For reasons related to domestic and international politics, the United States increasingly has employed economic sanctions and especially oil sanctions as a policy tool, seeking to influence the behavior of foreign regimes. Such sanctions can take many forms but generally refer to boycotts of a country's exports and bans on U.S. investment in those countries. Ultimately, the use of such sanctions is traceable to U.S. dissatisfaction with some aspect of these regimes' behaviors, be it sponsorship of terrorist activity, drug trafficking or violations of their own citizens' human rights.
Although there have been instances in which the U.S. has been joined by others in imposing economic sanctions, the more common situation is that the U.S. has acted independently, imposing sanctions unilaterally. Thus, for example, while many countries joined in economic samctions against the previous South african regime and in oil sanctions against the present Iraqi regime, the U.S. alone recently has imposed oil sanctions against Iran and Libya and against oil and gas investment in Burma. in earlier years, unilateral U.S. economic sanctions also were imposed against grain exports to Russia and against the export of equipment to build a gas pipeline to Europe.
A good deal of previous research has examined the effectiveness of economic sanctions, generally concluding that unilaterally imposed sanctions are ineffective because for most goods and services the U.S. is but one competitor among many. However, when sanctions are imposed multilaterally, by many countries, they can effectively reduce the sanctioned country's ability to trade.
While the effectiveness of sanctions as a foreign policy tool has been much discussed and analyzed, less attention has been paid the economic consequences. Further, no formal analysis has been done of oil sanctions in particular.
This paper examines oil sanctions, though the analysis could apply to other goods as well. It first addresses just what economic effects ensue from such sanctions. The analysis begins with unilateral oil sanctions and then discusses multilateral.
Two types of unilateral sanctions are examined, those against a country's oil exports and those prohibiting investment in that country's oil industry. The impact of these types of sanctions oil markets and on U.S. suppliers is traced out, and then is followed by an analysis of multilateral oil sanctions. Again the impact on oil markets is analyzed, as well as indirect effects in non-oil markets.
The paper then turns to an analysis of what oil sanctions can accomplish. Possible reasons for sanctions are offered, along with some assessment of possible outcomes regarding the behavior of the sanctioned regime. A major weakness of oil (or any trade) sanctions is pointed out, namely their apparent inability to affect behavior at the margin. The paper concludes with a summing up of the economic effects of oil sanctions and of the usefulness of such sanctions as a foreign policy tool.