The Effects of Economic Sanctions on Foreign Asset Expropriation

Abstract

Studies suggest that home countries impose economic sanctions following host state expropriation of home firms. However, and not addressed in the empirical literature, is the possibility that sanctions lead targeted countries to nationalize firms from sender countries. Using bilateral expropriation data from 1985 to 2010, and controlling for endogeneity issues, we find that sanctions significantly increase expropriation risk, encouraging targeted states to inflict pain in a reciprocal manner on sender countries. Expropriations also enable targeted nations to acquire economic assets from foreign firms, undermining the restricting goals of sanctioning states, and provide opportunities for leaders to show political resolve at home by standing up to senders. Our results are robust using monadic or dyadic data and different statistical methods, indicating another sanction-busting strategy used by targeted countries.

International Sanctions and Emigration

“…2. When facing sanctions, political leaders are more likely to violate basic, political, and civil rights (Adam and Tsarsitalidou 2019;Gutmann et al 2020;Peksen and Drury 2009;Wood 2008) as well as property rights (Lee et al 2023) because sanctions reduce leaders' likelihood of staying in office (Marinov 2005).…”

International Sanctions and Emigration

“…2. When facing sanctions, political leaders are more likely to violate basic, political, and civil rights (Adam and Tsarsitalidou 2019;Gutmann et al 2020;Peksen and Drury 2009;Wood 2008) as well as property rights (Lee et al 2023) because sanctions reduce leaders' likelihood of staying in office (Marinov 2005).…”

Do China and Russia undermine Western sanctions? Evidence from DiD and event study estimation

“…For example, sanctions are found to decrease economic growth, private investment, and trade (Biglaiser & Lektzian, 2020; Draca et al, 2023; Ghomi, 2022; Gutmann et al, 2023; Hatipoglu & Peksen, 2018; Mirkina, 2018; Moteng et al, 2023; Neuenkirch & Neumeier, 2015; 2016; Peksen & Son, 2015). There is also evidence of dramatic side effects in terms of harm to the health and life expectancy of the target countries' population (Allen & Lektzian, 2013; Gutmann et al, 2021) and the policy response of the targeted regime, which may use repression to hold on to power (Adam & Tsarsitalidou, 2019; Gutmann et al, 2020; Lee et al, 2023; Marinov, 2005; Peksen & Drury, 2009; Wood, 2008). While it is possible that sanctions are undermined and still cause significant harm to the target country, they cannot be both powerful and without teeth.…”