Looking Ahead

Looking Ahead (The Art of Sanctions – Part 9)

The Art of Sanctions – Looking Ahead:

at the close of the Obama administration, sanctions remained a preeminent tool for U.S. national security and foreign policy.

Mouood’s Introduction: The author of the present book (The Art of Sanctions) is Richard Nephew. Richard Nephew was in charge of the sanctions team against Iran during Obama’s second term. He supported the nuclear negotiators in the matter of sanctions in Vienna. Richard Nephew has previously served for ten years as an Iran member of the National Security Council at the White House and as Deputy Secretary of State for Coordination of Sanctions at the State Department. The book is also translated into Persian by the Iranian Parliamentary Research Center (IPRC).

Note: The content of this book is not approved by us and is published solely to familiarize policymakers with the views, approaches, and methods of the designers of sanctions against Iran.

They were mentioned as a core instrument of national power multiple times in the 2015 National Security Strategy, with the longest mention meriting reproduction in full here [emphasis added]:

At the same time, we will exact an appropriate cost on transgressors. Targeted economic sanctions remain an effective tool for imposing costs on those irresponsible actors whose military aggression, illicit proliferation, or unprovoked violence threaten both international rules and norms and the peace they were designed to preserve.

We will pursue multilateral sanctions, including through the U.N., whenever possible, but will act alone, if necessary. Our sanctions will continue to be carefully designed and tailored to achieve clear aims while minimizing any unintended consequences for other economic actors, the global economy, and civilian populations.

In many cases, our use of targeted sanctions and other coercive measures are meant not only to uphold international norms, but to deter severe threats to stability and order at the regional level. [1]

As of the time of this writing, the future direction of U.S. sanctions strategy is unclear. Donald Trump’s election in 2016 has called into question the degree to which the United States will be prepared to weaponize its economy in the future. As a businessperson whose cabinet is staffed with other businesspeople, Trump could be expected to oppose those foreign policy responses that leverage and put at risk access to the U.S. economy, as well as the opportunities of U.S. business abroad.

On the other hand, Trump’s campaign was replete with threats to do precisely that, although with the objective of strengthening the U.S. domestic manufacturing and industrial sectors rather than achieving specific foreign policy objectives. And Trump is not the only U.S. government decision-maker; Congressional enthusiasm for sanctions is unabated, even when Trump disagrees, as was the case with the passage of the Countering America’s Adversaries Through Sanctions Act in July 2017.

Rather than project Trump’s future decisions—which is impossible at the time of this writing given the inconsistency of his positions—in this chapter, we will examine three cases for which sanctions have thus far been assigned a role at the end of 2016 and which were the subject of the July legislation: Iran’s regional bad behavior and violations of Iranian human rights, Russia’s infringement of Ukrainian sovereignty, and North Korea’s nuclear weapons program.

I offer ways of thinking about these three problems and the utility of sanctions in dealing with them. I use the framework presented in the introduction and developed throughout this book to recommend how the United States and its partners ought to respond rather than how they necessarily will respond.


Having spent much of this book describing my experience with U.S. sanctions policy toward Iran, I will not reinvest substantial time or pages in offering additional background here. Rather, it is sufficient to say that Iran’s activities throughout the Middle East and at home continue to be of concern for the United States, its partners and allies in the region, and beyond.

These activities include providing physical and financial support to groups that the United States considers terrorist organizations (such as Hezbollah) and others that are imperiling the stability of countries around the region (such as Syrian president Bashar al-Assad and the Yemeni Houthis).

It is these activities that, as mentioned in chapters 7 and 8, led to disagreement within the U.S. political and analytic establishment about whether to support or oppose the Joint Comprehensive Plan of Action (JCPOA) and which have raised questions about the continuation of the JCPOA into the Trump administration.

The JCPOA continues to have real value for the United States in that it constrains Iran’s ability to develop nuclear weapons and to make advances toward them that could undermine regional national security perceptions.

As the United States frequently noted during the sanctions campaign that preceded the JCPOA, if governments around the Persian Gulf and beyond are concerned about Iran without nuclear weapons, how much greater and deeper would be their fears about an Iran either in possession of or poised to acquire such arms. From this perspective, regional states too have an interest in the JCPOA being maintained, as Prince Turki al-Faisal, a prominent Saudi national security thinker, noted in November 2016. [2]

If we assume that maintaining the JCPOA remains a priority for the United States as well as our partners, then a strategy to confront Iran (including through the use of sanctions) over its other bad acts needs to be developed. And it should exclude measures that contravene the terms of the JCPOA. The framework presented throughout this book can serve this purpose.

First, we must identify objectives for the imposition of pain and define minimum necessary remedial steps that Iran must take for pain to be removed. In this case, we can identify three:

  • Elimination or significant reduction of military and financial support to regional groups threatening the stability or integrity of existing states, and a commitment not to engage in such support in the future. This can and should include countries like Yemen, Bahrain, Iraq, and Saudi Arabia (where, even if Iranian involvement is minimal, it is suspected by Saudi authorities to be significant), as well as Palestinian terrorist groups. Ideally, it would also include groups like President Assad of Syria and Hezbollah, though international support for such an identification is less likely to be successful.
  • Cooperation with the United Nations Special Rapporteur for Human Rights in Iran and meaningful steps to address concerns regarding the human rights of the Iranian population, including religious minorities and other at-risk populations.
  • Cooperation with international efforts to address global terrorist threats, such as al Qaeda and ISIS. This could include surrendering al Qaeda members who may be located in Iranian territory for prosecution in their home jurisdictions, as well as participating in global efforts to eradicate such threats.

Second, we must understand as much as possible Iran’s vulnerabilities, interests, commitment to support acts of terrorism and violations of human rights within its territory, and readiness to absorb pain in support of these policies.

Clearly, after more than ten years of an active sanctions posture, the United States and international community know Iran’s vulnerabilities to sanctions well. Oil and gas remain its two most important industries, with a few climbing up the ladder-petrochemicals, automotives, and perhaps consumer goods—but yet to rival hydrocarbons.

The reform agenda in Iran is proceeding, albeit on shaky ground given the nature of the privatization debate (with some major power brokers, like the IRGC, concerned about their role in a new Iranian economy). And Iran’s financial sector remains incredibly fragile, and on the cusp of insolvency due to a legacy of bad debts and weak investment.

Relief from sanctions under the JCPOA has yet to permit Iran’s leadership to restore real confidence in the sector. From this perspective, Iran remains vulnerable to sanctions pressure though our options to use this vulnerability against Iran in this way are constrained by the JCPOA.

But we also know that Iran has demonstrated significant resilience in the face of efforts to address the problems it creates regionally, even if the full reach of sanctions was possible. Iran was named a State Sponsor of Terrorism in the United States in 1984.

The comprehensive U.S. embargo followed in 1995 in response to Iranian support for terrorist attacks around the world, which the 1996 attack on Khobar Towers in Saudi Arabia (killing 19

U.S. airmen and injuring over 350 other people) reinforced as a persistent aspect of Iranian regional policy. As I have written elsewhere, Iran continued to support terrorism and engage in policies that violate Iranian citizens’ human rights despite some of the most intense economic sanctions ever devised, some of which were imposed directly in response to these activities. [3]

This is in part because these activities either have direct value to Iran for the maintenance of the regime (as in the case of egregious human rights behavior) or tremendous importance as part of Iran’s foreign policy (as with support for activities the United States considers terrorism).

In addition, these activities are relatively low cost. Sanctions can choke off a billion-dollar nuclear program requiring a global supply chain much more easily than a million-dollar aid program involving point-to-point transfers to a terrorist proxy.

