As the United States has intensified its use of sanctions and economic tools for foreign policy more generally over the last 25 years, it has naturally developed bureaucratic structures to manage these tools. Along with these structures have come the routine challenges of staffing, organizational culture, and internal politics both within the agencies involved and among them in the interagency processes. Although there are myriad issues associated with U.S. economic statecraft (including important philosophical questions about the involvement of the government in finance and business, ethical questions around sanctions, and concerns about efficacy and over-use), the bureaucratic politics of sanctions do not often feature in the resulting analysis.
This article offers an assessment of how the U.S. Department of State (referred to hereafter as “State”) has adapted to the growth of sanctions use by taking on more functional responsibilities and the impact this tool has had on foreign policy more generally. In so doing, it also considers the changes in the U.S. Department of the Treasury (“Treasury”) that have accompanied this growth and the tensions that State and Treasury experience as a result.
We reflect on the cost borne by the shift in sanctions operations at State as well as the inefficiencies and deficiencies created. We argue that the U.S. government ought to redesign its sanctions structure to streamline operations and supporting analysis, with State taking less of an operational role in order to focus on sanctions diplomacy and agenda-setting. Such a role could also include far more long-range and scenario planning, a deficiency of current U.S. government economic statecraft that makes the sanctions tool more of a one-time event at the time of imposition rather than an ongoing point of disruption and leverage.
More than anything, we argue that if sanctions are here to stay, then the U.S. government needs to be sure it’s using them correctly, efficiently, and with a clear sighted vision as to what objectives sanctions are intended and able to achieve, as Treasury’s 2021 Sanctions Review made clear. To do this properly, it needs a State Department that concentrates on following through on its comparative advantages and do, as Ambassador Jim O’Brien, the former Sanctions Coordinator, often put it, “we should let each part of the U.S. government do what it does best.”
How we got here
State has long been in the international sanctions game, serving as it does as the lead foreign policy agency for the U.S. government in what is, at least rhetorically, referred to as a key “foreign policy tool.” But, over the last decade, State has forfeited some measure of its responsibility for statecraft and foreign policy development in an effort to become more operational. Ultimately, this has been to the Department’s – and broader U.S. government’s – detriment.
In 2012, State faced a bureaucratic challenge: how to assert itself in the then-expanding world of economic sanctions. With Treasury often described as responsible for sanctions policy and enforcement in international engagements, negotiations with Capitol Hill, and deliberations in the Situation Room, there was pressure within the Department to recapture some of its economic statecraft mojo. The issue was not merely one of bureaucratic politics; sanctions policy was at the heart of a variety of international issues. Whether the topic was the collective response to nuclear negotiations with Iran, North Korean missile testing, Russia’s then-growing aggression against Ukraine, or the smattering of small – but important – sanctions programs to address human rights violations, corruption, anti-democratic or transnational repression principally across sub-Saharan Africa and the Middle East, sanctions policy was at the heart of Obama era foreign policy.
But, State was not the driver of sanctions. During the George W. Bush Administration, particularly associated with its expanded powers in the aftermath of 9/11, Treasury reformulated the sanctions functions of the Office of Foreign Assets Control (OFAC) and other parts of Treasury into a powerful tool to police global financial activities. First targeting al Qaeda and terrorist groups, and then evolving to Iran and North Korea, the Treasury Department expanded beyond its notional remit of sanctions implementation into design and policymaking.
From a broad U.S. government perspective, this shift appeared broadly positive. The United States demonstrated an ability for effective coercive diplomacy using sanctions – in the form of various, short-lived deals with North Korea and Iran – and also grew more proficient at imposing costs on those bad actors. Moreover, the emergence of financial sanctions as a class expanded on the overall capabilities of the United States, which – to this point – had looked at sanctions in more traditional terms as involving the denial of goods and services to proscribed jurisdictions or as a messaging tool. These new sanctions were faster to impose, more agile and flexible in their execution, and tightly targeted; in one example, the Treasury Department imposed sanctions on specific bonds extended by the Russian government as a means of minutely targeting its pressure.
