The Cable

The Cable goes inside the foreign policy machine, from Foggy Bottom to Turtle Bay, the White House to Embassy Row.

Top Treasury Official Warns Against Over-Reliance on Sanctions

Though the Obama administration has often resorted to financial sanctions to coerce foreign adversaries into better behavior, a top Treasury official warned Friday that overusing the measures risks damaging the long-term vitality of the U.S. economy and the economies of friendly nations.

US Secret Service Uniform Division officers walk in the door near the seal on the US Treasury building August 9, 2011, in Washington, DC.    AFP Photo/Paul J. Richards (Photo credit should read PAUL J. RICHARDS/AFP/Getty Images)
US Secret Service Uniform Division officers walk in the door near the seal on the US Treasury building August 9, 2011, in Washington, DC. AFP Photo/Paul J. Richards (Photo credit should read PAUL J. RICHARDS/AFP/Getty Images)
US Secret Service Uniform Division officers walk in the door near the seal on the US Treasury building August 9, 2011, in Washington, DC. AFP Photo/Paul J. Richards (Photo credit should read PAUL J. RICHARDS/AFP/Getty Images)

Though the Obama administration has often resorted to financial sanctions to coerce foreign adversaries into better behavior, a top Treasury official warned Friday that overusing the measures risks damaging the long-term vitality of the U.S. economy and the economies of friendly nations.

“Sanctions are not a silver bullet, or the solution to every foreign policy crisis,” Adam Szubin, the acting undersecretary of Treasury for terrorism and financial intelligence, said in an address at the Center for a New American Security. “Even when sanctions do work, they can come with negative side effects.”

Szubin, who has been deeply involved in U.S. sanctions efforts targeting Iran’s nuclear program and illicit funding for the Islamic State terror network, said many of the downsides of sanctions are obvious: They risk retaliation from foreign governments, they strain diplomatic relations, and they dampen commercial activity.

Though the Obama administration has often resorted to financial sanctions to coerce foreign adversaries into better behavior, a top Treasury official warned Friday that overusing the measures risks damaging the long-term vitality of the U.S. economy and the economies of friendly nations.

“Sanctions are not a silver bullet, or the solution to every foreign policy crisis,” Adam Szubin, the acting undersecretary of Treasury for terrorism and financial intelligence, said in an address at the Center for a New American Security. “Even when sanctions do work, they can come with negative side effects.”

Szubin, who has been deeply involved in U.S. sanctions efforts targeting Iran’s nuclear program and illicit funding for the Islamic State terror network, said many of the downsides of sanctions are obvious: They risk retaliation from foreign governments, they strain diplomatic relations, and they dampen commercial activity.

But other risks, he said, are not so obvious. In particular, the risk that overusing sanctions can cause the U.S. financial system, the bloodstream of the global economy, to become so complicated and unwieldy for foreign businesses that they eventually seek new methods of doing business outside U.S. markets.

“If we insist on imposing sanctions without multilateral support … we could damage our standing internationally, weakening the primacy of the U.S. financial system,” Szubin said. “And if we lose that, we lose the very economic leverage that has made our sanctions so effective in the first place.”

Szubin’s warning comes as Republicans in Congress seek to pass new legislative sanctions against Iran despite its compliance with the nuclear deal it signed last year. Sens. Marco Rubio of Florida and Mark Kirk of Illinois have introduced a bill blocking Tehran from access to the U.S. financial system and offshore U.S. dollar-clearinghouses following its ballistic missile tests last month, which violated a U.N. Security Council resolution. The Obama administration opposes the bill.

While many lawmakers remain critical of the nuclear deal, which unfroze as much as $100 billion of Iran’s assets in international banks, Iranian officials have complained that lifting international sanctions has had a minimal impact on Tehran’s economy. In some instances, European banks are still wary of granting lines of credit to Iran for fear of being hit with U.S. sanctions, which remain in effect on a number of areas of Iran’s economy. On Friday, the head of Iran’s central bank, Valiollah Seif, reiterated those grievances while in Washington attending spring meetings of the International Monetary Fund and the World Bank.

More from Foreign Policy

A Panzerhaubitze 2000 tank howitzer fires during a mission in Ukraine’s Donetsk region.
A Panzerhaubitze 2000 tank howitzer fires during a mission in Ukraine’s Donetsk region.

Lessons for the Next War

Twelve experts weigh in on how to prevent, deter, and—if necessary—fight the next conflict.

An illustration showing a torn Russian flag and Russian President Vladimir Putin.
An illustration showing a torn Russian flag and Russian President Vladimir Putin.

It’s High Time to Prepare for Russia’s Collapse

Not planning for the possibility of disintegration betrays a dangerous lack of imagination.

An unexploded tail section of a cluster bomb is seen in Ukraine.
An unexploded tail section of a cluster bomb is seen in Ukraine.

Turkey Is Sending Cold War-Era Cluster Bombs to Ukraine

The artillery-fired cluster munitions could be lethal to Russian troops—and Ukrainian civilians.

A joint session of Congress meets to count the Electoral College vote from the 2008 presidential election the House Chamber in the U.S. Capitol  January 8, 2009 in Washington.
A joint session of Congress meets to count the Electoral College vote from the 2008 presidential election the House Chamber in the U.S. Capitol January 8, 2009 in Washington.

Congrats, You’re a Member of Congress. Now Listen Up.

Some brief foreign-policy advice for the newest members of the U.S. legislature.