Innocent or Not‐so‐innocent Bystanders: Evidence from the Gravity Model of International Trade About the Effects of UN Sanctions on Neighbour Countries

Abstract

This paper examines two hypotheses about the effects of UN sanctions on trade flows between land neighbours of the target country and the rest of the world. First, there have been claims that sanctions hurt neighbour countries by cutting off trading routes, increasing transportation costs and disrupting established trading ties. We would expect that a neighbour's trade with the rest of the world would fall, as a result. Second, there is extensive evidence that neighbours have been involved in smuggling. Consequently, neighbours should trade more with the rest of the world during UN trade embargoes, because now they also trade on behalf of the target. I employ the gravity model of international trade to show that, overall, a neighbour's trade with the rest of the world tends to fall during UN sanctions episodes. This confirms the first hypothesis above: on a net basis, land neighbours have been 'innocent bystanders' hit by UN sanctions. Copyright 2007 The Author Journal compilation 2007 Blackwell Publishing Ltd .

You're Banned! The Effect of Sanctions on German Cross-Border Financial Flows

“…They find that US sanctions, in addition to imposing restrictions on US trade with the target country, also adversely affect a target country's trade with other countries. Slavov (2007) and Yang, Askari, Forrer, and Zhu (2009) focus explicitly on third country effects.…”

Alliances and Trade with Sanctioned States

“…There is little consensus within the literature as to whether economic sanctions have generally positive or negative effects on their targets’ trade with third parties. While some scholars argue that economic sanctions have predominantly disruptive effects upon their targets’ trade with third parties (e.g., Van Bergeijk 1995; Slovov 2007), others contend that they create strong sanctions-busting incentives that boost their trade with third parties (e.g., Kaempfer and Lowenberg 1999; Drezner 2000). The lack of conclusive evidence supporting either position potentially stems from the fact that individual third-party states are affected differently by the costs imposed by sanctions and have varying abilities to take advantage of the opportunities they offer.…”

Arms imports in the wake of embargoes

“…There are at least two intertwined reasons why we may expect "special opportunities" for direct neighbors of targets in the wake of an arms embargo (Slavov, 2007). First, porous and fluid land borders give neighboring states a tangible advantage in the illegal trafficking of weapons and make them more likely to constitute an "ostensible" end-user for the transit of arms.…”

“…As of yet, however, because of the difficulties in detecting clandestine arms transfers, we have limited evidence of arms violations by nation states. As Slavov (2007Slavov ( : 1705 stresses, while anecdotal evidence of smuggling across the border is overwhelming, "[t]he problem with smuggling is that, by definition, it is hard to observe and quantify. Official statistics do not measure smuggling directly.…”