ECONOMIC SANCTIONS: A HISTORICAL ANALYSIS

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• Document Creation Date: December 22, 2016
• Document Release Date: March 23, 2011
• Sequence Number: 1
• Publication Date: May 1, 1986
• Content Type: REPORT

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Directorate of
Intelligence 25X1
Economic Sanctions:
A Historical Analysis
GI 86-10034
May 1986
Copy A 5 1
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Directorate of Secret
Intelligence 25X1
Economic Sanctions:
A Historical Analysis
Information available as of 17 March 1986
was used in this report.
This paper was prepared by
Office of Global Issues. Contributions came from the
Office of Soviet Analysis, the Office of Near
Eastern and South Asian Analysis, the Office of East
Asian Analysis, the Office of African and Latin
American Analysis, and the Office of European
Analysis
Comments and queries are welcome and may be
directed to the Chief, Foreign Subversion and
Instability Center, OGI,
Secret
GI 86-10034
May 1986
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Scope Note This study is a broad historical examination of economic sanctions as an in-
strument of foreign policy in a variety of political settings. It reviews 14
cases of economic sanctions covering a representative sample of sanctions
sponsors, targets, and circumstances. Drawing on the information in these
case studies as well as on open literature, we have examined each of the ele-
ments affecting the formulation and implementation of sanctions. The
result is a framework for examining sanctions as a foreign policy instru-
ment
iii Secret
GI 86-10034
May 1986
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Scope Note
Effectiveness in Brief
2
Establishing and Implementing Sanctions
Sanctions: Case Summaries
appended
Appendixes
A.
League of Nations Sanctions Against Italy (1935-36)
5
9
B.
Arab League Boycott of Israel (1948-Present)
'
13
C.
s Republic of China (1960)
USSR Sanctions Against People
62
1
17
D.
)
-
OAS and US Sanctions Against Dominican Republic (196
23
E.
US and OAS Sanctions Against Cuba (1962-Present)
33
F.
UK and UN Sanctions Against Rhodesia (1965-79)
G.
French Sanctions Against Algeria (1971)
39
41
H.
OAPEC Oil Embargo Against the United States (1973-74)
I.
US Sanctions Against Pakistan (1977-80)
J.
US Trade Sanctions Against Uganda (1978)
55
K.
US Sanctions Aganist Iran (1980-8 1)
59
L.
US Sanctions Against USSR (Afghanistan) (1980-8 1)
63
M.
US Sanctions Against USSR (Poland) (1981-82)
67
N.
European Community Sanctions Against Argentina (1982)
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Economic Sanctions:
A Historical Analysis
Economic sanctions, though rarely decisive in forcing
policy change, are a useful-and increasingly used-
foreign policy tool. More effective than diplomatic
protest and less drastic than military action, sanctions
not only send a strong political message, but also can
have a significant impact on target countries by
raising economic costs. The greatest impact typically
occurs during the first six to 12 months. This is a
period in which trade is disrupted, financial flows are
altered, and regimes are forced to deal with disloca-
tions throughout the economy. In general, countries
already subject to economic problems tend to be more
vulnerable to the impact of economic sanctions.F_
shifted to punishing Cuba and increasing the econom-
ic costs to the USSR of supporting a client state.
These costs have amounted to some $40 billion since
1960.
Often, the true objectives of sanctions are never
publicly stated. The announced objective of the
League of Nations actions against Italy, for example,
was to end the war in Ethiopia, while the real, but
unstated, objective was to check Hitler's expansionism
by demonstrating the effectiveness of the League's
collective security provisions. Similarly, the unstated
objectives of the UK sanctions against Rhodesia were
to prevent the use of force by third countries and to
maintain a favorable image for the United Kingdom
The effectiveness of economic sanctions depends, in
large part, upon the objectives of the sponsoring
country. While sanctions have traditionally been
viewed as efforts to change a country's behavior-10
of our 14 case histories fall into this category-they
may have less ambitious goals. For example, the Arab
League has long recognized that its boycott of Israel
can hurt the Israeli economy but cannot force policy
change. Similarly, according to Carter administration
officials, Washington understood that US sanctions
would not cause the Soviets to withdraw from Af-
ghanistan; the sanctions were intended to punish the
USSR and let Moscow know the price for similar
conduct in the future. In some cases, the objective is
limited to showing disapproval of the target country's
actions. This was the case with the European Commu-
nity (EC) sanctions against Ar entina during the
Falklands/ Malvinas war.
Sanctions may also combine the objectives or change
in their relative emphasis over time. For example, US
and Organization of American States (OAS) sanctions
against Cuba were initially meant to bring down the
Castro regime. As time passed, however, the focus
in the Commonwealth and the Third World.
Unstated objectives present policymakers with both
advantages and problems. On the positive side, unstat-
ed objectives allow:
? Flexibility in determining when sanctions can be
removed.
? An opportunity for the target country to accede to
the true objectives of the sanctions without publicly
capitulating.
There are three principal disadvantages, however, to
unstated objectives:
? A country urging a multilateral group to impose
sanctions will have a more difficult task if it main-
tains a private agenda.
? Unstated objectives cannot be kept secret in a
multilateral context, making a public confrontation
with the target country unavoidable.
? Unstated objectives may be more difficult to justify
in the public opinion of sponsoring countries.
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Establishing and Implementing Sanctions
We have identified four key elements that are likely
to affect a decision to implement economic sanctions:
? The kinds of items to be withheld or markets to be
boycotted.
? The need for multilateral sponsorship and willing-
ness of other countries to participate.
? The economic and political effects on the target
country.
? The target country's degree of commitment to its
policies relative to the sponsoring country's commit-
ment to the sanctions.
Emphasis on one or another of these elements depends
on the goals of the sanctions. If the objective is to
demonstrate disapproval, only the first two are perti-
nent; punishment, in addition to the first two ele-
ments, requires assessment of the economic impact;
an attempt to change the target country's policies
requires consideration of all four elements.
The economic impact of sanctions against the target
country can range from minor inconvenience to major
dislocation and is affected by:
? The target country's access to alternate sources of
supply or alternate markets for its exports.
? The target country's ability to adjust internally.
? The s onsorm country's ability to enforce sanc-
tions.
In 12 of the 14 cases studied, the target countries
were eventually able to secure alternate import
sources and export markets. The alternate sources
were ideological or strategic foes of the sponsors in the
cases of Italy, Cuba, and Rhodesia. In the rest of the
cases, the sources were opportunistic suppliers. Dur-
ing the short duration of sanctions against the Domin-
ican Republic, for example, Canada, Western Europe,
and the Middle East supplied arms, vehicles, and
petroleum. The EC sanctions against Argentina were
never seriously intended to deprive Buenos Aires of
key imports, and alternate supplies of most items were
available if necessary.
Target countries may also try to adjust internally to
sanctions by increasing self-sufficiency and shifting
demand away from embargoed items. Rhodesia, for
example, developed an effective manufacturing sector
in response to sanctions, and white Rhodesians were
generally able to maintain their standard of living
during the long sanctions period. In the case of Cuba,
the shift was from an economy dominated by US
capital and consumer goods to an economy in which
capital is supplied by the Communist Bloc and Japan,
and the supply of consumer goods is substantially
Despite general availability of alternate supply
sources and export markets, sanctions can still have
considerable economic impact. In the cases of China,
Cuba, and Rhodesia, there was either a timelag
between the imposition of sanctions and the availabil-
ity of new sources or a high economic or political cost
involved in obtaining the new sources. Thus, the
availability of alternate supplies does not preclude
successful application of sanctions.
The political impact of sanctions is difficult to quanti-
fy, but it is affected by:
? The severity of the economic impact.
? The distribution of the economic impact among the
population of the target country.
? The ability of the government to maintain its au-
thority despite the sanctions.
In general, the greater the ideological commitment of
the target government and population to the policies
that triggered the sanctions, the more likely that they
will bear the cost of sanctions without changing those
policies. Moreover, national unity and commitment
are often solidified as a result of sharing hardship
under the sanctions. One author notes that the theory
underlying the use of economic sanctions "disregards
the simple principle of adaptation: that which seems
unacceptable at the beginning of the conflict becomes
acceptable as one gets used to life under hardship ...
value-deprivation creates the social conditions under
which much more sacrifice is possible so that the limit
for political disintegration will be reached much
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The Chinese, Cuban, and Rhodesian cases are all
examples of a high degree of commitment:
? The Chinese continued their ideological and eco-
nomic split with Moscow despite the high initial cost
of Soviet sanctions.
? The Cubans not only continued but also intensified
the conduct that had brought forth the sanctions,
expanding their efforts to export revolution and
acting as Soviet surrogates in Africa.
? The Rhodesians held firm for almost 15 years,
eventually giving in to civil war and not to economic
sanctions.
The countries imposing sanctions are often less com-
mitted than the target countries. Commitment by the
sponsor countries is affected by:
? The importance the public attaches to the objectives
of the sanctions and its willingness to bear the
economic costs.
? The willingness of the government to incur the
political costs.
? The willingness of allies to share both political and
economic costs.
In the likely event of problems with any of these
elements, commitment will be reduced and sanctions
may not be sustained. This difference in relative
commitment between the sponsoring country and the
target country is a major reason for the failure of
many sanctions programs.
Given the current degree of international interdepen-
dence, economic sanctions frequently affect not only
the target and sponsoring countries but other nations
as well. The sanctions on Rhodesia, for example, had
an unintended negative impact on Zambia because of
disruptions in critical oil supplies and local trade;
furthermore, they had an unintended positive impact
on South Africa because Pretoria became a principal
supplier and transshipper of goods bound for Rhode-
sia. The economic confrontation between sponsor and
target can cause dramatic, unforeseen, and unintend-
ed changes in the latter's foreign policy. The case of
Soviet sanctions against China provides a clear exam-
ple of unintended political consequences. Although
sanctions were intended to reassert Soviet ideological
Reverse Blank 3
leadership over China, the result was a sharp reduc-
tion in political leverage as the USSR's participation
in Chinese development was terminated. The sanc-
tions were a major reason why China eventually
turned to the West for technology and capital. Simi-
larly, US sanctions against Cuba, originally intended
to force a reorientation of Castro's politics away from
the Soviet Union, ended with the reorientation of the
Cuban economy toward the USSR.
Economic sanctions represent a middle ground be-
tween diplomatic protest and military actions and, as
such, they constitute a useful foreign policy tool in a
variety of situations. Used alone, they are rarely, if
ever, sufficient to force a major policy change on the
target country. They can, however, serve to isolate the
target country, solidify international opinion against
the target country, and increase the political and
economic costs to the target country of maintaining
its policies.
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Appendix A
League of Nations Sanctions
Against Italy (1935-36)
Background to the Sanctions
Immediately following its invasion by Italy in October
1935, Ethiopia appealed to the Council of the League
of Nations under provisions of the Leagues's Cove-
nant, which declared any war or threat of war a
matter of concern to the whole League. The League
Council Committee of Six reported that Italy had
resorted to war in violation of League obligations to
submit disputes to arbitration or judicial settlement.
The adoption of this report by the Council was the
signal for the automatic application of sanctions
under the provisions of Article 16.1 of the Covenant:
Should any Member of the League resort to war in
disregard of its covenants under Articles 12, 13, or
15, it shall ipso facto be deemed to have committed
an act of war against all other members of the
League, which hereby undertake immediately to
subject it to the severance of all trade or financial
relations, the prohibition of all intercourse between
the nations of the covenant-breaking State and the
nationals of any other State, whether a Member of
the League or not.
never adopted; therefore, the scope of the sanctions
did not include commodities critical to Italy's war
effort.
Not only was the scope of sanctions limited, but also
the League did not have the legal power to enforce
members' compliance. Furthermore, when the initial
sanctions were imposed, the 54-nation League did not
include Germany or the United States, major suppli-
ers of arms and oil to Italy.
Objectives of the Sanctions
The League of Nations sanctions against Italy are a
good example of a case where the stated and unstated
objectives differed considerably. The announced ob-
jective of the League's sanctions was ". . . to make the
war so costly for Italy that a `reasonable' solution
could be evolved. The (member) nations were prepared
to be modest in their definition of their `reasonable'
aims. Ethiopia, like Czechoslovakia at Munich, was
expected to do most of the yielding."'
The sanctions imposed by the League on Italy were
not nearly as stringent as Article 16 mandated. The
League adopted four economic sanctions effective 18
November 1935:
? The prohibition of the export of arms, ammunition,
and implements of war.
? An embargo on certain agricultural and key mineral
exports to Italy.
? The prohibition of loans, credits, and some other
capital flows to public and private entities in Italian
territory.
? An embargo on imports of Italian goods.
Also in November, the League submitted to member
governments an additional proposal that extended the
sanctions to petroleum, iron and steel (including alloy
steels), and coal and coke. These later measures were
The publicly stated objective for the League's action
may not have been paramount in this sanctions case.
According to several academic studies, the League
intended the sanctions to inhibit Hitler's expansionist
plans by demonstrating that the collective security
concept of the League could work in Europe although
it had failed in Manchuria. The Italian invasion of
Ethiopia occurred against a background of rising
tensions in Europe created by both a resurgent and
expansionist Germany and Italy's search for its place
in the sun. The sanctions thus became a principal test
of the peace enforcement powers of the League of
Nations
' Rita Falk Taubenfeld and Howard J. Taubenfeld, "The 'Econom-
ic Weapon': The League and the United Nations," Proceedings of
the American Society of International Law at its Fifty-Eighth
Annual Meeting held at Washington, D.C., April 23-25, 1964.
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Given the specific provisions of the sanctions, howev-
er, the prospects for influencing the behavior of either
Mussolini or Hitler were not favorable. The two
principal powers in the League-France and the
United Kingdom-did not intend the sanctions to
undermine seriously Italy's warmaking capacity. Al-
though the Italian war effort was vulnerable to a
cutoff of strategic materials, the British and the
French did not want to impose stringent sanctions
that would push Mussolini too far toward war with
them or toward alliance with Hitler.' As author
George W. Baer wrote:
Much of this was well known to Mussolini. Italian
diplomacy made excellent use of this desire to avoid
war. At several critical times the British and French
turned aside from imposing increasingly harsher
terms of sanctions in response to threats that Italy
would assume belligerent rights.'
Compliance With the Sanctions
Not only was the scope of the sanctions limited, but
also the compliance by members and nonmembers
was incomplete. Four members of the League refused
to apply any sanctions. The embargo on arms was not
applied by seven members. Financial restrictions were
not adopted by eight countries. Finally, 13 countries
failed to prohibit imports from Italy. One writer has
noted:
The belated and partial restrictions adopted did not
interfere at all seriously with Italy's warmaking
potential or even with the comfort of her population.
Italy had been able to build significant stockpiles of
many essential products in the period from December
1934 to September 1935, while her intentions grew
ever clearer. She was able to continue this process for
at least a month and a half after the invasion, since,
for coordination purposes, the effective date for many
sanctions measures was November 18. The failure to
ban important items, such as petroleum, and the
failure to cut off shipments of banned items from
nonmembers and even from members permitted Ital-
ian industry to function at high levels.4
Z George W. Baer, "Sanctions and Security: The League of Nations
and the Italian-Ethiopian War, 1935-1936," International Organi-
Baer, pp. 166-170.
Taubenfeld, p. 184
Implications of the Sanctions
Analysts of the League's sanctions against Italy gen-
erally conclude that the measures had little, if any,
impact on the Italian Government's ability to main-
tain political leadership or on Italy's national unity
and commitment to continue the war against Ethiopia
and here written:
With the measures of control over trade and over the
economy which were adopted or strengthened, few of
the hardships envisioned by the advocates of econom-
ic sanctions were in fact felt by the Italian people.
Indeed, the buildup and war periods saw a substan-
tial decline in Italy's unemployment problem. While
wages rose little or not at all, many families saw
overall income rise as more members went to work or
received Army pay.'
In fact, analysts believe that Mussolini was able to
turn international opprobrium into a tool for uniting
the Italian people behind the Fascists in defiance of
the League.' Whether full application of sanctions
over a long period of time would have affected
Mussolini became an academic question after Italy's
conquest of Ethiopia and the League's failure to
extend sanctions to the point where concessions would
have been forthcoming.'
Results of the Sanctions
The League of Nations failed to achieve even its
stated objectives against Italy. Although collective
action by the League was imposed for six months, the
sanctions failed to make the war so costly for Italy
that it would be forced to resolve the conflict by
negotiation. More important, in the long run, failure
to apply Article 16 fully, coupled with serious prob-
lems of implementation of the sanctions because of
Taubenfeld p. 184.
b Taubenfeld p. 185.
Taubenfeld p. 186.
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French and British concerns about alienating Musso- ? Italy was able to adjust to the limited restrictions by
lini, and because of circumvention by members and stockpiling commodities, invoking firm measure
nonmembers, provided a strong indication to Hitler economic control, and utilizing idle resources.
that the League would not be likely to impose collec-
tive security measures against expansion of the Third
Reich.'
Historically, the focus of attention has been on the
lack of will of the League members to invoke the
collective security concept of the League to check
Mussolini and to serve as a demonstration to Hitler.
However, the fact is that even if Article 16 of the
Covenant had been fully invoked and even if all
members of the League had complied with the full
sanctions, nonmember Germany was willing to pro-
vide Italy with arms required to continue the war and
the nonmember United States was willing to provide
the oil. Furthermore, Ethiopia's inability to resist any
army equipped with modern weapons, including gas,
severely limited the time available for even fully
implemented sanctions to have an impact on Italian
military operations or to have a significant enough
impact on the Italian economy to give the political
leadership pause in its prosecution of the war.
Failure of the League's sanctions provides a classic
demonstration of the problems involved in establish-
ing and implementing effective sanctions through a
multilateral organization:
? The membership of the League did not agree on
objectives; sanctions were late, limited, and
incomplete.
? The League did not have the power to enforce
sanctions; therefore, League members violated them
as their individual national interests required.
? The membership of the League did not control the
supply of goods and services to be withheld by the
sanctions; therefore, Italy was able to purchase
essential strategic goods.
8 Albert Speer reports, "Hitler concluded that both England and
France were loath to take any risks and anxious to avoid any
danger. Actions of his which later seemed reckless followed directly
from such observations. The Western governments had ... proved
themselves weak and indecisive." Speer, Inside the Third Reich,
p. 72.
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Appendix B
Arab League Boycott of Israel
(1948-Present)
Background to the Sanctions
The Arab boycott of the Jewish community in Pales-
tine predates the formal establishment of the state of
Israel in 1948. In December 1945 the Arab League
Council called on all Arabs "to refuse to deal in,
distribute, or consume Zionist products or manufac-
tured goods." Even before the boycott, many Arab
individuals and groups shunned Jewish businesses in
Palestine.
Before 1950 the boycott attempted only to keep
Israeli goods out of Arab countries. In that year the
boycott was extended to include third-party shipping
in an effort to slow trade into and out of Israel. The
Arab League Council decided that any ship carrying
military equipment or immigrants to Israel would be
barred from Arab ports. In the early 1950s the
Council also recommended extending the boycott to
foreign firms with branches in Israel.
The Arab boycott is administered by a Central Boy-
cott Office (CBO) headquartered in Syria and nation-
al boycott offices in each Arab country. The sponsor-
ing Arab League had seven members initially-Syria,
Trans-Jordan, Iraq, Saudi Arabia, Lebanon, Egypt,
and Yemen-but has since grown to 21 active mem-
bers. Each member of the League appoints a repre-
sentative to a central boycott committee, which usual-
ly meets semiannually. The committee recommends
the addition or deletion of firms to the blacklist, but
its decisions are not binding. Each Arab country
decides whether to accept the decisions of the commit-
tee. Each country, therefore, maintains its own black-
list, and the various country lists are not uniform.
Objectives of the Boycott
The boycott's stated goal is to hinder the economic
and military growth of Israel. Beyond that, however,
the boycott serves as a sign of opposition to Israel and
a useful propaganda device. In a press interview, CBO
Secretary General Nurallah Nurallah claimed that
the boycott is "the only effective Arab measure
against Israel." One scholar has observed that "per-
haps one of the principal benefits of the boycott
program, in Arab League eyes, is that it keeps the
issue of Israel constantly before the Arab people." F
The Arab League does not distinguish among the
various types of boycott it administers, but the world
business community generally differentiates among
three types of boycott action. The primary boycott
bans all direct trade between Arab states and Israel,
and before 1977 was most commonly enforced by a
negative certificate of origin-a trade document that
certifies the goods in question were not made in Israel
and do not contain Israeli-made components. In 1977,
however, the United States enacted strict antiboycott
legislation and forbade US firms to supply negative
certificates. Since then, most Arab states have come
to accept a positive certificate of origin that indicates
where the product and its components were manufac-
tured and the name of the manufacturer.
The secondary boycott, instituted in the early 1950s,
bans commerce with companies that contribute signif-
icantly to Israel's economic or military strength. A
firm is blacklisted if it:
? Has a plant, branch, licensee, or regional agent for
the Middle East in Israel.
? Is a partner in any Israeli company.
