December 5, 2022
Suzanne Katzenstein, Duke University
Stephen Park, University of Connecticut
International law has been typically understood as playing a dual role with respect to sanctions. On the one hand, international law legitimizes the use of sanctions as a coercive means to enforce a target state’s compliance with international legal rules and, according to some commentators, constitutes a defense of the liberal international order. On the other, international law acts as a constraint, imposing limits and conditions on their use. The financial sanctions against Russia reflect the status quo of unilateral sanctions, imbued with the faith of governments to harness the coercive function of sanctions without bloodshed. But U.S. financial sanctions constitute a financial blockade, that may have—as sanctions against Iran have shown—profound humanitarian and human rights consequences, within and beyond Russia. As sanctions continue to escalate against Russia, the mismatch between the emerging strategies of twenty-first century financial warfare and international law’s capacity to regulate them is increasingly apparent.
In this reflection, we suggest that U.S. financial sanctions have evolved into a form of blanket financial warfare whose diffuse and amorphous effects make it too difficult to meaningfully assess whether they are in compliance with international law. In short, financial sanctions of the current scope and magnitude—primarily sectoral—can no longer be relied upon to enforce international law in a manner that complies with it. And yet financial sanctions are likely here to stay.
Where does that leave the prospect of anchoring unilateral sanctions in international law, which has long intrigued and vexed international law scholars? We suggest that international law’s primary contribution lies in facilitating political accountability and normative debate. Revising the international legal framework to address sanctions’ diffuse and amorphous effects is an important effort, indeed one that may save lives. But we also recognize its limits. As scholars have argued in other contexts, relying on international law to constrain the impacts of warfare—here, financial warfare—may also risk legitimizing its expanding use.
International Law as Constraint on Financial Warfare
For decades, there have been ongoing efforts to determine how to use international law as a means to constrain unilateral sanctions. Under the International Law Commission’s (ILC) Articles on the Responsibility of States for Internationally Wrongful Acts, the use of sanctions hinges on a violation of international law for which sanctioning states may impose lawful countermeasures that are necessary to induce compliance with international law. The ILC Articles contemplate the invocation of state responsibility by third parties for a breach of an international legal obligation erga omnes – i.e., the obligation of a state towards the international community. However, the right to impose third country countermeasures is not settled state practice under international law. Nonetheless, countermeasures are typicially deemed lawful if they are considered necessary to induce compliance, reversible, proportional, and do not adversely affect the protection of fundamental human rights.
Economic sanctions may lead to ‘collateral damage’ suffered by civilian populations, such as reducing access to food, medicine, and medical equipment, which may violate international human rights law, such as the International Covenant on Economic, Social, and Cultural Rights. Even targeted parties subject to travel restrictions and asset freezes may have human rights claims under the International Covenant on Civil and Political Rights. But perhaps most relevant in the case of Russia, international law has been much less protective of civilians outside targeted states, who may suffer the second or third order effects of sanctions. Sometimes these are the parties most in need of legal protection.
The U.S. government does not justify sanctions in terms of international law. Rather, its use of sanctions is constrained through federal statutes, regulations, and executive orders governing the blocking of assets and related restrictions and travel bans. U.S. federal law provides for a humanitarian exemption (which may be waived) as well as grants discretion to the Treasury’s Office of Foreign Assets Control (OFAC) to issue licenses for various humanitarian measures, such as those granted to permit the sale of food and agricultural commodities, humanitarian assistance by non-governmental organizations, and medicine and medical devices in Russia.
Sectoral Financial Sanctions are too Diffuse and Amorphous in Effect to Assess Compliance with International Law
At the onset of Russia’s invasion of Ukraine in February 2022, the United States swiftly leveraged its central position in the global financial system with a series of broadsides against the financial underpinnings of the Russian economy. In coordination with the European Union and the United Kingdom, the U.S. imposed blocking sanctions against major Russian banks and financial institutions, including the Russian Direct Investment Fund (RDIF), one of Russia’s major sovereign wealth funds. With the G-7, the U.S. imposed an asset freeze on the Central Bank of the Russian Federation, preventing the Russian central bank from accessing a substantial portion of its own foreign reserves that are held outside of Russia. The U.S. and its European allies effectuated the removal of certain Russian banks from the SWIFT messaging system, the primary means to process cross-border payments. The U.S. blocked the Russian government from making payments on international bonds using U.S. dollars held in U.S.-based banks, effectively forcing Russia into an external debt default.
At the heart of the international legal rules governing sanctions is an assumption that their impact can be identified and measured. But the nature of U.S. financial sanctions against Russia, with their diffuse and amorphous effects, renders the task of calculating proportionality difficult—if not impossible—legal math. By freezing payments, blocking SWIFT, and weakening the central bank, financial sanctions may impede the ability of citizens and humanitarian organizations to import food, medicine, and other essential goods. Moreover, as the International Court of Justice (ICJ) has observed, the chilling effect of financial sanctions may cut off humanitarian supplies by incentivizing foreign banks to suspend operations. How can the proportionality of these financial sanctions be calculated when its effects on non-targeted parts of the Russian economy—including those ostensibly covered by humanitarian exemptions—are uncertain? How does a loss of access to foreign exchange, foreign capital, and cross-border financing affect the ability of civilians to run their businesses, pay their employees, and provide shelter and education? This challenge of evaluating proportionality is exacerbated by the fact that financial sanctions may adversely affect both civilians of the targeted state and of third countries.
Sanctioning states themselves are subject to the fog of financial war, unable to calibrate ex ante the measures that minimize collateral damage relative to the realization of the objective. U.S. government agencies have expressed their own concerns about identifying the impacts of U.S. sanctions in meeting underlying policy objectives, highlighting problems with assessing causality, access to reliable data, and changing policy goals. These challenges extend to the endeavor of assessing proportionality and compliance with international law itself.
