Today, Explained - Do sanctions work?

Episode Date: August 19, 2019

The Trump administration is ramping up sanctions on Venezuela, but it may end up hurting the people they're meant to help. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for this episode of Today Explained comes from KiwiCo. KiwiCo wants your kids to step up and make something that's fun, but also make something that makes them smarter and more curious and enlightened about the world. Check out their KiwiCo crates, their little projects that come to you every month. KiwiCo is offering Today Explained listeners a chance to try them out for free right now at keepitco.com slash explained. The last time we spoke about Venezuela on the show, the country had two presidents, an economic crisis, and violent conflicts on its border with Colombia. And since then, things have actually gotten considerably worse. Once Latin America's wealthiest country, the conflict has plunged Venezuela into deep economic turmoil.

Experts say it is the single largest economic collapse outside of war in at least 45 years. Children are starving to death. Venezuela's child mortality rate has jumped 140% compared to 2008. A report presented here says the Venezuelan exodus could reach 8 million people by next year, making it the largest in the world, even surpassing the 6.7 million people who have fled serious conflict. Some things have changed, some others haven't. Jorge Luis Perez Valdez is a freelance reporter based in Caracas.

Things that have changed, well, there's no more protests in the streets. Those political protests that we were seeing trying to oust President Nicolás Maduro from power have ceased. What has not changed is that Nicolás Maduro from power have ceased. What have not changed is that Nicolás Maduro is still the president of Venezuela. He did not have the recognition of the parliament or other countries, but he is still the man who is having control of the institutions of the Venezuelan state. We have an opposition leader that is claiming he's an interim president. So pretty much the country is still in the same situation that we had in January.

How has the situation changed for Venezuelans? It changes every month. The economy has collapsed. You see it in the everyday life of the people you go to the supermarket one day and there's a price uh corn powder for example which is like the main meal for venezuelans and one day you have a price and the next day it could be double or triple so for venezuelans every this sort of a struggle trying to get the more food with a minimum wage that right now is no more than $4 a month. And this is just in terms of buying stuff, the whole country went to a general blackout.

So we spent hours, even days, even weeks for some cities in the countryside without electricity. And of course, this has led to this exodus in the country. How many people have left? According to the United Nations, there are more than 4 million Venezuelans living abroad. That statistic comes from before January 2019. And it's a number that is increasing and it's causing an immigration situation in the whole region that wasn't known before. Venezuela was a country that received immigrants in the past. It was the most wealthy country in Latin America, an oil producer country with a stable economy in the past. We're talking about the 70s, the 80s, the 60s. And that's just something from the past, not anymore. So now we are just exporting citizens to other countries. Most of them are going to Colombia, Argentina, Peru, Ecuador.

Most of them are throughout the region. What's the situation in Colombia right now? Is the outpouring of Venezuelans becoming too much for Colombia? flow of Venezuelan citizens going to the country. Colombia do not have enough employment positions for all these immigrants that are coming to the country. Over a thousand Venezuelan are sleeping on the streets of this border town in tents and hammocks or lying on sheets of cardboard in plaza and sport fields escaping hunger back home. What you see is a constant flow of people moving not only to Colombia they use Colombia as a bridge to go maybe to escaping hunger back home. What you see is a constant flow of people moving, not only to Colombia.

They use Colombia as a bridge to go maybe to Ecuador, Peru. And some people even tell us that they go to this country to make some money, to get some savings, and after that, being able to move to another developed country, probably Spain, probably the United States. People are trying to look better standards of living and they do what they have to do, even walking. We saw people that said, no, I'm going to Peru. And how are you going to do it? Well, I'm going to walk. You hear stories from people that

say, I gave up. I can't wait anymore for a change in Venezuela. I need to make my life so I'm leaving and they do it sometimes with just 50 US dollars the luckiest one had like 350 US dollars and and that's all money that people are taking trying to find a better life up to 45,000 migrants cross on foot from Venezuela to Cucuta every day. The Colombian city has become the last hope for many fleeing Venezuela's crumbling economy. Back there, there's no food. You can't find anything. There are no medicines. We had to come here to vaccinate the baby. People are broke. They don't have access to basic services. There's a mass exodus. How exactly is Nicolás Maduro holding on to power?

