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Terrorism and Trade Sanctions

Terrorism and Trade Sanctions. Todd Craig David Goldenberg Michael Anderson 28 April 2008 PUBP 701. Why Sanctions?. 1. Promote U.S. foreign policy objectives. 2. Respond to a variety of negative actions taken by a state:

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Terrorism and Trade Sanctions

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  1. Terrorism and Trade Sanctions Todd Craig David Goldenberg Michael Anderson 28 April 2008 PUBP 701

  2. Why Sanctions? • 1. Promote U.S. foreign policy objectives. • 2. Respond to a variety of negative actions taken by a state: • Human Rights violations, terrorism, proliferation of weapons of mass destructions, drugs and narcotics, aggression toward regional stability. • 3. Punish and isolate governments, individuals and businesses who are acting counter to U.S. interests. • GOAL: Make it impossible or difficult for violators to engage in certain behavior. “Sanctions offer a middle ground between diplomacy and the use of military force.”

  3. Who and How? • President has broad authority from the International Economic Power Act and various Public Laws. • Congress can impose sanctions, although it often gives the President the authority and leeway to impose them as necessary (Burma case). • EXAMPLES: Foreign assistance (military and economic), suspension of imports and exports, elimination of government contracts, stopping public and private financial transactions (freeze assets), revoking international loans, stop issuance of foreign and transit applications to and from the U.S.) • International Organizations will impose multilateral sanctions (UN, WTO, EU, Arab League, Organization of American States.

  4. Trade Sanctions vs. Economic Sanctions Trade Sanctions Economic Sanctions • Trade penalties imposed on another country or countries with the purpose of bringing change in their political or economic policies. • Import tariffs (duties), export controls, trade embargoes • Generally implemented after trade disputes in the WTO. • Differ from Economic Sanctions, which are primarily used as punitive measures in international relations. • Notable cases of trade sanctions as retaliation for terrorism involve Iran and Libya. • Economic penalties, such as prohibiting trade, stopping financial transactions, or barring economic and military assistance, used to achieve the goal of influencing the target nation. • Can be imposed selectively, stopping only certain trade and financial transactions or aid programs, or comprehensively, halting all economic relations with the target nation. • imposed when domestic pressure for action exists, but diplomacy or propaganda would be too mild and military action would be too severe • Economic sanctions are most effective when they are applied multilaterally

  5. The Good. The Bad. The Ugly. The Good • Easy policy to create and enforce. • Can be effective tools of foreign policy. • “The smaller the goal, the more likely it can be achieved.” The Bad • Unintended victims. • Rarely effective unilaterally. • Can hurt domestic producers/companies. • Negatively impacts U.S. economy. • Could destabilize a region or a country and hurt neighboring countries. • Limits ability to influence a country from the inside. The Ugly: If sanctions don’t work, there aren’t too many other options left.

  6. Unilateral Sanctions Plus • Doesn’t require outside cooperation. • Won’t hurt “the people” as much. • Can be specifically and carefully targeted. • Can work if the relationship close between the two states. Minus • Limited effectiveness except in certain cases. • Targets state has to be very independent on state imposing sanctions for sanctions to work. • Hurts domestic business while not punishing foreign businesses who continue to do business with the targets state. • International community usually rejects unilateral sanctions.

  7. Multi-Lateral Sanctions Plus • In general, enhances the likelihood that the sanctions will work. • Sends a stronger message. • Often utilizes international organization and builds consensus against one state rather than pitting one country against another. Minus • Very difficult to get many states and/or international organizations to agree. • One major state can renege and thwart entire effort. • Negatives (The Bad) are multiplied. • Can lead the targeted state/regime to “dig in” even more and strengthen the position of the dictator.

  8. Background on Libya • After independence in 1951, the Libyan kingdom followed pro-Western policies and had a close alliance with the U.S. • Coup d'etat by Colonel Muammar al-Gaddafi in 1969 • Gaddafi turned Libya into an authoritarian republic, and set forth his foreign policy, which included: - Arab Unity – bringing Arabs together under one foreign policy - Advancement of Islam, including the elimination of outside influence (Western) in the Middle East - The destruction of the Israeli state - Support for Palestine and a broad range of "revolutionary" causes, stretching from Ireland to Philippines

  9. U.S.-Libyan relations became increasingly strained because of Libya's foreign policies supporting subversion against moderate Arab and African governments. • Gaddafi closes American bases in Libya and nationalized all foreign oil and commercial interests. • Libya plays a key role in promoting the use of oil embargoes as a political weapon for challenging the West. - OPEC Oil Embargo of 1973 - OPEC Oil Embargo of 1979 • In 1978, Libya sends troops to support Idi Amin's failed invasion into Tanzania. • On December 29, 1979 the U.S declares Libya a “state sponsor of terrorism”.