? Advises Israeli manufacturers.
? Acts as agent or principal importer for any Israeli
firm.
? Prospects for natural resources in Israel.
Although boycott officials periodically insist publicly
and privately that only firms adding to Israel's
strength are blacklisted, the contributions of many
boycotted companies are difficult to discern. The
Topps Chewing Gum Company, for example, was
blacklisted after it licensed an Israeli factory to
produce Bazooka bubble gum.
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Firms suspected of proscribed activity in Israel are
usually confronted with a questionnaire asking if they
are engaged in forbidden practices. If a firm responds
positively or refuses to reply to a questionnaire, it may
be blacklisted. US firms are prohibited from respond-
ing to boycott questionnaires under the 1977 antiboy-
cott legislation. The law also requires US companies
to report the receipt of questionnaires to the US
Department of Commerce. In late 1979 the deputy
secretary general of the CBO stated that, since US
antiboycott laws took effect, 90 percent of all US
companies blacklisted were boycotted for failing to
respond to boycott office questionnaires.
In a form of extended secondary boycott, boycotting
countries require third-country firms to refuse to use
products or services of blacklisted companies in fulfill-
ing a contract or sale to enforcing countries. A clause
requiring such a refusal sometimes appears as a
contract condition. This requirement has been labeled
a tertiary boycott in the United States. It is especially
prevalent in international banking. As Arab financial
institutions have come to play an increased role as
lenders to corporate and government borrowers, some
borrowers have been pressured to refrain from dealing
with blacklisted banks or other institutions with al-
leged "Zionist" connections. Three Arab banks, for
example, withdrew as comanagers of a $2 billion loan
for the Mexican state oil company after blacklisted
banks were included in the management syndicate.?
Enforcement of the Boycott
The numerous exceptions made by Arab states to the
boycott principles detract from the Arab goal of
preventing certain types of commerce with Israel.
Some Arab League members have criticized the
central boycott bureaucracy itself. After the boycott
committee went through all of 1978 without meeting,
the League commissioned an investigation of charges
by some members that the CBO is ineffective. A
report written by the Arab League's then assistant
secretary general accused the CBO of inflating its
The threat of a loss of business in the Arab world is
the only tool the Arab League has to enforce its
secondary boycott. Therefore, companies that conduct
a relatively small share of their business with Arab
countries are less vulnerable to boycott pressure.C
Even countries that strictly enforce the boycott have
overlooked regulations and dealt with blacklisted
firms when they believed it was important to their
economic development or national security. Iraq, for
example, bought buses from British Leyland while the
company was on the blacklist. If goods or services are
only available through a few exporters, exceptions are
made. The boycott also may be ignored if a blacklist-
ed firm is the only source for necessary spare parts.
The former head of the US Commerce Department's
Office of Anti-Boycott Compliance said in 1981, "If
they want the goods, Arab countries will accommo-
date themselves ... by and large an arrangement can
Military equipment is usually exempted from boycott
requirements since government-to-government sales
are not subject to the boycott. Despite the principle of
blacklisting any company contributing to Israel's mili-
tary strength, Arab governments regularly put their
own national security interests ahead of boycott rules.
Still, the General Principles for the Boycott of Israel
recommend that importing countries examine Israel's
connections with arms manufacturers.
The boycott office excepts from boycott rules any
international banking institution from which the Ar-
abs derive greater benefit than Israel regardless of the
extent of the bank's relationship with Israel. A com-
mercial bank will not be blacklisted for dealing with
Israel if boycott officials have evidence that the bank
has loaned more money to Arabs than to Israelis.
In the same vein, some Arab countries have told
corporations investing in Israel that they would not be
blacklisted if they made an equal or greater invest-
ment in an Arab country.
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large firms and banks, therefore, have foun that they
can deal with both Arab states and Israel because the
Arabs consider their products or capital resources
indispensable.
Implementation of the boycott varies from country to
country. Iraq, Syria, Libya, and Kuwait are consid-
ered by most observers to be among the strictest
states. Morocco, Tunisia, Sudan, Somalia, Maurita-
nia, and Algeria do not enforce the secondary boycott.
Egypt ended its participation in the boycott as part of
may decide to forgo trade with Israel because of
boycott considerations, alternative sources of supply
are usually available.
The impact of the boycott on Israel's economy is
difficult to measure, but we believe it was a factor in
the drop in foreign investment in Israel from a high of
$185 million in 1973 to $86 million in 1985 after net
disinvestment of $1 million in 1980. Although Israel
touts its free trade access to the EC as an attraction to
investors, many potential investors probably locate in
EC countries to avoid boycott problems. The boycott,
however, is only one of the reasons for the decline in
investment. Triple-digit inflation and a strop trade
union movement discourage many investors.
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its peace treaty with Israel.
Iraq and Libya are among the most inflexible enforc-
ers of the boycott, but they will make exceptions for
products or services that cannot be matched else-
where, especially items for the petroleum industry.
Before the US embargo on Libyan petroleum-related
services and equipment in 1981, Tripoli allowed boy-
cott language acceptable to US authorities in letters
of credit for goods that could not be found outside the
United States.
Oman, at the other extreme, is an unenthusiastic
participant in the boycott. Muscat's practice has been
to pay lipservice to CBO directives and interpret them
in a liberal fashion or ignore them entirely.
Impact of the Boycott
Until the mid-1970s the Israeli Government for the
most part was quiet about the boycott, fearing that
publicity would only remind the business community
of its existence. Before the increase in Arab economic
power in 1973, Israel had so little concern about the
boycott that in 1971 it abolished its small antiboycott
office. In 1975, however, Israel reestablished an anti-
boycott unit. Still, Israeli Government officials have
differed in tone on the boycott, stressing its negative
aspects when talking to US officials but playing it
down to potential investors. Israeli officials have
acknowledged that foreign firms are able to continue
doing business with Israel through various means such
as dealing through separate companies or subsidiaries
or simply ignoring the boycott. Although some firms
Reverse Blank 11
The economic impact on the sponsoring Arab states is
diluted considerably by their failure to implement the
boycott stringently. If the Arab states adhered vigor-
ously to their boycott principles, they might deny
themselves access to necessary inputs or best suppli-
ers.
In the long term, Arab countries' implementation of
the boycott is likely to be marked by continued self-
interest, with exceptions to boycott regulations com-
mon when they serve a particular nation's purpose.
Therefore, the boycott's impact on Israel, the Arab
states, and third-country businesses will continue to
be limited
The main achievement of the Arab boycott has been
the symbolic expression of Arab solidarity against
Israel, as the boycott has few of the elements neces-
sary for successful sanctions:
? The Arab states do not control the supply of goods
Israel imports.
? The boycott is not mandatory for members of the
Arab League.
? The degree of enforcement varies widely, in part
because of the potential detrimental impact on the
Arab states themselves. US antiboycott legislation
has complicated the enforcement effort.
? The political and economic impacts of the boycott
on Israel have been small.
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Appendix C
USSR Sanctions Against
People's Republic of China (1960)
Background to the Sanctions
The decision by the USSR in August 1960 to cancel
abruptly its technical assistance to and withdraw its
economic experts from China was a dramatic remind-
er that Soviet aid entails a heavy political price. In the
early 1950s, China felt compelled to pay this price of
subservience to Soviet national interests and Soviet
leadership of the Communist world in order to enjoy
the strategic and economic benefits of the Sino-Soviet
alliance. By the mid-1950s, however, as China began
to stand on its own feet, differences over a broad
spectrum of political, military, economic, and ideolog-
ical questions began to undermine Sino-Soviet
relations.
As China became increasingly independent, Soviet
policy vacillated. In agreeing in 1957 to assist China
in the development of an advanced weapons program,
the USSR sought to persuade the Chinese leadership
to subordinate their political ambitions in the interests
of becoming a great military power. But, when in
1958 the Maoist leadership in quick succession
claimed to have discovered a new road to economic
development (the Great Leap Forward) and a shortcut
to the ultimate Communist society (the People's Com-
mune) and then precipitated the Taiwan Strait crisis,
Khrushchev turned increasingly to threats and sanc-
reality as Stalin had been and the Chinese delegate
responded in kind, including a personal attack on
Khrushchev for having "betrayed" Marxism-
Leninism, the moment of truth had arrived.
The purposes for which the USSR imposed economic
sanctions against China in mid-1960 were never
clearly defined. Crude and self-defeating as it may
seem in retrospect, Soviet strategy appears to have
been to give China a foretaste of the even more
unpleasant consequences that would ensue if Beijing
persisted in challenging Soviet leadership and Soviet
doctrine. The Soviet Union may also have hoped to
take advantage of China's economic dislocation-the
result of the Great Leap Forward and a succession of
bad harvests-to strengthen the hand of the moderate
opposition within the Chinese Communist Party to
Mao's radical policies.
Having threatened in an international Communist
forum to reduce aid unless China retreated, the
Soviets may have felt compelled to act when it
became evident the Chinese would not back down.
Since the objective of the sanctions was not made
clear, it was interpreted by the Chinese as an attempt
to force the replacement of Mao Zedong as leader of
tions in order to secure compliance from China. In
June 1959, for example, both as a penalty for past
behavior and a threat for the future, Khrushchev
formally abrogated the Soviet commitment to assist
China in the development of nuclear weapons
With the publication of the polemical Lenin Anniver-
sary pronouncements in April 1960, the Chinese
issued an unmistakable challenge to Soviet ideological
and political leadership of the international Commu-
nist movement. The Soviets responded at a Bloc
conference in June by circulating a long letter de-
nouncing the Chinese and threatening to reduce aid
unless China backed down. When Khrushchev then
attacked Mao for being as vain and isolated from
the CCP or at least the repudiation of his policies.
Description of the Sanctions
The USSR inflicted a heavy blow on the Chinese
economy in August 1960 when it abruptly canceled
Soviet technical assistance and withdrew some 2,000
experts. Soviet aid projects (some 300, including those
supplied by East European countries) constituted the
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very heart of China's industrialization program. Prac-
tically all the basic plans for industrial development-
for example, the construction of new steel complexes,
the building of new power plants, the development of
railways, and the installation of new chemical plants
and oil refineries-were predicated on these projects.
Although perhaps one-half of these were fully or
partly completed and in operation by mid-1960, the
whole program was undercut by the sudden withdraw-
al of Soviet technicians, who took the blueprints for
plant installation back with them. While Sino-Soviet
trade continued, equipment on order and arriving
from the Soviet Union could not be installed and
began to pile up on railway sidings, in warehouses,
and in half-completed factories.
Although the Soviets threatened a more drastic cessa-
tion of aid, they did not cut off trade, even in such
strategic commodities as petroleum (for which China
was then heavily dependent on the USSR) and spare
parts for China's industry, including military indus-
try. Indeed, it was the Chinese who in the fall of 1960
took the initiative in cutting back on trade by phasing
out the importation of Soviet complete plants and
equipment.
Factors Affecting Success or Failure
The Soviet Union could only prevent the supply of
experts and technical assistance to China from Soviet
Bloc countries. As a result of the Korean war and the
associated US and allied trade embargoes, however,
in 1960 China could not obtain many types of ma-
chinery, equipment, and complete plant installations
from any other source. The same applied to technical
assistance.
Within three months, however, the Soviet Govern-
ment had second thoughts and offered to send "any
number" of Soviet experts back to China. This rever-
sal was apparently prompted by the belated realiza-
tion that, by pulling the experts out, the USSR had
deprived itself of the chief remaining instrument
through which it might retain some leverage or
influence on the Chinese leadership and policy. The
Soviets also apparently had some forebodings of the
enormity of the consequences, which were to greatly
accelerate the process of separating the Soviet and
Chinese economies and societies.
The economic cost of the sanctions to China is
difficult to assess. There is no question that the
withdrawal of Soviet experts dealt the Chinese econo-
my a heavy blow whose effects were still felt many
years afterwards. Combined with three years of bad
harvests and the mistakes of the Great Leap Forward,
it helped precipitate a domestic crisis in the years
1960-62, which for a time appeared to imperil the
very existence of the Mao regime. Although industrial
production plummeted, the basic cause of this crisis
was a shortage of food so severe that it reached
famine proportions (the Chinese have admitted a
famine death toll in excess of 10 million at this time)
in the disaster areas of eastern and northern China.
Paradoxically, as the crisis deepened and the Chinese
restructured their economy to give priority to agricul-
ture and maintaining subsistence levels of food con-
sumption, there was progressively less need for Soviet
experts and technical assistance for China's industry.
Finally, the political consequences of the Soviet appli-
cation of economic sanctions against China were
counterproductive. Instead of undermining the Maoist
leadership, Soviet sanctions were exploited by the
Chinese as a scapegoat for the regime's economic
failures. A nationwide campaign criticizing Khru-
shchev and the Soviet Union was organized in discus-
sion groups extending down to the primary school
level. The Chinese charged the Soviet leader with
precipitating China's industrial slowdown (by with-
drawing Soviet technicians); aggravating China's food
crisis (by insisting on debt repayment via expanded
Chinese exports of foodstuffs); and attempting to
subvert and subdue the Chinese Government (by
applying economic pressures). In addition, the Chinese
propagandists heaped personal abuse on the Soviet
leader (employing such epithets as "pig," "donkey,"
"coward," and "turncoat") and predicted that eventu-
ally he would be disowned and overthrown by the
Soviet people.
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Figure 1
China: Total Trade Trends, 1950-70
Throughout the three-year "time of troubles"
(1960-62), there was continuing controversy within
China's leadership over the proper response to Soviet Billion us $
economic pressures. Alternating between defiance and
at least tactical accommodation, the varying charac-
ter of this response appeared to reflect fluctuating
leadership assessments of the gravity of China's do-
mestic crisis.
Confronted with famine, popular uprisings, and the
threat of disaffection in the Army, the Chinese re-
sponded favorably to the Soviet offer to negotiate a
new aid and trade agreement in November 1960 and,
throughout the ensuing protracted negotiations,
ceased polemics and even made a number of concilia-
tory gestures toward the Soviet Union. But the help
that China had hoped to obtain-principally, 5 mil-
lion tons of grain-was not forthcoming. Moscow's
refusal of Beijing's request at a time of desperate need
further embittered the Chinese.
After a further period of tactical accommodation in
the spring and summer of 1962 (this time prompted by
concern over the threat of a US-supported Chinese
Nationalist invasion), the Maoist leadership then de-
cided in the fall of 1962 to launch an all-out struggle
against the "modern revisionist" leadership of the
Soviet Union. The following year, the Chinese began
to orient their economy more and more toward the
West and Japan. The large capitalist industrial states
increasingly took over from the Soviet Union the bulk
of China's annual foreign trade (see figure 1). More-
over, as the Chinese emerged from their economic
depression, they began placing in the West long-term
orders for complete plant deliveries of the type the
Soviets had made to China in the past.
Instead of bringing the Chinese to their knees, the
final outcome of the Soviet decision in mid-1960 to
impose economic sanctions on China was to bring to
an end the central role the USSR had played in
China's modernization and to reorient the Chinese
economy toward the capitalist West.
Illl IIII IIlfllI I
Communist
countries
The USSR's cutoff of aid to China is a case where
sanctions not only failed to achieve their objectives
but led to adverse political consequences for their
sponsor:
? The Chinese leadership was so committed to its
ideological break with the Soviet Union and to
establishment of its own independent development
and foreign policy courses that it was willing to bear
the considerable economic and political cost of the
sanctions.
? The sanctions also provided the Chinese leadership
with a scapegoat for domestic economic problems,
thereby reducing their political impact during diffi-
cult times.
? Chinese adjustment to the impact of the sanctions
ultimately left Moscow with limited economic
means to influence Beijing's behavior, a substantial
political reversal for the sponsor of the sanctions.
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Appendix D
OAS and US Sanctions Against
Dominican Republic (1961-62)
Background to the Sanctions
For 31 years, the Dominican Republic was ruled by
what some academics have called the most absolute
dictatorship ever established in Latin America. Gen.
Rafael Trujillo began in 1930 to build a power base
on the control-through strong-arm tactics and brib-
ery-of both the armed forces and the political
apparatus as well as on a virtual monopoly of the
national economy. The Trujillo family controlled over
half the arable land, three-fourths of the nation's
labor force, and four-fifths of the capital city's busi-
nesses.
By the late 1950s, however, international and domes-
tic forces combined to undermine Trujillo. Regional
sentiment against dictators mounted with the fall of
other Latin American strongmen, such as Juan Peron
of Argentina in 1955, Marcos Perez Jimenez of
Venezuela in 1958, and Fulgencio Batista of Cuba in
1959, and the publicity over Trujillo's allegedly order-
ing the execution of a political opponent and his
American pilot in 1956. Meanwhile, Washington was
becoming increasingly aware of the growing anti-US
sentiment in Latin America that was highlighted by
Vice President Nixon's unfriendly reception in Peru
and Venezuela in 1958. As a result, the Eisenhower
administration reevaluated its policies toward Latin
America and began withdrawing support from the
Trujillo regime, including cancellation of arms trade
agreements.
Pressure against the Trujillo regime intensified in
February 1959 when Romulo Betancourt-an outspo-
ken critic of Trujillo-took office as the president of
Venezuela. In June 1959, Dominican exiles launched
an unsuccessful invasion that Trujillo believed was
Venezuelan backed. Trujillo lashed out with unprece-
dented violence against the exiles and their supporters
in the Dominican Republic. Pressed by Venezuela, the
OAS's Inter-American Peace Committee accused the
Dominican Republic of "flagrant and widespread
violation of human rights" including the "denial of
free assembly and of free speech, arbitrary arrests,
cruel and inhuman treatment of political prisoners,
and the use of terror and intimidation as political
weapons." In retaliation for Betancourt's continued
verbal attacks on Trujillo and for alleged Venezuelan
assistance in the June invasion, Trujillo launched his
third and nearly successful assassination attempt on
the Venezuelan president.
OAS and US Sanctions
Dominican aggression against Venezuela caused the
OAS to initiate sanctions. In January 1961, the
members voted to:
? Break diplomatic relations with the Dominican
Republic.
? Partially interrupt economic relations with the
Dominican Republic, beginning with the immediate
suspension of trade in arms and implements of war
of every kind.
These sanctions were later expanded to include trade
in petroleum, petroleum products, trucks, spare parts,
and other commodities.
The United States initially objected to the sanctions,
fearing that they would lead to Trujillo's overthrow
and his replacement with a pro-Castro leader. Wash-
ington argued that the OAS should persuade the
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With the other members clearly opposed to the US
approach, and in hopes that the OAS would condemn
Cuba in the future, Washington decided to approve
OAS sanctions. In addition to OAS sanctions, the
United States cut back import quotas for Dominican
sugar
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Table 1
Dominican Republic: Current Account
and Other Indicators, 1956-61
Million US $
(except where noted)
1958
1959
1960
1961
Current account balance -22.1
0.9
-29.4
-27.0
55.8
-97
0
Trade balance -4.0
24.7
-12.3
-5.0
80.4
.
63
2
Exports (f.o.b.) 121.6
161.0
136.6
130.1
180.4
.
143
1
Sugar 53.2
88.9
60.5
54.5
88.6
.
67
2
Imports (c.i.f.) 125.6
136.3
148.9
135.1
100.0
.
79
9
Other indicators
.
Annual real GNP growth (percent) 10.0
6.3
5.3
0.6
1.3
-2
2
Foreign exchange reserves 25.
334.1
33.3
27.3
15.4
.
6.0
The US-supported sanctions, officially imposed as
punishment for Dominican participation in the Betan-
court assassination attempt, were, in our judgment,
constructed to force political liberalization of the
Trujillo regime or an end to Trujillo's rule. After
Trujillo's death, the sanctions were used as a tool to
rid the Dominican Republic of the Trujillo family,
prevent a rightwing coup, and press for democratic
The sanctions hit the Dominican economy when al-
ready sagging economic performance hampered ad-
justment to them and the Trujillo regime had turned
its attention to survival. Real GDP growth, which had
averaged 7 percent annually from 1953 to 1958, had
fallen to only 1 percent 1959 and 1960 as massive
capital flight cut imports sharply. In 1960 foreign
exchange revenues were drawn down by nearly half,
to $15 million. Moreover, two-thirds of public expen-
ditures were allocated for defense. In 1961, the
sanctions worsened the economic crisis:
? A shipping crisis occurred when Venezuela refused
to admit ships that had docked in the Dominican
Republic and the international seamen's and long-
shoremen's unions stopped loading ships bound for
the country.
? Oil shortages developed when the Netherlands An-
tilles halted shipments of refined petroleum and
Shell Oil temporarily suspended sales in response to
pressure from Venezuela.
? Export earnings in 1961 were cut 21 percent, and
imports fell another 20 percent in nominal terms.
The Dominicans were able to circumvent some of the
sanctions by purchasing arms, vehicles, and petro-
leum-albeit at higher cost-from Canada, Western
Europe, and the Middle East. Trujillo also managed
to ship coffee to the United States disguised in
Colombian bags, and he planned to build a Domini-
can refinery with French and US contractors.
