US-EU Cooperation on Economic Sanctions: Characteristics, Limitations and Prospects

Liu Jianwei

The US and the EU are the international actors who implement economic sanctions most frequently today.1US and EU economic sanctions include sanctions for implementing resolutions of the UN Security Council and sanctions initiated outside of the UN framework. Sanctions in this paper refer to the latter, namely, autonomous or unilateral sanctions.They cooperate but at times disagree about imposing economic sanctions. However, once they agree on imposing sanctions, the sanctioned countries and even third parties would suffer major impacts.2Iran is a typical case. After the EU substantively cooperated with the US sanctions against Iran in 2010, Iran suffered a currency and economic crisis and had huge economic losses. But for Russia, the effect of the US-EU joint sanctions is controversial. Some studies believe that economic sanctions are the main cause of Russia’s economic downturn in recent years, while others believe that economic sanctions have little to do with it, nor have they changed Russia’s position on Crimea and conflicts in eastern Ukraine. There are even some that believe sanctions stimulated Russia’s economy and the patriotism of Russians. The US political circle often attributes the poor effect of sanctions against Russia to the EU, and has criticized the EU for its half-hearted implementation of sanctions.This paper explores the trends and influencing factors of such cooperation based on relevant statistics of economic sanctions from 1993 to 2018, and, considering Trump’s foreign policy changes and the influence of Brexit and the Iran nuclear issue, assesses the future of US-EU cooperation in economic sanctions.

Characteristics of US-EU Cooperation in Economic Sanctions

Since the end of the Cold War, the US and the EU have frequently launched economic sanctions. According to preliminary statistics, from 1993 to 2018, the US initiated 23 economic sanctions while the EU launched a total of 21, of which 13 were initiated jointly.3Notes on the statistics: 1) effective statistics start from the establishment of the EU on November 1, 1993 and end on December 31, 2018; 2) economic sanctions are defined in the narrowest terms, namely trade, financial and investment restrictions, excluding measures like arms embargoes and aid suspension; 3) data of US sanctions comes from presidential executive orders, while data of EU sanctions comes from common positions under the EU Common Foreign and Security Policy or decisions by the European Council; 4) sanctions targeting the same country but for different reasons are counted as different sanctions, for example US sanctions against Iran on counter-terrorism, non-proliferation, and human rights grounds are counted as three different sanctions.There were a variety of reasons or objectives for US-EU joint economic sanctions, including peace-making, counterproliferation, anti-terrorism, advancing democracy, protecting human rights, and promoting rule of law. There was a wide range of specific measures, from targeted sanctions which were more symbolic than substantive (such as freezing personal assets), to harsh sanctions involving financial isolation and trade embargoes. The countries affected by US-EU joint sanctions were widely distributed, some of which were in the vicinity of the US and the EU while others were thousands of miles away. On the whole, the US-EU economic sanctions cooperation after the Cold War has three main characteristics.

First, the overall level of US-EU cooperation in economic sanctions is relatively high.The purpose of economic sanctions is to achieve political goals through economic means. In terms of foreign policy, the US and most EU member states have similar values and strategic security interests, and their consensus on economic sanctions is greater than their differences. After the end of the Cold War, the two sides still maintain a relatively high level of cooperation in economic sanctions even absent a common strategic threat. For example, they jointly launched proposals for economic sanctions in the UN Security Council; they imposed sanctions separately when the Security Council was unable to pass a sanctions resolution or when the sanctions imposed by the Council were limited; their sanctions were similar in terms of the initiation time, the measures called for, and the list of entities sanctioned. In major international political events after the Cold War, such as the Balkan conflict, the September 11 attack, the Middle East conflicts and the Russia-Ukraine conflict, the US and the EU coordinated with each other for the most part and jointly implemented economic sanctions, the most direct reflection of their high-level cooperation in this regard.4Kristin Archick and Derek E. Mix, “U.S.-EU Cooperation on Ukraine and Russia,” CRS Insights, March 13, 2015, https://fas.org/sgp/crs/row/IN10129.pdf.

