28 United States The EconomistNovember 30th 2019
2 This stands in stark contrast to other parts
of Mr Trump’s foreign policy.
According to data gathered by Gibson,
Dunn & Crutcher, a law firm, in his first
three years in office Mr Trump has added
over 3,100 people and entities to the sanc-
tions list run by the Office of Foreign Assets
Control, a division of the Treasury. That is
only slightly short of the 3,484 that George
W. Bush added in his entire eight years in
office. Last year Mr Trump added 1,474
names to a list that is now around 7,500-
strong. The Trump administration has not
just expanded sanctions but innovated
with them too—for example, by stopping
the trading of Venezuelan sovereign bonds.
America is not alone in imposing tar-
geted sanctions: the European Union and
the United Nations have programmes too.
But America’s is of special importance be-
cause of the country’s position at the heart
of the world’s financial system. When indi-
viduals suffer sanctions from the Treasury,
their assets in America are frozen. But the
effect goes further than that. Firms which
operate in America, or make payments in
dollars, cannot easily deal with individuals
on the list. Such is the reach of the dollar
that penalised individuals will struggle to
open bank accounts, own assets or be paid,
even in countries that are not close to Mr
Trump’s America. When companies face
sanctions from America’s Commerce De-
partment, as Huawei, a Chinese telecoms
giant, does, it has a similar effect—they
cannot buy from American firms.Making a list
Mr Trump has used sanctions as a blud-
geon in high-profile disputes. In Septem-
ber, imposing measures on Iran’s national
bank, he declared they would be “the high-
est sanctions ever”. Last month, when Tur-
key’s president, Recep Tayyip Erdogan,
launched an invasion of Syria, Mr Trump
threatened to “swiftly destroy Turkey’s
economy”, as the Treasury imposed target-
ed sanctions on three Turkish officials. But
more quietly, his administration has also
punished unprecedented numbers of peo-
ple accused of corruption and human-
rights abuses in more unexpected places.
Many such as Mr Gertler have been targeted
under the Global Magnitsky Act, which
came into force in 2016 and allows America
to impose sanctions on people even from
countries on which there is no national
sanctions programme in place.
In October the Gupta brothers, two Indi-
ans accused of working with Jacob Zuma,
South Africa’s former president, to loot
state institutions, were added to the Trea-
sury’s list. Weeks later Mr Trump added
Owen Ncube, the Zimbabwean security
minister, to the list. America now has sanc-
tions on 85 Zimbabweans. According to
John Prendergast, an activist who co-
founded The Sentry, a pressure groupwhich investigates corruption and human-
rights abuses in Africa, Mr Trump’s use of
the Global Magnitsky Act to go after crooks
and murderers has been “a game changer”.
What has driven this surge in sanc-
tions? According to Marshall Billingslea, an
assistant secretary in the Treasury depart-
ment, it reflects Donald Trump’s innova-
tive “financial statecraft”. Certainly, sanc-
tions seem an ideal tool for a man who
wants to put foreigners under lots of pres-
sure but is reluctant to send troops or bom-
bers to do the job. “Sanctions are...an op-
tion for when words aren’t good enough
but war is too much,” says Elizabeth Rosen-
berg of the Centre for a New American Se-
curity, a think-tank in Washington.
Mr Trump’s personality is clearly a fac-
tor, too. Mr Mnuchin has announced sanc-
tions in person more than two dozen
times—instead of leaving it to more junior
officials as previous treasury secretaries
did. He has claimed to spend half his time
working on sanctions. The commerce sec-
retary, Wilbur Ross, has been almost as en-
thusiastic. Adam Smith of Gibson, Dunn &
Crutcher argues that unleashing sanctions
on people and firms is quicker and cheaper
than most of the other things that Mr Mnu-
chin and Mr Ross can do to bring about
change. In an administration “less steeped
in the formal deliberative policy process”
than most, this matters, he notes.
That raises another question, how-
ever—do sanctions work? In a tactical
sense, it seems fairly clear that they do. Tar-
geted sanctions make people miserable,
says Mr Smith. In October the Zimbabwean
government declared a national holiday in
order to organise protests against sanc-
tions on its members. Mr Gertler has hired
lobbyists including Alan Dershowitz, a
prominent lawyer, to try to get off the list.
The sorts of people who suffer sanctions in
general find that they need to deal with
America and American companies.
Yet, in a strategic sense, it is not so clear
that sanctions are achieving much. Mr
Trump’s government says that for sanc-
tions to be lifted, Venezuela’s presidentmust step down, while Iran must trans-
form its foreign policy. Such a full capitula-
tion seems unlikely. Nor is it obvious that
individuals are responding. Beyond in-
creasing his lobbying bill, the sanctions on
Mr Gertler did not change his behaviour
much. He still flies to Kinshasa on his priv-
ate jet each week and is still close to Mr Ka-
bila, who retains considerable influence in
Congo. He still collects royalties of around
$30m per year on his mining interests.
Glencore, one of the biggest mining com-
panies in Congo, found a way around the
Treasury by paying him in euros. If sanc-
tions did help push Mr Kabila to step down,
it was because they signalled America’s se-
riousness about seeing the back of him.
In a research paper The Sentry, Mr Pren-
dergast’s outfit, points to successes in
places like Liberia and Sudan in changing
the behaviour of individuals who are tar-
geted. But all the sanctions programmes it
analysed suffered from “poor conceptuali-
sation, co-ordination, implementation,
and enforcement.” Diplomats are not al-
ways engaged in sanctions policy, which
comes from the Treasury and Commerce,
not the State Department. The staff keeping
the lists up to date are stretched thin. Many
African sanctions programmes have no-
body to manage them. That means sanc-
tions can sometimes be dodged. Overall,
officials have little idea how well sanctions
work or what their effects are, according to
a report released last month by the Govern-
ment Accountability Office.Checking it twice
Few will shed a tear for foreign officials
who can no longer buy penthouses in Man-
hattan or yachts in Miami. But foreigners
can be penalised in this way on the basis of
entirely classified evidence. There is no
way to appeal. And the costs affect more
than just the individuals. One risk is that fi-
nancial firms simply cut off whole coun-
tries to ease the cost of compliance. In Zim-
babwe, for example, local banks by law
cannot comply with American sanctions.
That means that American banks will not
deal with them. That is certainly not the
cause of Zimbabwe’s economic problems,
but it does not help.
If they do not change behaviour, Ameri-
can sanctions risk becoming less a tool of
coercion than an expensive and rather ar-
bitrary extra-territorial form of punish-
ment. Over time, foreign powers could be-
gin to create avoidance schemes that
would make them less effective. If that
happens, the Trump administration will
have weakened one of America’s strongest
non-military weapons. But such schemes
will not be easy to devise as long as America
is the world’s pre-eminent financial centre.
For the moment at least, Mr Trump’s sanc-
tions policy is a bright spot in an otherwise
lamentable foreign-policy record. 7Winning on penalties
United States, specially designated nationals
andblockedpersonslist,numberofadditionsSource:Gibson,Dunn& Crutcher2001 05 10 18151,5001,0005000Bush Obama Trump