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Sanctions vs Embargoes - International Trade Restrictions Explained

Author: Syedur Rahman  9 April 2024
6 min read

The terms “sanctions’’ and “embargoes’’ appear regularly in discussions and articles relating to how countries take action to protect their interests. There are, however, distinct differences between the two. This article explains what sanctions and embargoes are and outlines those differences.

What are sanctions?

Sanctions are measures, which are often economic in nature, that a country or international organisation imposes on another country, organisation (such as a business) or individual. Sanctions are imposed to prevent the country, organisation or individual from carrying out particular activities.

To take an example, many sanctions prevent a country (that is the target of the sanctions) from exporting goods to a particular country (which has imposed the sanctions).

Why are sanctions imposed?

Sanctions are imposed for a wide range of reasons. But, in general terms, the aim of them is to stop a person, organisation or country from carrying out particular activities, such as trade or financial transactions.

This can be done to:

  • Enforce international laws and ensure countries honour international agreements.
  • Safeguard a country’s economic interests by protecting its industries from competition from similar businesses in other countries.
  • Promote behaviour change in a country, such as ensuring human rights standards are met or that nuclear weapons are not built or obtained.
  • Affect a country’s foreign policy.
  • Protect national and international security.

Types of Sanctions

Sanctions can take a number of forms and can be used for various purposes. But it is possible to categorise them according to the measures included in them, their scope and the purpose of them.

Economic Sanctions

These restrict the trade of goods and services. They do this by restricting access to particular resources, technology or financial and other markets. They are used in an attempt to cause economic hardship to the target of the sanctions, whether that be a person, a business or other organisation or a whole country.

To take an example, in 2014 the European Union’s Council Regulation (EU) No 833/2014 introduced measures against Russia that included the freezing of the funds and economic resources of certain people and organisations and restrictions on investments.

This was imposed in response to Russia’s illegal annexation of Crimea and Sevastopol. Restrictions on exports of certain dual-use goods and technology, on certain services related to the supply of arms and military equipment, and on technological goods involved in the Russian oil industry were also included in the Regulation.

Financial sanctions involve restricting access to global financial markets, the freezing of assets, and limiting financial transactions in an attempt to restrict the economic activities of the target of the sanctions.

Diplomatic Sanctions

These involve ending or reducing the diplomatic links between countries. A country imposing such sanctions on another country may withdraw its ambassadors, close its embassies or limit its diplomatic engagement with that other nation. This would be done to express disapproval of that country’s behaviour and to isolate it diplomatically.

Military Sanctions

These sanctions restrict the sale and supply of military equipment, technology and assistance in an attempt to reduce the military power of the country that is being targeted

What are embargoes?

Embargoes are a way of imposing a ban on trade, investment or any other form of economic activity with one or a number of countries. Like sanctions, embargoes are used by governments to apply pressure on a country to rethink its actions or policies. They involve a restriction being placed on the trading of products or services, so that individuals and companies can no longer trade with the country targeted by the embargo.

An embargo can involve the banning of imports or exports between countries or may only target particular items, such as arms.

Why are embargoes imposed?

As with sanctions, countries use embargoes as a way of applying pressure on other countries (or sometimes organisations) in order to achieve certain goals.

They can be used to:

  • Promote Behaviour Change: Embargoes can be used in an attempt to force a country to change its behaviour. For example, an embargo may be used to apply pressure on a country to end human rights abuses or stop looking to acquire nuclear weapons.
  • Protect National and Global Security: Embargoes can be used to protect the security interests of the imposing country (or countries) and the global community by targeting a country that is viewed as a security risk.
  • Uphold International Laws: Embargoes can be a way of penalising countries that are not following internationally-agreed laws or agreements.
  • Obtain an Economic Outcome: Embargoes are a means for a country to protect a particular business sector from competition from foreign rivals.

Types of Embargoes

There is a range of embargoes that can be used. The particular type of embargo that is used will depend on the situation.