Squeezed by the growing crisis, Trujillo raised taxes,
slashed public employee salaries, cut bonuses, and
increased commissions to government officials on all
business transactions. He also used the sanctions as a
basis for anti-US propaganda and opened diplomatic
and commercial relations with the USSR and Eastern
Europe. In these circumstances, investor confidence
remained in the depths. Economic activity fell 2.2
percent in 1961, and unemployment rose sharply.
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The deterioration of the economy fostered political
unrest in the middle and upper classes, the Army-
traditional Trujillo supporters-and the Catholic
Church. The regime responded with increased repres-
sion and terror. An underground movement grew
rapidly, and on 30 May 1961 Trujillo was assassinat-
ed. Trujillo's inept son succeeded his father, while
figurehead President Balaguer retained his office.
With continued economic pressures from OAS sanc-
tions and an increasingly vociferous opposition, Tru-
jillo's son resigned abruptly in November. Trujillo's
brothers, dissuaded from taking power by the show of
US naval force off the coast and the antagonism of
the Dominican armed forces, left the country with the
remainder of the Trujillo family, leaving Balaguer in
charge. Balaguer, considered a Trujillista, encoun-
tered widespread domestic opposition. After the Unit-
ed States threw its support to the opposition, Balaguer
was forced to share power with a seven-member
Council of State and promised he would resign if
OAS sanctions were removed. On 4 January 1962, the
OAS removed all diplomatic and economic sanctions.
The OAS sanctions and US sugar quota cutbacks,
initiated to punish Trujillo and force political liberal-
ization in the country, met with considerable success
in exacerbating deteriorating economic conditions and
providing fuel for the floundering anti-Trujillo opposi-
tion. Although the assassination of Trujillo cannot be
directly attributed to the sanctions, after his death
clear signals of US policy and the continuation of the
sanctions forced the Trujillo family to flee the coun-
try.
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Dominican Chronology
5 February
Venezuela requests OAS investigation of human
rights in the Dominican Republic.
26 February
United States announces aid to the Dominican Re-
public and Cuba will cease in June 1960.
8 June
Inter-American Peace Council accuses the Trujillo
regime of flagrant and widespread violations of hu-
man rights.
24 June
Assassination attempt against Venezuelan President
Betancourt.
21 July
United States announces that the Dominican Repub-
lic will not be included in extra sugar quotas replacing
Cuba's quota.
2 August
The Dominican Republic is excluded again from the
new sugar quota.
20 August
OAS foreign ministries vote to condemn the Domini-
can Republic on aggression and intervention in Vene-
zuela, and call for diplomatic and partial economic
breaks.
23 August
Eisenhower asks Congress to curtail sugar imports
from the Dominican Republic.
25 August
Dominican Radio Caribe announces ties to TASS and
broadcasts in defense of Castro.
26 August
United States breaks diplomatic relations with the
Dominican Republic.
4 January
OAS Council votes to impose limited economic sanc-
tions on the Dominican Republic.
30 May
Trujillo is assassinated and succeeded by his son,
Rafael Trujillo, Jr.
27 October
Three major opposition groups in the Dominican
Republic call for continuation of OAS sanctions,
crediting them with pressuring limited sanctions.
14 November
United States recommends that certain sanctions be
lifted; Trujillo resigns.
19 November
Balaguer assumes control and US naval units patrol
coast of Dominican Republic.
9 December
Agreement in principle on a provisional government is
announced; United States is credited with pressuring
the negotiated settlement by withholding sugar
quotas.
17 December
Balaguer says he will resign as soon as the OAS lifts
economic and political sanctions.
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1 January
Provisional government headed by Balaguer is sworn
in.
4 January
OAS removes all diplomatic and economic sanctions.
Balaguer says he will resign before the end of his term
in response to the lifting of all OAS sanctions.
6 January
United States resumes diplomatic relations.
16 January
Balaguer resigns after riots in Santo Domingo.
22 January
United States extends $25 million in emergency bal-
ance-of-payments assistance.
26 January
Possible resumption of US military aid announced.
29 January
United States ends restrictions on exports to Domini-
can Republic.
12 February
United States authorizes purchase of additional
105,135 tons of sugar.
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Appendix E
US and OAS Sanctions Against
Cuba 9 (1962-Present)
Background to the Sanctions
Almost from the day Castro took power in January
1959, Havana and Washington embarked on courses
of action that inevitably led to conflict. The United
States was at first shocked by the circuslike execu-
tions of Batista supporters and then alarmed at Cuban
provocations directed against US citizens, property,
and policies. The antagonism grew as Cuba came to
be seen as the vehicle for Soviet encroachment into
the hemisphere.
The turning point came with the visit to Cuba of
Soviet First Deputy Premier Anastas Mikoyan, who
signed a trade agreement with the Cubans on
15 February 1960. The agreement was the first of a
series of political, military, and economic understand-
ings that tied Cuba to the USSR. Furthermore, it
began the basic reorientation of Cuba away from its
traditional relationship with the United States. On
7 May 1960 Cuba and the USSR reestablished full
diplomatic relations.
With these actions and the attacks against US proper-
ty and interests, US policymakers decided to impose
economic sanctions against Cuba. A contingency or-
der had already been given in March 1960 for Cuban
refugees to be organized, trained, and equipped for
possible action:
? In June the American- and British-owned oil refin-
eries in Cuba refused to process crude oil sent from
the Soviet Union. (Cuba retaliated by seizing the
installations.)
? In July, President Eisenhower suspended the re-
mainder of the Cuban sugar quota for 1960, which
amounted to 900,000 tons out of a total of 3.1
million tons, worth approximately $92 million. (The
Cubans reacted by confiscating a series of properties
of US citizens and companies.)
The application of economic sanctions was only one set of
measures used by Washington in its relationship with the Castro
regime. Other measures included military action, covert activities,
political pressure, and propaganda, which are not addressed in this
? During the same two-month period a coordinated
decision was made by the US Government and the
US companies to remove key personnel from Ameri-
can-owned plants in Cuba, a measure designed to
put the squeeze on Cuba's productive capacity and
output. (Despite disruptions, this technical manpow-
er gap was filled by Cubans or foreign specialists.
By August, the Castro regime had seized all Ameri-
can-owned properties on the island.)
Following the unsuccessful Bay of Pigs invasion in
April 1961, US policy toward Cuba entered a new
phase:
? On 3 February 1962 the Kennedy administration
imposed a total prohibition on exports to Cuba
except for "foodstuffs, medicines, and medical
equipment for humanitarian reasons."
? On 23 March, Washington prohibited imports of
merchandise made or derived in whole or part of
products of Cuban origin.
Under the Johnson administration, the anti-Cuban
measures already instituted by the United States were
multilateralized through hemispheric approval and
support. In July 1964 the OAS voted to establish the
following sanctions against Cuba:
? The severing of diplomatic and commercial
relations.
? The suspension of all trade-direct and indirect-
except for foodstuffs, medicines, and medical
equipment.
? The suspension of all sea and air service to and from
Cuba.
? The establishment of passport restrictions on travel
to and from Cuba.
Additional sanctions were imposed by the OAS in
1967:
? The recommendation that cargoes owned or fi-
nanced by member governments not be shipped on
vessels sailing to Cuba.
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? The general call to "Western" allies to restrict their
trade and financial ties to Cuba.10
Most OAS members adopted the sanctions, but many
did not rigorously enforce them.
The initial primary objective of the US sanctions was
to remove Castro from power, as demonstrated most
visibly by the abortive Bay of Pigs invasion. Subse-
quently, US policy shifted to a combination of eco-
nomic and political pressures designed at least to
neutralize Castro and, at best, to cause his downfall.
The 1962 missile crisis did not change this thrust. US
officials publicly and privately stated their belief that
Cuba posed a potentially grave security threat to the
United States-directly because of its ties to the
international Communist movement and indirectly
because of its support for subversive groups elsewhere
in Latin America.
The basic structure of the Eisenhower-Kennedy
Cuban policy changed little during the Johnson ad-
ministration. The Johnson administration followed the
example of its predecessors by treating the Castro
regime as temporary. The United States publicly
portrayed the overall goal of its policies to be the
establishment of "a truly free and independent Cuba
which, under a government democratically chosen by
the people, will live in peace with is neighbors."" US
officials also publicly identified four specific goals,
indicating that US objectives had become more di-
verse over time. These goals were:
? To weaken the Castro regime.
? To discredit the Cuban economic model and make
Cuba pay a high economic price for its conduct.
? To contain the spread of Castroism.
" Robert M. Sayre, Deputy Assistant Secretary of State for Inter-
American Affairs, "Review of Movement of Cuban Refugees and
Hemispheric Policy Toward Cuba," Department of State Bulletin,
? To make Soviet support of the Castro regime so
costly in political and economic terms that the
Soviets would realize the futility of continuing their
burdensome commitment to Cuba or of assuming
similar commitments elsewhere in the hemisphere.
US policy goals toward Cuba did not change signifi-
cantly during the Nixon administration." Neverthe-
less, enforcement of the economic sanctions became
increasingly difficult. The onset of the Vietnam war
had revised Washington's foreign policy priorities, as
had the administration's overture to China, and ef-
forts to enforce the embargo became less aggressive
over time. The Castro regime not only had demon-
strated its staying power, but also had gradually
abandoned its support for revolutionary movement in
the hemisphere. Indeed, Havana launched a broad
campaign to normalize its economic and political
relations with other nations in the hemisphere as well
as in Africa, Asia, and Europe.
As a result of these events, pressures began to build in
the United States against continuation of the policy of
isolation. In the early 1970s a number of US Con-
gressmen began urging normalized relations with
Cuba. In 1972 five hemispheric nations recognized
Cuba, in the face of the OAS ban on relations. In
1974 the United States agreed to permit the first
major exception to US embargo regulations by per-
mitting sales to Cuba by US subsidiaries in third
countries. Other exceptions followed.
'Z See Congressional testimony by administration spokesmen in: US
Congress, House of Representatives, Cuba and the Caribbean,
Hearings Before the Subcommittee on Inter-American Affairs,
Committee on Foreign Affairs (Washington, DC: Government
Printing Office, 1970); US Congress, House of Representatives,
Soviet Naval Activities, Hearings Before the Sub-Committee on
Inter-American Affairs, Committee on Foreign Affairs (Washing-
ton, DC: Government Printing Office, 1971); US Congress, Senate,
United States Policy Toward Cuba, Hearing Before the Committee
on Foreign Relations (Washington, DC: Government Printing
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By the mid-1970s, therefore, it had become apparent
that the broad application of economic sanctions and
other measures aimed at the isolation of Cuba was no
longer possible. In August 1975 the OAS passed a
Figure 2
Cuba: Trade With the United States, 1956-62
resolution that allowed each member to determine for percent
itself the nature of its economic and diplomatic
relations with Cuba. The United States voted in favor
of the resolution.
The Economic Impact of the Sanctions
In our judgment, the Cuban embargo in its early
years was significantly damaging to Cuba's growth
and general development. Before the embargo, Ha-
vana was extremely dependent on trade with the
United States (see figure 2). The loss of this natural
trading partner caused serious dislocations throughout
the Cuban economy.
Havana's hard currency earnings suffered greatly
from the loss of the US market for sugar-its major
export. Since most large sugar importers had long-
established contracts with sugar-producing nations,
Cuba could not make sizable sales to other hard
currency purchasers. With low export revenues from
its major crop, Cuba was forced to reduce drastically
its imports from the West. Havana turned to the
Communist Bloc for trade, and, by 1965, this group of
countries accounted for 76 percent of Cuban trade, up
from less than 3 percent in 1957 (see figure 3).
The rapid shift in the direction of trade caused a
multitude of domestic production problems. The most
damaging effect of the embargo was probably Cuba's
inability to attain the needed spare parts and raw
material inputs for its almost entirely (90 percent) US-
produced capital stock. Other problems arose from a
lack of complementarity between Cuba's import needs
and Bloc export capabilities. Often the kinds of
machinery and raw material imports that Cuba need-
ed most were in short supply within the Bloc. Fre-
quently, the quality of Bloc imports was unsuitable,
either because of poor production processes or because
products were unsuitable to the Cuban climate, tech-
nological orientations, or methods of use. Hundreds of
pieces of Soviet farm equipment were junked because
i I 1 1
1956 57 58 59 60
they were designed for continental crops planted in
rows of different widths from those the Cubans
planted
While it is not possible to quantify the cost of the
embargo to Cuba, we believe it was at least partially
responsible for the decreases in production experi-
enced by Havana during the 1960s (see table 2)."
Other factors included irrational and inefficient plan-
ning systems and the flight of skilled technicians. In
addition, the embargo had a significant impact on
Cuban lifestyle since the Cuban people were over-
whelmingly dependent on US consumer goods and
foodstuffs. Domestic production was oriented toward
export goods, and, after the implementation of the
embargo, imports of consumer goods were severely
limited because of reduced foreign exchange earnings.
" Recently Cuba has publicly claimed that the embargo has caused
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Figure 3
Cuba: Total Trade by Major Area, 1957-81
The effects of the embargo have diminished consider-
ably over time. Cuba's capital base now consists
largely of Soviet, East and West European, and
Japanese machinery and equipment. Consumer goods
are more readily available from both the Eastern Bloc
and from improved domestic production capabilities.
In addition, Havana has opened several front compa-
nies that enable it to obtain various types of US
products, particularly consumer goods. Industrial, ag-
ricultural, and transportation activities are now rela-
tively unaffected by the disruptions and diversions of
resources originally associated with the embargo.
The costs of the embargo to the United States were
minimal. Washington readily obtained alternative
suppliers for Cuban sugar. In addition, US exports to
Cuba were small-2.8 percent of total US exports in
Political Impact of the Sanctions
The imposition of sanctions in the 1960s did little to
weaken then Prime Minister Castro's internal politi-
cal situation. Indeed, the benfits probably outweighed
the disadvantages. Sanctions implied a grave external
threat, which Castro exploited to carry out the radi-
calization of all Cuban political, economic, and social
institutions. In an atmosphere of national peril, most
Cubans were ready to accent radical change in a spirit
Those on whom the economic weight of the sanctions
would ordinarily fall directly were no longer of eco-
nomic or political importance-having either fled the
country or been discredited and forced from active
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Table 2
Cuba: Production of Major Agricultural
and Industrial Products a
Leather
footwear
21.5
49.3
82.7
87.3
71.9
Paper and
cardboard
217.2
226.4
214.0
227.8
200.8
Cement
124.6
109.6
111.8
108.0
104.6
Nickel
60.9
112.7
96.5
110.7
134.1
political life-or had cast their lots with the revolu-
tionary government and supported its policies. Long
after the sanctions had lost their economic impact, the
Castro regime continued to extract political capital by
blaming virtually every economic problem on them.
Recently Cuba attributed its need for debt reschedul-
ing to the economic damage allegedly wrought by the
US sanctions.
In our judgment, the US and OAS economic sanc-
tions, by themselves or in conjunction with other
measures, have not met any of their objectives. We
also believe that Western economic sanctions have
almost no chance of compelling the present Cuban
leadership-mostly guerrilla warfare veterans in pow-
er since the late 1970s-to abandon the policy of
exporting revolution. Not only are these veterans
Vietnams."
deeply committed to armed struggle, but they also see
revolution abroad as protective of Cuba by redirecting
US attention toward regional "hot spots." This was
the basis for Che Guevara's theory of "creating many
We believe the current Cuban leadership reacts to
sanctions and other external pressures not by reducing
foreign subversive adventures but by stepping up such
activity. Unless Western pressures coincide with Sovi-
et pressures on Havana, sanctions are not likely to
have the desired limiting effect on Cuban policy until
the "guerrilla elite" now in control in Havana passes
from the scene.
The outcome of the US economic sanctions against
Cuba in many ways parallels that of the USSR's
sanction against China:
? The Castro regime was so committed to its revolu-
tionary policies that it was willing to bear the
force their withdrawal of support for Castro.
considerable economic cost of the sanctions.
? The sanctions provided Castro with a scapegoat for
all kinds of domestic problems; in fact, he exploited
the threat they posed to gain acceptance of radical
changes in all aspects of Cuban society.
? Cuban adjustment to the impact of the sanctions
left the United States with limited economic means
to influence Havana's behavior.
In addition, OAS participation in the sanctions did
not change the results because their additional eco-
nomic impact was minimal and enforcement became
increasingly lax. The economic cost to the Soviets of
backstopping Cuba was great but not great enough to
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Economic Sanctions Applied
Against Cuba as of 1975
The OAS Sanctions
(None of these has effect by itself; all need support by
laws and regulations of the individual states):
? Member states are called upon to suspend all trade
with Cuba, except for foodstuffs, medicines, and
medical equipment; and to suspend all sea transpor-
tation between their countries and Cuba except that
necessary for humanitarian reasons (under Author-
ity of the Rio Treaty, Resolution 3 of the Ninth
Meeting of Consultation of Ministers of Foreign
Affairs 1964).
? Recommendation is made that OAS member states
deny bunkers and government cargoes to ships in
the Cuba trade (under OAS charter, Resolution III
10 of the 12th Meeting of Consultation of Ministers
of Foreign Affairs, 1967).
? Recommendation is made that friendly nonmember
governments restrict their commercial and financial
operations with Cuba, as well as sea and air trans-
port with that country, especially transactions and
transport conducted by state entities (recommenda-
tion under OAS charter, Resolution 111 2 of the
12th Meeting of Consultation of Ministers of For-
eign Affairs, 1967).
Restrictions on US Citizens and Entities
Section 620(a) of the US Foreign Assistance Act of
1961, as amended, authorizes the President to "estab-
lish and maintain a total embargo upon all trade
between the United States and Cuba." Although in
actual practice provision is made for exceptions for
humanitarian purposes, a near-total embargo on such
trade is maintained under regulations that include:
? Export control regulations. Issued under the au-
thority contained in the Export Administration Act
of 1969 (previously the Export Control Act of 1949)
and other laws, these regulations prohibit any unli-
censed direct or indirect export from the United
States to Cuba except for humanitarian shipments
of certain foodstuffs, medical supplies, and inexpen-
sive gift parcels. This prohibition includes parts and
components exported from the United States for use
in the manufacture of a product for export to Cuba.
Licenses are usually not issued.
? Cuban assets control regulations. Issued under the
authority contained in Section 5 (b) of the 1917
Trading with the Enemy Act and other laws, these
regulations:
Prohibit the direct or indirect import or export
of any property in which Cuba or a Cuban
national has any interest.
- Prohibit, without a license from the US Trea-
sury, any vessel under the control of US citizens
or their foreign subsidiaries from engaging in
the Cuba trade.
- Prohibit US companies that own foreign petro-
leum installations in their own names from
bunkering or having any dealing with vessels
registered in or under charter or lease to Cuba.
- Block Cuban assets in the United States, pre-
vent use of US financial facilities by Cuba or
Cuban nationals, and prohibit Americans, in-
cluding those who are officers and directors of
foreign subsidiaries of US companies, from
engaging in any financial or commercial trans-
action with Cuba without Treasury license.
- Where there are no American officers or direc-
tors, the US company is asked to support US
foreign policy by preventing its foreign subsid-
iary from engaging in such transactions. This
"moral suasion" has been successful.
- Transportation Order T-1. Issued under the
authority contained in the Defense Production
Act, this order prohibits US registered vessels
and aircraft from carrying to Cuba without
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appropriate authorization any commodity on
the United States Positive List, the United
States Munitions List, or under the control of
the Atomic Energy Commission
Restrictions on Foreign Citizens and Entities
The following legislation applies to Foreign Citizens
and entities:
? Under Section 620 (a) (1) of the Foreign Assistance
Act of 1961, as amended: US assistance is prohibit-
ed to the present Government of Cuba and to
countries that furnish assistance to that government.
This restriction can be waived if the President
determines such assistance is in the national
interest.
? Under Section 620 (a) (3) of the Foreign Assistance
Act of 1961, as amended: US assistance under the
Act shall be terminated to countries that fail to take
appropriate steps to prevent ships or aircraft under
their registry from carrying any goods to or from
Cuba. This can be waived if the President deter-
mines it is important to national interests.
? Under the Mutual Defense Assistance Control Act
of 1951 (the Battle Act): US assistance is prohibited
to any country that permits strategic exports to any
nation threatening the security of the United States.
Cuba was included within the terms of the Battle
Act as of November 1962.
? Under Section 103 of the Agricultural Trade Devel-
opment and Assistance Act of 1954, as amended
(Public Law 480): Under Title I of the Act, US sales
of agricultural commodities are prohibited to coun-
tries that sell, furnish, or permit their ships or
aircraft to carry any equipment, materials or com-
modities to or from Cuba, except that with respect
to the selling, furnishing, or transporting of medical
supplies, nonstrategic raw materials for agriculture,
and nonstrategic agricultural or food commodities,
sales agreements may be entered into if the Presi-
dent finds with respect to each such country that
such sale is in the national interest, informs the
Congress of his reasons for such finding, and pub-
lishes his reasons and findings in the Federal
Register.