Second, the frequency of US-EU cooperation in economic sanctions is on the rise.Before the establishment of the EU, the US and the European Community only launched three joint economic sanctions in more than 30 years: against Myanmar (1988), Yugoslavia (1991), and the Soviet Union (1991).5Gary Clyde Hufbauer, et al., Economic Sanctions Reconsidered, Shanghai People’s Press, 2011.Since the EU’s founding in 1993, the number of joint economic sanctions by the US and the EU has increased year by year. From 1993 to 2008, six economic sanctions were jointly initiated. Since 2009, the frequency of joint sanctions has increased substantially, with nine imposed between 2009 and 2018.6The EU was established in November 1993 and the actual statistical year began in 1994. Since the EU did not launch economic sanctions against Iran and North Korea outside the UN Security Council until 2010 and 2016, the two cases were included in the two statistical periods 2009-2013 and 2014-2018 respectively.

Third, the US foreign policy adjustment has had a significant impact on US-EU cooperation in economic sanctions.The adjustment directly influences US-EU relations, which in turn affects their cooperation in sanctions. During George W. Bush’s administration, the US pursued a policy of unilateralism, and the US-EU relations deteriorated saliently, greatly affecting bilateral cooperation in economic sanctions. During that period, the US imposed sanctions against Iraq (2003), Syria (2004), and Sudan (2006), none of which were in coordination with the EU. When Obama took office, the US changed course and attached greater importance to multilateralism and transatlantic cooperation, and US-EU relations improved substantially. Economic sanctions initiated by the US received an active response from the EU. The two sides cooperated closely in a series of sanctions against Iran (2010), Libya (2011), Syria (2011) and Russia (2014). At that time, the EU also reversed its previous strong opposition to the imposition of secondary sanctions7Secondary sanctions, also called extraterritorial sanctions, refer to restrictive measures on economic exchanges with third (or secondary target) countries, with the purpose of forcing third countries to suspend economic relations with, and hence increase pressure on, the target country. In history, the US and the EU (or its predecessor) once had serious disputes over US secondary sanctions against the Soviet Union (1982), Cuba (1996) and Iran (1996/2000), which directly restrained relevant bilateral cooperation. However, marked by the US promulgation of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) with multiple provisions on secondary sanctions in 2010, the US-EU dispute was significantly mitigated.by the US, and deferred to the extraterritorial jurisdiction of the US in sanctions against Iran and Russia. After Trump took office, his “America First” policy has once again upended transatlantic cooperation. The divergence between the two sides on economic sanctions has resurfaced, and their debate regarding restoration of sanctions on Iran has become the focal point of those differences.

Causes for US-EU Cooperation in Economic Sanctions

After the end of the Cold War, and particularly since 2009, the increasing number of US-EU joint economic sanctions has been due to multiple factors closely related to the reform process of international sanctions and the pace of European integration, and is also directly affected by US-EU interactions on the issue of sanctions.

Acceptance of targeted sanctions

Economic sanctions are divided into comprehensive sanctions and targeted sanctions (also known as smart sanctions). The former puts pressure on sanctioned countries as a whole, aiming to exert maximum pressure on them by cutting off all economic exchanges. The latter targets specific groups (usually political and military dignitaries) or industries in the sanctioned countries, aiming to concentrate economic pressure by adopting selected economic measures such as asset freezes, trade sanctions, investment restrictions or financial sanctions.8There are two other common measures, arms embargoes and travel restrictions, but whether they belong to economic sanctions remains controversial.Long a dominant factor in US sanctions policy, comprehensive sanctions were rather controversial in EU countries, which was a major factor that constrained bilateral cooperation in economic sanctions.9The EU opposed US comprehensive sanctions for its economic interests and for humanitarian considerations.Since 2000, however, both sides have accepted the concept of targeted sanctions, and their conceptual differences have gradually narrowed.

The shift to targeted sanctions stemmed from the bitter lessons of the Iraq issue. The US and the UN carried out comprehensive sanctions against Iraq for 10 years with no satisfactory results, instead causing a massive humanitarian disaster which was widely criticized by the international community. Similarly, the sanctions against Haiti and Yugoslavia also fell short of expectations, which prompted the EU and the US to reflect on comprehensive sanctions. The EU has been a forerunner in promoting sanctions reforms. From 1998 to 2001, the Swiss, German and Swedish governments launched the Interlaken, Bonn-Berlin and Stockholm Processes respectively, proposing the concept of targeted sanctions and a specific instruction of how to implement them.