  10. Libya begins armed hostilities • In 1981, two Libyan MIGs fire at U.S aircraft over the Gulf of Sidra. The U.S F-14s retaliate shooting down both MIGs. • In 1986, Libya is involved in the terrorist bombing at LaBelle discotheque in Germany, killing two U.S servicemen. • In 1987, Libya and Chad fight over the Aouzou Strip • In 1988, the largest Chemical weapon production facility in the developing world was built at Rabta. • Libya's relationship with the former Soviet Union involved massive Libyan arms purchases and the presence of thousands of Eastern Bloc advisors. • In 1989, U.S aircraft are fired upon once more over the Gulf of Sidra. Two Libyan MIG 23s are shot down by American F-14s.

  11. PAN AM Flight 103 and UTA flight 772 • In 1988, Pan Am flight 103 was bombed over Lockerbie, Scotland. • In 1989, 6 Libyans were convicted in absentia by a Paris court, for the bombing of Union Air Transport 772. • The flight traveling towards N’Djamena carried mostly French citizens, and was bombed as retaliation for French support of Chad. • In 1991, two Libyan intelligence agents were charged by the U.S for their involvement in the downing of Flight 103. • The U.N Security Council passed Resolution 731 asking Libya to surrender the suspects, cooperate with the Pan Am 103 and UTA 772 investigations, pay compensation to the victims' families, and cease all support for terrorism.

  12. Libya's refusal to comply led to the approval of Resolution 748 and 883 in 1992, which imposed trade sanctions. • Sanctions included a limited freeze on Libyan assets, and an embargo on selected oil equipment. • In 1999, Libya released two of the bombing suspects of Pan Am Flight 103. • However, Full lifting of U.N. sanctions is contingent on Libyan compliance with its remaining Security Council requirements on Pan Am 103. • The United States also called on Libya to comply with its remaining requirements, including acceptance of responsibility for the actions of its officials and payment of appropriate compensation.

  13. Iran and Libya Sanctions Act • The Iran and Libya Sanctions Act was signed into law on August 5, 1996. • Though the U.S already had some trade sanctions on these countries, the new law imposes sanctions on foreign companies that invest $40 million or more in these two countries' energy sectors. • The Iran and Libya Sanctions Act was the U.S. response to these two countries' support for international terrorism, their efforts to acquire weapons of mass destruction, and their efforts to derail the peace process. • The purpose of the law is to deny Iran and Libya the hard currency necessary to fund terrorism

  14. Provisions of the Iran and Libya Sanctions Act • U.S. foreign policy will seek full compliance by Libya with UN Security Council Resolutions 731, 748, and 883 concerning the bombing of Pan Am 103 • Requires the President to impose 2 sanctions on foreign entities that invest more than $40 million in any year in the petroleum sectors of Iran or Libya or that trade with Libya in violation of UN Security Council resolutions. • These can include: - No extension of credit to a sanctioned entity from the U.S. Export­Import Bank. - No export licenses granted to a sanctioned entity seeking advanced U.S. dual­use technology. - No loans or credits in excess of $10 million to a sanctioned entity from U.S. financial institutions.

  15. Aftermath of ILSA and Present Relations • After the passing of ILSA in 1996, Libya has made a complete turn in its foreign policy towards the West. • In 1998, at an Arab League meeting in which fellow Arab states decided not to challenge the sanctions, Gaddafi announced that he was turning his back on pan-Arab ideas. • In 2003, The Libyan government announced its decision to abandon its WMD programs and pay almost $3 billion dollars in compensation to the families of Pan Am Flight 103 and UTA Flight 772 • In 2004, the U.S. State Department ended its ban on U.S. citizens and allowed for travel to Libya • In 2006 the U.S. restored full diplomatic relations with Libya and remove Libya from the U.S. list of countries that foster terrorism. • ‘Libya Model’ is an example of what can be achieved through multilateral rather than unilateral sanctions