Moreover, given the dynamics of Iran’s internal politics, backing away from such support for violent extremism or desisting in human rights violations could be conceived of as creating vulnerability where none exists. It is certainly possible that the Iranian population would continue to support an entity known as the Islamic Republic of Iran even without the Basij militia and security forces.

But it is doubtful that the regime would dominate its population without such apparatus. Consequently, from a national policy perspective, Iran’s leaders could see great vulnerability being created from cooperating with U.S. and other foreign attempts to improve human rights in Iran.

Likewise, even though they too may support groups like Hezbollah, reformers probably see risk in removing from the hands of security-minded Iranian politicians the tool of foreign influence-building through supporting such groups. Given this, Iran would have to weigh and those imposing sanctions against Iran would similarly have to consider the relative extent of existing vulnerabilities that might be created by any particular outcome of a negotiation.

Third, we should develop a strategy to carefully, methodically, and efficiently increase pain on those areas that are vulnerabilities, while avoiding those that are not.

Unlike the nuclear issue, which was of limited national consciousness until Iran’s leaders elevated its place in political discourse in the 2000s, developing a sanctions strategy that threatens Iranian national interest to obtain concessions on terrorism or human rights could be much more difficult to achieve.

To be effective, the sanctions strategy will have to internalize the likelihood (if not the certainty) that merely applying pressure on Iran’s leadership and economy and expecting the Iranian government to back away from its support for Hezbollah will not work. Iran has absorbed considerable pressure in the past and persisted in its pernicious activities.

It is certainly true that the United States has yet to organize a comprehensive, global embargo against Iran. It is similarly true that Iran’s response to such an embargo would be to concede such activities. However, even if we take on board the dubious prospect of sanctions pushing Iran to abandon Hezbollah altogether, securing such an embargo would require a degree of global consensus around the nature of Iran’s bad acts that has thus far eluded both Republican and Democratic presidents.

It is notable, for example, that although the United States has had sanctions against Hezbollah for decades, only in the past five years did the European Union impose sanctions on the organization and, even then, only against the “military wing” of Hezbollah. Bearing in mind the relative ease through which resources can be passed from one “wing” to another, such a specific definition is to some degree self-defeating, but even this face-saving, somewhat superficial compromise took a long time to achieve.

Therefore, the sanctions strategy will have to accept that much of the world will not see the Iran issue the same way, particularly in light of Iran’s attacks on ISIS and other terrorist groups in Syria (alongside its support for Assad) and desire for stability in at least that part of the world.

Even as the United States and its regional partners lament the reality that Iranian activities in Syria are self-interested to the extreme and in support of a brutal dictator, other countries will look to the end of this policy rather than the means and be satisfied (especially in a Europe that is challenged by an influx of refugees).

The most effective sanctions strategy would be one that accepts the low likelihood of global support and, therefore, the need for continued emphasis on U.S. unilateral measures that target particular bad actors in an evidence-based construct. Targeted sanctions that center on specific, provable connections between bad acts, bad actors, and Iran would be the hallmark of such a strategy but spanning classes and types of foreign business entities.

Banks, transportation firms, insurance agencies, and the like would all be on notice that the provision of support to U.S. designated Iranian terrorist supporters and human rights violators would be a sanctionable offense. This, in turn, would maintain a substantial cost of doing business in Iran with an associated, negative effect on investment and trade. Iran’s economy would not be devastated by such measures, which would largely mirror the U.S. strategy from 2006 to 2010.

But Iran would find the situation uncomfortable and problematic, especially in the context of competition from other emerging markets. Iran would face some pressure internally to resolve the situation and, importantly, would see that its policies come with direct, clear costs.

In fact, in comparison to a broader-brush sanctions campaign targeting Iranian oil because oil money pays for terrorism (or similar), this more targeted approach would be sellable to an international audience as well as translatable to an Iranian audience (even if that audience rejects some of the fundamental premises of such a strategy), and manageable for international businesses and banks (whose compliance functions would need to deal with the situation but as a business cost, rather than a complete hindrance).

This strategy—reflected in the aforementioned bill passed in July 2017—calls for patience and perseverance, as well as the acknowledgment that, unlike with the nuclear program’s rapid march toward provision of a fully-fledged weapons capability, the nature of the Iranian threat is manageable in the intervening period.

One counterargument is that this strategy could conflict with the JCPOA at times. However, so long as the strategy does not result in a blanket sectoral approach, this complaint is based on an Iranian interpretation of the deal.

The U.S. interpretation, which a plain reading of the text would support, is that the United States is entitled to continue enforcing its sanctions laws already on the books dealing with terrorism and human rights but not to engage in sector-wide, sweeping sanctions. The structure already exists; the explanation and basis for action has yet to be articulated.

This does not mean that there will not be times where the provisions of the JCPOA and this strategy conflict. One can easily imagine an Iranian bank for which sanctions were removed pursuant to the JCPOA being identified as having facilitated a transfer from Iran to a terrorist group, and then being sanctioned.

But if the approach is evidence based, if it is methodical, if it is targeted rather than sectoral, and if it is clearly articulated, then both Iranian institutions will protect themselves from such problems and the international community will understand the strategy being executed. This may already be happening in some small ways.

Iranian banks operating in the United Kingdom, for example, have started to identify entities and individuals in Iran with whom they will not do business in order to avoid this risk. [4]

An Iranian banking initiative to cooperate with the Financial Action Task Force to similarly avoid risky banking relationships in Iran itself became intensely political in 2016, but was based on the same premise, ironically echoing the words of U.S. officials over the past decade: if Iran wants to engage in the international economy, it needs to adhere to its standards. [5]

Fourth, the United States and its partners should monitor the strategy’s execution and continuously recalibrate their initial assumptions of Iranian resolve, the efficacy of the pain applied in shattering that resolve, and how best to improve the strategy. This is self-explanatory. However, it may take years to demonstrate real results given the constraints identified above.

Fifth, the United States and its partners should present Iran with a clear statement of the conditions necessary for the removal of pain, as well as offer to pursue any negotiations necessary to conclude an arrangement that removes the pain while satisfying U.S. and partner requirements.

Since the sanctions strategy outlined above is evidence- and conduct-based (rather than just “Iran” based), there are two straightforward ways for the sanctions regime to be removed:

administratively, sanctions can be terminated if bad acts no longer take place or evidence is provided that casts doubt on the original sanctions; and diplomatically, in exchange for Iranian commitments that provide sufficient confidence to the United States and its partners that Iran will perform as it has promised.

Here, there will have to be a strong measure of vision on the part of the United States and its partners. Doubtless, some of those who opposed the JCPOA on the grounds that the United States could not accept an agreement with the present government of Iran, given its hostility and duplicity, will make a similar argument.

They may suggest that the Iranians will never live up to a bargain and, in fact, that no bargain with Iran on such matters is enforceable or verifiable. However, this is inherently an issue that would arise in any agreement with the Iranians, whether through a negotiated settlement or an Iranian capitulation on the verge of regime economic and political collapse (which is unlikely to be realized in any event).

Only through a reorganization of the Iranian government (read: regime change) can such a problem be avoided, and it would be an understatement to point out the difficulties and problems intrinsic to such an approach. Consequently, structuring an agreement will be an outcome of any such strategy; the considerations should instead be how to structure it and under what circumstances might it be achievable.

Regarding the first, a resulting agreement would require regional participation and support. Iran’s support for terrorism is likely not because of a malevolent, nihilistic desire to destroy existing systems of government around the world. Rather, it is derived from a combination of interests, some of which may stem from its history as a revolutionary system and some of which stem from its own national security interests and needs.