The concept of targeted sanctions was quickly accepted by the UN and directly affected US economic sanctions. Since that time, the EU and the UN Security Council have not launched any comprehensive sanctions.10Although the UN has imposed strict sanctions on Iran and North Korea, it has not prohibited general trade with the sanctioned countries, so they are still targeted sanctions.The US also accepted the concept and has been actively engaged in utilizing targeted sanctions, in particular targeted financial sanctions. After the September 11 attack, the US quickly utilized targeted sanctions in the War on Terror, and later against North Korea and Iran to prevent the countries’ development of nuclear weapons, as well as against Russia in the Russia-Ukraine conflict. There is an increasing consensus on the use of targeted sanctions in the US. Senior officials and think tanks, such as former US Assistant Secretary of State Rose Gottemoeller, and George W. Bush’s Deputy National Security Advisor Juan Zarate, have repeatedly endorsed targeted sanctions.11Daniel W. Drezner, “Sanctions Sometimes Smart: Targeted Sanctions in Theory and Practice,” International Studies Review, Vol.13, Issue 1, pp.99-101.So far, US economic sanctions are all targeted sanctions except those imposed on Cuba, Iran, North Korea, Syria and Sudan.12“Embargoed and Sanctioned Countries,” https://www.export.pitt.edu/embargoed-and-sanctionedcountries.The US has gradually adopted the EU’s approach on the issue of targeted sanctions, greatly reducing conceptual differences between the two sides and promoting their cooperation on sanctions issues.

The EU’s increased willingness and capability to impose sanctions

Due to difficulties in European defense integration, the EU cannot exert international influence with military power. In this context, economic sanctions have become one of the few “hard measures” the EU can take.13Joakim Kreutz, “Hard Measures by a Soft Power?” BICC Paper 45, https://www.bicc.de/uploads/tx_bicctools/paper45.pdf.The EU’s willingness and capability to impose sanctions are closely related to European integration, and have gradually been strengthened by its own institutional development. Prior to the entry into force of the Maastricht Treaty in 1993, the European Community rarely initiated its own sanctions outside the UN framework.14One exception is the European Community’s sanctions against the Soviet Union in 1981 due to the Poland issue. See Joakim Kreutz, “Hard Measures by a Soft Power?” BICC Paper 45, p.9.After 1993, under the framework of Common Foreign and Security Policy, the EU’s autonomous sanctions have increased, with the year 2003 (or 2004) and 2009 serving as two important nodal points in the development of its economic sanctions policy.

From 2003 to 2004, the EU successively formulated three documents, the Guidelines on Implementation and Evaluation of Restrictive Measures (Sanctions) in the Framework of the EU Common Foreign and Security Policy (2003), the Basic Principles on the Use of Restrictive Measures (Sanctions) (2004), and the Best Practices for the Effective Implementation of Restrictive Measures (2004). The introduction of these documents was a compromise between the EU’s urgent need of an economic sanctions policy and its immature conditions for formal legislation. They manifest the EU’s willingness to strengthen its economic sanctions regime and its capability to impose sanctions.

In 2009, with the ratification of the Lisbon Treaty, the roadmap of European integration was redesigned, which opened a historical process that shifted the focus of integration from economy to politics, and was thus widely regarded as a milestone in European integration. For the EU’s economic sanctions policy, the Lisbon Treaty is also of great significance in that it stipulates “restrictive measures” of the EU’s external action under a special title in the amended Treaty on the Functioning of the European Union, highlighting the importance of sanctions to the EU, clarifying the legal basis for implementing sanctions, and hence avoiding recurring controversies. It significantly enhances the competence of EU institutions in implementing economic sanctions, and limits the space for member states to take separate actions. It revises the rule of qualified majority voting, increases its flexibility, broadens its scope of application, thus improving the EU’s efficiency in deciding when to impose economic sanctions.15The new qualified majority requires 55% of voting EU member states, representing at least 65% of the population of voting members for a European Commission proposal to be approved, while the blocking minority requires at least four member states to block a proposal.It empowers the European Council to formulate implementing decisions or regulations, and replaces the previous unanimity rule with qualified majority voting to improve the flexibility of EU sanctions. It sets new written procedures related to sanctions, allowing the European Council to express its opinions in written form instead of on-site voting in order to improve the EU’s ability to tackle unexpected emergencies.16Francesco Giumelli, The Success of Sanctions, Ashgate Publishing Company, 2013, pp.26-28.

