The Failure of American Oil Sanctions

Since their first recorded use in Ancient Greece, sanctions—trade and financial restrictions on select countries—have been an integral part of our foreign diplomacy. The United States has been imposing oil-related sanctions for decades; although, their use of said sanctions has grown vastly in response to deteriorating diplomatic relations with Iran, Russia, and Venezuela—three major oil-producing nations. However, the overuse of oil sanctions in the recent past has rendered them ineffective and have significant human costs.

Whether or not oil sanctions are imposed is largely controlled by U.S. domestic politics, as the administration can choose to add or remove sanctions at will. Iranian oil sanctions were initially put in place in 2012 to discourage Iran from trying to build nuclear weapons, but in 2015, the Obama administration reached a deal with Iran to reduce the 2012 sanctions in exchange for more oversight over Iran’s nuclear program. However, the subsequent Trump administration rescinded the 2015 deal, reinstating oil sanctions on Iran largely to express opposition to Iran in Middle Eastern peace conflicts and to move away from changes made by the Obama administration. Under the Biden administration, the U.S. wants to revive the 2015 nuclear oversight deal in exchange for reducing sanctions, but Iran refuses due to concerns that inconsistency in American policy over time will reverse any progress made through such deals. Understandably, Iran doesn’t want to negotiate sanctions with the current U.S. administration unless Congress is involved.

When the U.S. began imposing oil sanctions on more countries, conflicting objectives eroded the effectiveness of the individual sanctions. In 2022, in response to the war in Ukraine, the U.S. and many European nations banned Russian oil imports and imposed a price limit on Russian oil exports to other countries. Since there weren’t that many oil-producing nations, simultaneous oil sanctions in Iran, Russia, and Venezuela contributed to high inflation of oil prices. To maintain stringent sanctions on Russia—containing the war in Ukraine was the United States’s predominant concern—while aiming to deflate oil prices, the administration eased sanctions on Iran and Venezuela. Since sanction enforcement was reduced out of necessity rather than through negotiation with Iran, the U.S. didn’t receive the oversight of Iran’s nuclear program that they were seeking, essentially rendering previous Iranian oil sanctions pointless.

The history of Venezuelan oil sanctions reveals a similar story. In 2014—a year after President Nicolas Maduro came to power in Venezuela—the United States began imposing sanctions on high-ranking officials in the Maduro administration in response to acts of violence, anti-democratic actions, and other human rights violations. In 2018, sanctions against the Venezuelan oil sector began, preventing American companies from doing business in Venezuela. The objective of these sanctions was to force Maduro’s administration to grant more democratic freedoms to the Venezuelan population.

Overall, the sanctions on both Russia and Venezuela were unsuccessful in improving the quality of life of the individuals they were targeted to help. Sanctions on Russia didn’t bring Russia any closer to ending the war in Ukraine, and despite the economic stress of oil sanctions, the Russian economy as a whole has not been adversely affected. Furthermore, these sanctions have redirected most of Russian oil and gas output towards China, which has now become the primary consumer of Russian oil. This is a concerning development for the United States, since this development has brought Russia and China closer together in a world that is already ideologically bifurcating.

In Venezuela, sanctions have clearly been unsuccessful in loosening Maduro’s grip on power and granting more liberties to the Venezuelan population. On the contrary, oil sanctions have actually hurt the Venezuelan population by weakening the oil industry in Venezuela, causing high inflation and dramatically lowering the standard of living. As a result of inflationary pressures, in 2022, the U.S. reached a deal with Venezuela to lower sanctions in exchange for the Maduro government taking concrete steps toward ensuring free and fair democratic elections. The U.S. decided in early 2024 not to extend licenses for American companies in Venezuela due to what it deemed insufficient progress by the Maduro government. However, the United States is continuing negotiations with Venezuela. So far, the Maduro administration has set an election date in July and allowed a candidate from an opposition party to run, indicating that some progress has been made.

There are several ways the U.S. could address the ineffectiveness of oil sanctions. First, sanctions should have a specific, narrow goal. When some sanctions have broad targets that aim to improve the lives of many—such as ending the war in Ukraine—they are often ineffective. Instead, policies such as the recent attempt to incentivize the Venezuelan government to hold free elections in exchange for relieving sanctions have a greater chance of success since they create measurable steps for the sanctioned nation to take.

In the case that broad sanctions are necessary, cooperation with other countries is necessary to ensure their effectiveness. For example, Saudi Arabia is one of the most influential oil-producing countries and is a close American ally. The United States has mismanaged the strategic relationship with Saudi Arabia in recent years. As a result of the deteriorating U.S.-Saudi relationship, when faced with inflation resulting from simultaneous oil sanctions on Russia, Iran, and Venezuela, the Biden administration failed to persuade Saudi Arabia to increase its oil production despite the large capacity the nation had to fulfill this goal. Had they better managed their relationship with Saudi Arabia, the U.S. might have been able to secure Saudi support and wouldn’t have had to resort to undermining existing oil sanctions, which would have increased the chances of the sanctions’ success.

Finally, the credibility of American oil sanctions can be strengthened by increasing the consistency of sanction policies across presidential administrations. When simple changes in administration lead to meaningful changes in sanctions policies, sanctioned nations—such as Iran—may be unwilling to negotiate with the U.S., knowing that the next administration could easily reverse progress. A possible solution to policy inconsistency is to have Congressional oversight over long-term sanctions, which would reduce the volatility of such policies.

As America enters the 2024 presidential election, voters are faced with two candidates who pursued starkly different oil sanctions policies as presidents. While the Trump administration imposed harsh sanctions on Iran and Venezuela, the Biden administration has worked to relax those sanctions in favor of other policy objectives such as fighting inflation. In a rapidly polarizing world between an American-led alliance of democratic nations and an evolving coalition of authoritarian regimes, the effectiveness of U.S. sanctions as policy choices can have far-reaching implications for the balance of global power structure.

The United States’s oil sanction policies are currently undermined by unclear goals, conflicting objectives, and inconsistent implementation. However, they don’t need to be. Through more focused and coordinated efforts, the United States can successfully use oil sanctions to achieve and strengthen its policy goals and foreign reputation.