Fomenting unrest and revolution abroad can be about ideology; it can also be about defense in depth. Consequently, for Iran to agree to stop engaging in such activities, it will need a sense of assurance about its place in the region. Certainly, this also will be the prevailing demand of any regional parties that are prepared to countenance an arrangement with Tehran: they would want absolute, concrete assurances as to Iran’s decision to no longer support such proxies.

An initial step, therefore, could be an exchange of assurances from all sides to respect the territorial integrity and political systems of their neighbors. Beyond serving as appropriate “diplo-speak” to begin a process, such an exchange of assurances would create a foundation for agreements on specific issues and measures necessary to execute an arrangement.

After that, individual issues would need to be addressed, identifying acceptable levels and forms of support, compliance mechanisms, sanctions snap-back procedures, and the like to create a framework for Iran to stop engaging in regional bad acts and in exchange for specifically defined benefits. This diplomatic work would be time consuming and intensive, probably taking years to sort out.

Herein lies the major problem: the degree to which establishing the right international atmosphere for such negotiations will be complicated by real life. In the JCPOA negotiations, real-life problems associated with Iran’s nuclear program, with Western sanctions, and even exogenous issues (like Ukraine) crept into the negotiating rooms and the context for the talks.

JCPOA negotiators were able to work past these problems, in no small part because the multinational nature of the talks—with varying opinions across the table on these exogenous issues—created its own pressure for negotiators to keep their eyes on the ball.

This may be much more difficult in a regional negotiation, particularly given the number of spoilers who may try to undermine progress in the talks. Terrorist attacks, military confrontations in the Persian Gulf, and even freak incidents of chance will all take place during negotiations around such a solution. Creating and maintaining the right environment for talks will be difficult, but—if they are to succeed—it will be necessary.

With respect to Iranian human rights, it is similarly possible to utilize a combination of sanctions and negotiations as a means of seeking improvements. Here, however, the most effective negotiating instrument may not be a regional arrangement, as there are widespread issues with human rights throughout the Middle East.

Instead, human rights may be advanced further through negotiations and interactions between European and Iranian officials (who have maintained a human rights dialogue for over a decade) or through an incremental, stepwise process building on such tools as the Iranian bill of rights that was being advanced, as of this writing, by Iranian president Hassan Rouhani.

Sixth, the United States and its partners should accept the possibility that, notwithstanding a carefully crafted strategy, their efforts may fail. The United States and its partners must be prepared to acknowledge their failure and change course, or accept the risk that continuing with their present course could create worse outcomes in the long run.

As already noted, a sanctions strategy intended to achieve the identified objectives will face grave difficulties in the absence of an Iranian change of government (and it would be folly for the United States to attempt to engineer such a change given the long, bad history of U.S.-Iran relations).

Given the complications involved in such an effort, the United States and its partners are better off trying to arrive at a mutually acceptable arrangement with Iran, using sanctions as the necessary source of leverage.

But this effort may fail, either because it is an inherently difficult enterprise or because of exogenous factors. If it does fail, it will be necessary to instead focus on measures intended to limit the damage from Iran’s provocative regional behavior (essentially, to put in place a firm containment strategy) or, in the case of human rights, intended to improve the living conditions of the average Iranian.

Russia in Ukraine

The Russian government and its core supporters in the Russian economy are under the most serious sanctions pressure still extant, save for North Korea. Moreover, the imposition of sanctions against Russia for its involvement in Ukrainian instability and acquisition of Crimea in 2014 also represents the most significant demonstration of coercive diplomatic pressure via sanctions in place as 2017 dawned.

Aided and perhaps enabled by low oil prices, these sanctions have had a direct economic cost on Russia, measured by a drop in Russian GDP growth in 2014–2015, increased inflation, and currency depreciation. More intangibly, these sanctions have also created a negative impression of the Russian transition to democracy and its membership in the international community; its expulsion from the G-8 (which became once more the G-7 in 2014) was only the most visible manifestation of this shift.

Yet, the fundamental question remains: have the sanctions actually affected Russian behavior on the core topic of Ukraine and—if not—do they have any promise of doing so? In this, the Russia case is a prime example of the pain and resolve framework that I develop in this book.

Moreover, even though Donald Trump may look to ease sanctions on Russia in his tenure (something Congress made more difficult with the legislation in July 2017), the case itself merits both study and examination insofar as our framework is concerned, given the significance of the problem being confronted and the country targeted.

Sanctions Approach Thus Far

The United States and the European Union began imposing sanctions against Russia in response to its activities in Ukraine in March 2014, but the origins of the crisis go much farther back, arguably beginning with the collapse of the Soviet Union, when the independent state of Ukraine was formed. Within it, a social and cultural cleavage existed between the Russian-speaking east and Ukrainian-speaking west, which was only the most superficial demonstration of the much deeper difference between the regions.

In 2013, these differences emerged in dramatic fashion, catalyzed by Ukraine’s ongoing consideration of a deeper economic relationship with the European Union through a formal association agreement. This agreement had been under negotiation by the EU and Ukraine for many years leading up to 2013, and, although the negotiations were complicated and time consuming, by 2013 it appeared as if they would come to a conclusion.

In August 2013, the Russian government decided to make known its true feelings concerning the agreement and what it perceived to be a drift of Ukraine into the EU’s sphere of influence (and, in a zero-sum frame, away from Russia).

The Russians began subjecting imports from Ukraine to extra rigorous inspections, essentially slowing trade with Ukraine to a trickle. Russian officials implied that, should the Ukrainians proceed with their negotiations with the EU these requirements would become permanent. In 2013, Russia accounted for 25 percent of Ukraine’s export market, helping to create the impression for Ukraine that to continue with the EU process would be—as a Russian government official made clear— “suicidal.” [6]

Over the course of the fall of 2013, the Ukrainian government worked with the EU to identify ways in which the EU could compensate Ukraine for the loss of Russian trade. But, in its own show of economic force, the Russian government’s pressure campaign was successful, leading then-Ukrainian President Viktor Yanukovych to back away from the negotiations with the EU.

However, the Russians may not have anticipated what impact this decision would have on internal Ukrainian politics. Protesters immediately began to congregate in Kyiv, angry about the decision to back away from the EU. Other protesters, these supportive of President Yanukovych and an orientation toward Moscow, arrived over time and there were to-be-expected clashes between them.

In December 2013, after weeks of protests, Ukrainian police tried to clear protesters from the public spaces in Kyiv, most notably at Independence Square (known in Ukrainian as the Maidan). On December 17, the Russians sought to aid Yanukovych with an expansive economic package, lowering the price of Ukraine’s natural gas import bill by a third and offering to buy $15 billion in Ukrainian debt. [7] But throughout January and February 2014, the situation deteriorated, with violence in the streets of Kyiv and—at the end of February—the collapse of the Ukrainian government.

Yanukovych fled the country, leaving it in the hands of pro-Western groups who, in turn, decided to ban Russian as a second language and thus further inflamed eastern regions of Ukraine.

At the end of February, Crimea began to secede from Ukraine, requesting in March 2014 to join Russia instead. The Russian government accepted its request and absorbed Crimea formally on March 18. Unrest and violence then spread throughout eastern Ukraine, spurred on by the emergence of pro-Russian militia groups widely believed to include Russian military personnel, although the Russian government has dismissed the claim.

The United States and the European Union responded by imposing sanctions against Russian and Ukrainian individuals and entities believed to be involved in the violence in eastern Ukraine as well as the seizure of Crimea.

Sanctions also were imposed that limit cooperation with Russia in defense areas. By September 2014, the United States and EU had expanded their sanctions to cover additional sectors of the Russian economy, including measures that: r Prohibit providing new debt or new equity greater than thirty days’ maturity to identified persons operating in the Russian financial sector.