? Under NSAM-220: Shipments owned or financed
by the US Government should not be shipped from
US ports on a foreign flag vessel that has called in
Cuba since 1 January 1963 unless the persons
controlling the vessel give satisfactory assurance
that no ships under their control will, henceforth, be
employed in the Cuba trade so long as it remains the
policy of the US Government to discourage such
trade.
? Under the Export Administration Act of 1969:
Department of Commerce regulations issued under
the authority contained in this Act, prohibit the
unlicensed bunkering or servicing in US ports of
vessels of Communist countries, including Cuba, or
vessels that have been denied access to US Govern-
ment cargoes by reason of their having been en-
gaged in trade with Cuba since 1 January 1963. In
accordance with the recommendation of the 12th
Meeting of Consultation of Foreign Ministers of the
American States, licenses for bunkers are denied to
ships that have called in Cuba since 24 September
1967. Additionally, resale by foreign firms of US
commodities (including ship stores, plane stores, and
bunkers) to Cuba is prohibited unless specificall
authorized by the Department of Commerce. I 25X1
Restrictions on Cuba
The following relates to Cuba directly:
? Under the Foreign Assistance Act, no aid shall be
given or any sugar quota given to any government of
Cuba except as deemed necessary by the President
in the interest of the United States until Cuba pays
compensation for expropriated American property.
? Under Section 301 (b) of the Foreign Assistance Act
of 1961, as amended: The President shall seek to
assure that no US contribution to the United Na-
tions Development Program shall be used for proj-
ects for economic or technical assistance to Cuba as
long as it is governed by the Castro regime.
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? US assistance to Cuba is also restricted under
Section 620 (f) of the Foreign Assistance Act of
1961, as amended, which circumscribes aid to Com-
munist countries (specifically including Cuba) unless
the President finds and reports to Congress that: (1)
such assistance is vital to US security; (2) the
country is not controlled by the international Com-
munist conspiracy; and (3) such assistance will
promote the recipient country's independence from
international Communism.
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Appendix F
UK and UN Sanctions
Against Rhodesia (1965-79)
White Rhodesian opposition to sharing power with the
country's black majority set the stage for the UK-led
imposition of economic sanctions against Rhodesia in
November 1965. Pressured by rising worldwide anti-
colonial sentiment after World War II, the United
Kingdom hammered out a new constitution for Rho-
desia in 1961. Among other things, the new constitu-
tion established a complex franchise system that
immediately created 15 parliamentary seats for
blacks and could have led eventually to black majority
rule. Seeking a quicker and more complete power
transfer, however, black nationalist groups (led by
Joshua Nkomo of the Zimbabwe African People's
Union) rejected the new constitution and, for the first
time, resorted to violence against white property.
Conservative whites formed the Rhodesian Front in
March 1962, and this party-aided by an election
boycott by blacks-won power at the end of that year.
The political platform of the Rhodesian Front was to
remove the threat of black nationalism and gain
independence from the United Kingdom. Ian Smith,
who had risen to leadership of the Rhodesian Front by
April 1964, pushed London to accede to a formal
application for independence that had been made by
the party leadership in 1963. Although the British
Government was not averse to independence for Rho-
desia, a stalemate quickly developed over the role of
black Rhodesians after independence. Britain sought
five conditions:
? Maintenance of the principles and intention of
progress toward majority rule, already enshrined in
the 1961 constitution.
? Guarantees against retrogressive amendment of the
constitution.
? Immediate improvement in the political status of
blacks.
? Progress toward ending racial discrimination.
? Acceptance by the Rhodesian population as a whole
of any proposed basis for independence.
Following two trips by Smith to London and a visit by
UK Prime Minister Harold Wilson to Salisbury in
futile attempts to iron out differences, the Smith
government announced a unilateral declaration of
independence on 11 November 1965. Prime Minister
Wilson imposed economic sanctions against Rhodesia
on the afternoon of the same day.
London imposed a second set of sanctions in Decem-
ber 1965, and the United Nations followed with
sanctions in December 1966 and May 1968. The UN
resolutions were passed without dissent. Both resolu-
tions included reminders to member states that failure
or refusal to implement the measures would constitute
a violation of their obligations under the UN Charter.
All states were called upon to report measures taken
to implement the resolutions, and a Security Council
committee was established h r information on
the evasion of sanctions.
UN sanctions complemented those imposed by Lon-
don and eventually encompassed a cutoff in all trade,
transport of Rhodesian goods, and funding to Rhode-
sia (see inset). In addition to the four major sanctions
measures, both the United Kingdom and the United
Nations passed supplementary legislation and resolu-
tions designed to tighten and increase their effective-
ness. In the period January through June 1966, the
United Kingdom made purchases of several Rhode-
sian products by anyone in the world a violation of
British law. The UN Security Council passed roughly
a dozen additional sanctions measures after May
1968. Some of these covered loopholes in transporta-
tion, financing, and franchising, while the remainder
simply duplicated items in Resolutions 232 and 253.
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United Kingdom and United Nations:
Sanctions Against Rhodesia, 1965-68
United Kingdom, November 1965
? Ban on sale of arms, including spare parts.
? Cessation of economic and military aid.
? Removal from the sterling area.
? Ban on export of capital.
? Denial of access to the London capital market.
? Ban on further coverage by the UK Export Credits
Guarantee Department.
? Suspension from the Commonwealth Preference
Area.
? Cutoff of purchases of Rhodesian sugar and tobac-
co (which together accounted for two-thirds of
Rhodesian exports to the United Kingdom).
United Kingdom, December 1965
? Cutoff of purchases of several minerals (including
copper, chrome, and asbestos) and foodstuffs (corn
and beef).
? Blockage of dividend, interest, and pension pay-
ments to Rhodesian citizens.
? Replacement of the Board of Governors of the
Reserve Bank of Rhodesia with a British board
located in London, and assumption by this board of
control of Rhodesian funds outside Rhodesia.
? Cutoff of sales of petroleum and petroleum prod-
ucts, accompanied by a request to other countries
for similar action.
The Wilson government's stated objectives were to
end the Smith rebellion and restore legitimacy so that
ultimately the country could be granted independence
under majority rule. Wilson wished to unseat Smith
("There can be no truck with this illegal regime or any
compromise with it.") rather than just induce a return
to negotiations. The objectives of the subsequent UN
sanctions were worded differently: to "end the rebel-
lion" and to "avoid assisting the illegal regime." F_
United Nations (Resolution 232), December 1966
? Ban on the purchase by UN members of Rhodesian
asbestos, iron ore, chrome, pig iron, sugar, tobacco,
copper, meat, meat products, hides, skins, and
leather.
? Ban on the sale to Rhodesia by UN members of
arms, military equipment and materials, aircraft,
motor vehicles and equipment, and petroleum
products.
United Nations (Resolution 253), May 1968
? Ban on all imports from Rhodesia.
? Ban on all exports to Rhodesia, except medical and
educational supplies.
? Ban on the transport of Rhodesian exports and
imports.
? Cutoff of investment and all other funding to
Rhodesia.
? Cutoff of airline connections to and from Rhodesia
because of the political impact these connections
had in a third country.
? President Nyerere of Tanzania interpreted the sanc-
tions to mean that the international community
would not oppose his invasion of Uganda to remove
Amin by force.
Wilson had several unspoken objectives aimed at both
domestic British constituencies and world opinion.
Holding a slim four-seat margin in Parliament, Wil-
son wanted to head off any growth in pressures for
military intervention that might endanger his consen-
sus with the Tory parliamentary opposition on the
sanctions issue. Many in the Liberal Party and some
in the left wing of Wilson's own Labor Party already
were pressing for much stronger measures against
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Rhodesia. Their views coincided with those of many
Third World countries. Some additional objectives not
directly articulated by the Wilson government were:
? To forestall the use of force by other countries.
? To maintain Britain's positive image and reputation
in the international community.
? To take a stand for morality and justice.
? To reduce the chances that Zambia might cut off
copper shipments to British industry if Britain failed
to punish Rhodesia.
? To reduce the likelihood of retaliation against
whites in other African countries.
The UK and UN sanctions were targeted against the
225,000 white Rhodesians. Besides controlling the
government, this group dominated the economy.
White farmers produced all of the country's principal
export crops; and white businessmen owned the mines,
factories, transport facilities, and most of the whole-
sale and retail distribution system. Had sanctions
worked as intended, they would also have severely
hurt the welfare of the country's 5 million blacks.
Roughly half of these depended on low-paying jobs in
white-owned businesses for at least part of their
As it turned out, however, the sanctions were severely
undermined because Rhodesia's African neighbors,
Japan, the United States, and many European coun-
tries-including the United Kingdom-were unwill-
ing or unable to abide by them. Moreover, the United
Kingdom and the United Nations were unwilling to
enforce them militarily.
South Africa, which faced the threat of sanctions
because of apartheid, openly helped Rhodesia circum-
vent the sanctions during the entire 14 years they
were in effect. Pretoria continued to trade with
Rhodesia and provided critical imports, such as oil, as
well as transport and other entrepot services to the
landlocked country. We estimate that at least two-
thirds of the goods moving between Rhodesia and
South Africa for much of the period originated or
ended up in world markets with false documentation
provided mainly by South African middlemen. The
similarity between Rhodesian and South African
traded goods, as well as South African laws prohibit-
ing importers from disclosing the ultimate destination
of their purchases, enhanced the ability of middlemen
to obscure the Rhodesian connection.
subsistence
In many respects, Rhodesia appeared to represent a
nearly ideal target for sanctions:
? Exports were concentrated in a small number of
primary products-tobacco, sugar, and a few miner-
als-and only three markets: the United Kingdom,
Zambia, and South Africa.
? Imports were concentrated in one product area-
machinery and transport equipment-and were pur-
chased largely from two countries: the United King-
dom and South Africa.
? Overall, foreign trade accounted for a sizable per-
centage of Rhodesian GNP.
? The British economy was not critically dependent on
supplies of raw materials from Rhodesia or on the
Rhodesian market."
"Several Western companies, however, were dependent on specific
primary exports from Rhodesia. For example, Union Carbide of the
United States and Foote Mineral of the United Kingdom depended
on Rhodesia for chrome ore; Turner and Newall of the United
Other African countries also breached the UN
embargo:
? Disguised trade channels similar to those through
South Africa were available to Rhodesia in Portu-
guese Mozambique until its independence in mid-
1975.
? Zambia-Rhodesia's largest 1965 export market-
continued to trade with Rhodesia and to use its
transport facilities until 1973. Then in October
1978, after a five-year hiatus, transport bottlenecks
on the alternative Benguela and Tazara railroads
forced Zambia to resume transshipments via Rho-
desia. This probably enabled some Rhodesian
goods-particularly white corn, light manufactures,
and coal-to find their way to Zambian markets.
? Other black African neighbors-Botswana, Mala-
wi, and Zaire-maintained economic relations with
Salisbury in spite of UN sanctions.
25X1
25X1
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The West and Japan did not vigorously enforce
sanctions, especially during the initial years of appli-
cation. Indeed, much of the billing and payment for
Rhodesia's trade with the West was -channeled
through Swiss banks; Swiss middlemen apparently
remained important conduits until the sanctions were
lifted, although in January 1978 their government
banned such activity. A 1978 report sponsored by the
British Government accused the United Kingdom's
two largest oil companies of supplying petroleum
products to Rhodesia until 1976-first through South
African middlemen, then via a complex swap arrange-
ment with a French company in then Portuguese
Mozambique. The United States resumed its role as
the leading importer of Rhodesian chrome and several
other minerals from the passage of the Byrd Amend-
ment in late 1971 until its repeal in March 1977.
? The cutting of trade ties to Rhodesia would have
caused severe economic dislocations in Malawi,
Botswana, Zambia, and Zaire.
The countries that evaded the Rhodesian sanctions
generally felt they had strong reasons. These reflected
their assessments of their own best economic and
political interests combined with the inducement of
strong price incentives offered by Rhodesian
businessmen:
? The US Congress passed the Byrd Amendment on
the grounds that chrome was "the one item which
could and should be imported from Rhodesia that is
vital to the national security of the United States."15
? Portugal viewed continued relations with Rhodesia
as a stabilizing factor in southern Africa. This was
important to Lisbon while it was still trying to
maintain control of Angola and Mozambique
through the mid-1970s.
? Switzerland felt that compliance with the sanctions
would violate its longstanding policy of neutrality.
" Although only chrome was mentioned during the Congressional
hearings and debates, the general license issued by the Department
of Treasury on 25 January 1972 authorized imports of chromium
ore, ferrochrome produced in any country from Rhodesian chromi-
um ore, and any other material of Rhodesian origin determined to
be "strategic and critical." Rhodesia produced 22 of the 72
minerals on the US list of "strategic and critical" mineral products,
and many of these were imported while the Byrd Amendment was
The UK and UN sanctions against Rhodesia failed to
achieve the stated objectives of either Prime Minister
Wilson or the UN Security Council. As time passed
and the Rhodesian economy flourished, the United
Kingdom narrowed its stated objectives for the sanc-
tions. Instead of ousting the Smith regime, Britain's
goal became that of keeping pressure on Smith to
negotiate. Even that objective was questioned. By 25X1
1972, Sir Alec Douglas-Home, Foreign Secretary of
the then Conservative government, said, "I do not
honestly think that sanctions are the main influen
which brings Mr. Smith to the negotiating table."
Following the first full year of sanctions, the Rhode- 25X1
sian economy performed well for almost a decade.
Real GDP growth averaged 6.5 percent annually
between 1965 and 1974; below-average economic
performance occurred only in drought years. F_
To achieve this pace, the government took a larger
role in the economy through a formidable array of
organizations and controls:
? Development corporations were set up to provide
financing and technical expertise for industrial,
mining, and agricultural enterprises.
? Efforts to find new export markets and to evade
sanctions were centralized.
? The Rhodesian Government assumed extensive
powers in resource allocation and control of wages
and salaries.
not match or exceed the 1965 level until 1973.
Import substitution flourished and contributed to the
economic resiliency. By 1970 manufacturing had re-
placed agriculture as the leading nonservice sector,
because of a 50-percent overall growth over the five-
year period. As a result, virtually all essential consum-
er items and some intermediate and capital goods
were supplied domestically, thereby saving Rhodesia
valuable foreign exchange. Indeed, import volume did
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On the export side, only agricultural sales suffered
badly during the sanctions period. The embargo crip-
pled tobacco sales, Rhodesia's largest foreign ex-
change earner. This was because tobacco was too
easily traced to the source and could not, therefore, be
passed through foreign middlemen to the world mar-
ket. The sharp decline in tobacco earnings and a need
to reduce dependence on imported food caused the
government to encourage growers to switch to corn
and wheat production.
Sanctions initially hurt the chromium market, Rhode-
sia's second-largest export earner. Despite a sharp
downturn in output during the late 1960s, however,
the US decision to end its embargo-the Byrd
Amendment-and the skirting of trade impediments
by other Western countries, allowed production to
outstrip presanctions levels by 1972.
Other nonagricultural exports generally held their
own. Copper and pig iron sales, for instance, were
hurt little by sanctions because of new markets in
Western Europe and transit with South African bills
of lading. The majority of Rhodesia's nondurable
manufactures were sold to South Africa and were not
affected.
Following the unilateral declaration of independence,
South African funds and an involuntary boost in
domestic investment allowed Rhodesia largely to re-
place traditional sources of capital. With remittances
to US, British, and Canadian parent companies pro-
hibited by the Smith government, profits had to be
reinvested rather than repatriated. As a result, total
domestic investment surged from 13 percent of GDP
in 1964 to an annual average of 20 percent during the
first half of the 1970s.
In addition to the reinvested earnings, some $500-750
million in new foreign investment flowed in, mostly
from South Africa. Adherence to the boycott by
international bankers and foreign donors made Salis-
bury almost totally dependent on South Africa for
these and other financial flows. Concessional aid and
access to Pretoria's private capital markets enabled
the Rhodesian Government to finance its small bud-
get deficits.
Beginning in 1975, Rhodesia was beset by a new
round of troubles that wreaked economic havoc. The
main factors were an escalation of the protracted civil
war and the Zambian and Mozambican closure of
their borders with Rhodesia. The ensuing uncertainty
and the erosion of the middle-class market because of
white emigration weakened the investment climate.
Moreover, international demand for Rhodesian com-
modities sagged with the recession in Western mar-
kets. The economic downturn that began in 1975
persisted for five years. With the real economic
decline averaging 3 percent annually, per capita in-
come had tumbled 24 percent by 1979.
Government reactions to the war also had profound
implications, as the mounting diversion of resources
into defense undercut economic growth. The defense
portion of the budget rose from 19 percent in 1975 to
a peak of 32 percent in 1979, pushing the overall
budget deficit from $4 million in 1975 to more than
$700 million in 1979. The stimulative effects of rising
defense expenditures were more than offset by the
reduction in producer and consumer subsidies, the
boost in personal income taxes, and the mandatory
purchase of war bonds to help cover these deficits.
Moreover, the shift of scarce foreign exchange to
military-related purchases reduced financial resources
for local businessmen, even as the diversion of skilled
white manpower from industry and agriculture wors-
ened an already bad labor situation
External factors also undermined the embattled econ-
omy. The Zambian border closure during the period
1973-78 had deprived Salisbury of transshipping fees,
but, by itself, this did little harm. More serious,
however, was the decision in 1976 by the new Machel
government in Mozambique to close Mozambique's
borders with Rhodesia. This action forced a rerouting
of trade through South Africa, which increased Rho-
desia's freight payments about 50 percent annually.
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Beyond the internal and regional forces, the deterio-
rating international economy also took a heavy toll.
Demand by developed countries for most of Rhode-
sia's exports slumped as world oil prices soared. Trade
sanctions caused Rhodesia to suffer disproportionate-
ly, as buyers switched to more dependable suppliers.
In addition, largely because of technology changes,
Rhodesia was unable to replace the US chrome
market lost to it after the 1977 repeal of the Byrd
Amendment.
Whether the sanctions were a significant factor in the
ultimate switch to majority rule-14 years after they
were imposed-is questionable. Without the escalat-
ing civil war after 1975, the Rhodesian economy
probably would have continued to achieve a perfor-
mance acceptable to the white population, despite
sanctions. Nonetheless, combined with the civil war
and the persistent diplomatic pressures of the United
States, the United Kingdom, and ultimately even
South Africa, the Smith government probably fac-
tored in the difficulties caused by sanctions in its
decision to capitulate
By imposing sanctions, the Wilson government proba-
bly achieved some of its unstated objectives. Thus, the
imposition of sanctions served-at least initially-as
an effective expression of morality and justice and
probably helped maintain a positive international
image for Britain. As time passed and the sanctions
proved ineffective in bringing Rhodesia to heel, these
initial results were severely eroded. Third World
countries, in particular, expressed frustration over
London's unwillingness to resort to military force.
Ironically, the longer term outcome of the Rhodesian
sanctions was to leave the Smith government's succes-
sors with stronger and far more diversified manufac-
turing and agricultural sectors than would otherwise
have been likely. By 1975 the investment of retained
earnings by Rhodesian companies plus South African
investment had developed Rhodesian manufacturing
sufficiently to meet most domestic consumer needs
and provide exports to South Africa and other neigh-
boring countries. Because of the enforced switch from
tobacco to grain crops, Rhodesia not only strength-
ened its self-sufficiency in food production, but also
became (along with South Africa) one of Africa's only
two consistent net food exporting countries.
The failure of the UK and UN sanctions to achieve
more than a few unstated-and certainly not prima-
ry-objectives illustrates the difficulties of enforcing
sanctions even against a target that appears highly
vulnerable:
? The sanctions were not fully enforced by any of the
major implementing parties.
? Neither the United Kingdom nor the United
Nations was willing to use military force.
? A key supplier of the value to be withheld by the
sanctions-South Africa-did not participate and,
in fact, openly flouted the sanctions.
? Largely because of South Africa's role, the Smith
government's prohibition against profit repatriation
by foreign-owned companies, and Salisbury's cen-
tralization of economic authority, the Rhodesian
economy adjusted quite well to the sanctions that
were enforced.
The fact that the Smith government gave way after
14 years appears much more the result of the civil war
and heavy diplomatic pressure than of the domestic
impact of sanctions.
Even though unintentional, the sanctions ultimately
turned out to be beneficial from the viewpoint of both
the sponsors and the target because they left Rhode-
sia, now Zimbabwe, with a much stronger economy
than would otherwise have been likely.
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Appendix G
French Sanctions Against
Algeria (1971)
Background to the Sanctions
In April 1971, France imposed sanctions against
Algeria in an effort to resolve a dispute over oil prices
and the nationalization of French oil holdings. The
issue arose when a 1965 oil agreement granting oil
and gas concessions to France in return for aid in
industrial development and exploration came up for
renegotiation in 1970. The Algerian Government
claimed that France was not fulfilling all of its
obligations in connection with exploration, industrial
development, and the import of Algerian gas into
France.
