Sanctions and embargoes are often used as tools of foreign policy to exert pressure on a country or group to change its behavior or comply with certain demands. While both measures aim to achieve similar goals, there are important differences between the two. Sanctions typically involve the imposition of economic or political restrictions, such as trade restrictions, asset freezes, or travel bans, while embargoes involve a complete prohibition on trade or other economic activity with a particular country or group.
Sanctions: Definition and Types
Sanctions are penalties or measures imposed by one country or group of countries against another country or group of countries to influence or change their behavior. Sanctions can be imposed for a variety of reasons, such as human rights violations, non-compliance with international law, or the pursuit of nuclear weapons. Sanctions may include restrictions on trade, investment, or other economic activity with the targeted country or group, as well as diplomatic measures such as the severing of ties or the expulsion of diplomats. The aim of sanctions is to pressure the targeted country or group to change its behavior or comply with certain demands.
Types of Sanctions:
There are different types of sanctions that can be imposed, depending on the goals and intentions of the imposing country or group. Some of the most common types of sanctions include:
- Economic sanctions: These involve the restriction of trade, investment, or other economic activity with the targeted country or group. Economic sanctions may include trade embargoes, import/export restrictions, or restrictions on financial transactions.
- Political sanctions: These may involve diplomatic measures such as the severing of ties or the expulsion of diplomats. Political sanctions may also include restrictions on cultural or educational exchanges or the suspension of membership in international organizations.
- Targeted sanctions: These are measures that aim to affect specific individuals or entities, such as freezing their assets or banning them from travel. Targeted sanctions may also include restrictions on access to technology or other resources.
Examples of Sanctions:
There have been numerous examples of sanctions being imposed throughout history. Some of the most notable examples include:
- The United Nations sanctions against Iraq in the 1990s were imposed in response to Iraq's invasion of Kuwait.
- The economic and political sanctions against Iran have been imposed by the United States and other countries in response to Iran's nuclear program.
- The targeted sanctions against Russia were imposed by the European Union and the United States in response to Russia's annexation of Crimea.
- The economic and political sanctions against North Korea have been imposed by the United Nations and other countries in response to North Korea's nuclear program and human rights violations.
Embargoes: Definition and Types
An embargo is a commercial barrier that prevents commerce or trade with a single nation or a group of countries in a certain way. Embargoes are legislative restrictions that are viewed as powerful diplomatic measures aimed at eliciting a certain national interest outcome from the country on whom they are imposed. An embargo prohibits a country from dealing with another country for a certain product, sector, or even all items, implying that it would not import or export any products from that country.
Types of Embargoes:
There are different types of embargoes that can be imposed, depending on the goals and intentions of the imposing country or group. Some of the most common types of embargoes include:
- Trade embargoes: These involve the prohibition or restriction of trade with the targeted country or group. Trade embargoes may include restrictions on imports or exports or the complete cessation of trade between the countries.
- Military embargoes: These involve the prohibition or restriction of military aid or weapons sales to the targeted country or group. Military embargoes may also include the restriction of technology transfers or training of military personnel.
- Financial embargoes: These involve the restriction or prohibition of financial transactions with the targeted country or group. Financial embargoes may include the freezing of assets or the prohibition of access to international banking systems.
Examples of Embargoes:
There have been numerous examples of embargoes being imposed throughout history. Some of the most notable examples include:
- The United States embargo against Cuba has been in place since the 1960s and involves a trade and travel embargo.
- The United Nations arms embargo against North Korea was imposed in 2006 in response to North Korea's nuclear program.
- The European Union embargo against arms exports to China was imposed in 1989 after the Chinese government's crackdown on pro-democracy protesters in Tiananmen Square.
- The United States embargo against Iran has been in place since 1979 and involves restrictions on trade, investment, and financial transactions.