  • Prohibit providing new debt greater than ninety days’ maturity to identified persons operating in the Russian energy sector.
  • Prohibit the export of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in Russia, to identified persons operating in the Russian energy sector.
  • Prohibit providing new debt greater than thirty days’ maturity to identified persons operating in the Russian defense sector.
  • Impose sanctions on persons operating in Russia’s defense sector. [8]

These sanctions were principally intended to impose economic costs on Russia by forcing the Russians to find sources of financing for their oil and gas sector projects other than American or European banks and investors. In a normal world, the most likely alternative source would be domestic financing.

However, these sanctions were imposed amid a collapse in international oil prices throughout the summer and fall of 2014. From a high point of $115.19 per barrel (Brent) on June 19, 2014, the price fell by 52 percent to $55.27 per barrel (Brent) to close out the year.9 And, with it, Russian export revenues also fell.

Russian president Vladimir Putin noted in April 2015 that lost oil sales cost Russia $160 billion and put a significant dent in the $350 billion that Russia had grown accustomed to earning each year through energy exports.10 That said, the Russian economy also has a tradition of trimming imports in order to manage export shortfalls, something that the Russian government intentionally triggered when it imposed its own sanctions on Europe covering mainly agricultural goods.

As I have separately noted, the Russian economy shed itself of roughly the equivalent in import costs as its lost export revenue in 2014, helping to avoid contributing to its hard-currency crisis and ruble depreciation that began in fall 2014 and continued into early 2015. [11]

Still, by early 2015, the Russian economy was in poor shape, with much of Russia’s foreign currency reserves being spent in an attempt to settle its foreign debts. This pressure has presented challenges to key stakeholders of the Russian economy, such as Vneshekonombank, which required an $18 billion bailout in December 2015. [12]

Continued weak oil prices and the absence of sanctions relief—which some in the market had unwisely assumed would be quickly forthcoming—have amplified the damage already. [13] As of June 2017, the United States continued to maintain its sanctions lists, updating them periodically and harmonizing them with EU lists. As noted, the U.S. Congress passed legislation in July 2017 that, inter alia, expanded the prohibitions on U.S.

persons regarding additional oil and gas projects and other activities involving Russia. Though questions remain about the Trump administration’s enforcement as of this writing, the signal sent is of continued readiness to impose pressure. The practical effect has been to demonstrate to the Russians that, absent political progress in Ukraine, the sanctions will continue to bite and be ratcheted up albeit modestly.

Faced with such pressure, the Russians, Ukrainians, and Europeans have engaged in two rounds of negotiations intended to resolve the situation, each beginning with a cease-fire. The first such arrangement—called “Minsk 1”—collapsed shortly after it was concluded in September 2014.

Minsk 2, reached in February 2015, has been subject to almost daily violations, with the cease-fire being broken on countless occasions. Similarly, the political process required in Minsk 2 in Kyiv also suffers from the Ukrainian government’s incoherent politics and internal disputes.

As of this writing, the deadlines for the Minsk 2 political processes have been extended but show no signs of being met. Rather than moving the conflict from its frozen status, it seems likely that sanctions will continue to be in place against Russia for the long term.

Applying Our Model

The case of Russia and Ukraine offers an opportunity to assess the sanctions framework in a live case, with the possibility of adjustments still to be made.

First, we must identify objectives for the imposition of pain and define minimum necessary remedial steps that Russia must take for pain to be removed.

From the start of the sanctions campaign, U.S. officials have emphasized that sanctions are intended to deal with Russian intervention throughout Ukraine, the pressure applied on the government in Kyiv, and what the United States considers to be the illegal annexation of Crimea.

President Obama made this point clear when he first decided to impose sanctions on Russia in March 2014. [14] But there have been questions about precisely what Russia would have to do to reverse the sanctions.

Initially, U.S. and European official statements were ambiguous and somewhat contradictory on how sanctions would be reversed.

But by early 2016, the United States and European officials had clarified that the bulk of the sanctions imposed against Russia would be relieved if the terms of Minsk 2 were fully implemented, while sanctions that specifically targeted Russian occupation of Crimea (essentially a series of specific designations of individual Russians and Ukrainians) would remain in place so long as Crimea remained in Russian hands.

Though the Trump administration has offered some contradictory views, it has generally maintained this position, which Congress also reaffirmed in its July 2017 legislation. Assuming this remains the case, Russia has therefore been presented with a reasonably clear picture.

Second, we should understand as much as possible Russia’s vulnerabilities, interests, commitment to interference in Ukrainian sovereignty, and readiness to absorb pain. From the perspective of effectively targeting the Russian economy’s vulnerability, the sanctions campaign has been a strong success.

Sanctioners displayed considerable sophistication in their identification of Russian economic weaknesses and potential points of leverage, particularly in changing the terms of Russia’s ability to manage its external debt. Understanding this weakness permitted the United States and European Union to apply fairly precise pressure on the Russian economy without imperiling its ability and willingness to supply Europe with natural gas and avoid broader economic collapse.

Pressure and pain were created, with a sense of future economic menace to come should outside demands fail to be met. Luck and timing no doubt played a role: had the sanctions against Russia taken place in the context of $100 per barrel of oil, as opposed to during an oil price collapse, then the effects would have been far less damaging for the Russians.

However, even with good timing, proper sanctions design played a major role and though existing debt has become less of a significant vulnerability, Russia’s need for foreign financing and reliance on oil and gas exports remain viable targets for sanctions pressure.

The new sanctions legislation adopted by Congress in July 2017 seeks to capitalize on these vulnerabilities by further reducing the incentive to do business in Russia’s oil and gas sector, to engage in joint venture partnerships that give Russia technical knowledge it needs and ostracize its markets from the outside. It also foreshadows new sanctions to come, including potentially on Russian sovereign bonds that could imperil future growth.

That said, the sanctions campaign has fallen short of a complete understanding of Russian national values and readiness to absorb costs, particularly with respect to Crimea. The sanctions regime has yet to acknowledge that Russia is fully prepared to absorb considerable pain in order to maintain control of Crimea.

As noted above, the sanctions regime itself has become differentiated around eastern Ukraine and Crimea, but nonetheless, the degree to which Crimea would serve as a “bloody shirt” cause for the Russian public (and thereby a strengthener of resolve) was not registered fully in the announcement of sanctions against Russia.

Third, we should develop a strategy to carefully, methodically, and efficiently increase pain on those areas that are vulnerabilities while avoiding those which are not. Thus far, the sanctions regime has shown patience in its imposition of pain on Russia.

This patience is not entirely strategic, as there is countervailing pressure from Europe to refrain from imposing even tougher sanctions that could further undermine still legitimate trade between Europe and Russia. The Trump administration’s haphazard approach to Russia has also devalued expectations for sanctions contribution to the overall strategy, as open questions exist about its enforcement posture.

Still, the expectation in the market increasingly appears resigned to some new pressure, even if foisted upon Europe and Trump by the U.S. Congress.

However, as noted above, sanctioners may have let too much pressure off already. From this perspective, the careful, methodical, and efficient increase in pressure on Russia has flagged, undermining the crucial momentum needed to translate political concern into political concession. To be sure, there have been some incremental improvements in the sanction’s regime, with some additional targets being added to lists over the course of 2015–2017.

However, the result is still that while sanctions have not been eased, the momentum behind them has. Anecdotally, the only change that I experienced myself on a December 2016 trip to Moscow is that quality parmesan cheese was no longer available at restaurants, hardly a level of pain that inspires a desire to throw off the sanction’s regime through negotiations.

Systemically, Russia is still under strain. But it is harder to translate that sense of economic pressure into policy change absent more tangible illustrations of pain. Obviously, this should be reversed, with consideration of additional sanctions designations going hand in hand with the imposition of stiffer penalties for the Russian economy the longer that the crisis goes on. Russia has adapted to the pressure in place.