Obviously, there is a clear correlation between the frequency of EU economic sanctions and its own institutional development. With the promulgation of the above three documents, especially the adoption of the Lisbon Treaty, many institutional and legal restrictions facing the EU in implementing economic sanctions have been greatly reduced, the representativeness and flexibility in policy making and implementation have both been enhanced, and the EU’s willingness and capability to seek international influence through sanctions has been greatly enhanced. These changes will naturally contribute to US-EU sanctions cooperation. Before, the EU would only impose sanctions as a result of US lobbying or under US economic pressure, but now it has become more proactive and even launched economic sanctions on its own.

The US lobbying and pressure on the EU

There are both common interests and differences between the EU and the US on economic sanctions. In US-led sanctions with major differences between the two sides, the US lobbying and pressure has played an important role in promoting bilateral sanctions cooperation. Taking the US-EU joint sanctions against Iran as an example, the US adopted many fresh ideas and measures in lobbying and putting pressure on the EU, which has had a demonstration effect on subsequent cooperation.

As early as the mid-1990s, the US had begun to sanction Iran on the grounds of non-proliferation, which was gradually joined by the EU only 10 years later.17The US sanctions against Iran originated in the 1979 Iran hostage crisis and have since undergone numerous adjustments.Years of sanctions against Iran had rendered economic exchanges between the US and Iran nearly non-existent, and the impact of continued or strengthened US sanctions would be rather limited on Iran, which meant that further pressure would require coordination from the EU, a major economic partner of Iran. Before 2007, the economic relations between the EU and Iran were close. Because of the differences between the US and the EU in tackling Iran’s nuclear issue, the EU did not support economic sanctions as a solution. In order to make the EU join its sanctions alliance, the US step by step adopted a series of measures, both soft and hard.

First, the US combined the means of lobbying and pressure. At multiple levels from the President, the Department of State, the intelligence community to the Department of the Treasury, the US has repeatedly lobbied its European counterparts on various occasions, highlighting the urgency and authenticity of Iran’s nuclear threat and convincing them of the necessity to implement economic sanctions. At the same time, the US has also actively influenced the debate within the EU. “Each time that the soft approach seemed to win the EU internal game, the US intervened. Most of the time, it succeeded in moving the EU in its direction.”18Sascha Lohmann, “The Convergence of Transatlantic Sanction Policy against Iran,” Cambridge Review of International Affairs, Vol.29, No.3, 2016, p.941.The US has put much pressure on those EU member states who oppose sanctions, and “strong pressure from the United States brought even the most reluctant EU member states on board.”19Stefan Lehne, “The Role of Sanctions in EU Foreign Policy,” December 14, 2012, https://carnegieeurope.eu/2012/12/14/role-of-sanctions-in-eu-foreign-policy-pub-50378.

Second, the US turned to the UN Security Council before reaching out to the EU for autonomous sanctions. Sanctions authorized by the UN Security Council have international legitimacy and have for a long time been the main type of EU sanctions. In order to cooperate with the EU, the US first managed to persuade the United Kingdom and France to bring the Iran nuclear issue to the Security Council. With authorization from the Security Council, the US then pressured the EU to reduce its resistance to sanctions against Iran from the perspective of values and norms.

Third, the US strove for support from EU governments and businesses. Unlike before, the US wanted a coalition to impose sanctions on Iran joined not only by governments of EU member states but also by the European business community. US Deputy Secretary of the Treasury Robert Kimmett mentioned in his 2007 congressional testimony: “Our multilateral action to change Iran’s behavior is not confined to governments, however. We have engaged in unprecedented outreach to the international private sector, meeting with more than 40 banks around the world to share information and discuss the risks of doing business with Iran.”20Sascha Lohmann, “The Convergence of Transatlantic Sanction Policy against Iran,” p.938.In the process of isolating Iran from the EU business community, the US often rattled its sabers and piled on financial sanctions. As estimated, between 2005 and 2012 the US Treasury Department imposed fines on 45 banks for violating US sanctions against Iran, including many large European banks.21Ibid., p.940.In 2004, the US imposed a fine of US$9 billion on BNP Paribas, the largest such fine to date.22Jacob J. Lew and Richard Nephew, “The Use and Misuse of Economic Statecraft,” Foreign Affairs, Vol.97, No.6, 2018, p.143.

