The biggest challenge for Biden is where to take the campaign of economic coercion against China. It has mixed motives including the defence of human rights, punishing breaches by China of sanctions against other countries, limiting the use of US technology by business connected with the Chinese military, more generally constraining China’s technological advance and narrowing the US–China trade deficit.

Biden last week said he would be guided by the findings of a Pentagon taskforce established to develop a coherent US strategy. He said the China strategy would require a ‘whole-of-government effort’ and would depend on ‘strong alliances and partnerships’. Whatever that strategy looks like, it is unlikely to force wholesale change in the behaviour of the Chinese Communist Party.