Even if new forms of pressure seem modest, Russia should not be permitted to obtain de facto sanctions relief simply by virtue of having outlasted the pressure being applied. Sanctions adopted in July 2017 are a start, but additional measures—perhaps targeting other aspects of the Russian economy beyond oil and gas, such as its ability to generate international investment in its sovereign debt—should be considered, particularly as part of a broader European-U.S. endeavor and enlisting the aid and support of other partners around the world (such as Japan).

Fourth, we must monitor the execution of the strategy and continuously recalibrate its initial assumptions of Russian resolve, the efficacy of the pain applied in shattering that resolve, and how best to improve the strategy.

Many people within the U.S. government and European partner governments are monitoring the implementation of sanctions. I will take on faith the likelihood that those responsible for sanctions imposition are seeing momentum dwindling and sanctions drift in the measures applied thus far. But, as noted, this has yet to translate into the “recalibration” and intensification necessary to change Russian resolve.

While the United States and EU remain entrenched in their view that Russia must relinquish its control over Crimea, there is no indication Russia is remotely prepared to concede this point.

Russia has incorporated Crimea into its own state structures and considers the territory to be part of Russia proper now. People living in Crimea have expressed readiness to remain part of Russia, at least according to polling data. [15]

And the text of Minsk 2 would—at least if read literally—seem to accept that Crimea is to be treated as a wholly separate matter from the need to address Russian interference in eastern Ukraine, as the word is not even mentioned in the text of the Minsk 2 agreement. [16]

It is likely that Russia would not have signed on to Minsk 2, for all its flaws, without some indemnification of its control over Crimea and U.S.

and European rhetoric since Minsk 2 bears out acceptance of this concept, albeit with the proviso that some Russian and Ukrainian individuals would remain under sanctions specifically tied to the annexation of Crimea until that situation is remedied.

Recession, inflation, and shortages of goods are important indicators of the economic stress being felt by common Russians, and the threat to the solvency and integrity of the financial system are a manifestation of similar problems for the wealthy elite. But other measures, the Russian government continues to do well at home.

According to the Levada Center (a Russian nongovernmental organization that conducts polling in Russia), Putin enjoyed an 85 percent popularity rating in December 2015, which has been fairly consistent since he experienced a meteoric rise in February–March 2014. [17]

Even taking into account the possibility that polling data may be subject to either direct or latent manipulation, there is scant evidence that Putin has lost the support of the Russian people despite their economic problems. As a consequence, although economic pain has been borne, it is difficult to argue that it has translated into real pressure on Putin to change course rather than to find ways to deal with the problems created by sanctions in other ways.

In this regard, the Russians have been active in seeking out new markets for their energy exports and financing that do not rely on the United States or Europe. In December 2015, Russia announced its intention to issue its first sovereign bond in Chinese renminbi, expected to be worth approximately $1 billion; this follows similar actions undertaken by private Russian banks since 2013. [18]

There have also been reports that Russia and China are working together on a natural gas trading relationship that could be worth $400 billion. [19]

Russian strategy is to manage the problem by seeking to neuter the sanctions rather than to accommodate the concerns of the United States or Europe. Russian interest in the candidacy of Donald Trump is a subject beyond the focus of this book, but countering U.S. sanctions pressure may have played a part in Russia’s thinking in this regard.

The Russians have also sought to prevent the acceleration of sanctions, reaching out to European governments (particularly those that might be persuaded to break the EU consensus required to extend sanctions) and—arguably—agreeing to cooperate with cease-fire arrangements as a way of sucking wind from the sails of those in Europe and the United States that were seeking expanded sanctions.

Russia has been aided in this regard by the persistent fears of some in Europe that, if sanctions were to be ratcheted up too far, Russia could respond by cutting the export of natural gas sales to Europe, even though doing so would damage Russian economic interests dramatically. From a pain/resolve perspective, Russian resolve therefore appears—at least on the surface—to be fairly strong.

Fifth, we should present Russia with a clear statement of the conditions necessary for the removal of pain, as well as an offer to pursue any negotiations necessary to conclude an arrangement that removes the pain while satisfying U.S. and European requirements.

Russia has been given a clear signal as to what it must do for sanctions to be removed, with negotiations serving to underscore the necessary nature of a possible quid pro quo. The unresolved question remains the nature of the sanctioning states’ requirements.

In the United States and the EU as a whole, there remains a persistent sense that full restoration of pre-2013 Ukrainian sovereignty is an indivisible aim. However, press reports continue to emerge that others in Europe may have a different sense of what is necessary.

As suggested above, this is not necessarily a bad thing, if Russian resistance to at least the Crimea-related part of the crisis would otherwise make diplomatic progress unattainable. However, insofar as offering clarity is concerned, the mixed messages coming from Europe and within the United States are, at best, confusing to Moscow.

Sixth, the United States and its partners should accept the possibility that, notwithstanding a carefully crafted strategy, their efforts may fail because of inherent inefficiencies in the strategy, a misunderstanding of the target, or an exogenous boost in Russia’s resolve and capacity to resist. Either way, the United States and its partners must be prepared to either acknowledge their failure and change course or accept the risk that continuing with their present course could create worse outcomes in the long run.

As has been suggested above, U.S. and European sanctions efforts may have been coming to this point even before the election of Donald Trump. Consideration with Ukrainian officials is now necessary to see whether a resolution of the crisis that protects Ukrainian sovereignty (and that of other Eastern European states) is possible and in what form, followed by consultation with the Russians about potential acceptable end states for the sanctions campaign, especially if Trump is inclined to cancel it regardless.

This conclusion also lends itself to another general point about sanctions: even if sanctions objectives shift, they must not shift without accommodation. Even if the United States did not accept the annexation of Crimea, the situation on the ground in Ukraine, the contents of Minsk 2, and the necessity of maintaining a united front with Europe mean that—for all practical purposes—the annexation has been ceded to the Russians.

That may be, in the end, for the best if it resolves one of Russia’s long-simmering frustrations with Ukraine. But from a sanction’s pain/resolve calculus, the ceding of Crimea’s annexation—the reversal of which was a core objective of the sanction’s regime—would be highly damaging unless the sanctions regime is itself adjusted to acknowledge the concession.

It creates both unclear thresholds for the sanctions target, as well as the potential for misunderstanding the sanctioning state’s leadership. Clarity of purpose and communication of it to all sides is imperative for sanctions to work as intended. For this reason, the clarity given by U.S. and European officials in early 2016 as to the scope of Ukraine-related sanctions has been helpful in addressing this potential risk.

Democratic People’s Republic of Korea (North Korea)

The Democratic People’s Republic of Korea (DPRK, or North Korea, as it is colloquially known) has been effectively an international outlaw since it came into existence in the aftermath of the Second World War. As a client state of the Soviet Union and China during the Cold War, North Korea was isolated from the Western bloc to a significant degree.

However, even in this context, its activities were often strange, provocative, and dangerous. For example, North Korea engaged in extensive kidnapping operations starting in the 1940s and continuing through at least the 1970s, intended to bring in a combination of intellectuals, sources of intelligence, and cultural information for North Korean exploitation. [20]

Throughout the Cold War, North Korean intelligence officers and special forces infiltrated South Korea using carefully dug tunnels under the Demilitarized Zone (DMZ); some of these tunnels would have permitted a covert invasion of the South, with thousands of DPRK troops theoretically able to pass through them hourly. [21]

North Korea’s seizure of the U.S.S. Pueblo in 1968 raised significant tensions between the United States and North Korea, and sparked discussion of contingency plans that—ultimately—could have led to a resumption of the Korean War. [22]

In this context, North Korea’s actions since the end of the Cold War, particularly its program to obtain nuclear weapons and subsequent testing of them (as well as long range ballistic missiles), are largely in keeping with a history of taking steps that many other countries would pursue only reluctantly.

