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Analysis

The Biden Administration’s Disappointing Sanctions Report: What Should Come Next

There’s much more the administration can do to make sanctions work without wreaking havoc on innocent populations.

Last Updated: November 1, 2021
Published: November 1, 2021
the U.S. Treasury building in Washington DC
steinphoto/Gerry

This article was origin­ally published at Just Secur­ity.

Last week, the Treas­ury Depart­ment released a long-awaited report setting forth the results of its “compre­hens­ive review” of U.S. sanc­tions. To the dismay of sanc­tions reform advoc­ates, the thin seven-page report did not recom­mend ending, or even modi­fy­ing, any exist­ing sanc­tions regimes, nor did it propose any concrete policy changes. The broad approaches set forth in the report—en­sur­ing that sanc­tions are part of a broader policy strategy, coordin­at­ing with allies and part­ners whenever possible, mitig­at­ing unin­ten­ded impacts, and the like—are sound, but they are stated at such a high level of gener­al­ity that it’s unclear whether or how they will be put into mean­ing­ful prac­tice.

To be sure, compre­hens­ive sanc­tions reform will require legis­la­tion. Nonethe­less, there is much more the Biden admin­is­tra­tion should do—and, despite this inaus­pi­cious start, still can do—to ensure that sanc­tions regimes advance legit­im­ate policy goals without wreak­ing havoc on inno­cent popu­la­tions.

The Prob­lems

As the Treas­ury report recog­nizes, sanc­tions have become the govern­ment’s “tool of first resort” to address bad actors over­seas. They are routinely imposed as a comple­ment to U.S. milit­ary inter­ven­tion, but they also can be deployed in situ­ations where milit­ary force is not an option; even where milit­ary options exist, sanc­tions may be perceived as a less costly altern­at­ive. Need­less to say, however, sanc­tions and milit­ary inter­ven­tion are not the only choices on the table when deal­ing with foreign threats. And the reflex­ive reli­ance on sanc­tions both under­es­tim­ates their costs and over­es­tim­ates their bene­fits.

On the cost side of the ledger, it is well-estab­lished that sanc­tions can cause grave harms to civil­ian popu­la­tions in coun­tries or regions that are subject to sanc­tions. They often impede the flow of needed human­it­arian aid into areas ravaged by war or famine. Their economic impact can have seri­ous public health consequences, includ­ing malnu­tri­tion and increased infant mortal­ity. (Iron­ic­ally, the actual targets of sanc­tions are frequently shiel­ded from these effects because they hold posi­tions of power or priv­ilege.) U.S. sanc­tions have had a devast­at­ing effect on the abil­ity of coun­tries like Iran to respond to the COVID-19 pandemic.

The more targeted the sanc­tion­s—i.e., those levied against indi­vidual offi­cials rather than entire govern­ment­s—the less likely they are to have these collat­eral effects. However, even relat­ively targeted sanc­tions can cause broader harm if the sanc­tioned entit­ies—­for instance, partic­u­lar terror­ist groups—have effect­ive control over the deliv­ery of goods and services to non-sanc­tioned popu­la­tions.

The current approach toward mitig­at­ing these harms is wholly insuf­fi­cient. The Treas­ury Depart­ment grants human­it­arian exemp­tions from sanc­tions in the form of “general licenses” (which apply to anyone wish­ing to engage in the licensed activ­ity) or “specific licenses” (which may be gran­ted to applic­ants on a case-by-case basis). In theory, these allow entit­ies to provide food, medi­cine, or other forms of aid without incur­ring penal­ties for viol­at­ing sanc­tions.

In prac­tice, they rarely solve the prob­lem. For one thing, Treas­ury’s grant­ing of licenses frequently lags far behind the need. The impact of sanc­tions on coun­tries strug­gling to manage COVID-19 was appar­ent from the start of the pandemic. Yet the Treas­ury Depart­ment did not issue general licenses for COVID-related trans­ac­tions until June 2021—fif­teen months after the onset of the pandemic and five months into Pres­id­ent Biden’s admin­is­tra­tion.

