Economic sanctions are measures that restrict trade, financial transactions, investment or travel in order to pressure a target into changing its policies, to punish violations of international norms, or to deny it money and technology. Targets range from whole countries to specific companies, banks, ships and individuals. Sanctions are imposed by the United Nations Security Council, by groups such as the European Union and by individual states, most influentially the United States through the Office of Foreign Assets Control (OFAC).
Sanctions sit between diplomacy and military force. For banks, payment companies and traders they are also a legal obligation: firms must check customers and transactions against official lists through sanctions screening, and breaches can lead to heavy fines. Sanctions are related to, but distinct from, tariffs and capital controls, which are usually economic rather than political tools.
Economic sanctions in plain terms
Think of a neighbourhood that wants one household to stop a harmful behaviour. Instead of fighting, the neighbours stop selling it groceries, refuse to lend it tools and tell the local shops not to take its money. The aim is to make the behaviour so costly that the household changes course, or at least to make it harder to keep going.
Modern sanctions work the same way, but at the scale of countries and the global banking system. Because most international payments pass through a few currencies and banks, being cut off from them can be as damaging as a blockade of ports.
Types of sanctions
- Trade embargoes. Bans on all or most trade with a country, such as the long-standing US embargo on Cuba.
- Sectoral sanctions. Limits on specific industries, for example bans on new debt or equity for certain energy and defence firms, or the G7 price cap on Russian seaborne oil introduced in December 2022.
- Financial sanctions and asset freezes. Blocking of property belonging to listed persons, such as those on OFAC's Specially Designated Nationals list, and bans on dealing with them.
- Payment and messaging restrictions. Cutting banks off from systems such as SWIFT, as the EU required for Iranian banks in 2012 and for several Russian banks in 2022.
- Export controls. Bans on selling advanced chips, weapons-related or dual-use goods to certain destinations.
- Secondary sanctions. Threats against third-country firms that deal with a sanctioned target, a tool used extensively by the United States against Iran.
- Travel bans and arms embargoes, often paired with the measures above.
Who imposes sanctions and how
Under Article 41 of the UN Charter, the Security Council can require all UN members to apply measures short of force, such as the sanctions on North Korea's nuclear and missile programmes. In December 2022 it adopted Resolution 2664, creating a standing humanitarian exemption across UN asset-freeze regimes. Because any permanent member can veto a resolution, many sanctions are instead imposed unilaterally or by coalitions.
In the United States, most programmes rest on the International Emergency Economic Powers Act of 1977 and are administered by OFAC, with export controls run by the Commerce Department. The EU adopts "restrictive measures" by unanimity of member states under its common foreign and security policy; national authorities enforce them. The UK has run its own regime since leaving the EU, under the Sanctions and Anti-Money Laundering Act 2018. The dollar's role as the main reserve currency gives US sanctions extra reach, because dollar payments usually clear through US correspondent banks.
Major cases
Historical examples include the League of Nations sanctions on Italy in 1935–36, international measures against apartheid South Africa, and comprehensive UN sanctions on Iraq from 1990, later eased by the oil-for-food programme because of their humanitarian toll. Iran has faced UN, US and EU sanctions over its nuclear programme, which hit its oil exports and the rial.
After Russia's full-scale invasion of Ukraine in February 2022, Western governments imposed the broadest sanctions ever applied to a major economy, including the immobilization of Russian central bank reserves, mostly held in Europe (see immobilized reserves). The EU adopted its 20th package of measures against Russia in April 2026, targeting energy revenues, banks, crypto-asset services and the "shadow fleet" of tankers used to move oil. These measures pushed Russia to settle more trade in yuan and to use alternative channels, including China's CIPS.
Effectiveness and criticism
Whether sanctions work is debated. A widely cited study by Gary Hufbauer, Jeffrey Schott, Kimberly Elliott and Barbara Oegg, covering cases from 1915 to 2000, judged roughly a third to have at least partly achieved their aims, with modest goals succeeding more often than demands for regime change. Supporters argue that even when sanctions do not change a government's policy, they raise its costs and limit its military capacity, and that they signal resolve without war.
Critics from several directions raise other points:
- Humanitarian costs. Broad embargoes can harm ordinary people more than elites, as studies of Iraq in the 1990s argued; this led to more "targeted" or "smart" sanctions.
- Evasion. Targets adapt through front companies, sanctions evasion networks, ship-to-ship transfers, crypto assets and trade through third countries.
- Over-compliance. Banks often go beyond the law and exit entire regions, a form of de-risking that can hurt remittances and humanitarian work.
- Long-term blowback. Some economists and policymakers argue that heavy use of financial sanctions encourages countries to diversify away from the dollar and Western payment systems. Others counter that there is still no realistic alternative for most international finance.