They point to a regime that remains a threat to its neighborhood and to international security and stability more generally.

Sanctions Approach Thus Far

The international community has responded to North Korea’s actions, specifically its nuclear and missile programs, primarily by the application of UN sanctions against the country. Starting with UNSCR 1718 in October 2006, the UN Security Council (UNSC) forbade trade with North Korea in nuclear and missile-related goods and imposed targeted financial sanctions on a list of individuals and entities that—as of June 2017—now includes fifty-three individuals and forty-six entities of various importance to North Korea’s government and military. [23]

The sanctions have also expanded to address different aspects of the North Korean economy, including its primary export industry—coal extraction—and its broader links to the international economy. As of December 2016, it is against UNSC sanctions to permit unfet-tered DPRK diplomatic activity in UN member states; obligatory to inspect DPRK-bound or outbound cargo; and to provide a range of financial and related services to North Korea or its constituent elements.

National governments have also responded with their own sanction’s regimes. The United States steadily added to its national sanctions program, culminating with a comprehensive embargo against North Korea in March 2016 and building on decades of a diverse array of more specific prohibitions. South Korea and Japan have similar sanctions regimes and have in recent years been more willing to apply pressure on other countries that continue to do business with North Korea.

In December 2016, for example, Japan prohibited ships from entering its ports that previously entered North Korean ports, regardless of their flag or origin. [24]

South Korea’s economic interactions with the North have long been modest (limited to a joint venture at Kaesong that is periodically opened and closed with the prevailing political winds), but the South Koreans—especially under President Park—have sought to improve economic and political ties with China in order to convince the Chinese to switch or at least temper their relationship with the Korean Peninsula.

South Korea’s willingness to accept the deployment of U.S. theater missile defenses in 2016 was, in part, a way of applying pressure on China to change its approach, though China’s hostile reaction may show some of the limitations and risks inherent in this effort.25 European and other likeminded partners have similarly sought to apply pressure on North Korea, and the likeminded campaign has included trips around the world to third-party governments to discourage military and economic cooperation with the DPRK. [26]

All of these steps are naturally intended to increase the pain on North Korea such that it would agree to modify its behavior.

Notably, there have been some individual indications of success on this front. For example, in Juan Zarate’s book Treasury’s War, he recounts the case of Banco Delta Asia (BDA), which was found in 2005 to be in possession of approximately $25 million of the Kim family’s personal funds.

The September 2005 imposition of sanctions against these funds touched a nerve with North Korea, and ultimately may have contributed to North Korea’s willingness to negotiate an agreement with the United States and other countries in the “Six Party Talks,” composed of China, Japan, North Korea, Russia, South Korea, and the United States, that led to the dismantlement and inspection of North Korean nuclear facilities in 2007. [27]

An earlier Chinese cut-off of heating oil also has been credited by some as helping bring North Korea to the Six Party Talks in the first place, though an examination of the chronology of North Korean nuclear and missile activities would suggest such pain was insufficient to moderate North Korea’s actual activities of concern. [28]

Of course, this is the rub: while sanctions pressure has built on North Korea, so too has pressure built on the outside world.

Since 2005, North Korea has tested nuclear weapons five times.

North Korea has claimed that its tests have helped it improve its designs and has boasted of even testing thermonuclear weapons (which are both more efficient in terms of material usage and more destructive). Though there is some reasonable skepticism that North Korea has achieved this level of technical sophistication, it is not impossible. [29]

Nor is it impossible that North Korea has perfected a missile-deployable nuclear warhead, one that is considered sufficiently “standardized” to be reproducible at North Korean will. [30] With such technical developments, North Korea has not only demonstrated physical capacities that it can utilize to threaten and even attack its adversaries, perhaps as far away as the West Coast of the United States at some point in the near future. North Korea has also demonstrated considerable resolve in the face of Western and even Chinese concerted pressure.

To what end remains an open question. Based on reports from various non-governmental sources, it is possible that the North Koreans are interested in bartering their nuclear weapons capabilities for a peace treaty with the United States, removal of U.S.

troops from South Korea, and support in fixing its ailing economy. [31] It is also possible that North Korea has no intention of abandoning its nuclear or missile programs and is merely setting the context for its future treatment.

Conscious of the historical legacy of dictators who set aside their weapons of mass destruction programs (Muammar Qadhafi) or had them set aside involuntarily (Bashar al-Assad and Saddam Hussein), Kim Jong Un may believe that nuclear weapons and ballistic missiles are now permanent features of his regime, preserving it from external attack.

The United States has made a consistent policy decision—from Bill Clinton through Donald Trump—to oppose North Korea’s possession of nuclear weapons. Likewise, Congress has sown a consistent readiness to impose costs on North Korea for its behavior and to adopt ever more stringent sanctions. Consequently, it is likely that sanctions will continue to figure in the U.S. strategy going forward.

Applying Our Model

The obvious question is: sanctions to what end? Applying our framework can give some indication of what is possible and what is necessary.

First, we must identify objectives for the imposition of pain and define minimum necessary remedial steps that North Korea must take for pain to be removed. Here, it is easier to identify an objective for pain imposition than it is to define the minimum necessary remedial steps North Korea must take. This is because a decision about how far the North must go ultimately revolves around the U.S. expectation for North Korea’s future political and military development.

On its face, the U.S. objective and required minimum steps from North Korea overlap: the United States wishes North Korea to abandon its nuclear weapons and ballistic missile programs, submitting them to international verification. South Korea, Japan, and other interested states share this ambition.

It is consistent with the 2005 Joint Statement of the Six Party Talks, in which North Korea “committed to abandoning all nuclear weapons and existing nuclear programs and returning, at an early date, to the Treaty on the Nonproliferation of Nuclear Weapons and to IAEA safeguards.” [32]

It is also consistent with the 1992 Joint Statement on the Denuclearization of the Korean Peninsula, issued by North and South Korea, at least insofar as the nuclear program is concerned. North Korea’s ballistic missile program is in a somewhat more ambiguous position, although repeated UNSC resolutions have forbidden North Korea from testing ballistic missiles.

However, the key point remains; unless it is willing to change policy substantially, the United States has very little by way of a fallback position, particularly given the long and checkered history of North Korean “freeze” and other suspensions arrangements.

Herein lies one of the problems surrounding the North Korean nuclear issue: North Korea has also not indicated a readiness to abandon its missile or nuclear programs. In fact, in the 2005 Joint Statement, “the DPRK stated that it has the right to peaceful uses of nuclear energy. The other parties expressed their respect and agreed to discuss, at an appropriate time, the subject of the provision of light water reactor to the DPRK.” [33]

From this perspective, a floor has been established with respect to how far North Korea might go and, as with the Iran and Russia cases, an expectation that comes with diplomacy and sanctions that the end result will be a managed and monitored North Korean nuclear program rather than elimination. Persuading North Korea to accept some constraints on its missile program is probably essential, given its provocative nature and the criticism that the Iran JCPOA met for not addressing this problem.

Second, we should understand as much as possible North Korea’s vulnerabilities, interests, commitment to its nuclear and missile programs, and readiness to absorb pain. We do know much about North Korea’s countrywide vulnerabilities. Experts can wax on about the nature of the North Korean political system and economy, for even though sources of information are few, there are enough to draw a decent picture of how the system operates.

Such vulnerabilities may or may not be significant in the unique case of North Korea because of its extreme domination by the ruling clique. North Korea’s leadership has shown a steadfast unwillingness to consider the interests of its population, with only a select, isolated clique bearing most of the fruits of North Korean labor.