Why is the military still standing behind this guy? The answer is the military is an important institution to keep government stable in this country. It has been like that for many years in Venezuela. This is a country where traditionally the military has been involved in the politics. And having the support from the military, it's a key part of Maduro still being in power. And his messages to the military are always, we got to keep united. This is a union between the civilians that are in power and the military. And we have to strengthen this union against the United States, which is a common enemy.

This is a speech that he probably gives almost every day you hear it in the public television. Will you defend your commander in chief, he shouted. Yes, they roared. The message? No amount of pressure from inside or outside the country can force him out with loyal troops like these. Have there been any reports of military defectors? Some NGOs, local NGOs that are keeping an eye on this, they're watchdogs of this situation with the military.

They talk of over 200 military men detained in the country. There's a recent case that you probably hear in the news. There was this Navy captain. He was detained, accused of conspiring against the government, of trying to provoke a coup d'etat to overthrow Nicolás Maduro. Days after, he was taken to military court. And what his family and lawyers denounce is that his physical condition was bad, that he looked with signs of torture. That same night, that man died while he was in custody of the government.

The widow of a Venezuelan Navy captain has called for the U.N. to investigate her husband's death. She says he was tortured after being arrested for plotting to overthrow Maduro. And this all comes amid allegations that more than 700 Venezuelans are being held as political prisoners and that some are being tortured. So this became like an important case for the opposition, for those human rights defenders to denounce that there are reasons to believe that some military men are being tortured for not being totally loyal to the government of Nicolás Maduro. So he's torturing and murdering his own military.

I guess that will keep everyone in line until it doesn't. Apart from Russia and China, most of the world is denouncing Maduro. But what are countries doing to put an end to this? It's been like more than half a year with this two president situation now. There's a lot of pressure from the countries in duration, probably countries like Colombia, Peru, Brazil, which are pretty close to Venezuela, are trying to make the situation to change because they are having a direct impact. They're organizing between themselves,

putting pressure on the government, insisting that there should be free elections in the country again to choose new authorities. There's also a dialogue that has been mediated by Norway between the opposition and the government trying to find a peaceful solution for the country. But of course, the biggest pressure is coming from the United States. The United States was the main client of Venezuela in the oil industry. Most of the money that got into this country came from the US. And now that's changed dramatically.

Now Venezuela's main client a couple of years ago, is now the main country that is taking actions, trying to make a political change to happen. At President Trump's direction, effective today, the United States will impose additional sanctions on regime officials, including three border state governors implicated in last weekend's violence

and a member of Maduro's inner circle. In a minute, why the United States would impose sanctions on a country that's coming apart at the seams. And if those sanctions could actually help. I'm Sean Ramos-Firm. This is Today Explained. Hello? Hello, is this Ada? Yeah, hi, Sean. So you listened to the show from California,

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Daniel Drezner, you teach international politics at Tufts University. Can you help us understand what impact sanctions are supposed to have right now on Venezuela? How do sanctions ideally work? So in a perfect world, sanctions country that wants to impose sanctions, let's call that country the sender, issues an explicit quid pro quo threat saying, you, the sanctioned country, also called the target, we want you to change policy X or we want you to make this concession. The Minister for External Affairs announced new measures against the government of South Africa. Measures designed to show the Mulroney government's displeasure with the regime's continuing apartheid policies.

We can't order them to change it, but we can significantly influence their calculation of the consequences of not changing it. If you make this concession, there will be no interruption in economic exchange. However, if you continue to stand fast, we will disrupt a certain amount of economic exchange with you, which will cause your economy to suffer. So it's a choice. Which do you want, target country? Do you want to pursue the policy you want to pursue in return for

suffering an economic cost? Or do you want to keep the status quo in terms of your economy and change your policy? After so many centuries, all South Africans are now free. And they sound kind of like a phenomena of the new world order. When exactly did countries start placing sanctions on each other? Well, I think the earliest recorded example of sanctions actually dates back to the Peloponnesian War. Never mind. Yeah, sorry. One of the causes of the Peloponnesian War, according to Thucydides, was the Athenian embargo of the city-state of Megara. Control of the sea will be as important as land power in this war and enable you to supply your ventures or impose blockades or sanctions against sparta and its allies and even with respect to the united states

