How exactly are sanctions against a country enforced so that it disrupts that country’s supply chain? When the US sanctions China and it hurts their supply chains, how exactly does the US ensure that other countries do not trade in parts or supplies with China. Apparently sanctions have hurt Huawei. My question is how the US is able to rigorously enforce those sanctions ? What international mechanism exists to keep abreast of all the intended trades China may want to make to achieve production in order to hamper them successfully?
You have to distinguish between UN-imposed sanctions and unilateral sanctions here.
UN sanctions are based on a resolution of the Security Council, which is based on Chapter VII of the UN Charter and binding on all member states of the UN. If the Security Council uses this mechanism to impose sanctions, then all member states of the UN are obliged to follow. There are no such sanctions against China (since China has a veto in the Security Council, it can easily block any attempt to use this emchanism against it), but there are, and have been, sanctions of this sort against other countries.
Unilateral sanctions are done by a member state (such as the US) autonomously, on the basis of national law. The enforcement mechanism is purely national: A company that violates the sanctions could be fined under the law of the country in question. Obviously, this raises the question of how to enforce sanctions against companies located abroad. The US takes a very broad approach here: Non-US companies that trade with countries on which the US has imposed sanctions will typically also do business in the US, which exposes them to the risk of being taken to court in the US and having assets they posses there seized in enforcement of such a ruling. If that doesn’t work out, the US can try to prohibit other companies that do business in the US from doing business with the sanction-breaching company; an example for that was when the US prohibited US banks from doing business with aLatvian bank which, in turn, had breached US sanctions against North Korea. Since the US is a lucrative market, most companies will either do business there or do business with other companies that do business there, so this mechanism provides a deterrent even for companies that are not themselves located in the US.
Thanks Schnitte.
FWIW: Early this month China enforced a sanction against a third country by confiscating some of our equipment that had been shipped through that third country. Maybe it will be released one day: maybe there will be a fine. Probably it will just be destroyed.
The US can wield a pretty big stick. Huawei founder’s daughter and exec has been under house arrest in Canada pending extradition to the US since the end of 2018.
Any company that wants to do business with the US and Iran or N Korea has some real risks. Any company exec doing the above has to be careful about travelling to the US, or as seen above even to Canada.
I guess in an extreme case the US may enforce a physical blockade such as seizing Iranian oil on tankers to Venezuela
And note that in retaliation, two Canadians have been arrested for “espionage”. Canada allows Meng to sit in a luxury home on house arrest, while two Canadians are in Chinese jails with almost no outside contact. The Chinese play hardball.
It didn’t help that Trump during this time had suggested using Meng as a tradable pawn in the China-USA trade war.
But basically, above points nail it. The USA controls a lot of world banking through threat of penalties on any bank that does business in the USA, and they can be threatened if they also do business with banks who don’t do business in the USA and break sanctions. Essentially splits the banking world into “are you on our side or not?” So someone selling widgets to North Korea has to bank somewhere. If their bank wants to avoid being ostracized from the rest of the banks, it will refuse to allow that company to bank with it.
Note too, in the interests of justice, the USA can freeze or impose penalties on foreign banks and then the bank is welcome to contest those penalties in court for the next 5 years or more while the USA holds on to the frozen assets. It’s the 500-Pound Gorilla principle. (much like how pot retailers in legal states can’t use banks because the feds could simply seize their bank accounts) I suspect it’s only a matter of time before the world banking system finds a way to do an end run on US controls.
Thread on topic:
The situation gets really uncomfortable when one country imposes sanctions and another country that is politically opposed to the sanctions adopts what is called a blocking statute: A law that prohibits companies from complying with the sanctions imposed by another country. It basically forces companies to choose whose country’s law to breach. The EU has several such blocking statutes in place against US sanctions (link).