DEFINITION of 'Capital Blockade'

A form of economic sanction in which a country or a group of countries attempt to limit or entirely stop the amount of investment capital going into another country that is seen to be performing questionable actions. The main goal of a capital blockade is to hurt the offending country's economic growth to the point where it will agree to meet and resolve the issue(s) at hand.

BREAKING DOWN 'Capital Blockade'

Since most countries rely upon foreign investment for economic growth, cutting off such funds may be an effective and relatively peaceful method of getting all parties back to the bargaining table without escalating to armed conflict. This type of economic sanction can be combined with freezing foreign bank accounts that belong to the target country's citizens in order to put more pressure on the situation.

However, employing a capital blockade will only be effective if the vast majority of countries investing in the target country are willing to stop the flow of investment capital into the target country.

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