Precision-Guided Sanctions

How to Take the Profit Out of Proliferation

By Richard H. Speier and Brian G. Chow

Richard Speier, a RAND consultant, developed policies against proliferation during his two-decade career in the Arms Control and Disarmament Agency and the Office of the Secretary of Defense. Brian Chow, a senior physical scientist at RAND, has broad experience analyzing issues related to weapons of mass destruction and the missiles for their delivery.

The growing probability of terrorist acquisition of nuclear, biological, and chemical weapons compels us, more than ever before, to use international economic sanctions to counter the proliferation of these weapons around the world. Sanctions offer a middle ground between diplomacy and the use of military force. Unfortunately, sanctions have often failed. The proper response is to make them succeed. We believe that we can.

From 1974 to 1998, U.S. law imposed sanctions against proliferation in 24 instances. Of these, only seven sanctions had enough of an effect on the penalized party to lead to negotiations. In most cases, the sanctions were imposed on parties that did little business with the United States or against which the United States already had an embargo.

Worse yet, sanctions can cause collateral damage, both to other foreign policy goals and to domestic economic interests on which the trade or financial restrictions can fall. Unfortunately, current sanctions laws sometimes impose sanctions on a one-size-fits-all basis, making collateral damage a real risk. Partly as a result of collateral damage, a backlash had developed against a broad range of unilateral U.S. economic sanctions by the mid-1990s.

Today, as more governments make it their policy to observe international nonproliferation restrictions, the profits increase for the few remaining parties willing to transfer items that add to proliferation. This trend makes ever more pertinent the succinct statement by former Sen. John Glenn about the goal of sanctions: "To take the profit out of proliferation."

To make sanctions work better, we can pursue two approaches in parallel. First, we can target and calibrate sanctions more precisely by introducing a combination of incremental and fundamental changes in procedures that have evolved over the years. Second, we can make sanctions far more effective, cohesive, and persuasive by redesigning them according to a couple of simple but new principles.

Hit the Target

The first approach (of targeting and calibrating sanctions) requires us to refine the existing procedures that lead to sanctions. Currently, the laws are passed unmethodically by Congress and applied unevenly by the president.

Several incremental changes are in order before any of the more critical, fundamental changes in procedures can be successfully and consistently applied. For instance, the sanctions laws should stipulate standard timetables for determining sanctionability and for conducting international negotiations before imposing sanctions. Separately, the legal test for determining sanctionability should be merely a preponderance of evidence of bad behavior, thus preventing the process from becoming sidelined with an impossibly high standard of proof. The entire process should be more disciplined, with greater congressional involvement, including hearings and the possibility for congressionally legislated sanctions. Some of these steps may exacerbate clashes between the legislative and executive branches. But some of the steps, such as standard timetables, are what the executive branch is seeking.

Targeting and calibrating sanctions more precisely will then require some major departures from existing practice. For starters, the president should be given discretionary authority to make the punishment fit the crime—as long as he imposes sanctions that are at least as effective as the sanctions that are currently required by law. There should also be a specialized staff to design sanctions that are more precisely targeted to specific countries or individuals. The staff should monitor the sanctions to ensure that they take the profit out of proliferation. Ideally, the range of sanctions instruments should be expanded to include incentives (as well as penalties) and security measures (as well as economic measures). Combined, these steps would reduce the collateral damage to friendly parties and augment the intended damage to unfriendly parties. Specifically, we need:

New legislation to give the president discretionary authority over the target, type, and severity of sanctions to be imposed—subject to the requirement that they serve U.S. objectives against proliferation in a manner "at least as effective" as the sanctions required by existing U.S. law. The legislation should also provide for notification of—and possible override by—Congress on the specific sanctions that the president chooses to impose.
A new "incentives and sanctions analysis staff" in the executive branch. This staff would design targeted sanctions that meet the at-least-as-effective test, assess the economic and other effects of sanctions alternatives, analyze the sources of revenue that belong to the sanctioned parties, monitor the dynamic aspects of the sanctions process, and recommend modifications as the sanctions unfold.
A minimum standard of punishment for trade and financial sanctions. For example, when a foreign party profits from proliferation, the sanction could be required to inflict losses on the party of at least, say, 10 times the gains—with a minimum loss of $10 million (which may lead to bankruptcy). In some instances, multilateral sanctions may be necessary to reach this standard.
Additional sanctions instruments beyond trade and finance, particularly measures that reduce the security of a targeted nation. These instruments could include both reduced arms-related sales to the anctioned nation and increased arms sales and security assurances to regional adversaries. These instruments could also include the withdrawal of U.S. recognition of certain security guarantees.