Moreover, sanc­tions regimes are so complex, and the penal­ties for running afoul of them so severe, that finan­cial insti­tu­tions routinely “over­com­ply” and shy away from trans­ac­tions with sanc­tioned entit­ies even when those trans­ac­tions are licensed. A non-profit organ­iz­a­tion dedic­ated to provid­ing human­it­arian aid might be will­ing to take the risk, but it could still run into obstacles find­ing banks that will process its trans­ac­tions, compan­ies that will provide trans­port­a­tion, or other neces­sary assist­ance. A recent U.S. Govern­ment Account­ab­il­ity Office report found that all nine of the U.S. Agency for Inter­na­tional Devel­op­ment imple­ment­ing part­ners that were permit­ted to deliver human­it­arian aid in Venezuela had banks close their accounts or reject trans­ac­tions.

The U.S. govern­ment portrays these harms as unfor­tu­nate collat­eral consequences of a policy tool that is vital for the promo­tion of U.S. interests. In fact, however, stud­ies have shown that most sanc­tions regimes do not succeed at chan­ging the beha­vior of—or mean­ing­fully weak­en­ing—the sanc­tioned entit­ies. Indeed, sanc­tions against auto­cratic regimes can have the perverse effect of empower­ing them, as their role in the distri­bu­tion of scarce goods becomes more cent­ral. They can also drive the sanc­tioned entit­ies into alli­ances with enemies or rivals of the United States, who are will­ing to go against U.S. sanc­tions and provide support for those entit­ies.

That’s not to say that sanc­tions never work, or that their only legit­im­ate func­tion is to disable the target. But when combined with the collat­eral harms that often result, the ques­tions around sanc­tions’ effic­acy coun­sel in favor or a rigor­ous cost-bene­fit analysis before impos­ing them.

Put simply, that analysis does­n’t happen. Pres­id­ents are not required to state the specific goals of any given sanc­tions regime, let alone track and report progress toward those goals. On the other side of the equa­tion, they are under no oblig­a­tion to meas­ure or report the human­it­arian effects of sanc­tions or the cost to the United States economy. Without this inform­a­tion, lawmakers and the public are left to rely on the exec­ut­ive branch’s own conclu­sion—it­self based on insuf­fi­cient data—that each of its sanc­tions programs is useful and propor­tion­ate.

On top of these prob­lems, there are consti­tu­tional due process issues for Amer­ic­ans caught up in sanc­tions. Although sanc­tions are gener­ally reserved for threats eman­at­ing in substan­tial part from over­seas, pres­id­ent may still impose them on Amer­ic­ans who are deemed to contrib­ute to that threat. Treas­ury Depart­ment regu­la­tions, however, do not require the govern­ment to provide the targets of sanc­tions with any inform­a­tion about why they were desig­nated. Under the regu­la­tions, targets can request that the sanc­tions be lifted, but they are not entitled to an in-person hear­ing, and there is no dead­line for the govern­ment to respond. In short, Amer­ic­ans can be subject to what many have termed a “finan­cial death penalty” based merely on the signa­ture of a mid-level Treas­ury Depart­ment offi­cial.

The Report

The Treas­ury Depart­ment’s report fails to mean­ing­fully wrestle with these prob­lems.

The review took nine months, and accord­ing to the Depart­ment’s own descrip­tion, it involved inter­views with “indi­vidu­als repres­ent­ing hundreds of sanc­tions stake­hold­ers, includ­ing Members of Congress and their staffs, inter­agency part­ners, the private sector, foreign govern­ments, nongov­ern­mental organ­iz­a­tions, academ­ics, and Treas­ury’s sanc­tions work­force.” Yet the result­ing report is a mere seven pages of text, focused primar­ily on the need to “modern­ize” sanc­tions to account for changes in tech­no­logy and global finance. It includes only a single para­graph on “the unin­ten­ded consequences of current sanc­tions regimes on human­it­arian activ­ity needed to support basic needs”; one sentence on assess­ing the effect­ive­ness of sanc­tions regimes post-imple­ment­a­tion; and noth­ing on the prob­lem of over­com­pli­ance by finan­cial insti­tu­tions or the due process issues raised by the lack of mean­ing­ful notice or dead­lines for agency action.