Under Kim Jong Un (and, to a lesser extent, his father, Kim Jong Il), this has started to change and there have been indications of increased market-based economic activity. [34] But as of yet, we still have little indication that the fundamentals of the North Korean economy or the political treatment of the working class will improve to any great degree.

Because of this, North Korea presents a different target picture to the international community than either the Iranian or Russian cases. In this way, North Korea has shown some of the same qualities as Saddam Hussein, prepared to absorb pain as a national matter because the North Korean government merely passes it along to the population.

The North Korean government has shown considerable resolve in defense of its nuclear and missile programs. Taken in combination, this suggests a regime that is largely insensate to the pain being applied by the outside world and fully prepared to take its nuclear and missile interests to the mat.

On the other hand, we also have some experience with North Korean reactions to external pressure, as the BDA case in particular demonstrates. The question is therefore less about whether the North Korean regime can and will feel pressure and more about ensuring that it is the right pressure, at the right time, and for the right reasons.

From this perspective, the imperative is not to identify national vulnerabilities per se but rather regime vulnerabilities (and even personal vulnerabilities for the country’s major players).

In one sense, this may be an easier task than targeting an entire country, where there may be myriad viewpoints to balance. On the other hand, missing the essential target’s vulnerability also means that any pressure applied is likely to be ineffective at best.

It also may mean than the North Korea’s vulnerability might derive from lost opportunities for the future rather than from current pain. As long as North Korea proceeds in its current manner, it will continue to be an international pariah. This may be broadly acceptable to many in the ruling establishment, but perhaps not to Kim Jong Un who has displayed considerable interest in his country being seen as modern even with respect to superficial things, such as his decision to build facilities that are the equivalent to those being constructed for the upcoming Winter Olympic Games in South Korea.

This is not to say that Kim Jong Un could be convinced to give up his nuclear and missile capabilities for the price of hosting international sports competitions! But we would be imprudent to dismiss any potential factors in developing a picture of the pressures and incentives that might be brought to bear in both a negotiation and in a sanctions strategy, particularly when the actual target of pressure is—in many ways—a single individual in Pyongyang.

Third, we should develop a strategy to carefully, methodically, and efficiently increase pain on those areas that are vulnerabilities, while avoiding those which are not. With our understanding of North Korea from the second element of our framework, we can now formulate a strategy that applies judicious, timely pressure on the North Koreans.

Rather than simply adopting sanctions in a tit-for-tat manner, which has typified the U.S. reaction to North Korea over two presidential administrations, the Trump team should set the terms of the debate with a comprehensive approach that contains an offer to the North Koreans and a commitment on how sanctions would be applied.

First and foremost, this strategy would begin with an offer to talk in private, rather than the imposition of sanctions. Trump’s team should hear out the North Korean negotiators and formulate on the basis of those talks a precise picture of how the North Koreans see a possible resolution, what the North Koreans can concede, and in exchange for what.

Almost certainly, this will represent an ideal outcome for North Korea rather than its bottom line, but the contours of North Korea’s final needs will likely be present, if obscured with additional demands.

Assuming that the North Koreans have a remotely reasonable end state in mind, the United States can then formulate a set of reciprocal steps that it would be prepared to take, as well as a sense of bottom lines. For example, it is unrealistic to expect reunification of the Koreas as part of any initial deal and, consequently, for the United States to offer the removal of U.S. troops from the peninsula as part of an agreement at this stage.

However, there are lower-level steps that might be taken by both sides that could reduce tensions (such as a halt in missile tests and large-scale military exercises). From here, other, deeper, and more significant steps could be discussed.

In the meantime, the United States should also present to the North Koreans a clear picture of the consequences for a failure of talks. This would include not only sanctions, but also specific pressure brought to bear on the finances and external activities of North Korean elites. This is fully in keeping with the current U.S. (and UNSC) strategy.

What’s missing is a clear sense of cooperation from China and willingness to apply sustained pressure on the North for its failure to come to terms. This may be changing, as noted above, and as late as April 2017, the Chinese demonstrated increased commitment in this regard by banning coal purchases from North Korea altogether.

(It is also possible that this issue will be swept up in the interplay of the Trump administration and Chinese government, particularly as other issues—such as the future of the South China Sea—remain unsettled.)

The United States should lay out to China in stark terms its willingness to work together toward a diplomatic arrangement and even to consider concessions that were not previously on the table (such as on military exercises). But the United States should further communicate its expectation that China will also play a part and that the consequences of having failed to do so could include—among other things—a continued U.S. strategic build-up in the region that may create insecurity in China.

Sanctions against Chinese institutions can and should be considered, where necessary, but the key threat in China’s consideration with respect to North Korea is less business and more the threat of instability on the Korean Peninsula (with refugees potentially pouring across its borders) or reunification on South Korean (and U.S.) terms bring U.S. forces to the Yalu River.

China must be presented with the unenviable, but necessary, choice between the best of two evils in its attempts to ward off instability and crisis, preferably to apply pressure on North Korea to seek a resolution of the nuclear and missile crisis and reduction of tensions. And, of course, such a sanctions regime will require sustained cooperation from non-Chinese foreign parties.

In the meantime, of course, the sanctions regime in place can and should continue to function with respect to depriving North Korea of the items it requires to develop and sustain its nuclear and missile programs (if any such items still must be imported), as well as to prevent North Korea from exporting arms and providing technical support to arms recipients. As the UNSC POE’s report on North Korea issued on February 27, 2017, makes clear, North Korea has continued these activities notwithstanding UNSC sanctions and needs only a few successes to derive the kind of hard currency income necessary to prop up the regime in Pyongyang.

Preventing these transfers and deals ought to remain a priority while talks proceed.

Fourth, we must monitor the execution of the strategy and continuously recalibrate its initial assumptions of North Korean resolve, the efficacy of the pain applied in shattering that resolve, and how best to improve the strategy. As with previous sections, this step requires little elaboration.

Fifth, we should present North Korea with a clear statement of the conditions necessary for the removal of pain and offer to pursue any negotiations necessary to arrive at an arrangement that removes the pain while satisfying U.S. and partner country requirements. As noted above, and perhaps distinct from other sanctions efforts presently ongoing, this must be an intrinsic element of the sanction’s strategy as well, given North Korea’s limited appreciation for the nature of its economic vulnerabilities and the needs of its captive population.

Sixth, the United States and its partners should accept the possibility that, notwithstanding a carefully crafted strategy, their efforts may fail because of either inherent inefficiencies in the strategy, a misunderstanding of the target, or an exogenous boost in North Korea’s resolve and capacity to resist. Either way, the United States and its partners must be prepared to acknowledge their failure and change course or else accept the risk that continuing with the present course could create worse outcomes in the long run.

Although this element of the framework is phrased as a possibility, it may be more reasonably stated as the most probable outcome of a sanctions campaign that does not involve or does not achieve a diplomatic settlement of the situation. North Korea’s readiness to absorb pain in the surety that its leadership can survive, and its population remains expendable undermines the utility of a sanctions-primacy approach.

For this reason, the suggested strategy places further diplomacy at the center of the effort, with an expectation that—should it fail—the U.S. strategy would likely revert to an even more aggressive “containment” posture that seeks to mitigate the worst of North Korea’s threats (through nuclear deterrence and missile defense), prevent proliferation (through expanded interdiction authorities), and assist the North Korean population in the event of regime collapse.

In this regard, North Korea demonstrates a central theme of this book: that sanctions are ultimately a tool of leverage, no more and no less. Leverage can help achieve solutions, but only if solutions actually exist. In the end, the effectiveness of sanctions as a tool is only so good as the integrity of the policy in question and the readiness of the country targeted to respond to the pressure applied.



