It's not a good idea to get on the United States' bad side. As the wealthiest country in the world, the U.S. also lays claim to the world's most powerful military. But military might is nothing compared to the repercussions that economic sanctions from the U.S. can bring about. In Pictures: 9 Tricks Of The Successful Forex Trader
Economic sanctions are a popular way for large governments to exert their disapproval over one another. While wars are costly – both economically and politically – economic sanctions tend to be somewhat less tangible, at least for the country doing the sanctioning. But for the country being sanctioned, the results can be enormous and long lasting. (This instrument of foreign policy and economic pressure is preferred over military action but can still pack a punch. Find out more in The Power Of Economic Sanctions.)
What does a country need to do to attract the ire of the United States? Overwhelmingly, the U.S. sanctions countries that sponsor terrorism or perpetrate human rights violations on their people. Right now, six countries are being sanctioned.
The Southeast Asian nation of Burma – also known as the Union of Myanmar – is one of the countries that the U.S. has placed sanctions on for human rights and political reasons. The country is ruled by a military junta, a committee of military leaders that makes political decisions for the country of 50 million. In charge is Senior General Than Shwe, the head of state who made the number-four spot in Parade Magazine's 2009 list of World's Worst Dictators.
U.S. sanctions prohibit investment into Burma, restrict the financial resources of the ruling military junta and disallow U.S. imports of Burmese products, as well as U.S. exports of financial services to the country. However, General License No. 14-B allows not-for-profit humanitarian and religious organizations in Burma to receive U.S. funding.
- Côte d'Ivoire
The West African nation Côte d'Ivoire (or the Ivory Coast, in English) is another country that's being sanctioned by the U.S. government for human rights violations. In the 1970s, Côte d'Ivoire was home to Africa's strongest economies thanks to booming coffee and cocoa exports, but an economic decline through the 1980s and 1990s brought about social problems that eventually lead to civil war in 1999. The country is still in conflict, with both sides of the fight charged with numerous human rights violations.
As a result, U.S. sanctions prohibit trade with people or organizations who provide arms or assistance to Côte d'Ivoire. (Learn the contract specifications for a few of the most heavily traded commodities, in The Sweet Life Of Soft Markets.)
One of the U.S.'s longest-standing and most well known sanctions is against one of our neighbors to the south: Cuba. In February, 1959, Fidel Castro became Prime Minister of Cuba, unseating a post-revolution Cuban government that was favored by the United States (ironically, the previous Batista regime was defeated in part because of a U.S. imposed arms embargo). Since the Cuban dictator took power, the U.S. has had trade embargoes in place as a punishment for impediments to democratic rule.
While Americans aren't generally allowed to trade or travel with Cuban interests, the close geographic proximity (and large Cuban-American population) have ensured that a number of exemptions exist for humanitarian work and visiting relatives. (The tax-free zones in Taking A Look At Tax Havens might sound appealing, but the consequences often aren't.)
Following the Iranian Revolution, where the Western-friendly Shah of Iran was deposed in favor of a theocratic government, the Iranian Hostage Crisis and other ensuing events pushed the U.S. to levy a trade embargo on the Middle Eastern nation.
With increasingly tenuous political relations right now, Iranian economic sanctions continue to be a hotly discussed topic.
- North Korea
North Korea is arguably the country most brutally affected by U.S. economic sanctions. North Korea's battles with the U.S. started in the 1950s with the United States' entry into the Korean War – a move designed to counter the USSR's support for a unified, communist Korea. Today, North and South Korea continue to technically be at war (albeit under a ceasefire since 1953), and the U.S. maintains stringent trade restriction on the country. (Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common! Find out more in War's Influence On Wall Street.)
As one of the nations that former U.N. Ambassador John Bolton named as "beyond the axis of evil," Syria has had contentious relations with the United States because of its position as a sponsor of terrorism. As a result, the U.S. has strong trade restrictions on the country, barring major exports as well as financial services for individuals or organizations linked to terror. (The measures in Standard Of Living Vs. Quality Of Life may seem similar, but the reality is an issue of qualitative versus quantitative.)
Not all of the U.S.'s economic sanctions are against entire countries. Instead, the U.S. Treasury keeps a list of specific people and organizations in the Balkans, Belarus, Congo, Iraq, Liberia, Sudan and Zimbabwe who U.S. nationals and organizations are forbidden from doing business with. Generally, those sanctions focus on political groups or organizations that promote violence or social unrest, instead of the country's official government.
Military action isn't the only option for countries that are in the midst of a political dispute. Instead, economic sanctions provide an immediate way for the U.S. to crack down on rogue countries without putting lives on the line.
(Catch up on this week's top financial news in Water Cooler Finance: Auto Hope, Bubbling Oil And Obamanomics.)