The Next Generation of Sanctions

The next American president and his or her sanctions team at the Treasury and State departments will almost immediately face a series of key challenges, issues, and decisions about the direction of major sanctions programs. Some of these include:

• Ensuring continuation of strong multinational sanctions on Russia, barring a change in Russian policy toward Ukraine.
• Balancing implementation of the Joint
• Comprehensive Plan of Action (JCPOA) with Iran, which relieved many sanctions, with continued sanctions implementation targeting Iran’s support for terrorism, development of ballistic missiles, and efforts to destabilize the region.
• Maintaining economic pressure on the Islamic State terrorist group.
• Working with Congress to terminate the U.S. embargo on Cuba.
• Enhancing multilateral enforcement of sanctions on North Korea.

Beyond the policy measures that will underlie decisions on these issues, the next president will need to address a series of growing challenges related to sanctions implementation and enforcement – challenges that, if left unchecked, may erode the efficacy of American sanctions in the future. These challenges include:

• Ensuring cooperation with allies to manage both policy-level alignment on sanctions programs and alignment on technical implementation.
• Mitigating the impacts of the “de-risking” trend in the financial sector that has seen many U.S. and European banks withdraw from business to avoid higher-risk jurisdictions and clients.
• Improving cooperation and information-sharing with the private sector and expanding the U.S. government’s ability to analyze costs and benefits of different sanctions options. Avoiding sanctions overuse in ways that might undermine the effectiveness of the tool over time.

Addressing these issues will require the next president and his or her team to move quickly after Inauguration Day – and in some cases prior to inauguration – to signal intentions, work with allies, and begin strengthening the U.S. sanctions apparatus. Indeed, moving quickly will give the next president the ability to make important changes in how the U.S. government crafts and executes sanctions, and in how it manages the bureaucracies that will shepherd these national security tools into the next major stage of their evolution.

Introduction

It is difficult to overstate the extent to which the U.S. use of sanctions has exploded as a tool of foreign policy over the last decade.³ The Treasury Department’s Office of Foreign Assets Control (OFAC), the agency that administers U.S. sanctions programs, currently manages 28 sanctions programs covering countries from Russia to Yemen, and non-state actors from drug cartels to those responsible for cyberattacks on the United States.⁴ As Treasury Secretary Jacob Lew said in March 2016, “Economic sanctions have become a powerful force in service of clear and coordinated foreign policy objectives – smart power for situations where diplomacy alone is insufficient, but military force is not the right response.”⁵

The next American president will face a series of early decisions about the direction of key American sanctions regimes, including those against Iran, Russia, the Islamic State terrorist group (IS), Cuba, and North Korea. Indeed, the next president will need to begin making decisions about coercive economic measures even prior to Inauguration Day, given that world leaders will be looking for signals from the president-elect about his or her intentions regarding Iran and Russia sanctions. Strong signaling to demonstrate leadership, a willingness to act with key international partners, and the capacity for flexibility or adaptation will buy the next American president time to develop his or her own policies. A misstep will force the next president to deal with early foreign policy challenges. Over the course of his or her administration, the next president will also need to take a series of steps to respond to growing challenges in sanctions implementation to keep the U.S. sanctions tool strong for years to come.

This paper, the fifth in a Center for a New American Security (CNAS) series of papers outlining key national security recommendations for the next administration, sets the scene on key sanctions regimes and on the sanctions implementation challenges that the new president will face. Taking into account the opportunity a new administration presents for making structural and substantive changes to improve the efficacy and availability of sanctions, this paper offers recommendations for immediate and longer-term decisionmaking on sanctions.