Sanctions must not be used 'lightly': US Treasury chief

Economic sanctions are vital to countering threats to US interests, from rogue states to the Islamic State group, but overusing them risks weakening America's global economic clout, US Treasury Secretary Jacob Lew warned today. "Sanctions should not be used lightly," Lew said in a wide-ranging speech that parsed the successes and limitations of decades of sanctions -from the nationwide Cuban embargo to the targeted and flexible measures used against Iran or North Korea.

"We must be conscious of the risk that overuse of sanctions could undermine our leadership position within the global economy, and the effectiveness of our sanctions themselves," he told The Carnegie Endowment for International Peace in Washington.

Among the risks he identified was the prospect of sanctions weakening the role of the dollar on global markets.

"If foreign jurisdictions and companies feel that we will deploy sanctions without sufficient justification or for inappropriate reasons -- secondary sanctions in particular -- we should not be surprised if they look for ways to avoid doing business in the United States or in US dollars."

"Our central role must not be taken for granted," Lew warned.

"The risk that sanctions overreach will ultimately drive business activity from the US financial system could become more acute if alternatives to the United States as a center of financial activity, and to the US dollar as the world's preeminent reserve currency, assume a larger role in the global financial system."

Over the decades, Lew said, the United States has evolved from the rudimentary model of blanket sanctions, which risked inflicting "costs on innocent civilians," to far more finetuned measures enforced in concert with its international partners.

Lew highlighted the case of Iran as an example of how best to leverage sanctions to obtain change, including by building support from US partners, and offering targeted relief when the measures succeed.

"Our sanctions against Iran's nuclear program are the most powerful example of how a broad-based effort, coupled with serious diplomacy, can succeed," Lew said.

As concerns mounted about Iran's nuclear ambitions and defiance of international regulations, the United States began by imposing its own sanctions on Iranian banks and businesses and reached out to allies to work together to pressure Iran's economy.

By 2010, four UN Security Council resolutions had raised pressure on Iran.

Through sanctions and diplomatic efforts, Iran last year agreed with the United States and five other major powers to curb sensitive nuclear activities in exchange for targeted sanctions relief.

"We secured a comprehensive arrangement to cut off all of Iran's pathways to a nuclear weapon, removing a serious threat from a region that cannot afford further destabilization," Lew said. By contrast, Lew pointed at five decades of a unilateral US trade embargo on Cuba to illustrate how sanctions can be hobbled by a lack of international support.

Some of the closest US partners such as Canada and the European Union barred domestic companies from following the sanctions, and the embargo put the country at odds with much of Latin America.

The lessons learned, Lew argued, now need to inform how the United States tackles the major threats represented by North Korea and the Islamic State group.

In the case of North Korea, Washington is working closely with China, Pyongyang's sole major ally, and the international community in imposing sanctions on key economic sectors.

"North Korea's leadership has prioritized the pursuit of nuclear weapons over just about anything else, including economic growth or the day-to-day lives of its own people," Lew said.

"But it is precisely because of this that we must work closely with China and others in the region to ensure strong implementation of the new sanctions."