Economic Sanctions

Economic sanctions are penalties that one country, or a group of countries, puts on another country to force it to change its behaviour. Instead of using weapons, they use money and trade as pressure. For example, they may stop buying a country's oil, freeze its money held abroad or block its banks from the world financial system. Sanctions are often called a tool that sits between words (diplomacy) and war (military force).

Why do sanctions exist?

Countries want a way to punish or pressure another country without going to war. Sanctions are used against countries that build weapons of mass destruction, support terrorism, attack their neighbours or abuse human rights. The idea is simple: if a country's economy suffers enough, its government may agree to change its policy. Think of it like a housing society refusing to deal with a member who keeps breaking the rules, until that member agrees to follow them.

Who can impose sanctions?

There are two main types by source:

• UN sanctions: The UN Security Council can impose them under Article 41 of the UN Charter (Chapter VII). Article 41 allows "measures not involving the use of armed force", such as cutting trade, transport and communication links, or breaking diplomatic relations. These are binding on all 193 UN member countries. Each set of sanctions is usually watched by a sanctions committee. For example, the 1267 Committee lists terrorists linked to Al-Qaida and ISIL.
• Unilateral sanctions: Imposed by one country or a group (like the United States or the European Union) on their own. They are binding only under that country's own laws. The US is the biggest user of such sanctions.

How US sanctions work

In the US, the President can declare a national emergency about a foreign threat under the International Emergency Economic Powers Act (IEEPA), 1977, and then block transactions and freeze assets. Congress also passes country-specific laws, such as the Iran Sanctions Act of 1996 (first called the Iran and Libya Sanctions Act; extended until 2031 by a 2026 law) and CAATSA, 2017 (Countering America's Adversaries Through Sanctions Act).

The Office of Foreign Assets Control (OFAC), part of the US Treasury Department, runs and enforces these sanctions. It keeps the "SDN list" (Specially Designated Nationals): people and companies that Americans cannot deal with.

Primary vs secondary sanctions: the key difference

• Primary sanctions stop a country's own people and companies from dealing with the target. Example: a US company cannot buy Iranian oil.
• Secondary sanctions go further. They punish third-country companies and people, who are not American, for dealing with the target. The message is: "If you trade with Iran, you cannot trade with the US, or use US banks or the US dollar."

Because so much of world trade and banking runs through the US dollar and US banks, secondary sanctions are very powerful. Most big companies anywhere in the world will choose the US market over the sanctioned country. This is why sanctions imposed by the US alone can still cut a country off from most of the world.

One example shows both types at once. On 22 October 2025, OFAC put Russia's two biggest oil companies, Rosneft and Lukoil, on the SDN list under Executive Order 14024. Americans could no longer deal with them: that is the primary part. Foreign banks and firms that kept helping them could also be sanctioned: that is the secondary part.

Secondary pressure can also come as tariffs, which are extra taxes on goods a country imports. The US Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 became law on 18 September 2026. Under Section 113, it lets the US put tariffs of up to 100% on all goods from the top five buyers of Russian crude oil or gas, if they make new purchases after a 30-day window.

The US Trade Representative reviews this top-five list every 180 days. Under Section 112, it also allows tariffs of up to 500% on goods made in Russia. The US can lower these tariffs, or the President can waive them under Section 115. The Russia measures can end for good only if the President tells Congress that Russia has signed a peace agreement accepted by Ukraine and stopped its attacks on Ukraine.

Here the buyer country is punished, not Russia directly, so the tariff works like a secondary sanction. Such a tariff is sometimes called a secondary tariff. An earlier case: in August 2025, the US added an extra 25% tariff on Indian goods because India bought Russian oil (effective 27 August 2025). This took the total US tariff on most Indian goods to 50%.

It was the first time the US used a secondary tariff to punish a country for buying Russian oil. The US removed it from 7 February 2026, after India committed to stop buying Russian oil.

Common types of sanctions tools

• Trade embargo: A ban on buying from or selling to the country, fully or for certain goods (like oil or arms).
• Asset freeze: The target's money and property held abroad is locked and cannot be used. The "frozen Iranian assets" in the news are an example.
• Financial sanctions: Blocking the target's banks from the global system. Iran's banks were cut off from SWIFT (the global bank messaging network) in 2012 and again in 2018.
• Travel bans: Named officials cannot travel to the sanctioning country.
• Targeted or "smart" sanctions: Aimed at specific leaders, companies or sectors, to hurt decision-makers while sparing ordinary people.

What is a waiver?