Advoc­ates who had hoped that the review would involve the recon­sid­er­a­tion of exist­ing sanc­tions regimes were disap­poin­ted. The report expressly disavows any effort to assess the 37 sanc­tions programs currently in effect.

Nor does the report set forth any concrete recom­mend­a­tions for approach­ing sanc­tions differ­ently in the future. Instead, it iden­ti­fies a hand­ful of general, high-level prin­ciples to which sanc­tions should adhere (for instance, “Sanc­tions should be deployed along­side other meas­ures as part of a larger strategy in support of specific policy object­ives,” and “Treas­ury should seek to tailor sanc­tions in order to mitig­ate unin­ten­ded economic and polit­ical impacts on domestic work­ers and busi­nesses, allies, and non-targeted popu­la­tions abroad”).

These prin­ciples are import­ant, and they are rarely reflec­ted in current prac­tice; accord­ingly, there is value in the Biden admin­is­tra­tion stat­ing them. Nonethe­less, they are fairly obvi­ous to anyone famil­iar with the sanc­tions land­scape and could easily have been draf­ted in a matter of days. What the report should have provided—be­cause none of these prin­ciples are self-execut­ing—is concrete policy reforms that would put these prin­ciples into prac­tice. Ideally, those reforms would have been rolled out along­side modi­fic­a­tions to exist­ing programs, demon­strat­ing that the Biden admin­is­tra­tion is seri­ous about imple­ment­ing them.

The report comes closest to a specific policy recom­mend­a­tion in its para­graph on human­it­arian aid. It asserts that, “[w]here possible and appro­pri­ate, Treas­ury should expand sanc­tions excep­tions to support the flow of legit­im­ate human­it­arian goods and assist­ance and provide clear guid­ance at the outset when sanc­tions author­it­ies are created and imple­men­ted.” But this state­ment still raises more ques­tions than it answers. Under what circum­stances would it not be “possible” or “appro­pri­ate” to expand sanc­tions excep­tions? And in what ways should they be expan­ded? The state­ment is too general to provide any real blue­print for change.

Simil­arly, the report recom­mends that Treas­ury should “seek to develop and imple­ment an analyt­ical construct to assess its sanc­tions programs and actions system­at­ic­ally.” This is a crit­ical sugges­tion. But it, too, disap­points, given that many observ­ers thought the purpose of the nine-month review was to assess its programs system­at­ic­ally—or, at least, to develop the analyt­ical construct for such an assess­ment.

The Needed Reforms

Of course, last week’s report need not be the end of the matter. The report states that, “[g]oing forward, Treas­ury will continue to review its exist­ing author­it­ies to consider the unin­ten­ded consequences of current sanc­tions regimes on human­it­arian activ­ity . . . as well as poten­tial changes to address them while continu­ing to deny support to mali­cious actors.” The admin­is­tra­tion should go further and conduct a compre­hens­ive review of exist­ing sanc­tions programs to ensure that they comply with all of the prin­ciples set out in the report. And it should do so exped­i­tiously; the review should not consume another nine months. Prior­ity should be given to the recon­sid­er­a­tion of broad-based sanc­tions regimes that are known to have signi­fic­ant human­it­arian impacts.

The admin­is­tra­tion also should turn prin­ciple into prac­tice by enact­ing changes to Treas­ury Depart­ment policies. The Bren­nan Center (where I work) has recom­men­ded several reforms to the Inter­na­tional Emer­gency Economic Powers Act (IEEPA), which under­lies most sanc­tions regimes. Some of these reforms will require legis­la­tion. Others, however, can be under­taken by the admin­is­tra­tion now, without any inter­ven­ing legis­lat­ive or regu­lat­ory change (although the admin­is­tra­tion should codify them in regu­la­tions to ensure their longev­ity).

To begin, the admin­is­tra­tion should adopt a policy of stat­ing specific and meas­ur­able goals for every sanc­tions regime that it imposes or contin­ues. (The report does coun­sel that sanc­tions should be deployed “in support of specific policy object­ives,” but it does not require those object­ives to be stated publicly at the time sanc­tions are imposed.) The admin­is­tra­tion should peri­od­ic­ally assess progress toward those goals using object­ive metrics, and it should make those assess­ments public, with any clas­si­fied inform­a­tion redac­ted and provided separ­ately to Congress. At the same time, it should meas­ure and report any collat­eral effects. These should include the impact of the sanc­tions on public health and the provi­sion human­it­arian aid in the affected areas, as well as the effect on the U.S. economy. To the extent these assess­ments require addi­tional resources, the admin­is­tra­tion should move quickly to seek the neces­sary fund­ing from Congress, earmarked for that purpose.

