HEC Research Papers Series,
HEC Paris

Abstract: The claims advanced in this paper pertain to the operational, legal, and institutional idiosyncracies of financial sanctions, making this sanction type both an empirically increasingly relevant and normatively perennially unconstrained foreign policy tool. First, the pivotal role of financial intermediaries transforms sanctions in various dimensions: From sanctions on trade in goods to sanctions on transfers of capital; from state-centric to market-centric enforcement; from egalitarian and reciprocal sanction practice to hierarchical and hegemonic exercise of currency power; from multilateralism to unilateralism. Second, the coercive potential of financial sanctions contrasts with the absence of an adequate legal framework. On the level of international economic law, a ‘blind spot’ leaves the most common types of financial sanctions effectively unregulated. Third, financial sanctions employ the superiority of the monetary sovereignty nexus over territorial sovereignty to the extent that sanctions leverage financial dominance. In contrast to scholarship emphasizing the vanishing grip of the state on private money forms, over-compliance of financial actors with sanctions indicates the resilience of the Westphalian state order.

Keywords: Financial sanctions; warfare; monetary sovereignty; International Monetary Fund; World Trade Organization; financial intermediaries

JEL-codes: F51; F52; K33

78 pages, October 16, 2023

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