From a State Department perspective, the challenge was how to understand and fit into this new paradigm. State had some, largely semi-independent sanctions authorities. State, for example, has long held responsibility for designation of foreign terrorist groups, major proliferation actors, and human rights violators, as well as some responsibilities for export controls, working with the United Nations on UN sanctions measures, and other associated tools. But, within Washington, State was seen mainly as an inhibitor of sanctions action and pressure campaigns in the interest of moderated diplomacy, a reputation only augmented by the Department’s frequent statutory and/or regulatory role as the agency responsible for sanctions waivers and provision of foreign policy guidance to license applications. In a time shaped by sanctions use, being the agency responsible for moderating or even turning off sanctions hardly afforded it the right reputational oomph.
Then-Secretary of State Clinton’s response was to press the State Department to organize itself better in the conduct of sanctions and essentially to create an independent, effective sanctions bureaucracy at State. She created the first Coordinator for Sanctions Policy and sought to empower officers throughout the Department to be on the front lines of economic security as an essential part of their jobs. Her efforts were enhanced by the creation of more operational cells within the Department for sanctions targeting development and enforcement, asserting the Department’s practical role in this area and reinforcing the authorities granted to the Secretary of State in various statutes and executive orders. In this, Secretary Clinton was building on work done under previous administrations, but she did so in a way conscious of the value of expanding State’s involvement in the practical side of sanctions policy.
Costs of the current arrangement
Although this approach made sense at the time, especially given the context and structure of sanctions programs in the early 2010s, and also had some bureaucratic value, State’s concentration on what it might gain through operational involvement in sanctions came at a cost in the strategic clarity and foreign policy vision that the Department ought to bring to the table. One fundamental gap and three specific issues have arisen or been called into sharp relief in the intervening decade.
The fundamental gap was that, although State Department officers were supposed to execute this new vision, most of these officers had little to no experience in global finance or business. Those civil servants working on the sanctions portfolio may have a clear, discrete, and thorough understanding of sanctions dynamics, but they are in rare company within the Department, especially when balanced against the foreign service officers who, by design, are rarely able to develop or maintain such specialization. State officials may consider macroeconomic issues and trends but often fail to see the more specific ramifications and potential impact of cutting off targets from the U.S. financial system to the larger whole of U.S. international interests. Similarly, State officials tend to think about international affairs as the province of states hewing to international boundaries and the international organizations that manage them.
The State Department itself is principally organized around country desks that are themselves organized into regional bureaus; someone working on Iran may not think about Turkmenistan all that much, though the two countries share a border, because Iran policy is handled in one bureau and Turkmenistan policy is handled in another. Financial networks are often cross-border and intercontinental, which is often more challenging for State offices to track as efficiently and effectively as Treasury. As a result, State’s new internal bureaucracy that was attempting to channel the work of Treasury at State ran into many of the same hurdles that Treasury faced when it tried to deal with State. Instead of stepping back and recognizing the need for sharper policy rather than more operational bureaucracy, State continued on this path and confronted the three aforementioned issues.
First and foremost, State has lost some of the space and independence to think more about why sanctions ought to be imposed and under which circumstances they should be adjusted or even removed.
Bureaucratic politics do not explain every sanctions decision and Treasury’s oft-internally caricatured embrace of sanctions ignores the reality that it is in fact Treasury that will often oppose sanctions actions that it feels are unwise, unsubstantiated, or counterproductive. Nevertheless, the creation of authorities and capacities feeds a need to utilize them. For example, every decision to expand State’s own operational sanctions efforts came along with a management responsibility for budget and performance appraisals; a natural result was pressure on sanctions offices in State to look for targets to hit and to broaden the reach of their efforts, rather than being given strategic priorities and deciding how to engage them, which could more easily include not taking action.
In fact, this is a broader manifestation of the issues around sanctions in the U.S. government more generally; that incentive structures have been created to use sanctions in ways that are seen as topical, timely, and reputationally advantageous to the sanctioner rather than necessarily fitting the objectives of U.S. policy or because they might have any noticeable impact on the target. Some of this comes from the outside. Seemingly whenever an activist or, indeed, a member of Congress asks what the United States is doing about a particular problem, it is easier for a cabinet agency official to respond if they can point to some sort of aggressive action, like sanctions. But, the result is a sanctions policy that can often focus on one-time messaging and minutia rather than the sorts of persistent and defining measures that influence foreign policy change. Every sanctions action requires a baseline amount of effort to be imposed due to the legal requirements of designations, but there is nowhere near an equivalent level of impact for every designation of – say – a middle manager in a Russian oil company as there might be for a foreign head of state for corruption. But, the imperatives of sanctions action will drive towards as many Russian targets being included in a package, even if the effects are modest, due to the tyranny of numbers and metrics.