  16. U.S. – Iran History • 1953 – Shah Mohammed Reza Pahlavi assumes power – backed by the United States • 1979 – Collapse of the Shah’s regime and takeover by Ayatollah Khomeini (February) • 1979 – Takeover of the American Embassy by militant students (November) • 1979 – U.S. breaks diplomatic relations with Iran (remain suspended today) • 1984 – Iran designated “state-sponsor of terrorism”

  17. U.S. Economic Sanctions – Iran • 1987 – EO 12316 Bans imports from Iran • 1992 – Iran-Iraq Nonproliferation Act of 1992 • 1995 – EO 12957 restricts investment in oil sector. EO 12959 ban on imports/exports and investment in Iran • 1996 – ILSA of 1996 • Updated in 2000 to include nuclear, chemical, biological and ACW • Removed Libya from Act • 2000 – Iran Nonproliferation Act 2000 • Updated in 2005 and 2006 to include Syria and then North Korea

  18. Non-U.S. Sanctions • From 1984 to December 2006 – No U.N. sanctions in place during this period. • December 2006 – UNSC Resolution 1737 imposes technical and trade sanctions • March 2007 – UNSC Resolution 1747 widens scope of previous sanctions

  19. International Trade Agreements –Iranian Energy Sector (since 2003)

  20. International Trade Agreements –Iranian Energy Sector (since 2003)

  21. Sanctions Effectiveness • 1987 – 2006 • Exports $8.5 billion to $70 billion (9% growth rate) • Imports $7 billion to $46 billion (7% growth rate) • Since 2003 Iran has signed contracts worth $20 billion with foreign firms to develop its energy sector • $70 billion in oil revenue in 2008 (March 2007 – March 2008) • Top exporters to Iran • Germany $5.6 billion (2005) • China $3.3 billion (2005)

  22. Why Sanctions Failed • Iran has the third largest proven oil reserves in the world • Energy exports account for 80% of total exports • Established global ties in trade • Lack of support from most other nations and the U.N.

  23. Success Rates of Sanctions (1915-1990) * Total number of episodes, both successes and failures, in the specified category.

  24. Policy Recommendations Exempt Food and Medicine from Sanctions • Limits the negative impact on “the people” and other innocent victims of sanctions.

  25. Policy Recommendations Place a Greater Emphasis on Achieving Multilateral Sanctions through International Organizations • Multilateral sanctions send a louder message. • International organizations employ their own policing mechanisms to ensure compliance. • Avoids pitting one state against another and creates universal opposition to the actions of the targeted state.

  26. Policy Recommendations Better Targeted Sanctions • Congress and the President should act quicker. • Law should be written in a way that allows swifter action and the President should be given more authority to target with precision. • Enhanced criminal penalties for those who violate sanctions. • Create better enforcement mechanisms.

  27. Bibliography • Beesher, Margaret. “Imposing Sanctions is Easy, Making Them Work is Harder.” Voice of America News. 10 March 2008. • Bowley, Graham. “U.S. Faces new threat of EU trade sanctions.” International Herald Tribune. 13 February 2006. • Drury, A. Cooper. “U.S. Presidents and the Use of Economic Sanctions.” Presidential Studies Quarterly. Volume 30, Issue 4. December 2000. P. 623. • Kaempfer, William H. and Anton D. Lowenberg. “Unilateral Versus Multilateral Sanctions: A Public Choice Perspective.” International Studies Quarterly, Volume 43, No. 1 (March 1999). 37-58. • Rennack, Dianne E. and Robert D. Shuey. “Economic Sanctions to Achieve U.S. Foreign Policy Goals.” Congressional Research Service Report for Congress. November 1, 1999. • Saunders, Phillip C. and Stephanie C. Lieggi. “What’s Behind U.S. Nonproliferation Sanctions Against Norinco.” CNS, James Martin Center for Nonproliferation Studies. 30 May 2003. • Spier, Richard H. and Brian G. Cow. “Precision-Guided Sanctions: How to Take the Profit out of Poliferation.” RAND Corporation. April 2002. • GAO “Iran Sanctions; Impact in Furthering U.S. Objectives Is Unclear and Should be Reviewed.” GAO Report. December 2007 • GAO “Economic Sanctions; Effectiveness as Tools of Foreign Policy.” GAO Report. February 1992

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