After Russia launched its full-scale in February 2022, the aggressor was hit with economic sanctions from the US, UK, European Union and others. These sanctions restricted domestic companies or individuals in how they trade and do business with Russia.
The sanctions were an effort to make change its course without resorting to direct military force.
Since then, the . Russia’s foreign assets have been frozen, and a majority of Russian banks have been cut off from the global banking system.
To keep its economy going, Russia like China, , Turkey and the United Arab Emirates. To move its oil around the world, the country has turned to a fleet of “.”
What are secondary sanctions?
To end this game of economic cat and mouse and bring Russia to ceasefire talks, the US Senate is working to pass a bipartisan bill that threatens “secondary sanctions” on countries that still do business with Russia.
Primary sanctions are placed on foreign countries or entities, but they restrict the behavior of the sanctioning country’s own citizens and businesses by limiting or prohibiting them from engaging with the sanctioned parties.
Secondary sanctions go a step further and extend to third-party countries, companies or individuals that do business with sanctioned parties.
Even though these third-party entities aren’t directly bound by the sanctioning country’s laws, they are pressured to comply or face consequences should they do business in the sanctioning country.
“Secondary sanctions do not attempt to force foreign subsidiaries to follow a sanctioning country’s policies,” according to John F. Forrer in a paper published by the Atlantic Council, a Washington, D.C.-based think tank. “The sanctioning country restricts its own firms and/or citizens from having commercial dealings with designated firms or individuals.”
The proposed US legislation would enable 500% tariffs on goods from any country that buys or sells Russian oil, uranium, natural gas and petroleum or petrochemical products.
Who uses secondary sanctions?
The United States is the biggest proponent of secondary sanctions. Their power stems from the importance of the US dollar on a global level and from the fear of losing access to the US market or its financial system.
Since a significant amount of cross-border trade is in dollars or passes through the US banking system, this gives the country great leverage. For many countries, keeping this access is more important than doing business with sanctioned regimes.
“While secondary sanctions can ‘work’ as part of the larger package, the intent, timing and credibility of the threat are important,” said Lena Surzhko Harned, associate director of the Public Policy Initiative at Penn State Behrend.
They are an important tool with symbolic power. “However, like all threats, it loses its power if it is not perceived as credible or other loopholes are found,” Harned told DW.
How have they been used in the past?
The Obama administration used secondary sanctions to target banks and other companies doing business in Iran in a successful effort to get the country to negotiate about limiting its nuclear program.
More recently, the US has used secondary sanctions on Chinese firms trading with or handling financial transactions with North Korea.
The US also introduced secondary sanctions against entities doing business with Venezuela, especially in the oil and financial sectors, in an effort to isolate the Nicolas Maduro regime. This past April, President Donald Trump imposed secondary tariffs on countries that import Venezuelan oil.
This month, Trump issued an executive order, levying . Sidestepping Congress the president has threatened further secondary sanctions on buyers of Russian energy.
Do secondary sanctions actually work?
Not every country is a pushover when it comes to secondary sanctions, and some find creative loopholes to avoid much of their economic impact. They rely on alternative currencies, such as the Chinese yuan or . Businesses or countries subject to sanctions can barter or use intermediaries or shell companies to conclude deals.
Secondary sanctions are difficult to enforce and risk retaliation. They can also push like-minded countries closer together — and therefore further from US influence.
There is a rift between academics and practitioners on secondary sanctions. Many experts think they are not an effective foreign policy tool, according to Forrer, an associate professor and director of the Institute for Corporate Responsibility at the George Washington University’s School of Business.
“Many researchers view secondary sanctions as having all the worst attributes of economic sanctions, plus the added onerousness of potentially instigating new conflicts with allies and adversaries who object to the imposition of restrictions and economic hardship on their own industries and citizens,” argued Forrer.
Secondary sanctions are just one option
In the end, it is difficult to say what exactly makes a country change course with so many parallel variables to take into account.
“Secondary sanctions should be considered an option when designing economic sanctions, but only under a very particular set of circumstances,” concluded Forrer. “As with any economic sanction, if deployed incorrectly, they can do more harm than good.”
“Not to use secondary sanctions against third parties is a waste of a potentially useful tool,” agreed Harned, but warned, “to expect them to be a silver bullet is a misguided mistake.”
Edited by: Ashutosh Pandey
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