After four years of upended norms under former President Donald Trump, the US Treasury Department rolled out a review of sanctions policy this week that represents a welcome return to a principled and more systematic foreign-policy approach.
Promised by Treasury Secretary Janet Yellen during her confirmation hearing, the Treasury 2021 Sanctions Review is a solid and sensible update rather than a dramatic reversal. That’s exactly what’s needed: Successful use of sanctions depends on the application of policy virtues such as diligence, discipline, and diplomacy with allies, partners, and stakeholders alike.
Although sanctions have been a go-to tool for the past four administrations (at least), each has suffered from a lack of three crucial factors: a more formal implementation and review process, resources, and sufficient outreach to stakeholders. These may sound like wonky DC problems—but they have real, and detrimental, effects on US policy. Famously, for instance, the Trump administration’s rushed sanctions on Chinese military companies had to be completely scrapped by the Biden administration (which agreed with the policy) and reissued due to legal flaws that could have been avoided with a more formal implementation process.
But this review provides a blueprint for change. Here’s why:
What it says…
- Link sanctions to a clear policy objective. Some of the worst sanctions policies were poorly planned attempts to seek too much or simply just “do something.” When the Obama administration imposed sanctions against Iran on a multilateral basis, it achieved a limited but useful nuclear deal—in contrast to several sanctions programs across the last four administrations, for example in African countries, which lacked clear and achievable policy objectives. The review outlines sensible, if general, criteria for new sanctions regimes, all of which are unobjectionable but none of which is new. Still, having an explicit and clear framework to evaluate potential new sanctions regimes—which currently doesn’t exist—can provide some needed structure to decision-making.
- Incorporate multilateral coordination. Negotiating multilateral sanctions takes time and energy—but is worth it. This objective is part of the Biden administration’s push to reengage US allies and partners and reintegrate the United States in multilateral policy efforts. Critically, this recommendation does not discount the need to act unilaterally, which is necessary from time to time (if often suboptimal). This goal reflects the reality that US sanctions are disproportionately powerful, but that their effect and legitimacy is always enhanced by multilateral cooperation.
- Mitigate the unintended consequences. Sanctions are complex and often have impacts beyond their intent—whether unforeseen complications or general chilling of even non-sanctioned transactions. This recommendation is tacit acknowledgement that some common complaints about sanctions are valid and that the US government should do more to mitigate those impacts, especially in two key areas. First, the United States should expand humanitarian exceptions to ease the flow of such goods, consistent with American values. Second, it should ease the burden of compliance, especially on smaller US businesses that face an uneven playing field and are rendered less competitive—an excellent nod to the administration’s goal of a foreign policy for the middle class.
- Make sanctions easily understood, enforceable, and adaptable. The Treasury Department’s sanctions arm, the Office of Foreign Assets Control (OFAC), is part policy shop, part administrator, and part enforcement agency. Its structure, plus the increasing complexity of its sanctions programs, makes it difficult to engage businesses, foreign governments, and humanitarian organizations with clarity. A common concern is the lack of sufficient guidance. OFAC is also focused on implementation, which this administration correctly sees as too backward-looking to foresee new challenges such as cryptocurrencies, which operate largely outside of normal banking channels. While somewhat unspecific, this recommendation points in the right direction.
- Modernize sanctions technology, workforce, and infrastructure. None of the aforementioned goals are achievable without long-overdue investment in the Treasury Department’s small sanctions team of just around 240 staff members. Comparatively, the anti-money laundering section has received two major budget increases to modernize in the past twenty years. This review notes a more than 900 percent increase in sanctions designations over the past two decades—but without a correspondingly large investment in the tool itself. Ideally, this report would have indicated the necessary scale of investment, but even mentioning serious investment in this critical foreign-policy tool is welcome.
… and what it means
This document seems to be intentionally more of a practitioner’s strategy than a granular plan. Its most novel elements: calling for more forward-leaning work with smaller businesses and humanitarian organizations to help them cope with the complexities of working within sanctions strictures; urging greater resources for the Treasury Department’s sanctions arm; and a new focus on digital assets, which Treasury officials fear could undermine the efficacy of their sanctions.
Still, the review’s lack of specificity and verifiable policy goals could open the door to criticism—especially in the absence of additional follow-through on some of its goals. It may have been helpful for the Treasury Department to commit itself to discrete, achievable goals to show some progress to both outside observers and its congressional overseers. That’s why we consider this document a starting point for ongoing improvements, and we hope to see progress in at least several key areas in the near term:
- A targeted supplemental budget request by the Biden administration on par with the recent 50 percent increase recommended for the department’s anti-money laundering arm.
- A more formal interagency policy directive (issued by the White House) to govern the development of new sanctions and to review existing programs—including strong support for the State Department’s soon-to-be reestablished sanctions coordinator office.
- Concrete expansions of humanitarian exceptions to remove obstacles to payments, including personal remittances, and addressing common industry complaints that existing exceptions are too narrow.
- An effort to standardize and clarify guidance across sanctions programs, including the use of more plain-language explanations—not legal jargon—to describe the scope and application of sanctions.
To its credit, the policy review avoids several clichés (and self-serving ideas) floating around the wider sanctions-policy community—such as that sanctions are overused, never work, or inevitably impose massive humanitarian hardships that outweigh their dubious benefits. There may be some truth to each of these charges, but the review is smart in addressing the true root causes of sanctions misuse without indulging bad-faith argumentation.
No policy tool is immune from misapplication or abuse. This review is appropriately focused on enhancing the sanctions process itself—while also implying that such measures will remain an active policy tool—to boost the chances of success.
In the hands of strong leadership, it could prove a useful tool. But, like sanctions themselves, it will have to be wielded with skill, determination, and follow-through.
Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council and former National Security Council senior director, ambassador to Poland, and assistant Secretary of State for Europe.
Brian O’Toole is a nonresident senior fellow at the GeoEconomics Center and a former senior US Treasury Department official.
Mon, Aug 9, 2021
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