1. 2015 National Security Strategy of the United States, February 1, 2015, https://www.whitehouse.gov/sites/default/files/docs/2015_national _security_strategy.pdf.

2. Reuters, “Senior Saudi Prince Says Trump Shouldn’t Scrap Iran Deal,”November 11, 2016, http://www.reuters.com/article/us-usa-election-saudi-iran-idUSKBN1361SS.

3. Richard Nephew, “Sanctions Relief Won’t Be a $100 Billion Windfall for Iran’s Terrorist Friends,” Foreign Policy, July 2, 2015, http://foreignpolicy.com/2015/07/02/iran-rouhani-khamenei-syria-assad-nuclear-sanctions-hezbollah/.

4. Bradley Hope, “U.K.’s Iranian-Owned Banks, Freed of Sanctions, Now Face Trust Barriers,” Wall Street Journal, March 8, 2017, https://www.wsj.com/articles/u-k-s-iranian-owned-banks-freed-of-sanctions-now-face-trust-barriers-1488978001.

5. Golnar Motevalli, “Top Banks in Iran Dragged into Rouhani Tussle with Rivals,” Bloomberg, September 5, 2016, https://www.bloomberg.com/news/articles/2016-09-05/top-iran-banks-dragged-into-rouhani-tussle-with-hardline-rivals.

6. Derek Frazer, “The Refusal of President Yanukovych of Ukraine to Sign at the EU Vilnius Summit on 28 to 29 November the Association Agreement Including a Deep and Comprehensive Free Trade Area (DCFTA) with the European Union,” EUCAnet.org, December 3, 2013, http://www.eucanet.org/news/media-tips/6-international-relations/169-the-refusal-of-president-yanukovych-of-ukraine-to-sign-at-the-eu-vilnius-summit-on-28-to-29-november-the-association-agreement-including-a-deep-and-comprehensive-free-trade-area-dcfta-with-the-european-union; David Herszenhorn, “Russia Putting a Strong Arm on Neighbors,” New York Times, October 22, 2013, http://www.nytimes.com/2013/10/23/world/europe/russia-putting-a-strong-arm-on-neighbors.html.

7. “Ukraine Crisis: Timeline,” BBC News, http://www.bbc.com/news/world-middle-east-26248275.

8. Richard Nephew, “Issue Brief: Revisiting Oil Sanctions on Russia,” Columbia/SIPA Center on Global Energy Policy, July 2015, http://energypolicy.columbia.edu/sites/default/files/energy/Issue%20Brief_Revisiting%20Oil%20Sanctions%20on%20Russia_Nephew_July%202015.pdf.

9.Energy Information Agency, Database of Oil Prices, http://www.eia.gov/dnav/pet/PET_PRI_SPT_S1_D.htm.

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11. Nephew, “Issue Brief: Revisiting Oil Sanctions on Russia.”

12. Evgenia Pismennaya, “Putin’s Bailout Bank Needs a Rescue; It’s a $18 Billion Whopper,” Bloomberg, December 28, 2015, http://www.bloomberg.com/news/articles/2015-12-28/putin-s-bailout-bank-needs-a-rescue-it-s-an-18-billion-whopper.

13. Vladimir Kuznetsov, “Ruble Drops to 2015 Low on Year-End Budget Flows as Oil Tumbles,” Bloomberg, December 28, 2015, http://www.bloomberg.com/news/articles/2015-12-28/ruble-drops-to-2015-low-on-year-end-budget-flows-as-oil-tumbles.

14. White House Press Office, “Statement by the President on Ukraine,” March 20, 2014, https://www.whitehouse.gov/the-press-office/2014/03/20/statement-president-ukraine.

15. Kenneth Rapoza, “One Year After Russia Annexed Crimea, Locals Prefer Moscow to Kiev,” Forbes, March 20, 2015, http://www.forbes.com/sites/kenrapoza/2015/03/20/one-year-after-russia-annexed-crimea-locals-prefer-moscow-to-kiev/.

16. “Minsk Agreement on Ukraine Crisis: Text in Full,” Telegraph, February 12, 2015, http://www.telegraph.co.uk/news/worldnews/europe/ukraine/11408266/Minsk-agreement-on-Ukraine-crisis-text-in-full.html.

17. Levada Center website, homepage. Accessed on January 6, 2016.http://www.levada.ru/eng/.

18. Jonathan Wheatley, “Russia to Issue Renminbi Denominated Debt,” Financial Times, December 7, 2015, http://www.ft.com/cms/s/3/6b7036c4-9a8e-11e5-a5c1-ca5db4add713.html#axzz3vpvUdMgC.

]19. James Paton and Aibing Guo, “Russia, China Add to $400 Billion Gas Deal with Accord,” Bloomberg, November 9, 2014, http://www.bloomberg.com/news/articles/2014-11-10/russia-china-add-to-400-billion-gas-deal-with-accord.

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23. UN Secretariat, “The List Established and Maintained Pursuant to Security Council res. 1718 (2006),” https://scsanctions.un.org/fop/fop?xml=htdocs/resources/xml/en/consolidated.xml&xslt=htdocs/resources/xsl/en/dprk.xsl.

24. Ministry of Foreign Affairs of Japan, “Measures taken by the Government of Japan against North Korea,” December 2, 2016, http://www.mofa.go.jp/a_o/na/kp/page3e_000628.html.

25. Benjamin Lee, “THAAD and the Sino-South Korean Strategic Dilemma,” The Diplomat (October 2016), http://thediplomat.com/2016/10/thaad-and-the-sino-south-korean-strategic-dilemma/.

26. Julian Ryall, “North Korea Losing African, South American Allies,”Deutsche Welle, June 21, 2016, http://www.dw.com/en/north-korea-losing-african-south-american-allies/a-19344851.

27. Kelsey Davenport, “Chronology of U.S.-North Korean Nuclear and Missile Diplomacy,” Arms Control Association, March 2017, https://www.armscontrol.org/factsheets/dprkchron.

28. Jonathan Watts, “China Cuts Oil Supply to North Korea, Guardian, March 31, 2003, https://www.theguardian.com/world/2003/apr/01/northkorea.china; Scott Conroy, “North Korea to Rejoin Six Party Talks,” CBS News, October 31, 2006, http://www.cbsnews.com/news/north-korea-to-rejoin-six-party-talks//.

29. Aaron Stein, “North Korea Tested an H Bomb?,” Arms Control Wonk, January 6, 2016, http://www.armscontrolwonk.com/archive/1200732/north-korea-tested-an-h-bomb/.

30. Jeffrey Lewis, “North Korea’s Nuke Program Is Way More Sophisticated Than You Think,” Foreign Policy, September 9, 2016, http://foreignpolicy.com/2016/09/09/north-koreas-nuclear-program-is-way-more-sophisticated-and-dangerous-than-you-think/.

31. Josh Rogin, “Inside the Secret U.S.-North Korea ‘Track 2’ Diplomacy,” Washington Post, August 28, 2016, https://www.washingtonpost.com/opinions/global-opinions/inside-the-secret-us-north-korea-track-2-diplomacy/2016/08/28/ef33b2d4-6bc0-11e6-ba32-5a4bf5aad4fa_story.html?utm_term=.6f37f529c80b.

32. Joint Statement of the Fourth Round of the Six Party Talks, September 19, 2005, https://www.state.gov/p/eap/regional/c15455.htm.

33. Ibid.

34. Georgy Toloraya, “Deciphering North Korean Economic Policy Intentions,” 38 North, July 26, 2016, http://38north.org/2016/07/gtoloraya 072616/.


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