Under pressure from the US, EU financial entities and enterprises gradually withdrew from Iran. Coupled with new developments of the Iran nuclear issue and Europe’s political turn, the EU’s internal obstacles to strengthening sanctions against Iran were largely reduced, providing conditions for joint US-EU sanctions. In 2012, the EU issued a ban on Iran’s oil, prohibiting its member states from importing Iranian oil, and also imposed sanctions on the Central Bank of Iran. The US-EU sanctions cooperation reached a record level. It is worth noting that the success of bringing Europe into a sanctions regime against Iran was of great importance in the history of EU sanctions. As an icebreaker for later sanctions against Russia, Egypt and Tunisia, it greatly reduced the EU’s internal challenge and opposition to sanctions.23Stefan Lehne, “The Role of Sanctions in EU Foreign Policy,” December 14, 2012.

Limitations on US-EU Cooperation in Economic Sanctions

The US has been pushing the EU to maintain their cooperation in economic sanctions. The EU’s response in turn has an important impact on the level of cooperation. Because the two sides have differences in perceptions, interests and institutional capabilities, their cooperation in economic sanctions is inevitably constrained.

Different views with regard to sanctions

Due to discrepancies in history, international status, and character, the US and the EU have different views on the functions and purposes of economic sanctions. The US tends to view economic sanctions in a dualistic manner, taking sanctions as a foreign policy tool to isolate and ultimately defeat the target state or regime.24Robin Niblett and Derek Mix, “Transatlantic Approaches to Sanctions: Principles and Recommendations for Action,” CSIS Report, December 2006, https://www.csis.org/analysis/transatlanticapproaches-sanctions-principles-and-recommendations-action.This way of thinking is directly reflected by the legal empowerment of US economic sanctions—the Trading with the Enemy Act, the Countering America’s Adversaries through Sanctions Act, the International Emergency Economic Power Act, National Emergencies Act, etc. The corresponding presidential executive orders also label specific countries or events as threats to national security and foreign policy in order to justify the initiation of sanctions. US economic sanctions have a strong unilateralist character, focusing on extreme pressure but lacking flexibility. Therefore, US economic sanctions are easy to impose but difficult to remove, and often serve as a prelude to military actions.25Simond de Galbert, “Transatlantic Economic Statecraft,” CSIS Economic Statecraft Series, June 21, 2016, p.9.Implying that economic sanction is “the last chance for peace,” the US has reduced domestic and international resistance to subsequent military operations.

Unlike the US, the EU tends to regard economic sanctions as a negotiating tool for changing the policies and actions of target countries. Based on this perception, EU economic sanctions are aimed at specific policies or actions which violate international law or are detrimental to EU interests, but are not targeting a presumed long-term and fixed enemy.26Tom Keatinge, et al., “Transatlantic (Mis)alignment: Challenges to US-EU Sanctions Design and Implementation,” RUSI Occasional Paper, July 2017, p.5; Robin Niblett and Derek Mix, “Transatlantic Approaches to Sanctions.”EU sanctions seek to change the behavior of, rather than defeat, the countries targeted, and therefore they are usually of shorter duration than US sanctions. In addition, the EU attaches importance to flexibility in the use of economic sanctions: it tends to clarify the causes and duration of sanctions as well as the conditions for lifting the sanctions, and combine economic sanctions with political dialogue, material incentive, and even UN-authorized military measures. Moreover, the EU remains cautious about military operations and believes that economic sanctions can complement or even substitute for military operations, which is obviously different from the US stance that often takes sanctions as a prelude to military operations.27Simond de Galbert, “Transatlantic Economic Statecraft,” p.9.

Conflict of interests restricting US-EU sanctions cooperation

The US and the EU have their own preferences with regard to sanctions, which is reflected in their respective previous actions. The US has rarely imposed sanctions on its allies, even if the ally’s policy clearly violates US values or if there are calls for sanctions against the ally at home and abroad. In addition, counter-terrorism has also served as an effective pretext for the US for not imposing sanctions on particular countries. For the EU, colonial history, geographical distance, and development performance (of recipient countries) are all important factors in decision-making about imposing sanctions. Ultimately, the two sides’ difference in sanctions preference or tendency is due to their different interests, which not only restricts the possibility of their sanctions cooperation, but also affects the level and sustainability of the cooperation. The recent sanctions against Russia and Iran clearly reflect the impact of those conflicting interests.