In July 1970, Algeria unilaterally announced an
increase in the tax-reference price 16 of oil from $2.08
to $2.85 per barrel. In the fall of 1970, Algeria raised
this to $3.00 and by the end of the year was demand-
ing $3.24. Futhermore, Algeria asserted that the price
issue was secondary to this objective of taking over
control of oil production from the French companies
involved. After protracted negotiations, the Algerian
Government broke the deadlock in February 1971 and
unilaterally announced that it would take over 51
percent of French oil production-accounting for
about 70 percent of total Algerian crude oil produc-
tion-and all pipelines and gas wells in the country.
According to press reports, the French Government
initially decided to make the best of the situation and
seek the highest possible remuneration for seizures.
Following fruitless talks between the two govern-
ments, however, Algeria announced in April 1971
that:
? It was raising its oil price to $3.60 per barrel (the
highest price of any oil producer in the world).
? It would pay only $100 million to French oil
companies as compensation for the 51-percent take-
over of their assets (about a seventh of what the
French companies had estimated their lost assets to
be worth and a third of what they were willing to
settle for).
? It was ending all foreign-owned concessions in
Algeria.
The French Government responded by cutting off
negotiations with the Algerian Government, and the
French companies involved-the state-owned Elf-
Erap and the 35-percent-state-owned French Petro-
leum Company (CFP)-suspended their liftings of
Algerian oil.
Objective of the Sanctions
The objective of the sanctions was to force the
Algerian Government to reconsider compensation
terms and the tax-reference price of oil. The French
calculated that their actions would lead to an immedi-
ate drop in revenue. The French companies involved
produced in 1970 some 660,000 b/d of crude oil out of
a total Algerian production of 976,000 b/d.
Description of the Sanctions
The French boycott campaign cost the Algerians a
production drop of at least 25 percent in 1971. In
addition to suspending their lifting of Algerian oil, the
companies took action on the international oil market
by issuing warnings that they would sue any buyers of
oil from the fields seized by Algeria, which they
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considered to be their property. The French Govern-
ment also approached the World Bank, from which
the Algerian state oil firm Sonatrach was seeking
financing for petroleum development, to block any
extension of credits. Finally, it appealed to the United
States to forgo a planned purchase of gas from
Sonatrach until the oil dispute was settled.
Factors Affecting the Success
or Failure of Sanctions
The effectiveness of the French sanctions was under-
mined by developments in the world oil market, where
rising prices enabled the Algerians largely to offset
the losses resulting from production cutbacks. More-
over, the French could not win the full support of their
allies. Although the United States proved willing to
delay the purchase of Algerian gas by the Texas El
Paso firm-a decision also influenced by the high
Algerian asking price-both US and British firms
reached agreements with Sonatrach on the exploita-
tion of their own, smaller oil concessions in Algeria.
French determination to uphold the sanctions was
eroded by the disproportionate cost of the measures to
their own interests. Before the imposition of sanctions,
Algerian oil accounted for 25 percent of total domes-
tic consumption. French energy policy, which did not
provide well for alternative sources of supply, made it
difficult for France to find quickly oil substitutes to
make up for the Algerian shortfall. The loss of the
Algerian oilfields was particularly serious for the Elf-
Erap firm, for which the fields represented 80 percent
of total production. In addition, the sanctions strained
Franco-Algerian trade relations generally and encour-
aged Algeria, which had relied heavily on trade with
France, to diversify its trading partners (for example,
by developing prospects for large-scale exports of oil
and gas to the United States). The sanctions also
strained the "special relationship" between Algeria
and France. This was of special concern to France
since Paris considered Algeria an important link to
the Arab world.
The net result of these converging pressures was the
collapse of the sanctions. CFP agreed to Algerian
terms in June 1971, followed by Elf-Erap in Decem-
ber of that year. CFP settled for a share of oil
amounting to half its 1970 production, and Elf-Erap 25X1
agreed to accept a share equal to only one-third of its
prenationalization production. Four small companies
agreed to withdraw completely from the Algerian
industry. Compensation for the nationalization was
close to Algeria's original terms. The tax-reference
price was raised from $2.90 to $2.95 per barrel, with a
provision for renegotiation after five years.
Sonatrach, on the other hand, emerged as the 10th-
most important oil producing company in the world.
Algeria itself has emerged as one of the leading price
hawks in the Organization of Petroleum Exporting
Countries (OPEC). Its victory over sanctions in 1971
almost certainly contributed to this aggressiveness.F
In the French boycott of Algerian oil almost none of
the factors needed for successful sanctions was
present:
? France was not Algeria's only customer and could
not gain the full support of the others.
? France's commitment to the sanctions was eroded
because it could not readily replace Algerian oil,
which was a significant portion of French supplies,
and because the sanctions strained the "special
relationship" with Algeria, which Paris considered a
key link to the Arab world.
? The cost of the sanctions to Algeria was minimal
because rising world oil prices enabled the Algerians
to offset most of the revenue loss resulting from the
reduction in export volume.
? The Algerian Government remained strongly com-
mitted to taking over control of its oil production.F
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Appendix H
OAPEC Oil Embargo Against
the United States (1973-74)
Background to the Sanctions
members of the Organization of Arab Petroleum
Exporting Countries (OAPEC) " sufficient financial
The Arab oil exporting nations embargoed the United
States during and after the 1967 Middle East war,
but the embargo was not effective. The United States
used its domestic spare capacity in conjunction with
stepped-up imports from non-Arab oil producers to
meet its oil requirements. The Arabs were unable to
withstand the loss of oil revenue for an extended
period and soon lifted the embargo.
By October 1973, however, the United States had
become vulnerable to an Arab embargo. Three impor-
tant developments had taken place:
? US oil demand increased steeply while domestic
production fell.
? Increased world oil demand reduced world spare
capacity.
? Oil prices quadrupled.
Between 1967 and 1973 the US energy-intensive
industries boomed, and, because environmental laws
and federal regulation limited the mining and use of
coal, the construction of nuclear power plants, and
natural gas production, most of the increased energy
demand was for oil. US oil output peaked in 1970 and
fell thereafter; Arab oil imports rose as a result. F_
Until 1970 world oil supply usually exceeded demand.
In the early 1970s, however, the economies of the
major industrial countries expanded simultaneously
and soaked up the excess supply. The surge in oil
demand and growing assertiveness by OPEC revolu-
tionized oil pricing. In 1971 producer governments
forced the oil companies to raise oil prices. Then, on
16 October 1973, OPEC unilaterally hiked the price
from $3.01 to $5.12 a barrel. Demand continued to
outrun supply, and three months later OPEC raised
the price to $11.65. Oil revenues flowed into produc-
ing countries at unprecedented rates, giving the
Qatar, Abu Dhabi, Bahrain, Syria, and Egypt.
reserves to withstand a prolonged embargo.
Description of the Sanctions
On 6 October 1973, Syria and Egypt invaded Israeli-
occupied Arab territory. Israel suffered military re-
versals in the first days of the war and asked the
United States to resupply it with arms.
On 17 October the members of OAPEC decided to:
(1) embargo the United States, (2) shut in the oil
normally shipped to the United States and reduce
production an additional 5 percent, (3) determine an
importer's access to Arab oil according to its level of
support for the Arab cause, and (4) make further
monthly production cuts of 5 percent until Israel
relinquished all Arab territory."
On 18 October the United States announced that it
would resupply Israel with arms. Saudi Arabia, which
had counseled OAPEC to be moderate, reacted by
reducing its oil production an additional 5 percent and
assuming leadership of the embargo.
OAPEC governments ordered foreign oil companies
to enforce the embargo and threatened them with
expropriation and other punitive measures if they
failed to comply. To ensure compliance, OAPEC
members required tanker captains loading Arab oil to
sign affidavits designating their destination and to
cable back upon arrival. Arab diplomats abroad also
checked public records of oil imports. OAPEC mem-
bers did not establish a mechanism to monitor each
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other's observance of the boycott; nonetheless, virtual-
ly no Arab oil reached the United States during the
embargo.
OAPEC members stated three objectives for the
sanctions:
? To express their anger at the United States for
assisting Israel.
? To demonstrate solidarity with Egypt and Syria.
? To make the United States press Israel to return
Arab land.
The act of imposing sanctions allowed OAPEC to
accomplish the first two objectives. As to the third,
Egypt regained sovereignty over some of its territory
while the sanctions were in effect, but the United
States did not ask Israel to make territorial conces-
sions in order to induce the Arabs to lift the embargo.
The OAPEC linkage between the sanctions and repa-
triation of Arab land loosened after the war ended in
late October. Saudi Arabia, the largest oil exporter
and the key to maintaining the embargo, indicated
that total Israeli withdrawal was not a condition for
lifting the sanctions. It did insist, however, that Israeli
withdrawal begin.
In November 1973 the United States launched a
diplomatic effort to disengage Arab and Israeli forces.
Egypt and Israel concluded an agreement in mid-
January 1974 that required Israel to pull back in the
Sinai. Henry Kissinger, who mediated the agreement,
asserts in his memoirs that the sanctions did not
influence US diplomacy. Israeli Defense Minister
Moshe Dayan's memoirs corroborate Kissinger's
statements.
The United States felt that the agreement met the
Saudi condition for ending the embargo. Syria, how-
ever, quickly petitioned the Saudis to extend the
embargo until the United States attempted a Syrian-
Israeli disengagement. The United States refused to
commence negotiations while the embargo was in
effect. In February an Arab summit conference
offered a compromise-OAPEC would agree to end
the embargo if the United States sent a diplomatic
mission to assess the prospects for a Syrian-Israeli
disengagement. The United States agreed, and
OAPEC lifted the embargo on 19 March 1974.F-
The Arab sanctions led to widespread fuel shortages
in the United States. The sanctions had an impact
because non-Arab exporters did not have sufficient
spare capacity to compensate for Arab production 25X1
cutbacks and the Arabs had the financial reserves to
maintain the embargo for an extended period.
Three factors, however, mitigated the sanctions'
impact:
? The oil companies used their worldwide transporta-
tion and marketing networks to reallocate the avail-
able oil. By diverting some non-Arab oil from
Europe and Japan to the United States and replac- 25X1
ing it with OAPEC production, they protected the
United States from the maximum oil loss possible.
? At the time, US dependence on Arab oil was
modest. The sanctions cost the United States 1.3
million b/d of oil, or 8 percent of its total oil
consumption. The American people experienced dis-
comfort but not hardship."
? The US commitment to Israel had broad support.
Throughout the embargo, the public never pressed
the government to change its Middle Eastern policy
to meet Arab demands.
The embargo awakened the United States to the costs 25X1
of importing substantial amounts of oil. During and
after the embargo, the United States began making
major adjustments in its domestic and foreign policies
" The oil companies' allocation measures caused Western Europe to
lose about 12 percent of its total oil consumption; they permitted
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to try to reduce its vulnerability to future sanctions.
The United States:
? Initiated a variety of programs to conserve energy,
develop synthetic fuels, and increase oil, gas, and
coal production.
? Helped create the International Energy Agency to
foster energy cooperation among the industrial oil-
importing countries.
? Assumed a more active role in the Middle East to
prevent a diplomatic stalemate that could trigger
another war and renewed sanctions.
The embargo had a powerful demonstrational effect
on other industrial countries. Most were heavy con-
sumers of Arab oil and lacked the capacity to reduce
their dependence substantially. Western Europe and
Japan waged vigorous diplomatic campaigns to culti-
vate OPEC members, and, as a result, they voiced
greater support for Arab positions.
The sanctions greatly enhanced the international
prestige of the Arab oil exporters and OPEC in
general. OAPEC had used oil to punish a military
superpower with impunity. The less developed coun-
tries saw it as a turning point in international rela-
tions. They soon enlisted OPEC support in an attempt
to make the industrial countries create a "new inter-
national economic order" favorable to the Third
World.
In terms of its effectiveness, the OAPEC oil embargo
on the United States presented a paradox. Few of the
elements needed for achieving substantial economic
impact were present:
? The Arab oil exporters were not able to control the
supply of oil to the United States.
? The United States was able to adjust to the embar-
go with relatively little economic dislocation.
? The United States remained committed to its sup-
Yet, OAPEC members could legitimately claim that
the embargo met their objectives:
? The goals of expressing anger at the United States
and demonstrating solidarity with Syria and Egypt
were symbolic and easily met by imposing the
embargo.
? The goal of making the United States pressure
Israel to return Arab land was also largely symbolic
because Washington was already committed to this
end.
As it turned out, the oil price increases had a more
substantial economic impact on the United States
than did the embargo.
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Appendix I
US Sanctions Against
Pakistan (1977-80)
Background to the Sanctions
The imposition of sanctions against Pakistan in the
late 1970s involves a number of factors that appear to
make it a special case. First, the objective on the part
of the US Government was highly specific-to dis-
courage the Pakistani military regime from pursuing
a nuclear weapons program. Other aspects of Islama-
bad's foreign and security policies, or even its domes-
tic politics and human rights record, were not relevant
to the decision to impose sanctions. Second, the
sanctions were diverse, involving not only the prohibi-
tion of all nuclear cooperation but also the termina-
tion of US Government assistance in the areas of
military and economic aid. Third, some of the sanc-
tions have been removed while other restrictions still
remain in effect. The prohibition against nuclear
cooperation is still in force, but economic and military
assistance programs involving or requiring US Gov-
ernment financial support resumed as of December
1981.
A crucial factor that complicates any long-term as-
sessment is that developments in the Pakistani nuclear
program could trigger the reimposition of economic
and military sanctions within a short period of time.
The rationale and legal foundation for the original
sanctions remain operative. US political leaders can
authorize a total embargo on assistance programs any
time the pace of the Pakistani nuclear program seems
to warrant this step. The possibility of a reimposition
of economic and military sanctions could still influ-
ence the decisionmaking process within the Pakistani
regime concerning the immediate need for a nuclear
weapons device.
The Sanctions: Origin and Scope
The imposition of sanctions against Pakistan in 1978
and 1979 was an outgrowth of the broad
Congressional-Executive effort in the period 1976-78
to codify laws governing nuclear exports and to make
US nonproliferation policy more stringent. The rele-
vant US legislation does not single out Pakistan, but
growing concern about the direction of the Pakistani
nuclear program was an important factor in stimulat-
ing proposals for tougher laws on nuclear transfers to
nonnuclear weapons states. The French decision in
early 1976 to sell Pakistan a commercial-scale repro-
cessing plant was a major turning point. The Ford and
Carter administrations put considerable pressure on
the French Government to cancel the contract even
though Pakistan had agreed to place the facility under
International Atomic Energy Agency (IAEA) safe-
guards. In June 1978 Paris informed Washington that
French firms would withdraw from the reprocessing
plant project. We believe this step was taken not in
response to US wishes but primarily because of the
risks in being associated with the nuclear weapons
ambitions of a rightwing military regime
US Government efforts to restrict relations with
Pakistan were based on the following legislation:
? The Symington and Glenn Amendments to the
Foreign Assistance Act of 1961.
? The Nuclear Non-Proliferation Act of 1978.
The fundamental purpose of this legislation was to
pose the threat of sanctions in order to persuade states
that had not already ratified the Non-Proliferation
Treaty to accept IAEA safeguards over their entire
nuclear program and refrain from procurement activi-
ties that could contribute to a nuclear weapons pro-
gram. Congress and the Executive Branch were essen-
tially in agreement on these basic goals, although
opinions varied about the ultimate motives of poten-
tial proliferators such as Pakistan.
The prohibition against all nuclear cooperation with
Pakistan resulted from the automatic application of
section 128 of the Nuclear Non-Proliferation Act of
1978. This section stipulates that there can be no
nuclear exports to any nonnuclear weapons state that
has not placed all its nuclear activities under IAEA
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safeguards at the time of export. Islamabad's long-
standing refusal to accept safeguards on all its exist-
ing nuclear facilities required ipso facto the total and
immediate ban on US nuclear transfers to Pakistan."
This prohibition took effect when the Act came into
force on 10 March 1978.
Termination of economic and military assistance to
Pakistan resulted from the Glenn and Symington
Amendments. The Glenn Amendment to the Foreign
Assistance Act requires such sanctions against any
nonnuclear weapons state that acquires unsafeguard-
ed reprocessing technology or detonates a nuclear
device. This amendment was never formally invoked,
but the US Government ordered a winding down of
economic aid in 1977 in reaction to the French-
Pakistani reprocessing plant project. Economic assis-
tance was resumed for the period 1978-79 after the
French decision to withdraw from the reprocessing
project.
The eventual termination of all US Government
economic and military assistance to Pakistan resulted
from the application of the Symington Amendment.
This amendment to the Foreign Assistance Act stipu-
lates that a nonnuclear weapons state that has ob-
tained uranium enrichment technology outside IAEA
safeguards can no longer receive economic or military
assistance from the United States. Discovery of evi-
dence of the existence of Islamabad's clandestine
enrichment facility near Kahuta led to the imposition
of economic and military sanctions for nearly three
years beginning in March 1979.
There were three publicly stated objectives for the
imposition of sanctions on Pakistan:
? To discourage\the Pakistani military regime from
pursuing a nuclear weapons program.
? To slow development of the program by persuading
other nuclear weapons states not to export sensitive
nuclear materials, equipment, and technology to
Pakistan.
? To demonstrate that the United States would with-
hold nuclear cooperation and economic and military
aid from a nonnuclear state that is attempting to
develop nuclear weapons.
In our judgment, the imposition of the sanctions failed
to achieve the first objective. Pakistani President Zia
and his top military advisers were not deterred from
their fundamental objective of obtaining a nuclear
weapons capability. Islamabad steadfastly resisted
safeguards over its entire nuclear program, and Paki-
stani scientists continued efforts to develop both re-
processing and enrichment technology-the two
routes to a nuclear weapons capability. Moreover,
there was no incentive to slow the effort to develop a
nuclear weapons capability once it became evident
that the United States wished to resume economic
and military aid to Pakistan in the wake of the Soviet
invasion of Afghanistan. Although the nuclear sanc-
tions remain in effect, economic and military aid
resumed as of December 1981.
On a political level, the military regime in Islamabad
appeared to reap additional public support in the wave
of reaction against the US sanctions in 1979. The
Pakistani leaders felt no compelling need to rely on
the United States prior to the Soviet invasion of
Afghanistan later that year. They had taken steps to
develop strong ties to China following the downturn in
US-Pakistani relations in the mid-1960s. In the
1970s, Pakistan also looked more to moderate Arab
states and Iran for financial assistance and to Europe-
an suppliers for arms.
there was virtually no visible public pressure to restore
relations with the United States, given the uneven
history of bilateral relations and the widespread belief
among Pakistanis that the United States had failed
them in two wars with India
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The sanctions appear to have reinforced Islamabad's
doubts about the credibility of the US security com-
mitment to Pakistan as enunciated in the defense
cooperation agreement of 1959.2)
the termination of US military
assistance, anyt ing, confirmed Pakistan's intention
to develop a nuclear weapons capability. Islamabad
regards such a capability as the ultimate guarantor of
its security against India, whose conventional suprem-
acy and nuclear potential it cannot hope to match.
With the United States unavailable as a counter to
India and the Chinese unable to supply sophisticated
arms, Islamabad placed a high value on nuclear
weapons as an effective deterrent that was attainable
with Pakistan's technological and financial resources.
The cutoff in US economic aid occurred at a time
when Pakistan's foreign payments position was be-
coming increasingly precarious following several years
of heavy borrowing. Foreign exchange reserves had
dropped by one-half between December 1978 and
July 1979 to $183 million and continued to slide to a
mid-September low of $77 million, roughly one week's
import coverage. While US aid was small in relation
to Pakistan's needs-scheduled 1979 disbursements
of $130 million versus a financial gap of $1.3 billion-
it was provided on very soft terms. Nevertheless, after
vaguely threatening to default on debt service pay-
ments in an effort to secure a new debt rescheduling
agreement from a group of Western creditors, Paki-
stan was able to bolster its international reserves by
negotiating short-term credits from foreign private
banks and soliciting emergency assistance from Saudi
Arabia.
Despite the lack of US aid, by June 1980 Islamabad
had covered its foreign payments gap and increased
foreign exchange reserves to nearly $700 million.
Islamabad used planned and emergency aid from
Saudi Arabia, a $163 million trust fund loan from the
IMF, and short-term funds borrowed against export
earnings of the next rice crop. Moreover, good crops,
1' President Zia ridiculed a tentative US offer in early 1980 to
provide $400 million in emergency economic and military aid
following the Soviet invasion of Afghanistan. This offer was made
by the Carter administration without having obtained Congres-
sional approval to waive the restrictions under the Symington
strong export growth, and several key economic policy
reforms enabled the economy to grow by 6 percent in
FY 1980 for the third consecutive year. Pakistan
reduced its current account deficit in both 1980 and
1981.
Military Assistance
The termination of military aid probably reduced US
influence within the Pakistani military establishment
as a result of the suspension of the International
Military Education and Training (IMET) program for
promising officers, but it had no appreciable effect on
Pakistan's military capabilities. The amount of US
arms supplied to Islamabad after 1965 was negligible
and largely paid for in cash. Since the US arms
embargo during the 1965 Indian-Pakistani war,
China and France had become Pakistan's principal
arms suppliers. From FY 1966 through FY 1979,
Pakistan purchased less than $430 million in military
equipment from the United States, much of it spare
parts and ammunition for older US weapons. The
only significant military items purchased from the
United States during this time were TOW antitank
missiles and M- 113 armored personnel carriers,
bought in 1975 and 1976.
