What is an Embargo?

By definition, an embargo refers to a restriction issued by a government that prevents commerce and trade with one or more nations. During that period, goods and services cannot be moved in or out of the embargoed nation. The embargo may be complete or partial. In the case that it is partial, an embargo will have special clauses that allow some imports and exports as long as they adhere to certain restrictions and limitations. Often, governments will use an embargo as a bargaining tool.

One thing to note is that an embargo is not a blockade, that is, an effort by one government to cut off supplies (by force if necessary) from another country. The key difference between an embargo and a blockade is that the latter is an act of war while the former is not. An embargo is a trade barrier that is legally enforced.

In an embargo, a government may choose to take any number of actions including coming up with special tolls, banning imports and/or exports, and other measures. Embargoes are only as effective as the amount of international participation they receive. For example, a country that issues an embargo against another would wish other countries to issue a similar embargo in order to increase pressure. In some cases, embargoes have proven to be highly effective in improving the self-sufficiency of a country to the extent that the embargo proves ineffective.

Types of Embargoes

There are different types including:

a. Trade embargo – This simply refers to a restriction on the exportation of certain goods and services. In some cases, a trade embargo will allow some goods and services to be traded if the goods serve humanitarian needs such as medicine and food.

b. Sanitary embargo – This type is normally issued as a means to offer protection to people, plants, and animals. For example, most countries have embargoes on the importation and exportation of endangered plant and animal species.

c. Strategic embargo -This refers to prohibitions on the sale of goods and services of a military nature.

Politics

Embargoes and similar restrictions are deployed mainly as foreign policy measures. Embargoes are the preferred alternatives to outright war. Normally, larger countries impose such restrictions on smaller countries because of a threat the smaller nation poses or because of cases of human rights. Whatever the reason, they are a coercive tool to get another country to change a policy or concede a certain resource to the embargoing country.

Effectiveness

Several studies conducted have proven that embargoes are largely ineffective, especially if the embargoed country has a form of totalitarian government. People living in countries governed by totalitarian governments have little sway with the government compared to democracies.

In studies conducted by Hufbauer et al., around 34% of the embargoes have been successful. Further analysis by other experts showed that only 5% of those so-called successes particularly stood out. Aside from that, sanctions have proven to have negative consequences to the embargoed nation.

According to a study conducted in 2015, sanctions by the UN and the US reduced the gross domestic product (GDP) of the target country by at least 2% in a year. Further, the study shows that embargoes span for about ten years, which cumulates to a decline of around 25.5% of the targeted nation’s GDP.

The imposing country also suffers some negative consequences. For example, embargoes on imports limit the choices of goods and services that consumers can access. If the embargo prevents exports from the embargoing country, then business in the imposing nations suffers. Ultimately, the imposing nation may end up losing business altogether from competing nations that do not participate in the embargo.

One popular consequence of an embargo is a counter from the embargoed nation. If a country is embargoed, it, in turn, issues restrictions of its own. For example, the US and other Western countries embargoed Russia in 2014. In retaliation, Russia also issued an embargo banning food imports from those nations.

Businesses

The global economy may also suffer since businesses are not willing to take a risk and invest in foreign countries that may be embargoed. In addition, embargoes increase the cost of running a business due to difficult embargo checks.

Before exporting or importing a product, firms have to be certain that there are no sanctions or face punishments. In addition, necessary licenses have to be procured. However, even with all these, business is still challenged because politics and relations keep on changing. Keeping up with trends in the past was tough since tracking of compliances was done manually. These days, technology has somewhat lessened the burden.

Economic Sanctions

An embargo is similar to an economic sanction although an economic sanction is a less severe action. In addition, economic sanctions have been known to have some unforeseen consequences, which lessens their effectiveness. An economic sanction refers to a penalty of a financial and commercial nature that is applied to a person, group, or state. Economic sanctions can be issued for a number of reasons including economic, political, social, and military circumstances. Aimed to target a few elites in the sanctioned nations, economic sanctions may be in the form of trade barriers, financial restrictions, and tariffs.

Notable Examples

One of the most popular embargoes took place from 1803 to 1815 during the Napoleonic Wars. At that time, Emperor Napoleon I of France wanted to completely diminish the United Kingdom economically. Therefore, in 1805, the emperor issued a decree called the Continental System that prevented European countries from trading with the UK. The embargo was issued even though the French could not enforce it effectively. The outcome proved to have as many negative outcomes (if not more) to the European countries that participated as to the UK.

One of the longest embargoes in history is the United States embargo on Cuba (called "el bloqueo" by the Cubans) that has been in place since March 14, 1958. Initially, the embargo, which was issued during the Fulgencio Batista regime, involved weapons only. However, on February 7, 1962, it expanded to encompass almost all goods and services. Running to this day, the embargo has been largely ineffective since most US allies did not join in. Cuban policies have also not changed much to this day. Interestingly, the US exports about 6.6% of its goods and services to Cuba. The percentage of exports places the US in the fifth position in terms of export sizes among countries exporting goods to Cuba. However, the embargo stipulates that Cuba is not allowed credit and must pay in cash for everything imported from the US.

Even the US is not immune to embargoes. The US and other developed nations had an oil embargo imposed on them by the Arab nations that lasted from 1973 to 1974. All this was action taken against nations that were on Israel’s side during the 1973 Yom Kippur War. The embargo had several consequences including high oil prices, increased revenue from oil sales, shifts towards alternative energy sources, and other things. The embargo proved unsuccessful as Israel still received support from the Western countries.

An example of an individual embargo is the one placed on the Taliban and Al-Qaida-associated people. The United Nations, under the UN Security Council Resolution 1267, placed this embargo in 1999. All countries have to freeze all financial assets owned by such individuals. During the Venezuela crisis, countries such as the US and Canada also imposed individual sanctions against people supporting Nicolás Maduro’s administration.