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.