The Symington Amendment did not preclude cash
military sales. Even before the sanctions were applied,
only $7.6 million of Pakistan's total arms purchases
from the United States were funded by Foreign
Military Sales (FMS) credits, and none have been
since FY 1968. Pakistan signed cash FMS agree-
ments worth $88 million in FY 1980 and FY 1981
after the Symington Amendment sanctions were ap-
plied, but only for spare parts, ammunition, and
support equipment. Moreover, the Symington Amend-
ment did not preclude the delivery of military equip-
ment already purchased. Pakistan received about
$130 million in military equipment, including TOWs
and armored personnel carriers from FMS agree-
ments concluded before the sanctions.
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Nuclear relations between Pakistan and the United
States were virtually nonexistent when the Nuclear
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Non-Proliferation Act of 1978 went into force. The
main effect of the Act's prohibition of nuclear trans-
fers to Pakistan fell on the US voluntary contribution
in cash and kind to the IAEA, an annual gift used to
finance technical assistance and training programs for
developing nations. Since the contribution was funded
under the Foreign Assistance Act, the United States
decided that the provisions of the Symington Amend-
ment made Pakistan ineligible for any US funds
provided via the IAEA on a country-specific basis.
This assistance included the provision of experts, gifts
of equipment for laboratory facilities, and fellowships
for the study of nuclear-energy-related subjects in the
United States. The training and technical assistance
that the United States denied to Pakistan through the
IAEA was instead provided by European countries.
The United States has succeeded to a considerable
extent, however, in meeting its secondary objective of
making it more difficult for Pakistan to achieve a
nuclear weapons capability. Washington continued
efforts to persuade other nuclear supplier states not to
export sensitive nuclear materials, equipment, and
technology to Pakistan-efforts that would not have
been credible in the absence of US nuclear sanctions.
This attempt to win support for tighter export controls
was a source of tension and disagreement with other
nuclear suppliers for a number of reasons:
? Several West European countries as a matter of
policy are opposed to trade restrictions even with
regard to nuclear transfers to a potential
proliferator.
? Few West European countries accepted the princi-
ple that a nonnuclear item should be controlled on
the basis that it could contribute to a nuclear
weapons program. As a result, the United States has
found it difficult to interdict trade with Pakistan
involving dual-use equipment or gray-area
technology.
? Other nuclear supplier states have until recently
resisted US efforts to make the export control lists
more precise and more comprehensive. The London
Suppliers Guidelines, in many instances, are too
vague to serve as a useful guide to the implementa-
tion of export control policy.
? Some countries have not been willing to devote the
law enforcement resources needed to prevent Paki-
stan from operating a clandestine procurement net-
work in Western Europe. Through the use of inter-
mediaries, false shipping addresses, dummy
companies, and other techniques, Pakistan has been
able to conceal in many instances that it is the
ultimate user of items being bought.
Nevertheless, Pakistan is less prepared to explode a
nuclear device at this time than it would have been
had Islamabad been free to advance its nuclear
program through open procurement and trade. A
number of nuclear supplier states were sensitive to the
issue of nuclear cooperation with Pakistan and took
steps to prevent some sensitive nuclear transfers. As a
result, Islamabad is now almost totally dependent on
the clandestine procurement network. The completion
of the enrichment and reprocessing facilities designed
to produce weapons-grade nuclear material was sig-
nificantly delayed.
The United States is still trying to get Pakistan to
accept safeguards on all its nuclear facilities. Wash-
ington has urged other nuclear supplier states not to
submit bids for Pakistan's new nuclear power reactor
without the stipulation that Islamabad accept "full-
scope" safeguards. Several Western governments,
however, have made it clear to the United States that
they fear they might be undercut by competitors at
the last moment and lose the contract. Nevertheless,
the concern about Pakistan's unsafeguarded facilities
and the IAEA's inability to maintain effective safe-
guards at Pakistan's only power reactor near Karachi
is now widespread. There are no international legal
obligations for any nuclear supplier to insist on full-
scope safeguards, but failure to make this demand of
Pakistan at this point would expose the supplier state
to considerable criticism.
years to bear fruit.
Pakistan's leaders are not likely to relinquish their
objective of obtaining a nuclear weapons option even
if the United States succeeds in fashioning a united
supplier front on the issue of full-scope safeguards.
However, the rejection of full-scope safeguards would
seriously impede Pakistan's plans for a larger nuclear
power program. The Pakistanis could and probably
would turn to other developing nations with nuclear
expertise for assistance, but this strategy would take
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The US sanctions against Pakistan did not halt
Pakistan's nuclear program, but the fact that the
United States took tangible action and reinforced it
with efforts to sensitize other nuclear supplier states
has caused Islamabad to be almost totally dependent
on the clandestine procurement network and has
slowed development of its nuclear program.
The sanctions imposed under provisions of the Foreign
Assistance Act did not have a major impact on
Pakistan's military preparedness or economic develop-
ment:
? Pakistan was able to adjust to the absence of US aid
for the short period of its suspension in part because
other donors, including multilateral institutions sup-
ported by the United States, provided alternate
sources of military and economic aid.
? The Government of Pakistan was willing to forgo
US assistance in order to continue its efforts to
develop nuclear weapons because it perceived nucle-
ar weapons as a vital element in its national
security.
? Imposition of US sanctions in a highly visible way
increased domestic support for the Government of
Pakistan, thus easing the political cost of the for-
gone aid.
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Appendix J
US Trade Sanctions
Against Uganda (1978)
Background to the Sanctions
The United States imposed trade sanctions against
Uganda in October 1978 in response to a lengthy
series of human rights violations by Ugandan Presi-
dent Idi Amin. According to US estimates, Amin had
murdered nearly 100,000 people-including two
American reporters-since seizing power in a military
coup in 1971. He also had expelled almost all of
Uganda's 60,000-member Asian community, crip-
pling the country's domestic trade.
The decision to impose sanctions capped a yearlong
campaign by a small group of congressmen who in
September 1977 introduced three bills to terminate all
trade between the United States and Uganda. State-
ments in The Congressional Record indicate particu-
lar concern about US purchases of Ugandan coffee-
half of Kampala's total coffee exports at the time-
which were cited as an important element in Amin's
ability to stay in power. The statements also pointed
out the role of US companies in supplying nearly 40
percent of Uganda's oil imports, in constructing a
telecommunications satellite system, and in providing
civilian jet aircraft and pilot training. According to
Ugandan statistics, the United States was Uganda's
largest trading partner in 1977, accounting for nearly
one-third of the value of Kampala's international
transactions
Efforts to obtain approval of embargo legislation were
held up by the lack of support in both Congress and
the White House.
President Carter's opposition to Ugandan sanctions
was based on a number of factors:
? The United States had already demonstrated its
distaste for the Amin regime by closing its Embassy
in Kampala and suspending all official US
assistance.
? Washington was monitoring Ugandan trade by re-
quiring the Departments of State and Commerce to
review US export licenses and determine whether
the export item would contribute to human rights
violations.
? Amin might retaliate by taking measures threaten-
ing the safety of the 200 Americans still in Uganda.
? Economic sanctions would be ineffective and incon-
sistent with the principle of free trade.
Over the next several months, however, an intensive
anti-Amin campaign by the American media gradual-
ly aroused public opinion in favor of sanctions, with a
similar impact on Congress.
Provisions and Objectives of the Sanctions
The sanctions contained in Public Law 95-455 of 10
October 1978, applied to nearly all US trade with
Uganda and directed that:
? No article-including technical data or other infor-
mation-except grains and additional foodstuffs
could be exported to Uganda by anyone subject to
the jurisdiction of the United States.
? No article grown, produced, or manufactured in
Uganda could be imported into the United States.
These proscriptions were to remain in effect until the
President certified to Congress that the Government
of Uganda was "no longer engaged in a consistent
pattern of gross violations of human rights."
While an end to human rights violations in Uganda
was the stated objective of the sanctions, we believe
the congressional testimony on the legislation indi-
cates that there was a major unstated objective as
well. That goal was to put enough pressure on the
Ugandan economy to undercut Amin's control and
thereby result in his ouster.
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Uganda was in desperate financial straits during this
period, and, being landlocked, it was dependent on the
pro-US government of neighboring Kenya for its
international trade. Most of the modern sector of the
economy had long since shut down, following the
expulsion of Asians and Amin's indiscriminate perse-
cution of Ugandan professionals. Agriculture kept the
economy going, but production had been declining as
farmers reduced output to subsistence levels.
Despite its economic problems and heavy dependence
on the US market, Uganda suffered little from the
US trade sanctions. Ugandan officials had been
aware for some time of official US sentiment regard-
ing Amin's policies because of the steps taken by the
Carter administration and the discussions in Con-
gress. According to Embassy sources, Ugandan en-
voys were visiting numerous Western and other coun-
tries as early as January 1978 to line up new
customers for coffee and other products. Indeed, by
the time sanctions were in place, US companies had
almost completely ended commercial dealings with
Kampala. In addition, the Kenyan Government con-
tinued to provide transit for Ugandan trade. Official
data indicate Ugandan efforts to locate other buyers
were largely successful-export receipts during the
embargo showed no change from the similar period
immediately preceding the sanctions. Most of the
slack was taken up by other Third World countries,
although Japan, the United Kingdom, West Germa-
ny, and Italy also stepped up purchases somewhat (see
Table 3
Destination of Ugandan Exports,
1977-78
Federal Republic of
Germany
Japan
Netherlands
United Kingdom
United States
Other
Nonmarket industrial
economies
Hungary
Poland
Capital surplus oil
exporters
Middle- and low-income
countries
1977
1978
Percentage
Point Change
1.7
3.5
1.8
3.7
8.3
4.6
2.4
1.7
0.7
19.5
21.5
2.0
40.4
9.2
-31.2
2.2
0.6
-1.6
2.9
0
2.0
2.0
1.5
1.2
-0.3
1.6
18.0
table 3).
On the import side,) Ithe
US embargo hampered Uganda's ability to obtain
petroleum imports. Official Ugandan data show a
steady decline in oil deliveries, reflecting, in our
judgment, a reluctance by other international oil
companies to allow Kampala to purchase oil on credit.
Embassy sources report that, as a result, the govern-
ment had to contend with more frequent fuel short-
ages and associated disruptions in public transporta-
Although sanctions did not directly bring about a
change in Ugandan Government policies or the gov-
ernment itself, Embassy reporting suggests the em-
bargo did have an indirect role in Amin's political
demise. According to conversations between senior
Tanzanian and US Embassy officials, Washington's
decision to terminate commercial dealings with Kam-
pala was an important factor in Tanzanian President
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Nyerere's decision to opt for a direct military cam-
paign to remove Amin in October 1978. Nyerere
believed the sanctions were a sign that the interna-
tional community would not oppose his invasion of
Uganda.
On the surface, the US trade sanctions against Ugan-
da had little going for them:
? The United States was unable to gain the coopera-
tion of other governments in shutting off trade.
? Uganda was able to find other suppliers and buyers
of most of the goods traded with the United States.
Yet, the sanctions ultimately-even if indirectly-
achieved the objective of bringing about a change in
the Ugandan Government because of the political
impact they had in a third country. President Nyerere
of Tanzania interpreted the sanctions to mean that
the international community would not oppose his
invasion of Uganda to remove Amin by force.
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Appendix K
US Sanctions Against
Iran (1980-81)
Origin and Scope of the Sanctions
The United States imposed economic sanctions
against Iran as part of a larger diplomatic strategy to
force the release of the American hostages seized by
Iranian militants on 4 November 1979. The immedi-
ate objective of the sanctions was to create sufficient
economic pressure on Iran to force it to release the
hostages.
Three days after the US Embassy was taken, Presi-
dent Carter ordered a halt to all US oil imports from
Iran. As the crisis dragged on, the administration also
blocked all Iranian assets under US control and
informally curtailed some exports to Iran-particular-
ly military equipment already paid for by Tehran. US
impatience with Khomeini's intransigence with re-
spect to settlement proposals from both Washington
and the United Nations culminated in Carter's formal
prohibition on 7 April 1980 of all exports to Iran
except food and medicine. In fact, a de facto trade
embargo was already in place because US longshore-
men had earlier refused to load cargo-even food-
bound for Iran.
The most controversial US sanction was the blocking
of all Iranian assets in the United States and those
under the control of US banks, businesses, and indi-
viduals outside the United States. The objectives of
this action were, initially, to protect US asset claims
from Iranian default and, later, to pressure Iran to
release the hostages. The US decision froze about $12
billion of Iran's bank deposits, gold, and other proper-
ty under US control; about $5.6 billion of these
deposits and securities were held in overseas branches
of US banks, mostly in the United Kingdom. By
taking the extraordinary step of obstructing the use of
these overseas accounts, the United States doubled
the amount of Iranian assets it could immobilize-
including nearly one-half of Iran's official foreign
exchange reserves.
To make the sanctions work, the United States needed
the cooperation of its allies. To this end, US repre-
sentatives visited several European countries to dis-
cuss the sanctions from the outset of the crisis. The
United States also asked the UN Security Council in
January 1980 to adopt restrictions on trade and
financial transactions with Tehran, and in April Sec-
retary of State Vance met in Washington with repre-
sentatives from 25 countries to seek a commitment to
the sanctions.
Concerned about their own self-interest and the wis-
dom of Washington's hardline economic position, the
allies' response was less than enthusiastic. They
feared the sanctions would threaten their substantial
contractual arrangements with Iran and generally
were skeptical that sanctions would force Tehran to
free the hostages. Japan and, to a lesser extent,
Western Europe counted on Iran to meet oil import
needs. Following the Soviet veto of the UN resolution,
the EC and Japan reluctantly adopted a diluted
version of the sanctions they had earlier approved
during the Security Council discussion.
Although some allies gave tacit approval to the assets
freeze, they never did agree to the tougher measures
that Washington wanted them to impose. Generally,
the EC agreed at its ministerial meeting in May 1980
to ban:
? All export contracts retroactive to 4 November
1979, excluding food and medicine.
? All new industrial service contracts.
? All new supplier credits, loans, or credit guarantees.
The EC measures also included some financial restric-
tions on Iranian bank accounts and on the purchase of
Iranian oil at prices sharply higher than the OPEC
benchmark. Japan announced similar sanctions in
June 1980. These sanctions did not block Iranian
assets in the allies' banks, contained loopholes, and
were not strictly enforced. Moreover, neither the EC
nor Japan embargoed oil imports from Iran.
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Domestic Impact of the Sanctions
The rationale for the economic sanctions was Iran's
heavy dependence on foreign trade. In 1979 the
United States was Tehran's second-largest source of
imports, following West Germany; the member coun-
tries of the Organization for Economic Cooperation
and Development (OECD) accounted for about 70
percent of Iran's imports in 1979. Iran relied on
imports to meet most of its requirements for capital
goods, industrial raw materials, military equipment,
and consumer goods. Iran's most critical import needs
at the time of the sanctions were for food and for
spare parts for the oil industry.
The economic sanctions apparently had no effect on
Iran's decision to hold the hostages. Khomeini's re-
sponse to the sanctions was even more caustic than his
usual criticisms of the United States. Khomeini re-
portedly appeared ecstatic over Carter's break of
diplomatic relations, calling it a "final victory" for
Iran. His control of this emotionally charged issue
was so great that Iranians were probably willing to
suffer (or could be coerced into suffering) economic
costs far in excess of those exacted by the sanctions. If
anything, the hostage crisis consolidated the revolu-
tion in the hands of Khomeini and the clerics.
The sanctions exacerbated economic problems in
some sectors of the economy but did not inflict major
new hardships or create insurmountable difficulties.
Tehran managed to find alternative sources for many
denied goods-albeit at much higher prices. In other
cases, Iran either rationed commodities or fell back on
inventories. Because of the generally depressed state
of the economy, Iran probably would have cut back on
imports of most trade categories, in any event.
The only sector of the economy to suffer notably from
US economic sanctions was the transportation sector,
which faced a critical shortage of spare parts. By June
1980 about half of the civil aircraft fleet-composed
mostly of Boeing and McDonnell Douglas aircraft-
lacked sufficient spare parts. The railroads also were
in desperate need of spare parts for their US-made
locomotives. Iran suffered a general shortage of car
and truck parts as well.
Stopping the supply of oilfield equipment to Iran did
not substantially affect already depressed crude out-
put. The revolution had put the petroleum industry in
disarray; the oilworker strike from January to March
1979 and Khomeini's decision to lower oil exports
caused oil production to tumble 40 percent to an
average of 3.2 million b/d for 1979. During most of
1980 the high price for Iranian oil in the face of a soft
world oil market was the main reason oil exports fell
further to about 1.6 million b/d; the other reason was
Iraqi war damage. Nonetheless, Iran had sufficient
spare parts and excess capacity to keep its oilfields
and refineries operating at these reduced levels of
production without US equipment or technology; even
with the sanctions, oil industry equipment often could
be obtained legally from third parties and foreign
subsidiaries of US companies.
Oil income of about $33 million a day gave Iran the
financial wherewithal to cope with the sanctions. Even
without US oil purchases, Iran's oil earnings-which
accounted for virtually all Iran's income-were more
than sufficient to cover the import bill in 1980, which
was up 34 percent from 1979. Although oil exports to
other developed nations also declined, these countries
still provided an important market for Iran's oil.
Iran easily circumvented US and EC sanctions on
trade. Increased food shipments from France, Germa-
ny, and Australia more than made up for the loss in
US foodstuffs, which had accounted for about one-
fifth of Iran's food purchases abroad before the
sanctions. Food imports from the OECD in 1980 rose
30 percent over 1979 to $1.2 billion. Tehran also
turned to the Third World for new sources of food.
Several West European, Japanese, and even US firms
traded embargoed goods with Iran in violation of the
sanctions, usually through intermediary firms in the
United Arab Emirates and Kuwait. Supply arrange-
ments covered a wide range of industrial goods,
capital equipment, and chemicals, all of which fell
under the sanctions. US involvement included the sale
of goods such as engine parts, tires, appliances, and
drilling rigs.
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Table 4 Million US $
Iran: Trade With the World
Non-OPEC LDCs
1,648
2,187
Other OPEC
372
460
USSR
416
399
The blocking of financial assets did not significantly
worsen Iran's economic problems, in part because
Iran radically changed its portfolio management poli-
cies. Markazi, Iran's central bank, increased its hold-
ings of gold as a reserve asset.
Longer Term Impact on Trade
While the sanctions had little short-term impact on
Iran's ability to procure needed imports, they did
refocus Iran's trading patterns. The sanctions acceler-
ated the shift of trade from the West that had begun
before the hostage crisis. To offset the impact of the
sanctions and to lessen its dependence on the industri-
alized West, Iran signed economic agreements with
several Third World countries. Largely as a result, the
OECD share of Iranian imports fell from 83 percent
in 1978 to 66 percent in 1980.
Iran also strengthened its economic relations with
Eastern Europe. Tehran signed comprehensive trade
agreements with several of these countries to ex-
change oil for foodstuffs, industrial goods, and the
technical assistance, equipment, and material to con-
struct factories in Iran. In addition, Eastern Europe
provided military hardware to Iran. Some of these
countries helped Iran evade the sanctions by trans-
shipping Western spare parts.
Iran also signed a one-year trade agreement with
China in November 1979 calling for a doubling of
two-way trade over 1978, to roughly $160 million. In
May 1980 the two countries concluded a deal for an
unspecified amount of Iranian oil.
The USSR provided little help to Iran despite a new
trade agreement. The Soviets were unable to meet
Iran's priority need for food because of the USSR's
own agricultural problems. Moreover, the USSR
could not supply many of the components needed by
Iranian industry, which was based largely on Western
designs. As a result, Iranian purchases from the
USSR actually declined about $17 million in 1980.
share of Iran's official reserves not frozen by the The US sanctions on Iran by themselves failed to
United States amounted to about $8 billion-the force the early release of the hostages or to create
equivalent of about eight months' worth of 1980 substantial problems for the Khomeini regime:
imports. In fact, Iran increased its reserve holdings
during the period of the sanctions ? The economic impact of the sanctions was small
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far below normal as a result of the internal revolu-
tion. Moreover, most of the economic pressure that
should have resulted from the US-imposed trade
and financial restrictions was relieved by Iran's
ability to circumvent the sanctions.
? The United States failed to have the full support of
its allies and, hence, full control over the value it
attempted to deny Tehran.
? The failure or inability of the United States to
reduce substantially Iran's oil exports gave the
regime the financial wherewithal to overcome what-
ever trade disruption initially occurred.
? Finally, the United States underestimated the
strength of the revolutionary movement in Iran,
Khomeini's ability to organize and control the popu-
lace, and the willingness of Iranians to sacrifice to
the point of martyrdom for what they perceived as a
just and important cause.