A corollary of this incentive-to-use dynamic is that State Department officials have come to think of sanctions principally in terms of targeting designations, which it has personnel to handle, rather than in creative licensing approaches, compliance engagement with financial institutions, or enforcement, all of which remain the unique purview of Treasury. This trend toward sanctions-as-targeting often results in missed opportunities for more dynamic and multifaceted approaches to addressing foreign policy objectives because of the fact that the action may rely more operationally with Treasury and the nuances and details less well understood.
Second, State’s operational role has created arguments over authorities, confusion in terms and interpretations, and duplication of intelligence analysis that wastes time and government resources that could be better applied. When functioning well, State and Treasury often have to engage in frequent “de-confliction” meetings to sort out who is targeting whom and with what authorities. In our experience, this often results in counterproductive, seemingly endless discussions of who ought to take the lead on which sanctions package and for what reason.
This, however, is when these processes are functioning well. In other times, it is not at all uncommon for State and Treasury to discover later on in a process – quite near the time for public announcement of a sanctions action – that both have been working on the same target, using different (and occasionally overlapping) authorities. Worse, these differing standards also have differing requirements for sanctions removal or waiver, creating a circumstance in which one agency might move to remove sanctions while another could not do so legally. Beyond creating confusion for the sanctions target, the purported foreign policy objective, and broader market, the result of the swirl of differing standards is that even good faith disputes about bad actors can become protracted arguments among agency leaders. If sanctions are akin to a punch in the face, then multiple actors punching the same target but for different reasons can leave everyone involved in the fight fairly confused about what the ultimate point of the punch is.
Third, external actors do not know who to go to for advice on sanctions actions, exceptions, waivers, and rules. In a way, this is not uncommon for the U.S. government, where a blend of agencies perform roles that overlap and dovetail depending on the topic at hand. Still, this is an area in which a system of mixed authorities offers little by way of advantage. Even if State were to relinquish all of its sanctions implementation authorities, the agency would still have a fundamental role in deciding whether and how to impose sanctions, subject to statutory requirements, due to its foreign policy mandate. Yet by keeping operational sanctions decisions spread among agencies, the U.S. government does make it harder for any outside person to understand whether and how exceptions could be made, the terms for sanctions removal or modification, and similar operational questions. This is often to State’s detriment, in the end, as the fact that its role is confusing and poorly understood outside the U.S. government ends up leading to it having less influence and weaker overall impact on the ultimate policy objectives than it might have if things were clearer and more focused.
Reform options
The current system can be changed; indeed, if sanctions continue to play the role they have assumed in foreign policy, it must. Specific recommendations as to which statutes or authorities would require modification is beyond the scope of this article, though a comprehensive legal analysis could easily be prepared that outlines which provisions of law or executive orders would need to be amended. Instead, this section will focus on the policy and operational changes that could be introduced.
First, State should cede to Treasury all responsibility for the operational elements of sanctions designation and delisting of individuals or entities regardless of which sanctions authorities would be utilized. The primary reason to hold on to the current system is so that State and Treasury have some equal authority to designate such targets, but this is not a necessary function for sanctions performance. Treasury can be granted sole responsibility for such designations (and personnel needed to implement), as well as for administering associated authorities for waivers and sanctions removals. This is not to say that the personnel and contractors at State doing this work have done poorly; quite the opposite. By virtue of doing well, the overall situation has gotten muddier when clarity is what is needed.