Pakistan.higres.resized
AP/WIDE WORLD PHOTOS/GREGORY BULL
Three brothers sit near their mud home in Rawalpindi, Pakistan, on Feb. 13, 2002. Since Sept. 11, the United States has dropped the severe economic sanctions imposed against Pakistan in 1998, committed up to $600 million in loans and aid, and encouraged the International Monetary Fund to loan Pakistan $135 million.
Many of these steps have the great liability of being untried. Weak implementation could lead to substantial difficulties. But the tremendous advantage of these steps is that they answer the repeated executive branch calls for "flexibility" and "proportionality" in sanctions—without sacrificing the objectives of sanctions. Effectively implemented, the steps could be terrifying to proliferators and financially devastating to their supplier organizations. The steps could undercut the security objectives of nations that are seeking nuclear, biological, and chemical weapons and missiles. The steps could minimize collateral damage to other foreign and domestic parties. Together, the steps could take the profit out of proliferation, whether profit is measured in dollars or security.

Make It Hurt, and Use Automatic Fire

With only the steps listed above, sanctions could continue to be just a patchwork of measures with unreliable effects. Therefore, we offer our second approach. We contend that the formulation of all sanctions should be guided by two new, unifying principles: (1) a "worse-off" criterion, and (2) automatic implementation.

First, the worse-off criterion would stipulate that any economic or security-related costs imposed on a target of sanctions exceed the benefits of the sanctionable activity. If U.S. sanctions policy can create a reliable expectation that aiding and abetting the proliferation of weapons of mass destruction will ultimately be a money-losing proposition, then there will be no economic motive for such commerce. (Only a case-by-case design of sanctions, performed by a specialized staff, can ensure that a weapons supplier ends up economically worse off.)

Many sanctionable actions are motivated not by economic gain but by security concerns. Here, again, the criterion for sanctions should be to make the target worse off. There is no way to quantify "worse off" when it comes to security, but sensible judgments can be made. A specialized staff can weigh many alternatives: reductions of various military assistance (such as munitions, dual-use supplies, training, technology, and financial assistance), reduced security commitments to the targeted entity, and increased military aid to its regional rivals. In some cases, as in North Korea today, the withholding of civilian trade, such as fuel shipments, could also make the target's security worse off.

The worse-off criterion implies a scale of sanctions to fit the offense and the offender. On the one hand, this criterion avoids predetermined sanctions that are nothing more than a slap on the wrist. On the other hand, this criterion does not require the target to be made infinitely worse off. Taking the profit out of proliferation does not necessarily entail draconian measures that penalize entire governments or nations. A worse-off criterion also contains its own exit strategy. For finite triggering events, such as a one-time transfer of weapons material, there should be a finite sanction—and a beginning, middle, and end to the sanctions process.

Iran.highres
AP/WIDE WORLD PHOTOS/VAHID SALEMI
Iranian armed forces roll a Shahab-3 missile through Tehran in September 2000. The proliferation of this missile resulted in U.S. sanctions against various trading organizations, aerospace institutes, technical universities, and government agencies in Iran, North Korea, and Russia in the 1990s. However, the entities in Iran and North Korea had already been subject to sweeping U.S. embargoes against those countries.
A good example of a worse-off sanction is when the United States blocked China from launching satellites that were subject to U.S. export licenses. This sanction, used first in 1991 and briefly again in 1993, imposed substantial financial losses on the Chinese organization that had previously benefited from the exports of missile equipment to Pakistan. Under a worse-off criterion, the sanction would need to be imposed only on enough space launches to make the U.S. government confident that the Chinese organization had lost more money than it had gained from its exports of missile equipment.

Second, automatic implementation means that the sanctions, once they are scaled appropriately, should be imposed as automatically as the law can allow. There should be no waivers for any reason. Even friends of the United States, even nations and entities that agree to mend their ways, should understand that U.S. law automatically generates actions that will make any party worse off if it contributes to proliferation.

Historically, presidential determinations and waivers have been major points of ineffectiveness of sanctions. Consequently, a proliferator today has good reason to believe that he will not be subject to sanctions—much less to effective sanctions. It may be understandable that the executive branch has, in the words of former President Clinton, tended to "fudge" the process when the sanctions were so draconian as to undercut major elements of U.S. foreign policy.

Adhering to the first recommendation, which calls for a worse-off criterion to produce appropriately scaled sanctions, should reduce the incentive for presidents to wink at sanctions. Automatic implementation, then, would tighten up the presidential determination process, eliminate presidential waivers altogether, and require presidential certifications of improved behavior before Congress could lift sanctions.

It will always be possible for Congress to enact waivers, just as it did to ease the severe sanctions that followed the Indian and Pakistani nuclear tests of 1998. But a sanctions law tailored to a worse-off criterion should be discriminating enough in its effects to require such a congressional about-face only rarely.

The appropriateness of sanctions needs to be determined in the first stage of enacting a sanctions law. Because the sanctions would be automatic, there would be a greater incentive for lawmakers to prescribe appropriately scaled and targeted sanctions.

Countering the proliferation of weapons of mass destruction is vital for international security, and sanctions can be an effective force in this effort. Even critics of sanctions make exceptions for well-designed sanctions. The next step should not be to retreat from sanctions. Rather, it should be to improve and focus them. The world needs effective sanctions, because the world needs alternatives to inaction or war.