What happened?

As of May 2019, the U.S. has 7967 sanctions in place. For a long time, experts have argued that sanctions are ineffective and have unintended consequences. However, from recent developments in Russia and Venezuela, a more interesting picture emerges. Both countries have adapted to U.S. sanctions in different ways.  

What does this mean?

In Russia, prolonged sanctions have led the government to clean up its financial sector, stimulate domestic production and create a sovereign wealth fund – all with great success: public debt is down to 15%, currency reserves grew by 50% over a few years and agriculture exports are now twice as high as arms exports. Sanctions still harm economic growth by targeting key industrial groupings and FDI, but the Russian economy is strengthening. In Venezuela, as the government has been forced to relax economic restraints, the private sector is flourishing: oil production is stabilizing and imports by private companies overtook those done by the state for the first time in Venezuela’s modern history.

What’s next?

U.S. sanctions have actually been effective by bringing Russia and Venezuela to the brink of economic collapse. However, as countries adapt to sanctions, the U.S. will have to rethink its strategy. The Trump administration already chose different strategies (e.g. trade war with China, accommodation with Russia, assassination of key Iranian figures) to pressure adversaries. Future U.S. administrations are likely to do the same, but could pick (radically) different strategies, such as renewed support for multilateralism, as advocated by Democrats.