Second, and in exchange, State should be granted greater authority to identify the countries, issues, and purposes for which sanctions use should be prioritized and/or eased, and what types of sanctions would be most impactful. State’s role as the foreign policy lead should afford it the ability to decide in which circumstances sanctions tools ought to be emphasized as helpful or necessary to advance foreign policy goals and which it would not. For example, State has advocated for the use of sanctions on key political targets in countries where the disruptive impact of sanctions can shift negative political trajectories. At times, Treasury will push back because it’s not clear what connection the target may have to the U.S. financial system (or any other financial system for that matter). By more firmly rooting the responsibility for policy objectives in State, this kind of approach will be better understood across the Department. This can lead to better reporting from embassies on relevant topics and more integrated policy processes that bring in multiple regional and functional bureaus, which can spend less time tussling over specific targeting processes and more time focused on nuanced policy development and articulation.
Similarly, because of the operational effort that State puts into sanctions targeting and execution, it can, at times, be less willing to acknowledge that they should be eased for policy reasons. That is, too often, a sanctions removal, or de-listing, is seen as a failure or loss by the originating agency rather than what it often should be: a success in leading a target to change behavior or otherwise agree to support U.S. objectives. Although undoubtedly questionable in their specifics (and almost certainly not as a result of changed behavior), the recent spate of delistings of sanctioned individuals in the Balkans is an important example in the abstract of where State has led the effort to ease sanctions to advance its clearly articulated policy objectives. Had State led the effort to develop those packages, its role could have been more complicated. State’s initiative to push for the end of the Zimbabwe sanctions program, which occurred in 2024, was a step made easier by the fact that State was not the lead targeting agency on Zimbabwe but was dealing with challenging foreign policy issues that Treasury was largely removed from.
State should be required, on an annual basis, to provide Treasury with a list of priority topic areas and countries. Treasury should then be required to work closely with State to identify and sanction the most impactful targets within those priority areas. State’s assessment and prioritization exercise can and should include clear and specific explanation of what our policy in a particular country or context actually is, how different types of sanctions tools might play a role in advancing that policy by complementing or bolstering other interventions, and even recommendations along these lines down to the individual target level.
Third, the White House should ensure that everyone is playing by the rules, that sanctions priorities fit the broader foreign policy of the president, and that sanctions authorities are being appropriately utilized. The White House can execute this function through its processes, including meetings led by NSC staff, and adjudicate disagreements as it historically has (this is admittedly a grayer area at a time when the NSC staff is more limited in number and led by a dual-hatted Secretary of State). The White House will also then be responsible for ensuring that materials associated with a sanctions decision are cleared within the government but – importantly – with deference to the agencies responsible for their own functions to explain why sanctions were appropriate and why those targets were selected. Relatedly, Congress will then have a clearer approach to oversight of the roles being played across the Executive Branch and serve its own role in U.S. government checks and balances.
While we have focused these proposals primarily on the State Department, successful reform would also require changes at Treasury.
Currently, Treasury plays both a significant international policy and diplomatic role on sanctions (including through TFFC and OFAC’s policy shop). When the U.S. government is at its best, Treasury coordinates these functions with State to ensure development and implementation of sanctions policy that is both seamless and effective (even if nothing is ever truly seamless to those on the inside). Frequently, however, Treasury outmaneuvers State on sanctions policy development and engages in sanctions diplomacy without full coordination with State. Just as sanctions operations should be a Treasury function, and removed from State, the international policy and diplomatic aspects of sanctions should reside primarily with State, and not Treasury. Reform of just one agency’s role and not the other is unlikely to result in a cleaner, clearer, and more effective sanctions function within the interagency or in engagement with allies and partners.
Advantages
Although idealized and perhaps oversimplified, this set-up would have significant advantages. First, it is clean. State identifies the right places for sanctions and policy objectives those actions would advance and passes that information along to Treasury, making some of the core decisions about where sanctions ought to be prioritized and where they might not. Treasury would then coordinate its target selection with State and make decisions about how to best execute that sanctions mission, using its judgment and evidence on legal cases. Agencies would be aware of those decisions and actions before they are imposed – with appropriate opportunity for last minute decisions to pause if circumstances have changed – but otherwise, everyone would understand their role and responsibility. This would continue after the fact. Although State would have to defend internationally the U.S. use of sanctions in a given case, it would defer to Treasury to defend the specifics which – in turn – would explain the role these sanctions played in the execution of foreign policy.