In March 2014, the annexation of Crimea prompted the US and the EU to form a sanctions coalition against Russia, the scope of which was extensive but deliberately avoided the sensitive field of Europe-Russia energy cooperation. In 2017, the US enacted the Countering America’s Adversaries through Sanctions Act in an escalation of sanctions against Russia, triggering the EU’s strong opposition since the Act involved its energy cooperation with Russia. Many EU countries criticized that US sanctions impinged on the EU’s energy policy, and pursued economic interests in the name of regional security. In particular, they accused the US of hindering the construction of Nord Stream 2 natural gas pipeline project in order to expand its own LNG exports. Germany and Austria even issued a harshly worded joint statement, saying that “We cannot accept … the threat of illegal extraterritorial sanctions against European companies that participate in the development of European energy supply.”28Henry Foy, et al., “Berlin Hits Back at US Move to Tighten Sanctions on Russia,” Financial Times, https://www.ft.com/content/27e28a44-51b0-11e7-a1f2-db19572361bb.EU Commission President Jean-Claude Juncker claimed that the US was interfering in the EU’s internal affairs, pointing out that “America First cannot mean that Europe’s interests come last,” and warned that the EU might file a complaint with the World Trade Organization against the US.29Dominik Tolksdorf, “U.S. Sanctions Law and Western Coordination on Russia Policy,” Kennan Cable, No.29, December 2017, https://www.wilsoncenter.org/sites/default/files/kennan_cable_29_-_tolksdorf.pdf.Although the US later amended its provisions in deference to the EU’s concerns, this incident fully demonstrated the divergence between the two sides, especially with regard to restrictions of economic interests on sanctions cooperation. In the middle of 2019, the US House of Representatives and Senate successively passed similar bills, demanding sanctions against enterprises and individuals involved in Nord Stream 2, once again intensifying the contradiction between the US and some EU member states. German Foreign Minister and Austrian President publicly criticized the US action and declared that they would resolutely resist the measures.

Economic interests also play an important role in US-EU sanctions against Iran. Due to its close energy trade ties with Iran, the EU has been reluctant to follow the US in imposing sanctions against Iran. In 2007, with threat of financial sanctions, the US successfully forced the EU to re-assess the relative costs of continuing its energy trade with Iran or suffering US secondary sanctions. After considering the impact on their economic interests, the UK, France, and Germany took positive actions, greatly contributing to the 2015 Iran nuclear deal. Since then, the EU has resumed its economic and trade exchanges with Iran and opposed the US unilateral withdrawal from the Iran nuclear deal. When the US restarted sanctions against Iran, in an effort to save the deal, the EU even attempted to set up a special payment channel to bypass US sanctions. From the intricate and tortuous history of sanctions against Iran, it can be seen that economic interests centered on energy are always the key factor affecting the EU’s participation in US-led sanctions.

Distinction in institutional designs affecting cooperation capability

In the course of history, the US and the EU have respectively formed their own economic sanctions systems, with differences at every step from initiation, implementation to lifting of sanctions, and this has affected their cooperation capability in this regard.

In the US, both the Congress and the President have the authority to initiate economic sanctions, but their powers are asymmetrical. Sanctions initiated by the Congress are mostly directional and in principle, while those by the President can be comprehensive and specific, and also be targeted and flexible according to actual needs. The President can delegate sanctions to appropriate departments by category, such as sanctions regarding arms embargoes to the Secretary of State, dual-product trade sanctions to the Secretary of Commerce, and general and financial sanctions to the Secretary of the Treasury. The initiation system with the President as its core and a clearly defined division of labor among various departments helps the US respond promptly to corresponding events. The EU’s initiation procedure is more complicated. First the EU Council needs to adopt sanctions in principle by unanimous consent. Specifics of the economic sanctions then require the Council’s approval by qualified majority, while member states are responsible for sanctions regarding arms embargoes and entry restrictions. EU sanctions are formed through coordination among member states, which is much more time-consuming. The final sanctions are always the result of compromises and therefore EU sanctions are often less harsh than US sanctions.

