Mr. Chair, Madam, Vice-Chairs, and members of the committee, it's an honour to be with you here today. My only regret is that I am not in beautiful Ottawa with you. If I look a little green around here, it's not only the fault of the video conferencing and it's odd lighting, but it's also because I came down with food poisoning yesterday. Food poisoning was not going to dissuade me from appearing before you.
My testimony is based on more than 15 years of research on both North Korea and Iran. I've travelled to both countries, and with my colleague John Park, a Canadian, recently completed a three-year study on North Korean sanctions based on interviews with North Korean defectors whose jobs were to procure licit and illicit goods and materials. I filed a copy of that study with your committee.
Before addressing some of the the important questions posed by your committee, let me comment on two common errors one finds in the discussions of sanctions. First, sanctions are a tool that can be used to advance very different policy objectives, but most discussions of sanctions mix together different goals and objectives, leading to poor analysis and faulty evaluations. Sanctions can, among other things, be used for the denial of technology and goods, coercion, bargaining, punishment, inducing regime collapse, and deterring others who might want to imitate a target country. These are all very different things. Some of these objectives are far more difficult than others, and some are contradictory, for example, with bargaining and regime change. If you tell a country your objective is regime change, they're probably not going to be interested in bargaining with you. An effective sanctions strategy requires clarity about the objectives.
In addition, at a time when sanctions are offered as an answer to virtually every problem, it is easy to forget that sanctions, by themselves, will not accomplish policy objectives. They are one limited policy instrument that can be useful in combination with other tools as part of an integrated political strategy. Sanctions did not stop the Iranian program. The Iranian nuclear agreement stopped the Iranian nuclear program. Sanctions, together with other conditions, helped make that agreement possible, but without a negotiation, Iran would still have 19,000 centrifuges. Punishment for the sake of punishment, in the absence of a political strategy, may be psychologically and politically satisfying, but it does not solve real world problems.
Now to your questions. The first question is, how has the use of sanctions evolved over time? In the last decade or so, sanctions have witnessed an unprecedented level of innovation. This has included targeted financial sanctions, America’s use of its position in the international banking system to impose extraterritorial sanctions, and the designation of individuals, government ministries and organizations, and non-state actors. These innovations have been impressive, but two caveats should be kept in mind. First, to date, the research has not shown that these new forms of sanctions are more effective than the older versions. That might yet be demonstrated, but the jury is still out on that one. Second, we are not the only ones innovating. As they say, the enemy gets a vote, and the targets of sanctions have not stood still. They have innovated and developed countermeasures. In the case of North Korea, it can be said that Pyongyang has been quicker to innovate in the face of sanctions than the international community has been in responding to the DPRK's countermeasures.
Your next question is, how effective are sanctions in compelling behaviour on the part of state and non-state actors, and in deterring or denying specific activities? The short answer is that sanctions have been useful in some cases and not in others. Overall, the research suggests that sanctions can be effective, but they are successful in roughly less than half the cases studied. It depends to a very large degree on the conditions: who is being sanctioned, for what reason, toward what purpose, and the degree to which the sanctioned party depends on international commerce. It is important to distinguish between imposing costs on a country, which is easy to do, and changing the behaviour, which is much harder to do. For many years, the U.S. was able to impose costs on Iran, but that did not change its nuclear behaviour. Indeed, it went from having roughly 300 centrifuges to 19,000 centrifuges during that period of sanctions. Too often, policy-makers judge the effectiveness of sanctions by triumphing the costs imposed, such as inflation and lost GDP, rather than whether one is any closer to achieving the policy goal of changed behaviour.
The next question is, to what extent are the cases of Iran and North Korea comparable from a sanctions standpoint? Simply put, not very. First, there is no country like China in the Iranian case, i.e., a country with tremendous leverage, but one that also has the ability to insulate the target. That just doesn't exist in the Iranian case.
Second, Iran depends on international oil sales, while North Korea relies primarily on the sale of coal and commodities to one country, China. Because of the global nature of oil sales and Iran's close ties to the international financial system, it was vulnerable to the application of targeted sanctions.
Third, while Iran's government has authoritarian aspects, it cannot simply ignore the conditions of its citizens without political consequences. By contrast, the DPRK is a dictatorship unafraid to use any measure to suppress its population.
Your next question was, are unilateral sanctions more or less effective than multilateral sanctions? The research suggests that, on average, multilateral sanctions are more effective, but, again, it depends on the circumstances. North Korea provides an obvious example. Ninety per cent of its trade is with China. China has more leverage on Pyongyang than the rest of the international community combined. In general, however, and for obvious reasons, multilateral sanctions have been more effective insofar as they narrow the options of the target state.
Last, in what ways do sanctions imposed have an impact on the citizens, economies, and elites of targeted states? This is a vitally important question that is too often overlooked by policy-makers. In our study of North Korean sanctions, we identified a number of possible unintended consequences. Some of them were negative, some were positive, and with some it was hard to judge in which direction they would have an effect.
Curiously, we documented that in North Korea some sanctions actually had the effect of improving Pyongyang's procurement capabilities. Facing higher risks than costs, North Korean traders resorted to paying higher commission fees to their private Chinese middlemen, with the effect that Pyongyang was able to attract larger, more sophisticated partners.
Our main fear, however, is that squeezing the North Korean economy will have an adverse impact on the lives of millions of North Korean citizens who already live on the economic margins. Our concern applies to the macro level—for example, curtailing coal exports and remittances, something that is the subject of today's UN Security Council resolution. At the micro level, South Korean sanction laws make it more difficult for humanitarian NGOs to operate in the DPRK. We are not confident that governments can precisely dial in economic pressure and know for sure whether it will cause pain or cause a humanitarian crisis. We think that's worth keeping an eye on.
In summary, sanctions can contribute to achieving foreign-policy objectives, but they are not a wonder drug. It is easier to impose costs than to change behaviour. Often, they have no impact, and in some cases they can actually have severe negative consequences, as was the case with the Iraqi people during the Iraq sanctions in the 1990s. When they are effective, they are part of an integrated political strategy that has a clear objective, not a stand-alone measure. More so than most foreign-policy instruments, they depend very much on the particular conditions in play.
Sanctions can play a useful role, but if they are misapplied, oversold, because the tail wags the dog, or are confused in their application, the results can range from simply being ineffective, to inhibiting a political solution, to harming civilian populations. Knowing the difference between where sanctions can be helpful and where they are harmful will require tough questions and attention to detail.
Thank you for the honour of appearing before you today.