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Theory and (Scarce) Evidence
from Part I - Secondary Sanctions
Published online by Cambridge University Press: 14 December 2024
The effects of sanctions have been extensively studied in both the political science and economic literature, but with little appreciation of their consequences for third countries and the firms in these countries. This is an important oversight, given that secondary sanctions have the stated objective of holding third countries not party to the original sanctions regime to account for their actions. This chapter surveys the economic theory behind the possible effects of sanctions on firms in third countries and then extends this to the specific case of secondary sanctions. Looking at the US sanctions regimes on Cuba and Iran, and using the scarce empirical evidence available, this chapter concludes that secondary sanctions are likely to amplify the effect of sanctions. However, their effects will depend on the particular firm, the overall trading relationship between the third party and the sanctioned party, and the relationship between the firm and the sanctioning country.
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