the very first example of the united states imposing sanctions is also among the most disastrous which was the 1808 embargo act imposed by the jefferson administration on both the united kingdom and Napoleonic France for impressing U.S. sailors into their navies. It was a disaster. It lasted about 18 months and hurt the U.S. economy far more than it hurt either the British or the French. But obviously, the United States doesn't shy away from imposing sanctions, doesn't learn its lesson. after World War II, the United States became more active in terms of using its market power

or threatening to use its market power as a means of trying to coerce both allies and adversaries alike. Probably the most prominent success you could argue would be in 1956, when the United Kingdom, France, and Israel seized the Suez Canal from Egypt. Unit after unit comes ashore to build up the Allied strength. As well as fighting troops, there are many specialists. For one aim of the Allied action is to safeguard the canal, and the Egyptians have sunk several ships defend the pound. There was a run on the pound. And eventually, those countries withdrew their troops. So that's a sort of very prominent example of a sanction success. That was an instance in which sanctions were imposed where there was a clear quid pro quo on offer, or there was a specific ask. In the background was the growing struggle between two great powers to shape the post-war world.

On orders from the Kremlin, Russia had launched one of history's most drastic political, moral, and economic wars, a Cold War. And we're talking about the Cold War era here. Does the U.S. do a lot of sanctioning of the Soviet Union? The Cold War meant there were a fair number of sanctions imposed on states that contemplated switching from one side to the other. So both the United States and the Soviet Union imposed sanctions. The Soviet Union, for example, would impose sanctions on Finland during something called the Night Frost Crisis. And the United States imposed sanctions on Cuba when Castro took over, and it became apparent that Castro was planning to ally more closely with the Soviet Union. So did these U.S. sanctions work in the Cold War? Most sanctions during the Cold

War did not have a great track record of success. To use a baseball analogy, you're talking about, you know, at best like a 250 hitter potentially falling close to the Mendoza line of 200. So the success rate was not great. On the other hand, to describe them as ruinous would also be inaccurate because the United States was such a massive economy. And most of the countries that the United States was sanctioning were incredibly small. And so as a result, even if it disrupted trade, the effects on the US economy were like pinpricks. And how does this become such a go-to measure in the United States? If for decades of Cold War, the U.S. keeps striking out with sanctions?

After the Cold War, there was a renewed enthusiasm for sanctions, among other reasons, because suddenly the United Nations Security Council became a place where sanctions could actually be authorized. During the Cold War, there were only two instances in which the UN Security Council could agree upon sanctions because of Cold War tensions. But beginning with the sanctions against Iraq, when Iraq invaded Kuwait, suddenly there was a newfound enthusiasm and sort of alignment of preferences

within the Security Council to be able to impose sanctions. The problem facing us today is what threat does Iraq present and what threat will Iraq present should sanctions be lifted? But those first wave of sanctions, particularly against Iraq, were examples of sanctions that without question imposed ruinous economic costs on the target, but without in any way generating much in the form of concessions. And so there began to be an increased emphasis politically on the sort of collateral damage that these sanctions were causing.

Prolonged economic sanctions directly and indirectly cause death, malnutrition and social destruction in respect of the innocent, the children and others who are blameless for the bad decisions of government. Truly hundreds of thousands of Iraqi children dying, for example, because of diseases and poor vaccinations. And so there began to be an evolution of how sanctions should be applied beginning in the post-Cold War era that really sort of came into refinement after the September 11th terrorist attacks. What happens then? Post 9-11, there began to be an appreciation that one of the other alternatives through which sanctions can be imposed was sanctioning financial transactions.