International Law Can Foster Political Accountability—but at the Risk of Legitimizing Financial Warfare
We posit that international law’s primary contribution lies not in eliciting or even assessing state compliance with its rules but in helping to highlight and narrow a particularly acute political accountability gap. The weak accountability of the U.S. government in the context of financial warfare is not simply a function of its hegemonic status. Rather, we see it in terms of three dynamics.
First, economic sanctions—both the financial sanctions against Russia and generally—pose limited domestic costs on the U.S. government. This, of course, is what makes financial sanctions such an appealing instrument to U.S. policymakers, and why it has become a tool of first resort. Without palpable costs to the American public, the domestic bar for meaningful restraint becomes exceedingly high. The destruction caused by comprehensive UN sanctions against Iraq led eventually to a global turn to ‘smart sanctions’. But the U.S. is experiencing a kind of déjà vu as it applies sweeping sanctions against some countries, including Afghanistan, with devastating humanitarian effects.
Second, weak political accountability for sanctions stems from America’s newly-invigorated Transatlantic partnership with Western Europe. Many scholars and policymakers celebrated this cross-continental collaboration (which includes Japan, Canada, and others) as heralding a new age of multilateralism and global cooperation. But this newly united front in imposing sanctions constitutes coordinated unilateralism, not a new form of multilateralism. In contrast to cases like Iran and Cuba, Europe is not playing a symbolically important oppositional role with respect to Russia. As a result, the U.S. government is arguably even less accountable.
Most unique to financial sanctions, the third and final source of weak U.S. accountability is the absence of a clear and direct chain of causality, connecting U.S. sanctions to humanitarian harms both within and beyond Russia. In other forms of warfare, the causal line is arguably easier to ascertain. A drone operator sees on their computer screen at least the moment of impact. A journalist may investigate when civilian deaths or collateral damage seem too high. But how does one foster political accountability for harm that is hard to trace in the first place, or for which responsibility is easy to deny?
Within this context, international law plays an important role by keeping political and ethical questions about financial sanctions salient. For instance, the UN Human Rights Council appointed a Special Rapporteur in 2014, with a mandate to investigate and report on the human rights consequences of unilateral sanctions. The first Special Rapporteur was vocal in calling for both ex ante and ex post accountability mechanisms, including requiring sanctioning states to conduct human rights impact assessments prior to imposing sanctions and proposing the idea of a compensation commission for harms stemming from sanctions in their aftermath. UN responses to unilateral sanctions come from broader coalitions as well. In April 2022, a group of special rapporteurs and independent experts called on the U.S. government to unblock foreign assets of Afghanistan’s central bank to allow for humanitarian assistance to the Afghan population—a call that may have partly influenced the U.S. to establish the “Fund for the Afghan people.” But even when UN criticisms of U.S. sanctions and calls for accountability do not lead to policy revision or retrenchment, they can inspire or at least bolster efforts by the U.S. government to more explicitly justify its policies, or to begin domestic conversations about possible reforms, including new laws.
And yet focusing one’s critique and revision efforts on the international legal project of regulating warfare can have unintended legitimizing effects, limiting inquiries to a narrow subset of questions. Instead of asking whether the United States should apply unilateral sanctions, policymakers and scholars risk focusing only on which form of sanctions to apply. Rather than ask whether international law should be the primary framework for evaluating U.S. financial sanctions policy, the debate centers on questions about compliance.
In his book Of War and Law, David Kennedy powerfully reminds us of the limits of the legalization of war. He tracks the merging worlds of military planners and humanitarian advocates as they separately and together deploy legal discourse in their projects of evaluating, implementing, and constraining war. As lawyers in the White House and Treasury and State Departments devise their target lists, identify sectors to isolate, and evaluate potential impacts, international law may become a double-edged sword: promoting some form of accountability while reinforcing an elusive logic of a measurable and humanitarian financial war.
 While not a formal treaty, the ILC Articles are the most widely referenced and cited source of legal authority for constraining unilateral sanctions.
 ILC, art. 49.
 ILC, art. 48.
 ILC, commentary to art. 54.
 ILC, art. 49(1).
 ILC, art. 49(3) (“Countermeasures shall, as far as possible, be taken in such a way as to permit the resumption of performance of the obligations in question.”).
 ILC, art. 51.
 ILC, art. 50(1)(b).
 See ILC, art. 51 (requiring that countermeasures to be “commensurate” with the injury induced by the original, wrongful act).
 United Nations General Assembly, Report of the Special Rapporteur on the Negative Impact of Unilateral Coercive Measures on the Enjoyment of Human Rights, A/HRC/30/45, para. 42 (Aug. 10, 2015).
 Alleged Violations of the 1955 Treaty of Amity, Economic Relations, and Consular Rights (Islamic Republic of Iran v. United States of America), Request for the Indication of Provisional Measures, ISBN 978-92-1-157350-3, para. 89 (Oct. 3, 2018).
 Notably, the Department of the Treasury’s sanctions review, published in 2021, calls for “incorporating multilateral coordination, where possible” (emphasis added).
 United Nations General Assembly, Report of the Special Rapporteur on the Negative Impact of Unilateral Coercive Measures on the Enjoyment of Human Rights, A/HRC/39/54, paras. 14-19 (Aug. 30, 2018); United Nations General Assembly, Report of the Special Rapporteur on the Negative Impact of Unilateral Coercive Measures on the Enjoyment of Human Rights, A/HRC/36/44, paras. 41-47 (July 26, 2017).
Return to Money, Sanctions and International Law prompt.