A working paper by Dr. Urjit Patel (former governor of RBI) recognises that using economic coercion to achieve geopolitical goals has been a longstanding American policy and is only expanding under the Trump Presidency. 

• Over the years, the US has sanctioned oil exports from Venezuela, Iran, Iraq, Libya, Sudan, and Syria.

Key Highlights of the Paper

• Sanctions as a Tool of Economic Warfare:  Economic sanctions – curbs on trade and shipping, banking, payments channels, etc. are a substitute for military war for lining up the diplomatic agendas.
• Rise in number yet limited effectiveness: Despite a deluge of sanctions in the 21st century, sanctions have been largely ineffective in achieving the diplomatic objectives of sanctioners. 
  • Of 687 sanctions since 2000, fewer than 20% achieved complete success.
• Rise of Secondary Sanctions: They are extraterritorial, imposed to impede the economic activity of third countries not directly violating primary sanctions. 
  • The US and allies (G7, EU) use secondary sanctions to block third-party trade with sanctioned countries. Key Examples are 
    • Chabahar Port (Iran): Indian investment hit by US sanctions.
    • Oil Investments in Russia: Indian PSUs unable to access $900 million in dividends due to US/EU payment restrictions.

India should view the emerging international financial architecture around BRICS and the Asian Infrastructure Investment Bank (AIIB) as a “risk mitigant” and a rational response to the ever-expanding sanctions regime.