Europe Under Fire from US Secondary Sanctions. Valdai Club’s Special Report for SPIEF-2019
Secondary Sanctions
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There are several reasons why the European Union is increasingly proactive in applying economic sanctions. First, the EU has emerged as one of the largest global economies with vast technological, industrial, and human resources. Second, the foreign policy tools used by Brussels are traditionally economic and based on soft power. The EU’s limited military and political capabilities make sanctions a particularly promising foreign policy tool. Third, the EU is bound by a relationship of strategic interdependence to the United States, often joining US sanctions to some extent. 

As Washington has dramatically increased the use of sanctions, the EU has had to keep up. Naturally, US and EU sanctions are not always identical, but their largely shared political positions and allied relations ensure that political steps, including sanctions, are coordinated. This is the case, for example, in relation to Russia.

At the same time, the US remains the leader in imposing unilateral economic sanctions. Washington leads both in the number1 of sanctions and the sheer might of the government machinery involved in enforcing them. The Americans have amassed an enormous amount of experience and acumen in this regard, taking advantage of their powerful economy and unique standing in the global financial system. The dollar’s dominance in world financial transactions enables the US authorities to monitor a huge number of financial transactions, identify breaches of US sanctions programmes, and punish violators with secondary sanctions.

Secondary sanctions target companies, states, or individuals that do business with sanctioned countries, organizations, or individuals. ‘Sanctions for violating sanctions’ are used against US citizens and companies, as US laws are applicable only within US jurisdiction. During the past three decades, however, such sanctions are increasingly exterritorial in application, hitting companies and organizations from numerous other countries. The fact that exterritorial sanctions are possible at all is due to the dominant position of the US financial system in the context of international financial transactions and the close links that many major companies have with the US market. All foreign players who have some degree of relationship with US financial institutions, companies, or markets come under US national law. Apart from purely economic benefits, this global economic role gives the Americans powerful political leverage.