Investment, Opportunity, and Risk: Do US Sanctions Deter or Encourage Global Investment?¹

Abstract

Complementing the effectiveness of US sanctions debate, the US government often prods US investors to disinvest from targeted countries, hoping to pressure sanctioned countries to back US foreign policy goals or face economic costs for their actions. Missing from the effectiveness of sanctions debate is the impact US sanctions have on third-party foreign direct investment (FDI). Using panel data for 171 countries from 1969 to 2000, we present the first empirical study on the effect of sanctions on global FDI. We find strong evidence that when US firms disinvest during US sanctions, global FDI significantly increases, providing the target country with a reliable source of capital replacement. The results suggest the limited effectiveness of sanctions for restricting capital flows to targeted countries and that US firms may ultimately bear the highest costs from US-imposed sanctions.

The “Oil Weapon” Reversed? Sanctions Against Iran and U.S.‐EU Structural Power

“…13 Moreover, while U.S. oil companies were prohibited from shipping Iranian crude oil to the U.S. market, their offshore subsidiaries could still sell Iranian oil to other export destinations. 14 In the mid-1990s, the United States therefore tried to strengthen its Iranian sanctions regime. It moved from applying strictly unilateral oil sanctions to an attempt to enforce extra-territorial sanctions through the adoption in 1996 of the Iran-Libya Sanctions Act (ILSA).…”

Do Human Rights Regimes Affect FDI in Developing Countries?

“…Second, this paper contributes to the literature on international political economy. By analyzing the direct and conditional effects of HR regimes on FDI, this paper further specifies the political determinants of FDI and the cues that investors look at (Allee and Peinhardt 2011;Busse and Hefeker 2007;Büthe and Milner 2008;Jensen 2006;Kerner 2009;Lektzian and Biglaiser 2013;Pinto 2013). Finally, this paper also speaks to the more general question about the relationships between globalization and HR Egan 2012;Richards et al 2001).…”

Not all dictators are equal

“…Accordingly, we assume senders to be more reluctant to target richer countries with a large economy. Earlier research has also emphasized the importance of trade (Early, 2011;McLean & Whang, 2010) and foreign direct investment (FDI) (Lektzian & Biglaiser, 2013). Higher trade levels and FDI give more economic leverage to sanctioners but also increase their costs.…”