The U.S. is the epicenter for global capital markets in a way that even in terms of trade, it's not nearly as important. Because the dollar is the global reserve currency, and because most banks have to have corresponding banking accounts in the United States if they're doing dollar transactions, they need to stay in the good graces of the Federal Reserve and the U.S. Treasury Department and U.S. regulators. So, for example, one of the most recent successful cases of sanctions was when the Obama administration imposed financial sanctions on Iran to get them to the negotiating table for their nuclear program. This legislation strengthens existing sanctions, authorizes new ones,

and supports our multilateral diplomatic strategy to address Iran's nuclear program. And the initial Iranian reaction to all of this was, hit us with your best shot. We've been sanctioned for 30 years by you guys. You really think this is going to have that much of an effect? And one of the ways in which the sanctions had unanticipated effects as far as the Iranians were concerned was that Lloyds of London decided

they were no longer going to provide shipping insurance to Iran because they were worried that they would mean they would run afoul of the sanctions, which meant that suddenly Iran literally couldn't get their oil out because they couldn't have tankers commit to sending out their oil because the tankers had no insurance. This is a way in which financial sanctions actually often magnify the economic cost to the target. So bring this back to Venezuela. How is this long and evolving history of placing sanctions being applied to Venezuela right now? What's the approach?

Is there a quid pro quo? Is it clear? Are they hitting trading now. What's the approach? Is there a quid pro quo? Is it clear? Are they hitting trading partners? What's going on? The approach of the United States and the Trump administration is taking towards Venezuela essentially, what can we sanction? It's a kitchen sink strategy. The United States had already imposed multiple sanctions against Venezuelan elites, against Maduro and a lot of his cabinet officials. There are human rights sanctions that have been imposed. What's happening now is that the latest imposition or new imposition of sanctions are what we call secondary sanctions, where the idea is we're not just going to sanction

Venezuela. We're also going to sanction any company, including foreign companies that do business with these entities that we don't like. The U.S. is widening its sanctions on Venezuela by freezing government assets and threatening measures against countries dealing with President Maduro's government. Leaders in Caracas have described the moves as economic terrorism. Venezuela's primary export is oil. And as you would imagine, there are lots of countries interested in doing business with Venezuela, particularly European energy firms, but also Russian and Chinese companies as well. Maduro is much closer to the leadership in China and Russia than he is to the United States. Dan, I'm sorry, we have a fire alarm going off in our building. This is a first for us.

Oh, Jesus. Yeah. We'll get back to you in a second. Sorry. Is it okay if I hang up? Sorry, I got a call while we were talking, and I want to call my wife back. Sorry about the disruption. That's okay. That was a first for us. We do a lot of interviews at this show, and that's never happened, so fun. Glad you could be a part of it.

You know, it'll add to the conspiracy theories. Exactly. They don't want us to talk about sanctions. All right. Exactly. So how much can we attribute this humanitarian crisis we're seeing right now to these sanctions? The Maduro government is truly inept when it comes to economic policy. That said, obviously, the sanctions make everything that much worse. And as the U.S.

ratchets up these sanctions, you're going to see even more immiseration of the target population, because essentially what the Trump administration is doing is not so much a quid pro quo, but rather hoping that the Venezuelan state collapses. They've already recognized Juan Guaido as the legitimate leader of Venezuela, and there is a semi-plausible legal case to be made for that. But in the process, there's no negotiation to be had with the Maduro regime. From the perspective of the Maduro regime, there's no point in making any concessions because they don't think that the United States is going to relent at all. So basically, the question here is, can the Maduro regime outlast these sanctions?

And in some ways, the outflow of refugees isn't so much a Venezuelan problem as it is a problem for all of the bordering states that are not necessarily well off on their own either. And what's the message the Trump administration is sending to these neighboring states? Is there one? Essentially, what the Trump administration is trying to engage in here is regime collapse. Often what takes its place is not necessarily all that great either. So there's a wide variation of outcomes. You know, in a perfect world, the Venezuelan military decides they look at the

handwriting of the wall and they tell Maduro, look, we're going to back Guaido unless you just leave peacefully. There's a peaceful transfer of power, rule of law is reestablished, the refugees come back in and Venezuela rejoins the community of nations. That is the absolute best outcome. The one lesson that we should draw in terms of the history of economic statecraft is that if a leader is bound and determined to stay in power and they are willing to either kill or starve their own population and determined to stay in power and they are willing to either kill or starve their own population, they can stay in power. Kim Jong-un has proven that. Fidel Castro proved that. Maduro is simply the latest in a long line of dictators who are willing to let populations suffer to keep their grip on power. Thanks to KiwiCo for supporting the show today.

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