Trump’s Use of Sanctions May Be Unsustainable

A year into his presidency, President Donald Trump has become an aggressive practitioner of economic sanctions. So far, the Treasury Department has added over 700 people, companies, and government agencies to sanctions lists. The administration has also increased other forms of economic pressure on North Korea and Venezuela. Its tactics are different too. Trump has threatened to rip up the Iran nuclear deal, thereby abandoning a multilateral approach to the application of financial sanctions on Iran.

Trump’s use of sanctions has notched some notable wins. Three rounds of North Korea sanctions adopted by the U.N. Security Council last year will, if fully enforced, cut off 90 percent of North Korea’s pre-sanctions export revenues. Sanctions on Venezuela target President Nicolas Maduro, who has presided over a humanitarian catastrophe that prompted over half a million Venezuelans flee in the last two years and caused hunger and child mortality rates to soar. U.S. sanctions have dramatically increased pressure on Caracas.

But there are worrying signs that Trump’s use of sanctions may not be sustainable. The administration needs a long-term strategy to shore up multilateral cooperation, prevent career staff burnout and departures, and get ahead of emerging trends that threaten to undercut U.S. sanctions dominance. Absent a holistic plan, America’s dealmaker-in-chief risks leaving his successors with a much weaker tool to deploy against future national security threats.

The first troubling sign is that Trump’s aggressive use of sanctions is straining cooperation with allies. While the United States has more sanctions leverage than any other country, the reality is that U.S. sanctions have powerful bite when allies apply coordinated, parallel measures. This is particularly true of sanctions targets such as Iran and Russia that have deeper economic ties with other countries than they do with the United States. European and Asian cooperation was essential to success of the oil sanctions on Iran between 2012 and 2015, since the United States did not purchase Iranian oil.

The Trump administration’s threat to end the Iran nuclear deal is the most significant example of the rift between the administration and key U.S. allies. European governments denounce this possibility in uncharacteristically derisive terms. Actually tearing up the deal would damage U.S.-EU cooperation on Iran and poison transatlantic ties needed to secure cooperation on other security priorities, including Russia and North Korea.

Like it or not, the Trump administration can only deliver true economic impact over the mid- and long-term if it invests significantly more diplomatic energy in securing sanctions alignment with U.S. allies. Moreover, sanctions are only as good as the broader strategy in which they are applied. So going it alone without allies to counter major global security threats will reveal both Trump’s strategy, and his tools, to be damningly inadequate.

Another troubling sign of sanctions unsustainability is the specter of staff burnout and departures at U.S. sanctions agencies. Sanctions depend on human capital — the talented women and men across the U.S. government who analyze targets, develop regulations, and work with allies to craft broad-based financial pressure campaigns. There has always been high turnover among sanctions staff, given the demanding workload and pull of lucrative private sector job offers. But the frenzied pace, with no additional resources, and hasty reversal of sanctions implementation conducted over the last several years on Iran, Cuba, and Russia, pushes more bureaucrats toward the door.

This is the recipe for institutional crisis. The Pentagon needs an increase in resources to adapt to the growing range of U.S. national security threats, and the same is true of the economic wing of the U.S. national security arsenal. Congress should include a dramatic increase in staffing and other resources for sanctions agencies in its next appropriations bill.

Perhaps the most alarming indication that Trump may preside over the end of the era of powerful U.S. sanctions is that his team is not staying ahead of emerging trends that threaten to undercut U.S. sanctions dominance.

Over the next decade new financial technology, such as cryptocurrencies and blockchain-based international settlement mechanisms, could significantly diminish the impact of U.S. financial sanctions. Cost-cutting and efficiency-seeking entrepreneurs drive financial technology innovations. However, the reckless use of U.S. sanctions could speed the migration of China, Russia, and other U.S. adversaries away from U.S. markets and currency. The Trump administration needs a major new effort to understand and adapt to potential risks that threaten to reduce the power of U.S. sanctions.

Sanctions have been a central part of the U.S. foreign policy toolkit for the last two decades. No president has been more ambitious in the use of this tool than Trump. But his team must craft a long-term strategy, and bigger fighting force, to ensure continued impact in the years to come.