As for sanctions implementation, the US has established a comprehensive and complex institutional system, including a working mechanism that combines division of labor and cross-departmental coordination, a sanctions list based on controlled items and sanctioned targets, a licensing and exemption system, and a sanctions enforcement mechanism, which all provide an institutional guarantee for strict implementation of sanctions. It is worth noting that the US intelligence community is effective at supervising sanctions implementation. In addition to relying on professional intelligence agencies, the US Treasury Department has also set up the Office of Terrorism and Financial Intelligence to acquire, analyze and integrate information regarding the sanctions.30Juan Zarate, Treasury’s War: The Unleashing of a New Era of Financial Warfare, Public Affairs, 2013.On the contrary, the EU has many shortcomings in implementing sanctions due to its unique integration design and sanctions regime. Although EU institutions enjoy exclusive competence in decision-making about sanctions, the final implementation still depends on each member state. There are multiple interpretations of EU sanctions among its members, whose willingness and determination to implement sanctions, and capabilities and resources available, may vary. In terms of identifying violations, the EU, due to its weak intelligence capability, relies on the assistance of its member states. For reasons of confidentiality and law, not all member states take the initiative to report all violations to the EU. The shortcomings have caused the EU to remove some of its sanctioned targets for lack of evidence in legal disputes, so the EU sanctions lists are often shorter than those of the US.31Simond de Galbert, “Transatlantic Economic Statecraft,” pp.6-8.

As for the lifting of sanctions, the US and the EU also have difficulty in coordinating due to their different systems. For the US, it is hard to lift sanctions imposed by the Congress. For example, the Obama administration faced obstacles when it wanted to ease relations with Cuba and promote the Iran nuclear deal. Besides the high threshold for lifting sanctions,32Robin Niblett and Derek Mix, “Transatlantic Approaches to Sanctions,” p.10.the US bipartisan politics and the presidential election are also important macro factors affecting the continuation or removal of sanctions, which is demonstrated in the quick re-imposition of sanctions against Iran by the Trump administration that were partially lifted by Obama. For the EU, its legislatures have limited power over sanctions and therefore have less room to intervene in the initiation or lifting of sanctions. In recent years, most EU sanctions have had a “sunset clause,” which requires a review of the sanctions on a semi-annual or annual basis in order to determine whether an extension is needed. Therefore, the sanctions regime culture of the EU tends to lift rather than extend sanctions. In short, US sanctions are generally easier to initiate but harder to lift while EU sanctions are hard to initiate but easy to lift with a generally short duration of time.

Prospects of US-EU Cooperation in Economic Sanctions

As an important part of transatlantic cooperation, the future of US-EU economic sanctions cooperation mainly depends on the overall development of US-EU relations. In general, the US and the EU have common values, more common interests than differences, and a smooth coordination mechanism, so their economic sanctions cooperation has a relatively solid foundation. However, the foundation has been eroded by the changing US foreign policy, Brexit, and the Iran issue. Future US-EU cooperation in economic sanctions thus faces a number of variables.

First, Washington’s new foreign policy has weakened US-EU relations as well as their cooperation in economic sanctions. The Trump administration adheres to the principle of “America First” and has substantially adjusted the US foreign policy and relations with the EU. In the economic and trade field, the US has frequently pressured the EU with tariffs, causing tensions in bilateral economic and trade ties. On global governance, the US has again applied unilateralism and withdrawn or threatened to withdraw from a number of global governance mechanisms such as the Paris Agreement on climate change, the UN Human Rights Council and UNESCO, which conflicts with the EU’s insistence on multilateralism. In the security field, the US has once again called on the EU to shoulder a greater proportion of defense budget in NATO and has repeatedly criticized the EU’s refugee policy. The transatlantic relationship today faces the risk of retrogressing from the previous four-in-one alliance of security, economy, values and international order to one that is solely based on security. Affected by the US foreign policy, the EU has debated and reflected on its relations with the US, and expressed concerns about the future bilateral relations under the Trump administration, which will naturally leave a negative impact on economic sanctions cooperation between the two sides.

Second, Brexit will increase transaction costs for future US-EU cooperation in economic sanctions. In the past, the UK was a staunch supporter of EU economic sanctions, and played an important role in improving the EU’s economic sanctions regime and seeking other members’ support for sanctions against Russia and other countries. As a long-term and firm ally of the US, the UK is prone to understanding and supporting the US foreign policy and economic sanctions, and it has always served as a mainstay of US-EU sanctions cooperation.33Tom Keatinge, et al., “Transatlantic (Mis)alignment: Challenges to US-EU Sanctions Design and Implementation,” pp.10-11.The UK is also an important international financial center with a strong intelligence system, which is essential to ensure strict implementation of economic sanctions, consolidate the EU consensus on sanctions, and improve the capability of transatlantic sanctions cooperation.34Richard Nephew and David Mortlock, “Brexit’s Implications for UK and European Sanctions Policy,” October 2016, https://academiccommons.columbia.edu/doi/10.7916/D8J1053R.In January 2019, the Maduro government applied to retrieve Venezuela’s US$1.2 billion worth of gold from the Bank of England, but the application was rejected by the UK as a result of US lobbying, which directly reflects the importance of the UK as an international financial center in US-EU sanctions cooperation.