Ceding the operational side of targeting also creates more room and clearer points for officers in embassies engaging with foreign counterparts in sanctions-related contexts. Where those counterparts believe that State is both the messenger and possible sanctioning agency, it creates a cloud that can dampen relationships and impinge on economic statecraft goals and activities.
Second, it codifies some elements of the current system. State is already consulted on licensing and, on occasion, other decisions for its foreign policy guidance; Treasury is already part of the discussion when sanctions are being contemplated against this or that target. But, the current operational set-up is far less distinct and certain. State’s licensing views can often come at the last minute and with proposals that are inconsistent with its foreign policy vision; Treasury’s sanctions packages are often interrogated in the minutest detail by individuals who may not be familiar with the totality of the intelligence available. By setting the terms of exchange between State and Treasury, each agency is given a clear set of parameters in which to operate.
Third, it will give State space to think. State’s internal structure and constellation of embassies abroad mean that often different parts of the building and broader department have varying views on the role of sanctions in U.S. policy as well as different relationships with Treasury. The result is that State often gives Treasury mixed signals and even conflicting advice. The concept of the Sanctions Coordinator function did offer some relief, but the operational status of different parts of the State Department (whether for visa denials, export prohibitions, or asset freezes) often conflicted with its statutory responsibilities.
If State’s roles were to be clarified as we propose, the Office of the Sanctions Coordinator (if extant; though mandated by Congress, it has been largely dismantled during the current Administration) would have a clear set of mandates to set priorities for sanctions action in collaboration with the other offices of the Department and to get those priorities approved by the Secretary of State. The Sanctions Coordinator would then know that their responsibility would be to spend the rest of their time working through the practical dimensions of sanctions execution and standing by to help with any adjustments to prioritization that might be required throughout the year as well if global circumstances warrant.
State can also then utilize its time and staff during the year to conduct some of the deeper assessments of sanctions, their strategies, and their role in international issues. State can focus on integrating sanctions into its broader foreign policy framework and to game out how sanctions tools might be applied in the year ahead. This policy-planning framework will also allow for prioritization of intelligence resources to contribute to sanctions, embassy assignments for data gathering and transmission, and reduce the amount of conflicting messages given to Treasury as to which cases ought to be prioritized and when. Last, State can work on raising its own game to work in a world of sanctions. State can prioritize internal training and education, especially on the complex world of international finance and industry specific fields like mining or construction. Some basic training efforts on these sectors exists already, but these could be significantly strengthened with an eye towards the strategic effects of sanctions use and how sanctions policy can best fit into international negotiations.
Problems
The biggest problem with this sort of realignment is the practical, mundane detail of separating out authorities and ensuring that all agencies respect the division of labor provided for in this recommendation. We also see three other issues that would need to be addressed.
First, not every sanctions or sanctions-adjacent authority can be handed to Treasury. Visa denials are an area of sanctions-adjacent policy that does not neatly disaggregate from the Secretary of State’s broader responsibilities for managing consular affairs. For this reason, visa denial decisions will need to remain in the hands of the Secretary of State and could be a problem as sanctions policy is broadly realigned; a decision to freeze assets but not ban visas (or vice versa) could lead to confusion as to U.S. sanctions policy intent and practice. Still, this issue could be adjudicated with a sharper set of authorities granted by Congress to automatically deny visas to anyone designated for an asset freeze by Treasury (thereby reducing one area of paperwork responsibility) and to maintain broad authority for waiver of this requirement at the State Department. Likewise, since consular officers themselves operate semi-independently in their determination of who will be granted a visa and under what terms (at least traditionally), a clearer set of intentions with respect to sanctions policy (which would also be provided to U.S. embassies abroad) would address some of this space for confusion.
Second, State and Treasury are not the only sanctions-related departments in the U.S. government. Although the proposals in this article could serve as a start, eventually, a full sanctions reform agenda for the U.S. government would require similar examination and realignment of roles for other parts of the bureaucracy, including the Department of Commerce and other agencies with a role to play in sanctions enforcement or licensing policy.