The admin­is­tra­tion also should take a funda­ment­ally differ­ent approach to the human­it­arian costs of sanc­tions. IEEPA includes an exemp­tion for the dona­tion of human­it­arian aid, but it allows the pres­id­ent to waive the exemp­tion if he concludes that human­it­arian dona­tions would seri­ously impair his abil­ity to address the threat in ques­tion. Although IEEPA was enacted in 1977, the human­it­arian exemp­tion was never waived until 1995, and then not again until 2001. Since then, however, pres­id­ents have routinely invoked the waiver, to the point that it is effect­ively a dead letter. Instead, the govern­ment attempts to address human­it­arian needs through general and specific licenses.

The Biden admin­is­tra­tion should reverse this trend. For nearly twenty years, pres­id­ents did not perceive any need to waive the human­it­arian exemp­tion. It defies logic that a waiver has become neces­sary in every instance. Pres­id­ent Biden should refrain from waiv­ing the human­it­arian exemp­tion in future sanc­tions regimes, and he should end the waivers that are currently in place.

More will be needed, however, as IEEP­A’s human­it­arian exemp­tion applies only to dona­tions, and the Treas­ury Depart­ment often takes a narrow view of what consti­tutes human­it­arian aid. For every sanc­tions regime that could reas­on­ably be expec­ted to have some human­it­arian impact, the Treas­ury Depart­ment should include a general license in the accom­pa­ny­ing regu­la­tions. The license should permit the provi­sion of goods and services—both dona­tions and sales—­for health care, water, sanit­a­tion, nutri­tional support, agri­cul­tural and food secur­ity, civil­ian energy infra­struc­ture, primary and second­ary educa­tion, basic shel­ter, peace­build­ing activ­it­ies, and any other human­it­arian needs iden­ti­fied by the secret­ary of the Treas­ury.

There will still be an issue of over­com­pli­ance, with many entit­ies unwill­ing to take the risk of enga­ging in or facil­it­at­ing licensed trans­ac­tions. To address that prob­lem, the Treas­ury Depart­ment should estab­lish an inquiry process, with a short response dead­line (e.g., 30 days), for entit­ies that wish to ascer­tain whether partic­u­lar trans­ac­tions are permiss­ible. It also should proact­ively issue “comfort letters”—a prac­tice that is currently under­used—to assure finan­cial insti­tu­tions that it will not treat certain activ­it­ies as sanc­tions viol­a­tions. The White House should request dedic­ated resources for these efforts, if neces­sary. And the Treas­ury Depart­ment should adopt a uniform policy that it will not penal­ize viol­a­tions by entit­ies that seek to provide or facil­it­ate human­it­arian aid as long as those entit­ies were oper­at­ing in good faith.

Finally, the admin­is­tra­tion should afford due process to Amer­ican citizens or resid­ents who are the subject of sanc­tions. The Treas­ury Depart­ment should provide contem­por­an­eous notice to these targets, and within a week, it should provide the record on which the sanc­tions decision was based—in­clud­ing an unclas­si­fied summary or redac­ted version of any clas­si­fied evid­ence. Targets should be given the option of an in-person hear­ing within a reas­on­able period (say, 90 days) of receiv­ing the admin­is­trat­ive record, unless the parties agreed to extend that period, and the Depart­ment should issue its ruling within a similar time period.

These are signi­fic­ant changes, without ques­tion. But they are doable. They are also neces­sary to place sanc­tions on a sound policy foot­ing, and they are the type of systemic reforms that advoc­ates hoped for and expec­ted when the admin­is­tra­tion commit­ted to a compre­hens­ive review. The admin­is­tra­tion should act quickly to put them in place. Other­wise, the prin­ciples artic­u­lated in last week’s report will become a mere reminder of all the ways in which U.S. sanc­tions policy contin­ues to fall short.