However, with the increasing possibility of Brexit, especially of a no-deal Brexit, the relationship between the UK and the EU or between the US and the EU after Brexit will undergo inevitable readjustment. And regardless of the direction of this readjustment, Brexit will reduce the UK’s influence in EU economic sanctions. The willingness and capability of the EU to impose and maintain sanctions will be impaired, and the US will lose an important bridge connecting it and the EU with regard to economic sanctions.

Lastly, the Iran nuclear issue will have profound influence on future USEU sanctions cooperation. After years of difficult negotiations, China, the US, Russia, the UK, France, Germany, together with the EU, reached a deal with Iran in 2015. With restrictions imposed on Iran’s nuclear program, the international community lifted sanctions against Iran. After Trump took office, however, he has repeatedly criticized the Iran nuclear deal. In May 2018, he announced withdrawal from the deal and re-imposed sanctions on Iran.

The EU, believing that the deal is crucial to maintaining stability in the Middle East, opposed the US in restarting sanctions against Iran and has taken active actions to preserve the agreement. On August 6, 2018, the EU officially launched its blocking statute enacted in 1996 to provide legal protection for European companies in Iran. In September, the EU announced that it would provide a US$20-million development aid for Iran. The UK, France and Germany decided to set up a new payment mechanism, the Special Purpose Vehicle (SPV), to bypass US sanctions and continue trading with Iran. The mechanism was later developed and renamed as the Instrument for Supporting Trade Exchanges (INSTEX), and its first transaction occurred in July 2019.35Kenneth Katzman, “Iran Sanctions,” CRS Report RS20871, updated July 12, 2019, p.52

Despite its uncertain future, the establishment of a new payment mechanism itself indicates that the EU has begun to seriously consider its long-term strategy in response to US secondary sanctions. In the context of the US re-imposing sanctions on Iran and harming EU interests, the EU has realized that the asymmetry of transatlantic economic relations has made itself extremely vulnerable, restricted the effectiveness of EU law and affected the autonomy of EU foreign policy. In fact, despite the EU blocking statute, the majority of European enterprises, for fear of being listed onto the blacklist of the US Treasury Department, chose to follow US sanctions, which rendered the blocking statute insignificant. For this reason, some EU scholars regard the US re-imposing sanctions on Iran as a wake-up call to strengthen the international status of the euro and actively establish asymmetric counter-measures to deal with secondary sanctions, thereby protecting EU interests and the autonomy of its foreign policy.36Ellie Geranmayeh and Manuel Lafont Rapnouil, “Meeting the Challenge of Secondary Sanctions,” European Council on Foreign Relations Policy Brief, https://www.ecfr.eu/publications/summary/meeting_the_challenge_of_secondary_sanctions.Obviously, the Iran nuclear issue has already impacted US-EU relations to some extent and will inevitably have a major effect on their future cooperation in economic sanctions.

Conclusion

After Trump took office, the US has been more dependent on the role of economic sanctions in its foreign policy, and applied them even more frequently and willfully. Within the US, the excessive use of economic sanctions has aroused a lot of criticism, in particular from former senior officials in charge of economic sanctions who believe that it will have many negative effects on the US and its long-term interests. The sanctioned countries, major powers including China and Russia, and even some US allies have all opposed Washington’s long-arm jurisdiction and excessive use, or threat of use, of economic sanctions. For the EU, the abused US economic sanctions are not in the EU’s interests, but rather expand the differences between the two sides and constrain transatlantic sanctions cooperation. In the long run, sanctions should not be used as a tool for handling relations between nations, and all parties should abide by relevant international norms. The United States’ excessive use of economic sanctions will undoubtedly constrain its cooperation with allies, and even force relevant countries to establish an international trading system independent from the US dollar.