“It is the only thing between diplomacy and war and as such has become the most important foreign policy tool in the US arsenal. And yet, nobody in government is sure this whole strategy is even working.”

-- Bill Reinsch, a former Commerce Department official and now the Scholl chair in international business at the Center for Strategic and International Studies

Sanctions have become a considerable cornerstone of US foreign policy, with the United States imposing three times as many sanctions as any other country.

This powerful tool can cripple industries, erase fortunes, and shift political landscapes without risking American lives. However, the overuse of sanctions raises concerns at the highest levels of government and across C-suites.

While sanctions have historically achieved significant outcomes, such as ending apartheid in South Africa and toppling Serbian dictator Slobodan Milosevic, their effectiveness is not universal.

North Korea’s continued nuclear ambitions and the resilience of Nicaragua’s authoritarian regime highlight the limitations of this approach. Moreover, sanctions can have severe unintended consequences, as seen in Venezuela’s economic collapse.

The proliferation of sanctions has also fueled a multibillion-dollar advocacy industry in Washington, with law firms and lobbying groups capitalizing on the complex system. This has led to a “sanctions reflex,” where the US response to global issues is increasingly punitive.

Treasury Secretary Jack Lew’s 2016 prescient warning about “sanctions overreach” remains relevant today as the US continues to impose financial penalties at a record pace.

Bottom line...

The extensive use of sanctions by the US government underscores the need for businesses to conduct thorough geopolitical risk assessments. Companies must anticipate potential sanctions and their impacts on global operations, supply chains, and market access.

Understanding the nuances of different markets and their relationships with the US becomes crucial. Building strong local partnerships can help navigate the complexities of operating in potentially sanctionable environments.

The growth of a multibillion-dollar industry around sanctions compliance in Washington demonstrates that regulatory challenges can create communications opportunities.

Companies would be wise to engage with the media proactively to shape the narrative around your company's approach to sanctions compliance. This could involve interviews, op-eds, or background briefings with key journalists.

Internally, companies should develop a crisis communication plan specifically for sanctions-related incidents. This would include prepared statements, designated spokespersons, and clear escalation procedures.

Caracal is here to help.

Enjoy the ride + plan accordingly.

-Marc

Read: How four US Presidents unleashed economic warfare across the globe: US sanctions have surged over the last two decades and are now in effect on almost one-third of all nations. But are they doing more harm than we realize? The Washington Post