Third, Congress would need to buy in on and agree to live by this realignment. Congress has a habit of imposing authorities and reporting requirements that complicate the ability of an administration to determine its sanctions policy. Mandatory obligations to designate particular classes of individuals or entities mean that no administration has as free a hand in sanctions policy as it might. It may be impossible to prevent Congress from adopting contradictory foreign policy guidance in the form of sanctions policy, given that sanctions tools are intrinsically part of Congress’s authorities under the Constitution (only ceded to the Executive Branch under statutes like IEEPA).
Here, too, there are possible solutions to this problem. For example, the Executive Branch could encourage Congress to adopt an omnibus bill that realigns existing sanctions and waiver requirements along the lines of this proposal, e.g. a “Sanctions Administration Act” that complements the existing Export Administration Act overseeing export controls. Additionally, Congress could pass legislation that codifies the requirements of an annual sanctions strategy (asking for it to be conveyed to Congress too, under classified cover as need be) and perhaps even a process for oversight into the decisions associated with both the sanctions strategy and its execution by Treasury. In fact, a broader reorganization of IEEPA authorities is long overdue given its historical roots in the 1970s when sanctions focused on countries rather than targets and proposals such as a requirement for more reviews of emergency declarations and affirmative votes to support their maintenance every presidential term could help reduce the existence of “zombie sanctions” authorities and endless reauthorizations in the face of obvious failures of the sanctions tool to advance policy objectives over time, such as in Cuba.
Still, it is undeniable that Congressional participation in broader U.S. government reform is a tall order, especially given current political debates. For this reason, it is prudent to identify approaches – as outlined above – that do not necessitate legislative change to make a start.
Conclusion
This article identifies three big steps for immediate sanctions policy reform that solely require political will and operational change within the Executive Branch, all centered around the idea that the State Department should move away from operational sanctions execution to focus instead on policy development and strategic integration. These core features of foreign policy fit within the skillset of State officers and – crucially – have often been set aside in favor of the day-to-day minutiae of sanctions execution. The U.S. government can ill afford this unnecessary duplication of tasks, especially in light of the complexities that are involved in economic statecraft today. Thus, although maintaining the status quo for the long term is the path of least resistance, it will continue to lead to longer-term duplication of efforts and suboptimal policy and operational results.
There are alternative approaches to the ones we propose that could be explored. It is possible to imagine a consolidation of all sanctions functions at Treasury or at State, with the other agency leaving the field altogether. But, this would undermine the central challenge of conducting effective sanctions policy: to ensure that foreign and economic policy are better integrated, informed, and calibrated against the realities of what governments and markets can do. If Treasury absorbs all responsibility, then, the nuanced and integrated approach to foreign policy will be lost (or Treasury would need to develop its own capabilities) and the potential for the tool to achieve non-financial impact undermined; similarly, leaving Treasury out would take away the sophisticated understanding of the financial system, which is the main point of leverage that sanctions seeks to exploit. The key, as noted from Ambassador O’Brien, is how to let each agency do what it does best.
Likewise, one could argue for the creation of an independent organization that brings the key experts from both under one roof, e.g., a bureau or a White House office that would be responsible for sanctions policy and execution. For example, in 2024, Nephew argued in favor of the creation of a sanctions function at the White House that would mirror that of the U.S. Trade Representative. But, even with this function established, there would still be a need for State and Treasury to execute the decisions reached by this body given State’s management of international relations and Treasury’s responsibilities for working with banks and businesses. As a consequence, there would also still be a need for better rationalization of the sanctions function within the U.S. government.
Sanctions policy is here to stay as a defining element of the 21st century exercise of American power; getting the strategy, policy, and organization of the endeavor is essential to make sanctions as meaningful, well-resourced and proportional as possible.
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Richard Nephew is a senior research scholar and adjunct professor at the Center on Global Energy Policy at Columbia University's School of International and Public Affairs. He is the author of The Art of Sanctions and former U.S. diplomat who served as the Principal Deputy Sanctions Coordinator at the State Department, among other roles.
Brad Brooks-Rubin is a Partner at the boutique law firm Arktouros pllc and a Senior Associate (Non-resident) in both the Human Rights Initiative and the Economics Program at the Center for Strategic and International Studies. He previously served as a Senior Advisor in the Office of the Sanctions Coordinator at the State Department and an attorney-advisor for the Office of Chief Counsel, Foreign Assets Control, at the Treasury Department.