SANCTIONED ENTITIES' STRATEGIES FOR COUNTERING SPECIAL RESTRICTIVE MEASURES

Abstract

When met with unlawful or undesirable actions by foreign entities or states, a country may decide to impose special restrictive measures so as to coerce a positive change in behavior. Nevertheless, the constraining effect of sanctions may be partly reduced by sanctioned entities by adhering to a countering strategy. Senders thus are forced to account for such strategies to ensure effectiveness of sanctions. The article is devoted to the strategic aspects of sanctioned entities' behavior when countering special restrictive measures imposed on them. We cover their main responses when met with sanctions, including compliance with sanctions sender's demands, sanctions evasion and sanctions busting. We define sanctions evasion as conduction of prohibited trade or financial relations between the target and the sanctioning state, distinguishing between internal evasion, when the sender's firm knowingly engages in this relation, and external evasion, when the target uses deception to conceal themselves. We extend the economic theory of crime and punishment for the behavior of sanctioned entities and use it to derive the conditions for choosing the countering strategy based on the current level of sanctions pressure, its necessary level and evasion costs. We also mention some of the counterstrategies the senders may employ when sanctioned entities refuse to comply. We assume different types of sanctioned entities have different preferences in choosing the strategy for countering special restrictive measures, and so discuss some of the peculiarities related to such choice across entities sanctioned for corruption, human rights violations, drug trafficking and other illegal trade, weapons proliferation, terrorism/cyberterrorism, undemocratic states and initiators or voluntary participants of an armed conflict. We pay special attention to the behaviour of sanctioned states, noting their vast options in countering sanctions. We believe the results of the study deepen our understanding of the criminals' behavior under international sanctions and are useful for government agencies in the field of sanctions control and companies involved in international trade.