In a panel Tuesday, four experts analyzed U.S. sanctions that respond to spying, drug conflicts, and human rights abuses in countries such as Russia, Iran, Turkey, and Venezuela.
The panel consisted of David Baldwin GS ’65, a University senior political scientist; Thaddeus McBride ’95, a Bass, Berry & Sims PLC partner; Brian O’Toole ’03, BB&T Bank senior vice president and Anti-Money Laundering executive for sanctions; and Meredith H.Terrell ’91, American Express Global Sanctions Group director.
When the United States imposes economic sanctions on an individual or company, U.S. citizens and companies cannot conduct business with the sanctioned entity. According to O’Toole, sanctions are a diplomatic tool that can be used against nations or individuals.
“When an individual or nation is sanctioned, every company they control, everyone they do business with, may be affected,” O’Toole said. “This is a strong incentive to economically isolate the individual or country, particularly for American companies.”
O’Toole said that sanctions are particularly effective for U.S. foreign policy because 45 percent of global trade occurs in dollars. Many transactions that do not involve U.S. citizens or banks still go through the United States. According to O’Toole, $15 trillion is transferred through New York City every day.
The panelists also spoke about North Korea and Russia, noting that sanctions incentivize both countries to change their policies by freezing individuals’ assets or discouraging the use of Russian banks.
“Sanctions don’t target North Koreans — they target Russian and Chinese banks or individuals who may be maintaining businesses in North Korea,” Terrell explained.
For instance, O’Toole said that when the Russian Federation annexed the Crimean peninsula in 2014, the waves of sanctions enacted against Russia froze the assets of state-owned banks and reduced the number of Russian companies able to trade in the United States. This was the first major use of sanctions for national security against a large, developed economy, and was “10 times the size of all previously sanctioned economies combined,” O’Toole noted.
The panelists also spoke about “secondary sanctions,” which restrict U.S. business with any non-U.S. entities that have conducted business with a sanctioned state.
For instance, Baldwin explained that Iran is currently under U.S. sanctions for violating the terms of the 2015 nuclear agreement. French nuclear companies — which would normally be allowed to do business with Iran — are now facing the prospect of U.S.-imposed sanctions for having conducted business with Iran, a sanctioned state. If these secondary sanctions were imposed, France would have to choose between trade with the United States or Iran.
Terrell added, however, that the European Union is currently changing this system. The European Union is considering developing its own body to allow European companies to operate outside of the financial scope of the United States.
The lecture, entitled “Financial Sanctions,” was sponsored by the Julis-Rabinowitz Center for Public Policy and Finance. The panel was held in the Julis Romo Rabinowitz Building at 4:30 p.m.