ABSTRACT
Economic sanctions are generally applied when a government of one country wants to express its disagreement with the policies of another country. Such actions can be taken by countries individually or collectively. The objectives of the sanctions often go beyond the mere expression of dissatisfaction and can lead to a change of policies in the targeted country. The literature, however, does not present conclusive evidence that sanctions are an effective policy instrument in that regard. On the contrary, the rate of success has proven to be limited and yet it continues to be a preferred policy instrument. With a globalizing world economy, the effectiveness of economic sanctions becomes even more questionable. The literature shows that the extent to which sanctions work is limited to the very early stages of the sanctions episode. It was most recently applied against the Russian Federation (Russia) following its intervention in Ukraine reclaiming Crimea. Despite the rapidity with which sanctions were put in place, there is no indication that Russia will return Crimea to Ukraine. This chapter reviews the theory and practice of economic sanctions and the difficulties encountered in making sanctions an effective policy tool. It takes a closer look at two applications of sanctions against Russia. It is shown that one factor that reduces the effectiveness of sanctions as a policy instrument results from the growing interdependence and globalization of markets. It is increasingly challenging to single out products that can be sanctioned without hurting the economies of the countries imposing the sanctions.