Iran's war with Iraq probably had more to do with the
hostage release than the sanctions. Because of the
Iraqi invasion in September 1980, Iran desperately
needed spare parts for military equipment. War dam-
age to oil facilities and the danger to tankers serving
Iranian ports, however, eliminated a key source of
finance for these purchases. With Iran's security
threatened, the continuing assets freeze began to have
an impact.
The sanctions were probably more successful when
viewed as a response to the need to "do something"
quickly about Iran's temerity in seizing the hostages.
For both domestic and international political reasons,
the United States had to make some show of force.
Other options, such as military actions, were initially
dismissed as inappropriate or unlikely to succeed.
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Appendix L
US Sanctions Against
USSR (Afghanistan) (1980-81)
Background to the Sanctions
In January 1980, following the Soviet military inter-
vention in Afghanistan, the United States and its
major allies announced a sanctions program against
the USSR. All the governments involved issued im-
mediate, and in most cases, strong condemnations of
the Soviet invasion. After consultations, most of the
allies initially agreed to back the US-led partial grain
embargo. The United States, in addition, proposed a
number of specific economic denial measures covering
the supply of other agricultural products, various
kinds of high-technology goods, and government cred-
its and credit guarantees (see inset). Finally, the
United States proposed a Western boycott of the 1980
Olympic Games to be held in Moscow. The sanctions
effectively ended with the lifting of the grain embargo
in spring 1981.
The stated objective of the sanctions was to bring
about a withdrawal of Soviet troops from Afghani-
stan. None of the parties to the sanctions, however,
was willing to intervene militarily to achieve this
result, and most were convinced that nothing short of
force would work. Thus, the primary objective of
these sanctions became the unstated one of punishing
the Soviets for their aggression. Of the economic
denial measures introduced or suggested, three were
aimed at hindering Soviet plans for upgrading con-
sumer diets (grain embargo and denial of superphos-
phoric acid and fishing rights). Several were designed
to hinder Soviet efforts to eliminate bottlenecks inter-
fering with economic growth (denial of oil and gas
equipment, metallurgical equipment, communications
and automotive equipment, and computers-as well
as the proposed limits on Western government cred-
its). The Olympic boycott was aimed primarily at
embarrassing Moscow politically, and secondarily at
denying the USSR some hard currency.
Compliance With the Sanctions
The US-proposed sanctions did not draw strong sup-
port from US allies, who made it clear from the outset
that-for both political and economic reasons-they
wanted to keep the door to the Soviet market ajar.
Moreover, each was mindful not to take a markedly
tougher stand on sanctions than its neighbor. In the
case of grain, Argentina, a major exporter, refused to
embargo any sales. The varying degrees of commit-
ment to the sanctions meant that acceptance of and
compliance with the US proposals also varied. Most
countries put a temporary de facto hold on official
export credits, but some held out longer than others.
The national Olympic committees in West Germany,
Japan, and Canada boycotted the Olympic Games;
the committees in Britain, France, and Italy did not
boycott, although participation was limited.
In the months immediately following the US intro-
duction of sanctions, the debate over the issues had a
divisive effect on the Western alliance. The West
Europeans, in particular, were highly critical of the
Carter administration's handling of the matter, claim-
ing that the United States had no long-term strategy
for dealing with the Soviets and that the United
States did not appreciate the West Europeans' posi-
tion on their relationship with the USSR and the need
to keep channels of communication open. The debate,
however, served to heighten awareness of the need for
greater policy coordination in dealing with the Sovi-
ets. A consensus was reached on the need to strength-
en the Coordinating Committee for East-West Trade
Policy (COCOM), for example, even though the par-
ties did not agree on the means. In addition, the
discussion involving the US request for less conces-
sional terms on new credits to the USSR helped lay
the groundwork for the 1982 OECD decision to move
the USSR into a higher rate category for official
export credits.
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Principal US-Proposed Economic Denial
Measures Against the USSR
Agriculture
? Limit the USSR to purchases of the 8 million tons
of US-origin grain guaranteed in each of the
1979/80 and 1980/81 US-USSR Long-Term Agree-
ment years (1 October-30 September accounting
basis).
? Agreement among all the major grain exporters
except Argentina not to replace denied US grain.
? Denial of outstanding contracts for oilseeds, meals,
and poultry as of 4 January 1980.
? Ban the sale of processed agricultural products
made in foreign countries from US raw products
or example, soybean meal made from US beans).
? Suspend shipments of I million tons a year of US-
origin superphosphoric acid to the USSR.
? Reduce Soviet fishing quotas in US waters from
original 1980 figure of 420,000 tons to 75,000 tons.
Technology
? Assurances that West European and Japanese firms
would not be allowed to bid for projects US firms
could not pursue because of the suspension order on
export licenses.
By the spring of 1981, the United States had decided
that the domestic political costs of the partial grain
embargo were too high relative to its effect on the
USSR. US farmers-the group most affected by the
sanctions-had lost grain and soybean sales to the
USSR worth perhaps $1.3 billion.
The lifting of the US grain embargo further weak-
ened allied support for other US sanctions. Western
governments acted quickly to protect their commer-
cial interests.. The EC eliminated restrictions on sales
of grain to the USSR and planned to resume subsidies
on exports of grain and other agricultural products.
The Canadians, who were taking advantage of the US
? A US Government review of all outstanding and
pending export license applications for sale of
equipment and technology to the USSR.
? Tighter controls on equipment and technology sales
to the USSR within COCOM channels to include:
Consideration of a policy on process know-how
to include COCOM review of any large ($100
million plus) transaction in which Western
technology contributes to the development of
Soviet industry in a militarily relevant area,
even if neither the technology nor the equipment
is currently on the list of COCOM-embargoed
items.
- Agreement on new review procedures for fiber
optics, lasers, and polycrystalline silicon essen-
tial in the manufacture of integrated circuits.
- Agreement on strengthening controls on com-
puter and related software sales.
Other
? A total cutoff of government-supported credits and
guarantees subsequently revised to a request for
less concessionary terms on new credits.
embargo to pry better terms out of Moscow for grain,
dropped that tactic and rushed to sign a five-year
agreement. On the nonagricultural front, Tokyo be-
gan to argue that US lifting of the grain embargo
gave Japan a freer hand in selling high-technology
products to the USSR, although within COCOM the
no exceptions" policy on sales of embargoed technol-
ogy has not been formally abandoned.
In the case of the grain embargo, the USSR was able
to replace only 9 million tons of the 17 million tons
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denied by the United States between January and the
end of September 1980. Thus, total grain imports for
the 1979/80 marketing year (MY) (October/Sep-
tember) were roughly 25 percent below the expected
level. In the MY 1980/81 year, however, Moscow was
able to line up nearly all the grain its ports could
handle while relying on the United States for only 9.5
million tons, or one-fourth of the total, as compared
with nearly two-thirds in the year prior to the embar-
go. The roughly 1.5 million tons of soybeans and
soybean meal denied by the United States in the 1980
MY year were fully replaced by Argentina and firms
in Western Europe. EC, Canadian, and Australian
grain exports to the USSR all increased in 1980
compared with 1979.
The sanctions resulted in some delay in Moscow's
effort to upgrade its domestic fertilizer industry. The
United States is the only large-volume source of
superphosphoric acid (SPA)-a chemical that the
Soviet "liquid complex" fertilizer plants purchased
from France were designed specifically to use. The
suspension of US SPA sales between early 1980 and
mid-1981 delayed the liquid complex fertilizer pro-
gram by more than a year because most of the
available phosphoric acid was of a lower grade and
unsuitable for use in the program.
Western sanctions probably did not impair Soviet
industrial production appreciably, in large part be-
cause France, West Germany, and Japan did not fully
support restrictions on trade in technology and equip-
ment. While orders by the Soviets for Western ma-
chinery and equipment fell dramatically for a while,
new Western contracts to supply equipment rebound-
ed in second-half 1980. Nevertheless, the interruption
in US technology sales retarded some urgently needed
modernization in the USSR. For example, Soviet oil
and gas exploration schedules were set back by delays
in granting export licenses for such items as drillships
and rigs. The revocations of licenses for the Dresser
drill bit plant complicated efforts to improve drilling
efficiency. And US denial of computer parts and
assembly line equipment has further hampered an
already lagging Soviet effort to double production
capacity for diesel engines at the Kama truck plant.
The impact of these denials, however, is likely to
diminish over time as West European and Japanese
firms continue to step in as US replacements.
The boycott of the Olympics deprived Moscow of the
prestige and propaganda opportunities it hoped to
extract from well-run, noncontroversial games. It had
little effect on Soviet hard currency earnings, howev-
er, because most of the receipts from tourism and
broadcast rights had been prepaid.
On the political side, the economic sanctions height-
ened the debate within the USSR between advocates
of expanding trade with the West and those favoring
greater autarky. Sanctions served to strengthen the
hand of those favoring self-sufficiency who have long
argued that the USSR is dissipating its patrimony by
exporting vital raw materials for Western technology.
Thus, the denial measures introduced an element of
uncertainty at a time when Soviet officials were
putting the finishing touches on the 1981-85 plan and
reinforced doubts within the leadership about the
viability of Soviet-Western trade over the long term.
The sanctions have not, however, deterred Moscow
from the pursuit of its goals in Afghanistan.
The sanctions against the USSR following its inter-
vention in Afghanistan illustrate the difficulty of
implementing economic denial measures on a multi-
lateral basis even though potential sponsors generally
agreed on the objectives, both stated and unstated:
? The United States and others were unable to control
supplies of grain to the Soviet Union because a
major grain exporter refused to participate in the
embargo.
? The intensity of the US commitment to the grain
embargo was affected by domestic political
considerations.
? Apart from the grain embargo, there was no consen-
sus among the major sponsors on how to carry out
the objectives.
The sanctions did achieve, in some measure, the
objective of punishing the Soviets for their aggression:
? Grain imports in 1980 were reduced by 8 million
tons and restrictions on sales of SPA acid delayed
the liquid complex fertilizer program, thus adversely
affecting Soviet plans to upgrade consumer diets.
? Interruption of US technology sales delayed indus-
trial modernization efforts.
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Appendix M
US Sanctions Against USSR
(Poland) (1981-82)
On 29 December 1981, President Reagan imposed
sanctions against the USSR in response to Moscow's
"heavy and direct responsibility for the repression in
Poland." They included:
? Suspension of all Aeroflot service to the United
States.
? Closure of the Soviet Purchasing Commission
(SPC).
? Suspension of the issuance or renewal of licenses for
the export to the USSR of electronic equipment,
computers, and other high-technology materials.
? Postponement of negotiations on a new long-term
grain agreement.
? Suspension of negotiations on a new US-Soviet
maritime agreement and a tightening of port access
controls.
? Licensing requirement for exporting to the Soviet
Union an expanded list of oil and gas equipment,
including pipelayers, and suspension of the issuance
of such licenses.
? Termination of the US-Soviet exchange agreements
coming up for renewal in the near future, including
the agreements on energy and science and technol-
ogy, and a complete review of all other US-Soviet
exchange agreements.
Sanctions were also levied against Poland in Decem-
ber 1981 (see inset).
When the sanctions failed to produce the desired
result (a six-month review period had been allowed),
the Reagan administration announced a further re-
striction on 18 June 1982-a prohibition on the export
to the Soviet Union of all oil and gas equipment
produced under US license.
Objectives of the Sanctions
The stated objective of the sanctions was the restora-
tion of basic human rights in Poland as provided for in
the Helsinki Final Act. If this objective was not
attainable, then the administration's unstated goal
was to punish the Soviets economically as severely as
possible. The sanctions on the export of oil and gas
equipment were considered to be the most damaging
provisions because they might delay, or certainly
increase, the cost of completing the Siberia-to-
Western Europe natural gas pipeline. These restric-
tions were largely aimed at halting the delivery of
rotor sets produced by General Electric for gas tur-
bines being built by GE's West European manufac-
turing associates and destined for the Soviet pipeline
compressor stations
The pipeline has been viewed with alarm by Washing-
ton from its inception. The primary concern was the
degree of political leverage that the Soviets might
gain from West European reliance on the USSR as a
future major supplier of gas. With completion of the
pipeline, West European countries could be relying on
Soviet gas for nearly one-fourth of their gas require-
ments by 1990. Gas supplies seemed particularly
vulnerable because gas is difficult to replace on a
short-term basis (because of the lack of a spot market
and high startup costs) and the sectors most depen-
dent on gas-residential and commercial-are the
least able to cope with an abrupt fuel supply interrup-
Of equal concern was the fact that Soviet purchase of
Western oil and gas equipment and technology would
add to Moscow's export capabilities and hard curren-
cy earning power and relieve the pressures for reform
and the need to choose between financing additional
military growth and satisfying the needs of consum-
ers. The pipeline is vital to Moscow's prospects for
earning sufficient hard currency beyond the mid-
1980s to offset a substantial part of the expected fall
in oil export revenues. It was estimated that revenues
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Sanctions Against Poland
The sanctions against Poland included:
? Suspension of Polish civil aviation privileges in the
United States.
? A halt in the renewal of the Export-Import Bank's
line of credit insurance to the Polish Government.
? Suspension of the right of Poland's fishing fleet to
operate in US waters.
? Proposal to our allies that COCOM controls be
tightened on high-technology exports to Poland.
These US sanctions were followed in January 1982
by a set of NATO restrictions, which included a ban
on future government-guaranteed credits for goods
other than food and the suspension of negotiations on
service payments due on Poland's debt to official
creditors. Negotiations on Poland's reentry into the
IMF were also suspended.
In December 1983 the Polish Government claimed
that the damages to the Polish economy resulting
from Western sanctions amounted to more than $10
billion in the period 1982-83. In light of the econo-
my's problems, however, it is hard to separate the
impact of sanctions from the effects of prudent mar-
ket-oriented decisions that would have reduced West-
ern trade ties to Poland in any case. The denial of
Most Favored Nation treatment and suspension of
fishing rights did result in losses to specific indus-
tries. However, the suspension of airline service (the
route to the United States reportedly was unprofit-
able) and Poland's avoidance of debt service repay-
ments in 1982 and 1983 resulted in a cash flow gain
that probably more than compensated for such losses.
In January 1984 the United States lifted the ban on
fishing (but with quantitative limits imposed) and
allowed 88 charter flights to the United States by the
Polish air carrier. In late 1983, Western governments
resumed debt negotiations with Poland, resulting in
the July 1985 rescheduling of $11 billion in arrears
accumulated in the period 1982-84. Talks concerning
IMF entry resumed in 1984, and Warsaw expects
membership in the first half of 1986.
from the pipeline deal alone could reach $5 billion
annually in the early 1990s when all credits are
repaid, and total gas earnings (including existing
contracts) could be roughly $10 billion. Thus the
pipeline would support Moscow's purchases of West-
ern goods and technology, which are increasingly
important to the improvment of industrial produce
ty and the reduction of agricultural shortfalls
The United States expected that the Soviets would
also suffer some economic loss from the other sanc-
tions, but to a lesser extent, particularly since trade
had already been disrupted by the sanctions imposed
in 1980 and 1981 after the Soviet intervention in
Afghanistan. These provisions were largely intended
to be irritants that reminded the Soviets that normal
trade relations were not possible without some behav-
ior modification. The activity of the SPC, for exam-
ple, was already at a low level, and other Soviet
commercial organizations in the United States were
not affected by its closure.
Compliance With the Sanctions
The December 1981 US sanctions evoked weak sup-
port from our allies. In January 1982, NATO mem-
bers pledged not to undercut each other's sanctions
against Poland and the USSR. In March the EC
Commission recommended a reduction in 1982 of
imports of nearly 100 products from the USSR by 50
percent as compared with 1980 imports. These restric-
tions did not apply to contracts entered into before the
new regulations came into force and did not include
energy products. Moreover, EC member countries
further weakened these provisions by eliminating ad-
ditional products.
The West Europeans generally favored symbolic ges-
tures and resented the US attempts to slow the gas
pipeline construction. They viewed Soviet gas as a
relatively low-priced substitute for uncertain Middle
Eastern oil and anticipated that the Soviet pipeline
equipment orders would ease their substantial unem-
ployment problems. In addition, they held that in-
creased East-West economic interdependence would
lead to more responsible Soviet behavior. Even in the
event of a total cutoff of Soviet gas deliveries, the
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West Europeans believed that they could cope reason-
ably well through a combination of conservation, fuel
switching, temporary increases in domestic gas pro-
duction, and drawdown of gas stocks.
The attitude of the allies toward the United States
turned to hostility when the sanctions were expanded
in June. Most of the Big Seven 22 economic partners
believed that earlier in the month at their Versailles
meetings the United States had agreed not to press
the allies on the Siberian pipeline if they would
exercise "commercial prudence" in future extensions
of credit to the USSR and Eastern Europe. Yet the
sanctions imposed barely two weeks later were target-
ed at the West European associates of US companies
that were participants in the pipeline construction.
The previous sanctions had prohibited export licenses
for the export of machinery by US firms only. The
new regulations attempted to prohibit the export of
any machinery manufactured with US licenses. The
West Europeans believed that the extraterritorial and
retroactive features of the measures were a serious
infringement of their sovereignty. They saw the sanc-
tions as further evidence of US indifference to West
European political and economic difficulties and as
the latest example of Washington's predisposition to
interpret international trade practices unilaterally. F
Faced with the prospect that the US embargo would
delay delivery of the Western gas turbines ordered for
the gas export pipeline, the Soviets initiated a crash
program during 1982 and 1983 to produce 16- and
25-megawatt turbines. Although lower in efficiency
and less reliable than Western turbines, they were
workable substitutes. The decision to use a combina-
tion of these and West European equipment on the
pipeline and to mount a massive effort to accelerate
pipeline construction enabled the Soviets to overcome
much of the disruption and potential delay caused by
the US embargo. Pipelaying operations on the gas
export pipeline were completed in September 1983.
Gas deliveries to Western Europe began in October
1983 and reached 2 billion cubic meters of additional
gas in 1984-less than originally scheduled, largely
because of the warm winter and soft demand for gas.
The Soviets assigned a high priority to this project not
only because of the substantial hard currency that the
pipeline would earn but also because the imposition of
sanctions had made completion of the pipeline a
matter of national prestige and had provided an
opportunity to foment dissension in the Western
alliance.
The sanctions, however, imposed costs on the Soviet
economy. First, the imposition of sanctions in addition
to existing uncertainties in East-West trade caused by
East European debt problems and by a Western
review of credits to the USSR contributed to the
emergence of a new climate in the West that made it
more difficult for Moscow to conduct trade on terms
as favorable as those obtained in the past. Second, the
myriad of inefficiencies associated with the substitu-
tion of domestically manufactured equipment boosted
production costs in the affected industries and, in
turn, imposed costs on other sectors of the economy.
Third, the diversion of resources to the export pipeline
probably slowed the pace of development of other
important Soviet projects such as the Tyumen oil-
fields. Output from these fields went into decline in
1985 because timely countermeasures had not been
As a result, Paris ordered French firms to honor their
Soviet contracts, and London-acting under legisla-
tive authority-required British firms to do the same.
Bonn approved of the French action and stated that it
could not stop the West German firms involved from
delivering embargoed material to the USSR. Rome
said that pipeline contracts would be honored but did
not order Italian firms to do so. Because of the furor
in Western Europe and the continued determination
to participate in the pipeline project, the administra-
tion in early November 1982 reduced the sanctions on
oil and gas equipment to the level of controls that had
applied in 1980. The United States decided to concen-
trate instead on implementing a proposal for a com-
mon allied approach to East-West trade that had been
agreed upon (without French accord) in March 1982.
This included common policies on export credit re-
straint, interest rate subsidies, energy alternatives in
Western Europe, and tighter controls on the transfer
of advanced technology from West to East.
taken.
Except for the export restrictions on oil and gas
equipment, the sanctions had little economic impact
'= The Big Seven are the United States, Canada, Japan, the United
Kingdom, France, West Germany, and Italy.
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on the USSR. The postponement of negotiations on a
long-term grain agreement did not restrict Soviet
purchases of US grain. The agreement was extended
on a year-by-year basis, and a new five-year agree-
ment was signed in August 1983. The revocation of
Aeroflot landing rights, port restrictions, postpone-
ment of a new maritime treaty, and suspension of
exchange programs were never intended to inflict
major economic harm on the USSR. They were
meant to highlight the general deterioration in bilat-
eral relations; conversely, their lifting signified a thaw
in US-Soviet relations. After the May 1985 meeting
of the Joint US-USSR Commercial Commission-its
first meeting since 1978-progress was madam
resolving all of these longstanding issues.
The sanctions failed to achieve their primary aim-
the immediate lifting of martial law in Poland-or
their secondary aim-the substantial delay of the gas
export pipeline by the Soviets and a major rethinking
by the West Europeans of their potential dependence
on Soviet gas supplies. However, they did achieve to a
considerable extent their tertiary aim; they caused the
Soviets to mount a costly campaign to compensate for
the disruption in their imports of Western equipment,
which probably had a negative impact on efficiency
and on the pace of development in other sectors such
as oil. The United States also managed to obtain a
West European commitment to limit purchases of
Soviet gas to no more than 30 percent of total
requirements.