Trade Embargo

This is used by a country to cut economic relationships with the targeted nation. The aim is to restrict the export or import of goods and services in order to isolate the targeted country, have a negative effect on its economy and prevent it gaining access to particular items, services or resources.

They are often imposed on a country that is seen as a security risk, is not complying with international laws or agreements or is guilty of human rights abuses. To take an example, the United States imposed a trade embargo on Cuba in 1960 that restricted all forms of trade and investment between the two countries.

Financial Embargo

This type of embargo sees restrictions being placed on financial transactions and investments involving the targeted country. It may include the freezing of assets, the limiting of access to financial markets or the prevention of investment activities, which can all affect the economic health of the targeted nation.

Military Embargo

Military embargoes involve restrictions being placed on the sale, supply or transfer of military equipment to and from the embargoed nation. This is done to reduce that nation’s military capabilities and apply pressure on it without there being any physical conflict.

As an example, the United Nations imposed an arms embargo on South Africa during the apartheid era, which restricted the sale and transfer of arms to and from the country.

Other Types of Trade Restrictions

While embargoes and sanctions are arguably the most high-profile restrictions on trade, there are others.

These include:

  • Tariffs: Taxes that are imposed on goods or services as they cross a national border. They are often used to protect a country’s economy by making imports more expensive.
  • Subsidies: Payments made by governments to producers in that country to encourage the production or consumption of certain products, which can help reduce competition from imported goods.
  • Quotas: Limits imposed on the amount of a product that can be imported during a period of time. They can be used to help protect businesses in that country from foreign competitors.
  • Countervailing Duties: Also known as anti-dumping duties, these are taxes imposed by governments on imported goods that have been sold below cost price. They are used as a way of protecting business sectors in a country from foreign rivals.

These are all ways of managing the effect of imports and / or helping domestic production. But they can do damage to other countries’ economies.

Sanctions vs Embargoes - What is the difference?

There are some similarities between sanctions and embargoes when it comes to how they are used and the reasons why they are used. They are both ways of applying economic or diplomatic pressure.

But they do differ in a number of ways.

Scope

While embargoes tend to be comprehensive, prohibiting all trade or other specified activities, sanctions can be more targeted. Sanctions are likely to focus on specific types of business sector, organisation or individuals while embargoes are likely to affect all sectors and even a whole country.

Intensity

Sanctions can vary in their intensity, as they can involve anything from relatively mild measures such as travel restrictions through to much harsher economic sanctions. They are a wide range of measures that can include diplomatic measures, asset freezes and restrictions on trade and investment. Embargoes tend to be more intense and involve a total stopping - or a very severe restriction - of trade.

Objective

Sanctions are used as an attempt to change the particular policies or actions of a country, organisation or individual. But embargoes are used as a means of isolating and applying the maximum possible pressure on a country or organisation, often as a form of punishment.

Duration

Sanctions can be imposed for any length of time. Whether they are imposed for the short term or the long term will depend on why they are being used. Embargoes, however, are often imposed for an extended period of time in an effort to ensure maximum pressure on the target country or organisation.

Economic Impact

Embargoes are often used in order to achieve a broad economic impact, while sanctions can be used to put pressure on particular individuals or organisations without affecting a whole country.

Legal Framework

The use of sanctions is governed by a range of international and national legal frameworks. For example, in the UK sanctions are enforced by The Office of Financial Sanctions Implementation (OFSI) whereas countries in the European Union (EU) enforce the EU’s sanctions. Embargoes, however, are often imposed after international agreement through, for example, the United Nations.

Conclusion

The world of both sanctions and embargoes can be subject to change at any time, depending on international events and countries’ reactions to them. As a result, the legal landscape is a challenging one for those looking to ensure they are complying with each and every sanction or embargo that may affect their activities.

Compliance in this complex area can require assistance from those with the necessary expertise and experience.

At Rahman Ravelli, our International sanctions lawyers are well versed in all aspects of sanctions and embargoes and used to dealing with the relevant authorities. As a top tier sanctions law firm, our lawyers are available to anyone who requires their assistance with such matters.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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