Difference Between Sanction and Embargo
When it comes to foreign policy and international relations, sanctions and embargoes are two commonly used economic measures to influence the behavior of targeted entities. While the two terms are often used interchangeably, they have distinct differences in terms of scope, intensity, target, goals, and international law.
|Intensity||Sanctions can vary in their intensity, ranging from mild measures such as travel restrictions to more severe measures such as economic sanctions.||Embargoes are generally more intense than other types of economic measures and involve the complete cessation or restriction of trade.|
|Scope||Sanctions are a broad category of economic measures that can include a range of penalties, such as diplomatic measures, asset freezes, and restrictions on trade and investment.||Embargoes are a specific type of economic measure that involves the prohibition or restriction of trade with a targeted country or group.|
|Target||Sanctions can be used against a country, a group of countries, or specific individuals or entities within a country.||Embargoes are specifically used to target a country or group by prohibiting or restricting trade with them.|
|Goals||Sanctions are generally used to pressure a targeted entity to change its behavior.||Embargoes are often used to punish a targeted entity for specific actions or policies.|
| International Law
||While there is no specific international law governing sanctions, the United Nations Security Council can impose sanctions under Chapter VII of the UN Charter.||Embargoes are governed by international trade law and can be subject to World Trade Organization (WTO) regulations.|
Goals of Sanctions and Embargoes
The goals of sanctions and embargoes are generally aimed at achieving specific foreign policy objectives. Some of the common goals of sanctions and embargoes include:
- Changing the behavior of the targeted country or group: The primary goal of most sanctions and embargoes is to change the behavior of the targeted country or group. Sanctions and embargoes may be imposed in response to a variety of activities, such as human rights violations, support for terrorism, or the pursuit of nuclear weapons. The hope is that the pressure created by the sanctions or embargo will lead to a change in behavior.
- Preventing or stopping conflicts: Sanctions and embargoes may be imposed to prevent or stop conflicts. For example, an embargo on arms sales may be imposed to prevent a country from obtaining the weapons necessary to engage in armed conflict.
- Protecting national security interests: Sanctions and embargoes may be imposed to protect national security interests. For example, an embargo may be imposed on the export of sensitive technologies to prevent them from falling into the wrong hands.
- Supporting democracy and human rights: Sanctions and embargoes may be imposed to support democracy and human rights. For example, an embargo may be imposed on a country that has a poor human rights record to put pressure on them to improve their human rights situation.
- Punishing bad behavior: Sanctions and embargoes may be imposed as a form of punishment for bad behavior. For example, an embargo may be imposed on a country that has engaged in aggressive behavior toward its neighbors.
Importance of Sanctions Screening and Monitoring
Sanctions screening and monitoring are critical for businesses since they want their consumers to have a safe and inexpensive onboarding experience. Companies must, however, protect themselves from risks and comply with AML requirements in the customer onboarding process. As a result, firms conduct customer risk screening to identify their customers' risks throughout the customer account opening procedures, and therefore companies must use an AML compliance program template that is appropriate for the company's risk levels.
OFAC released a framework in 2019 to assist US companies in implementing and shaping their economic sanctions compliance procedures. The paper offers advice on satisfying compliance requirements, establishing internal controls, and conducting vulnerability audits. With this in mind, companies should consider several key factors when implementing a sanctions program, including:
- Regular updates: Because economic sanctions are issued and removed on a regular basis, businesses must ensure that their screening and monitoring systems are flexible enough to respond to such changes.
- Geographic location: Companies should verify that their sanctions screening methods are appropriate for the jurisdiction in which they operate and that they can distinguish between broad and narrow penalties.
- Data analysis: Companies must check a variety of data in order to filter sanctions lists and monitor changes in risk. To develop comprehensive client profiles, data gathering and analysis tools must be able to support that process rapidly and accurately.
Firms must devote technology, funds, and expertise to AML and economic sanctions compliance, as well as employee training to manage the rising sanctions load. Firms should seek third-party assistance to identify a solution that matches their goals and risk profile to minimize the AML/CTF risks. To find out how our products can help you to comply with the AML/CTF rules and regulations within the framework of global regulators, don't hesitate to contact us and request a demo.