These gains came at some economic and political cost
to the United States. Economically, some US exports
were replaced by West European and Japanese equip-
ment, and domestic Soviet production capacity was
developed that ultimately lost markets and jobs for all
the Western allies. The growth in foreign capabilities
to produce gas turbine compressors and oilfield equip-
ment systems and hardware also represented a loss of
future US control over the export of these items.
These sanctions added to Moscow's perception that
the United States was an unreliable trading partner,
increasing Soviet determination to-redirect trade
away from US firms in the future. Politically, the
sanctions-particularly the second round-created a
serious but temporary rift between the allies.
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Appendix N
European Community Sanctions
Against Argentina (1982)
Background to the Sanctions
On 2 April 1982, Argentina militarily occupied the
Falkland (Malvinas) Islands. On the following day,
the UN Security Council adopted Resolution 502,
which demanded immediate cessation of hostilities
and withdrawal of Argentine troops and called on
Argentina and the United Kingdom to resolve their
differences diplomatically.
The United Kingdom immediately dispatched a fleet
toward the islands, invoking the right of self-defense
under Article 51 of the UN Charter. On 3 April,
Prime Minister Thatcher froze Argentine assets in the
United Kingdom. This move was quickly followed by
invasion were to take place, the sanctions would have
failed to achieve their primary objective of forcing
negotiations.
Unable to achieve the unanimity required to renew
the Community-mandated sanctions by 16 May, the
EC Foreign Ministers announced action by their
separate governments to maintain economic pressure
on Argentina. Ireland and Italy stated they would
avoid "distortions of trade," which meant they intend-
ed to resume imports from Argentina but not for
cross-trade purposes. The Danish Government re-
newed its sanctions pending parliamentary adoption
of national measures for sanctions. The remaining six
member states announced a renewal of the existing
a ban on trade with Argentina.
In addition to bilateral action, the United Kingdom
embarked on a comprehensive worldwide diplomatic
campaign to induce other countries to apply maxi-
mum pressure on Argentina to withdraw its troops
and resort to a negotiated solution to the territorial
dispute over the Falklands. On 6 April, at a meeting
of the permanent representatives of the EC Ten in
Brussels, the United Kingdom requested a firm show
of EC solidarity and implied that it would like to see a
total ban on imports from Argentina. The EC re-
sponded to the British request on 16 April by agreeing
to a 30-day ban on imports from Argentina. This was
the sternest punitive measure taken by the EC, al-
though it was not as comprehensive as the British had
requested.
As the British fleet approached the Falklands and it
became clear that the United Kingdom would not
negotiate while Argentine troops remained on the
islands, EC solidarity faded. Ireland publicly stated
that it opposed British use of force to regain the
islands. The Italian Government was under strong
domestic pressure to lift the sanctions, primarily
because of cultural and ethnic links to Argentina.
Other members, such as the Netherlands and Den-
mark, were concerned that the sanctions were becom-
ing irrelevant to the conflict. They argued that, if an
sanctions for one week.
A week later, on 24 May, the EC Foreign Ministers
met again to discuss the sanctions issue. This time it
was announced that the members would extend indef-
initely the separate national measures announced the
previous week.
After the fall of Port Stanley, the British wanted to
maintain the sanctions until Argentina formally
agreed to end hostilities. However, on 21 June the EC
announced that economic measures would be lifted by
the member states the following day. The EC noted
that some of the Ten that had introduced arms
embargoes on a national basis would continue these
measures for the time being.
Objectives of Sanctions
The explicit goal of the sanctions was to pressure
Argentina to comply with UN Security Council Reso-
lution 502, which demanded Argentine withdrawal
from the Falklands and resumption of negotiations to
settle the dispute. The relative importance of EC
trade to the Argentine economy led many Europeans
to conclude that the trade embargo would exert
considerable pressure on the Argentine regime to
come to the negotiating table.
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An important unstated motive of the EC sanctions
was to demonstrate that the Community would re-
spond to a clear-cut case of aggression against one of
its members. Unlike controversial sanction cases such
as Poland and Afghanistan, where the Community
was divided on the appropriate form of action, Argen-
tina had attacked an EC member state. Many EC
countries felt that Argentina's sense of international
isolation would be increased by EC solidarity.
Finally, the continental EC countries were conscious
of the growing unpopularity of the EC within the
United Kingdom and the United Kingdom within the
EC. EC agricultural policies and the cost of EC
participation were sensitive domestic political issues
for Thatcher's Conservative government. Decisive po-
litical support from the EC on the Falklands issue was
seen as a possible way to increase the EC political
standing in the United Kingdom while coaxing the
Thatcher government to be more compromising on
internal Community issues.
The specific sanctions imposed by the EC were far
short of the comprehensive measures taken by the
United Kingdom. They applied only to imports from
Argentina and were for a 30-day period. Specifically
exempted from the sanctions were contracts that had
already been signed and shipments under way. Given
the amount of Argentine goods subject to long-term
contracts and the length of time it takes to ship goods
from Argentina to the EC, most trade was not
affected by the ban.
Only if the 30-day ban had been extended would the
measures taken collectively by the EC have had
practical effect. It was clear from the outset, however,
that renewal of the sanctions would be difficult, given
the unwritten procedural requirement for unanimity
within the Community and the reluctance of Ireland
and Italy to support continued sanctions. It was the
symbolic gesture of the EC decision that was intended
to produce diplomatic and psychological effects.
The EC sanctions were not nearly as effective as the
separate actions of particular states. Both France and
West Germany were strong supporters of the British
and quickly moved to impose arms embargoes on
Argentina. Other arms suppliers-including Belgium,
the Netherlands, Italy, Sweden, Switzerland, Austria,
and Norway-also cut off arms sales. Because Europe
was the primary suppliers of arms to Argentina,
access to military equipment was almost completely
EC sanctions were part of the broader context of the
diplomatic and economic pressure being applied
against Argentina. In a wide variety of multilateral
forums, Argentina found little support for its military
action. In the Security Council and the EC there was
explicit condemnation. Argentina was unable to gain
Nonaligned Movement support for its positions in the
UN General Assembly (UNGA), UN Conference on
Trade and Development (UNCTAD), General Agree-
ment on Tariffs and Trade (GATT), and even UN
Educational, Scientific, and Cultural Organization
(UNESCO). The response of the OAS was largely
rhetorical, and moderate Latin states insisted on
watering down Argentine resolutions so that they
would have no legal effect.
In spite of Argentine vulnerability to economic sanc-
tions, the nature of the dispute between Argentina
and the United Kingdom reduced the leverage of
economic coercion. It became clear as the crisis
developed that Prime Minister Thatcher had broad
domestic political support to retake the Falklands by
force. Within the Conservative Party she would have
faced strong opposition to a negotiated settlement that
did not achieve total Argentine withdrawal without
any commitment on the sovereignty issue.
Argentine President Galtieri and the military govern-
ment had little room to negotiate. National sentiment
in Argentina favored retaking the Falklands. As it
became clear that a favorable diplomatic settlement
was unlikely, the leadership decided that it would be
better to surrender on the battlefield after an honor-
able fight than to surrender at the negotiating table.
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The sanctions, combined with other factors, however,
may have kept the military conflict in bounds. Al-
though Argentine leaders decided to fight in the
Falklands rather than negotiate withdrawal, there
was also talk of a protracted war against Britain. Had
Britain stood alone, this might have been a more
attractive policy alternative; but, with the Argentine
economy already weak, little prospect of resupply of
military equipment, and with the threat of renewal of
the EC ban on imports, this was not a realistic option.
The EC sanctions against Argentina are the classic
case of a diplomatic gesture. At little cost the Com-
munity demonstrated solidarity with a member state
that had been the victim of aggression. Had the
sanctions been in effect for a lengthy period, their
economic impact might have provided incentive to
Argentina to remove the troops and return to the
negotiating process. However, the intransigent posi-
tions of both the United Kingdom and Argentina and
the British willingness to use force to prompt a rapid
resolution of the crisis meant that economic sanctions
had little influence in resolving the conflict.
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Table 5
Sanctions: Case Summaries
League of Nations sanctions Italian invasion of Ethiopia.
against Italy
Trigger
Objective
Provisions
The Arab boycott of Israel Prospect of the establishment of a
Jewish state in Palestine.
USSR sanctions against the Chinese assertion of independence
People's Republic of China on ideological and foreign policy
issues.
OAS and US sanctions against Trujillo-supported attempt to as-
the Dominican Republic sassinate Venezuelan President
Romulo Betancourt.
US and OAS sanctions against The Castro government's domestic
Cuba and international policies, particu-
larly alliance with the Soviet
Union,
UK and UN sanctions against Rhodesia's declaration of
Rhodesia independence and failure to agree
to permit majority participation in
the government.
French sanctions against Dispute over oil prices and nation-
Algeria
alization of French oil holdings in
Algeria.
OAPEC oil embargo against 1973 Middle East war,
the United States
US sanctions against Pakistan Under terms of the Nuclear Non-
Proliferation Act, Pakistan's refus-
al to accept IAEA safeguards on its
existing nuclear facilities required
total ban on US nuclear transfers,
The Foreign Assistance Act pro-
hibits provision of economic and
military assistance if any nonnucle-
ar weapons state acquires repro-
cessing technology or detonates a
nuclear weapon.
US trade sanctions against A lengthy series of human rights
Uganda violations by Idi Amin,
US sanctions against Iran Seizure of US hostages.
US sanctions against USSR Soviet invasion of Afghanistan,
(Afghanistan)
US sanctions against USSR Imposition of martial law in
(Poland) Poland,
European Community sanctions Argentina's invasion of the
against Argentina Falklands,
Stated, To make the war so costly for Italy that a
diplomatic solution to the dispute could be found,
Unstated: Inhibit Hitler's expansionist plans by
demonstrating that the collective security concept
of the League could work.
To hinder the economic and military growth of
Israel. To serve as a sign of opposition to Israel
and as a useful propaganda device.
To give China a foretaste of even more unpleas-
ant consequences that would ensue if Beijing
persisted in challenging Soviet leadership and
Soviet doctrine. To change ideological and for-
eign policy courses.
Stated: To punish the government of the Domini-
can Republic for the assassination attempt.
Unstated: To force political liberalization or elim-
ination of the Trujillo regime.
Broad range of trade sanctions and other econom-
ic denial measures,
Stated: To end the Smith rebellion and restore
legitimacy so that ultimately the country could be
granted independence under majority rule, Un-
stated: Wilson wished to unseat Smith rather
than just induce a return to negotiations. Wilson
also wanted to head of any growth in domestic
pressures for military intervention or use of force
by other countries. To maintain Britain's positive
image and reputation in the international
community.
Force the Algerian Government to reconsider
compensation terms and the tax-reference price
of oil.
To serve as a symbol of opposition to US support
for Israel. To demonstrate solidarity with Egypt
and Syria. To encourage the United States to
press Israel to return occupied Arab land,
To discourage the Pakistani military regime from
pursuing a nuclear weapons program. To slow
development of the program by persuading other
nuclear weapons states not to export sensitive
nuclear materials, equipment, and technology to
Pakistan. To demonstrate that the United States
would withhold nuclear cooperation and aid from
a nonnuclear state that is attempting to develop
nuclear weapons,
Stated: To end human rights violations in
Uganda. Unstated: To put enough pressure on the
Ugandan economy to undercut Amin's control
and thereby result in his ouster.
To create sufficient economic pressure on Iran to
force it to release the hostages,
Stated: To bring about a withdrawal of Soviet
troops from Afghanistan, Unstated: Punish the
Soviets for their aggression.
Stated: To restore basic human rights in Poland.
Unstated: To delay or increase cost of construc-
tion of gas export pipeline and convince West
Europeans to reduce dependence on future Soviet
gas supplies,
Stated: To pressure Argentina to comply with
UN Security Council Resolution 502 demanding
Argentine withdrawal from the Falklands and
resumption of negotiations. Unstated: To demon-
strate that the Community would respond to
aggression against one of its members,
Cut all trade and financial ties to Italy, Did not
include oil,
Primary: Bans all trade between Arab states and
Israel, Secondary: Bans commerce with compa-
nies that contribute significantly to Israel's eco-
nomic or military strength, Tertiary: Sponsors
require third-country firms to refuse to use prod-
ucts or services of blacklisted companies in fulfill-
ing a contract or sale.
Cancellation of Soviet technical assistance with
withdrawal of 2,000 experts,
Suspension of trade in arms and implements of
war, later expanded to include trade in petroleum
products, trucks, spare parts, and other items.
Initial: To remove Castro from power, Subse-
quently: To discredit the Cuban economic model
and make Cuba and the Soviet Union pay a high
price for continued alliance and for the efforts to
export revolution.
Four sets of UK and UN sanctions banning a
broad range of trade and other relations with
Rhodesia.
Suspension of lifting of Algerian oil by French
companies. Efforts to block extension to block
extension of IBRD credits and delay of US gas
purchase.
Prohibit shipment of oil to the United States, Cut
oil production.
Ban on US nuclear transfers. Cutoff of aid.
Prohibition of trade with Uganda.
Initially to embargo all US oil imports from Iran;
block all Iranian assets under US control; infor-
mally curtail some exports to Iran; particularly
military equipment. Later, prohibition of all ex-
ports to Iran except food and medicine.
Embargo of grain sales; denial of superphosphoric
acid and fishing rights, and tighter controls on
shipments of oil and gas equipment, metallurgical
equipment, communications and automotive
equipment, and computers; Olympic boycott,
Suspension of licenses for export of oil and gas
equipment and high-technology items; suspension
of Aeroflot service to the United States; closure of
Soviet Purchasing Commission; postponement of
negotiations on a new long-term grain agreement
and on a new US-Soviet maritime agreement and
tighter port controls; termination of US-Soviet
exchange agreements.
Prohibited imports from Argentina for a 30-day
period, Contracts that had already been signed
and shipments under way were exempted.
Few hardships felt by Italian people. Unemploy-
ment declined, and family income rose during
sanctions. Little if any impact on the Italian
Government's ability to maintain political leader-
ship or on Italy's commitment to continue the
war.
Until 1975, little discernible economic impact.
After 1975, some foreign firms may have decided
to forgo trade with Israel.
Withdrawal of Soviet experts dealt the Chinese a
heavy blow whose effects were felt many years
afterward. Combined with three years of bad
harvests and the mistakes of the Great Leap
Forward, sanctions helped precipitate a domestic
crisis in 1960 through 1962.
Sanctions hit the Dominican economy when al-
ready sagging economic performance hampered
adjustment, The Dominicans were able to cir-
cumvent some of the sanctions by purchasing
arms, vehicles, and petroleum. Economic deterio-
ration fostered political unrest in the middle and
upper classes, the Army, and the Catholic
Church, After Trujillo's assassination, the re-
maining family and supporter lost control of the
government.
The sanctions significantly damaged Cuba's
growth and general development. The sanctions
did little to weaken Castro's internal political
position.
Economic impact affected some sectors, notably
agriculture, more than others, but generally Rho-
desia's ability to adjust internally-combined
with circumvention of the sanctionssubstantial-
ly reduced economic effects.
Algerian production dropped at least 25 percent
in 1971, but impact undermined by developments
in world oil market where rising prices enabled
the Algerians largely to offset the losses from
production cutbacks.
The sanctions led to widespread fuel shortages in
the United States and other industrial countries
for a relatively short time, The embargo awak-
ened the United States to-the costs of importing
substantial amounts of oil, leading to the begin-
ning of major adjustments in US domestic and
foreign policies. The embargo had a powerful
demonstration effect on other industrial countries
that were heavy consumers of Arab oil; they
began to voice greater support for Arab positions,
Sanctions did not halt Pakistan's efforts to devel?
op nuclear weapons capability. Economic impact
was minimal.
Despite its economic problems and heavy depen-
dence on the US market, Uganda suffered little
from US trade sanctions.
Little impact on Iran's ability to procure needed
imports but did change its trading patterns. Iran
circumvented US and EC sanctions on trade.
Blocking of financial assets did not significantly
worsen economic problems. Sanctions, by them-
selves, failed to force early release of the
hostages.
In 1980 USSR able to replace only 9 million of
17 million tons of grain denied by the United
States, but the impact declined the next year as
the USSR more fully replaced denied grain sup-
plies. Some delay in Moscow's effort to upgrade
domestic fertilizer industry. Retarded some mod-
ernization programs, Deprived Moscow of some
prestige and propaganda opportunities from the
Olympics.
Despite initial delay and confusion caused by
embargo on gas rotors and turbines, pipeline
successfully completed on schedule with domestic
and West European equipment, This imposed
costs on the Soviets in terms of efficiency and
negative impact on other sectors caused by high
priority of pipeline project. Other sanctions had
little economic impact.
No significant economic impact. Reduced chance
for a protracted war against Britain.
71
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Conclusions
Failure of these sanctions provides a classic dem-
onstration of the problems involved in establish-
ing and implementing multilateral sanctions.
Membership did not agree on objectives; sanc-
tions came late, limited, and incomplete; League
did not have power to enforce sanctions; and
membership did not control critical strategic
goods.
Main achievement of boycott has been the sym-
bolic expression of Arab solidarity against Israel.
The boycott sponsors do not control the supply of
goods Israel imports and do not effectively en-
force the sanctions.
Sanctions failed to change Chinese ideological or
foreign policies. In fact, they led to adverse
political consequences for their sponsor. The Chi-
nese leadership was so committed to its ideologi-
cal break with the Soviets and to establishment of
its own independent foreign policy that it was
willing to bear the considerable economic and
political cost of the sanctions. The sanctions
provided the Chinese with a scapegoat to explain
economic failures. Chinese adjustment to sanc-
tions ultimately left Moscow with limited eco-
nomic means to influence Beijing's behavior, The
sanctions did punish the Chinese for their
conduct.
The sanctions met with considerable success in
exacerbating deteriorating economic conditions
and providing fuel for the floundering opposition,
After Trujillo's death, the continuation of sane-
tions forced the Trujillo family and supporters to
yield control of the government.
The Castro regime was so committed to its
revolutionary policies that it was willing to bear
the considerable cast of sanctions Sanctions pro-
vided Castro with a scapegoat for domestic prob-
lems, which he exploited to gain acceptance of
radical changes in Cuban society, OAS participa-
tion did not change results,
Failed to achieve principal objectives because
they were not fully enforced by any of the major
implementing parties; key supplier, South Africa,
flouted sanctions; and the Rhodesian economy
adjusted quite well to the sanctions that were
enforced. Unintentionally, the sanctions left Zim-
babwe with a much stronger economy than would
have otherwise been likely.
French companies settled the dispute on terms
favorable to Algeria. Sanctions had little impact
on Algeria because France failed to get coopera-
tion of other states; market conditions helped
Algeria offset revenue losses; French commitment
was eroded because it could not readily replace
Algerian oil,
The United States remained committed to its
support of Israel, The Arab states were not able
to control the supply of oil to the United States.
The United States was able to adjust to the
embargo. Yet, the embargo did demonstrate op-
position to US support of Israel and symbolized
solidarity with Syria and Egypt.
Pakistan was willing to forego US aid in order to
continue its efforts to develop nuclear weapons
because it perceived nuclear weapons as an ele-
ment vital to its national security. Highly visible
imposition of sanctions increased domestic sup-
port for the Government of Pakistan policies, thus
easing the political cost of forgone aid. The fact
that the United States took tangible action, com-
bined with demarches to other countries, has
caused Islamabad to become dependent on the
clandestine procurement network and has slowed
development of its nuclear program.
The United States was unable to gain cooperation
of other governments in shutting off trade, and
Uganda was able to find other suppliers and
buyers. Yet, sanctions indirectly changed the
Ugandan Govenrment because President Nyerere
interpreted them to mean that the international
community would not oppose his invasion of
Uganda to remove Amin by force.
Impact of sanctions was slight because the Irani-
an economy was already operating far below
normal and Iran was able to circumvent sanc-
tions. Although some allies gave tacit approval to
the asset freeze, the United States failed to have
full support of allies and full control over embar-
goed items, United States underestimated the
strength of the commitment of the revolutionary
movement in Iran and the willingness of Iranians
to sacrifice for their cause. The sanctions did
serve the US need to "do something" quickly in
response to the hostage seizure.
Illustrates the difficulty of implementing econom-
ic denial measures on a multilateral basis. United
States and allies not able to control supplies of
grain because a major exporter refused to partici-
pate. Intensity of US commitment was affected
by domestic political considerations. No consen-
sus among major sponsors on how to carry out the
objectives. Sanctions did punish the Soviets in
some measure.
Sanctions did not force Soviets to lift martial law
in Poland. Without cooperation from the West
Europeans, sanctions were not effective at delay-
ing pipeline and in fact increased determination
of Soviets to go it alone. US attempts to use
sanctions to force West Europeans to reconsider
their participation in project backfired, Some
costs were imposed on Soviets but US and West-
ern Europe also suffered economic losses and
damaged political relations,
The EC sanctions against Argentina represent the
classic case of diplomatic gesture. Community
demonstrated solidarity at little cast.
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