A waiver is a formal exception that allows some deals to continue despite sanctions. It works like a temporary permission slip. Most US sanctions laws let the President waive measures if this is in the US "national interest", usually after telling Congress. A waiver only pauses the penalty. The law stays in force, so the penalty can return later. Examples linked to India:

• In November 2018, the US gave "Significant Reduction Exceptions" to eight buyers of Iranian oil, including India. They expired on 2 May 2019, and India stopped buying Iranian oil.
• In 2018, the US also gave a waiver for India's work at Chabahar port under the Iran Freedom and Counter-Proliferation Act (IFCA). The US revoked (cancelled) it with effect from 29 September 2025.
• In March 2026, during the Hormuz crisis, the US Treasury gave India a 30-day waiver to buy Iranian oil. It expired on 19 April 2026.
• In March 2026, OFAC also issued short-term general licences for Russian oil. A general licence is a published permission that lets anyone do a certain kind of deal, without applying for it one by one. General Licence 133 (5 March 2026) let Russian oil already loaded on ships be sold and delivered to India for 30 days. General Licence 134 (12 March 2026) widened this to buyers in any country.
• On 16 October 2026, the US President used the national-interest waiver in the Sanctioning Russia and Iran Act of 2026. This paused the Russia measures of the law, including the 100% tariffs on top buyers of Russian oil and gas, before they could start. The waiver lasts until the US decides that further action is needed.

India's position

India's stated policy is that it follows sanctions imposed by the United Nations, but it does not formally accept unilateral sanctions by any single country. In practice, India has had to adjust to US secondary sanctions, because its banks, oil companies and exporters deal heavily with the US. India has used special payment channels in the past to keep some trade going, such as rupee-based payments for Iranian oil.

India also faces possible CAATSA sanctions over its 2018 deal to buy the S-400 air defence system from Russia. Section 231 of CAATSA calls for sanctions on foreigners who make "significant" deals with Russia's defence or intelligence sectors. Turkey was sanctioned under this section on 14 December 2020 for buying the same system. It was the first time the US used CAATSA against a NATO ally (a member of the Western military alliance led by the US).

As of October 2026, India has not been sanctioned for its S-400 purchase. India is one of the biggest buyers of Russian crude oil, so it was exposed to the 100% tariffs of the 2026 Sanctioning Russia and Iran Act. As of October 2026, these tariffs are waived, but the threat can return because the law is still in force.

Commonly confused concepts

• UN sanctions vs unilateral sanctions: UN sanctions bind all UN members. Unilateral sanctions legally bind only the country that imposes them, though secondary sanctions give them global reach.
• Primary vs secondary sanctions: Primary targets the sanctioning country's own people. Secondary targets foreigners who deal with the sanctioned country.
• Sanctions vs blockade: Sanctions are legal and financial rules. A blockade is a military action, where warships physically stop ships from entering or leaving ports. A blockade is generally treated as an act of war under international law.
• Embargo vs asset freeze: An embargo stops trade. An asset freeze locks money and property that already exists abroad.
• Waiver vs repeal: A waiver pauses a sanction while the law stays in force, so it can be switched back on. A repeal removes the law itself.

Issues, criticism and the way forward

• Harm to ordinary people: Broad sanctions can cause shortages of medicines and food, and job losses, hurting common citizens more than leaders. Humanitarian exemptions exist but often work poorly because banks fear penalties.
• Mixed results: Sanctions sometimes bring a country to the table (Iran agreed to the 2015 nuclear deal after years of sanctions). But often the target government survives and becomes more hardline.
• Hurting friends: Secondary sanctions can damage the interests of partner countries like India (lost cheap oil, delays at Chabahar).
• Pushing alternatives: Heavy use of the US dollar as a weapon has encouraged countries to trade in their own currencies and build new payment systems.
• Way forward: Experts suggest more targeted sanctions, clear and working humanitarian channels, and a clear path for lifting sanctions when the target changes its behaviour, so that sanctions become a tool for negotiation and not only punishment.

Concepts to Know

• Unilateral: Done by one country alone, without the agreement of others or the UN.
• SWIFT: A Belgium-based network that banks around the world use to send secure payment messages to each other. Being cut off from it makes international payments very hard.
• Chapter VII of the UN Charter: The part of the UN Charter that lets the Security Council act against threats to peace, with non-military measures (Article 41) or military force (Article 42).
• Waiver: An official permission to do something that a rule would otherwise forbid.
• General licence: A permission published by OFAC that lets everyone do a certain type of deal that sanctions would otherwise block. Nobody needs to apply for it separately. It is often short-term.
• Tariff: A tax a country charges on goods brought in from another country. A higher tariff makes those goods costlier, so fewer of them are sold.
• Executive Order: A written order from the US President that has the force of law. Many US sanctions programmes, like the one on Russia (Executive Order 14024), are run through such orders.