Sanctions: Meant to Change Behavior, Not to Punish Permanently

In thehigh-stakes world of international relations and economic statecraft,sanctions have become one of the most visible and controversial toolsin the modern policy arsenal. When governments impose economicrestrictions on nations, companies, or individuals, the public oftenperceives these measures as punishment for past wrongs. However, thisperspective misunderstands the fundamental purpose of sanctions.

As the U.S.Treasury's Office of Foreign Assets Control clearly states: "Theultimate goal of sanctions is not to punish, but to bring about apositive change in behavior." This principle represents morethan diplomatic rhetoric—it's the philosophical foundation thatshould guide how we design, implement, and ultimately lift sanctionsregimes.

The StrategicPurpose of Sanctions

Former U.S.Treasury official Adam Szubin, who led the Office of Foreign AssetsControl for nearly a decade, articulated this philosophy withparticular clarity. "The ultimate success of any sanctionsprogram is its demise," Szubin noted, arguing that sanctionsshould not be a product of anger but "a means to an end."He emphasized that "the primary purpose of a sanctions programis to promote a change in behavior," and thus policymakers "mustbe ready to remove sanctions when we see it happen."

Sanctions areintended as leverage, a means to coerce nations or companies to altercourse—rather than as perpetual penalties for past actions. Theyexist in what scholars call the space "between words and war,"providing governments with a tool more forceful than diplomacy alonebut less destructive than military intervention.

In practice, thismeans that when a sanctioned entity demonstrates credible change, thedoor to sanctions relief should open. This isn't weakness orcapitulation—it's the system working as designed. Sanctions thatnever end regardless of behavioral change cease to be policy toolsand become simply vindictive barriers.

Are RussianSanctions Actually Effective?

The effectivenessof sanctions against Russia has been the subject of intense debateand rigorous analysis. Since Russia's full-scale invasion of Ukrainein February 2022, Western nations have imposed unprecedentedfinancial sanctions and export controls, creating the mostcomprehensive sanctions regime in modern history.

The evidencepresents a complex picture. In the immediate aftermath of the 2022invasion, Russia's GDP contracted by approximately 2.1%, and economicforecasts predicted catastrophic decline. However, Russia's economyproved more resilient than many expected. The country transitioned toa wartime economy, with military expenditures doubling from 3-4% ofGDP to a projected 6.2% in 2025, artificially boosting economicactivity in the short term.

Recent analysesfrom organizations including the U.S. Government AccountabilityOffice, the Center for Strategic and International Studies, and theAtlantic Council reveal that while sanctions have significantlyimpacted Russia, they have not achieved all stated objectives. Themeasures have succeeded in several key areas: approximately 70% ofassets within the Russian banking system are now under sanctions,over €300 billion in Russian Central Bank reserves remain frozen,and export controls have complicated Russia's access to criticalmilitary technologies.

However, Russiahas adapted through several mechanisms. China has become the primarydestination for Russian exports, absorbing nearly 70% of Russianaluminum and dramatically increasing purchases of Russian oil.Russia's "shadow fleet" of over 500 vessels allowscontinued oil exports outside Western sanctions regimes. Moreover,India has emerged as the second-largest provider of restrictedtechnology to Russia, serving as a critical transshipment hub.

Perhaps mostsignificantly, Russia's interest rates have climbed to 21%—thehighest in decades—as the central bank struggles to controlinflation. The country's long-term economic prospects have beenseverely damaged. Estimates suggest that had Russia not initiatedaggression in Ukraine in 2014, its economy could have been nearly 20%larger today—a loss of approximately three-quarters of a trilliondollars.

The verdict?Sanctions have inflicted substantial pain and constrained Russia'scapabilities, but they have not prevented Russia from continuing itsmilitary operations. This raises the critical question: if sanctionsalone cannot force immediate compliance, what role should they playin a broader strategic framework?

When BehaviorChanges: The RUSAL/EN+ Success Story

One of the mostcompelling examples of sanctions working as intended involves RUSAL,one of the world's largest aluminum producers, and its parent companyEN+ Group. This case demonstrates how sanctions can achieve theirpurpose when properly designed and when the targeted entitydemonstrates genuine behavioral change.

In April 2018,the United States imposed sanctions on Russian oligarch OlegDeripaska and companies under his control, including RUSAL and EN+Group. The Treasury Department sanctioned these entities specificallybecause of Deripaska's ownership and control, accusing him of illegalactivities including wiretapping, extortion, racketeering, andalleged connections to organized crime.

The sanctionssent shockwaves through global aluminum markets. RUSAL's stock priceplummeted nearly 60% within two weeks. The company, which accountedfor 6% of global aluminum production, faced immediate crisis asWestern customers severed ties and financial institutions frozetransactions.

However, ratherthan simply accepting permanent isolation, RUSAL and EN+ pursued adifferent path. The companies approached the U.S. Treasury with acomprehensive restructuring proposal designed to address the specificconcerns that led to their designation. The framework they proposedincluded:

• Substantially reducing Deripaska's direct and indirect shareholding stake to below 50%
• Limiting his voting rights to less than 35%
• Completely overhauling the composition of EN+ and RUSAL boards of directors
• Implementing restrictive corporate governance measures to prevent Deripaska's control
• Committing to extensive, ongoing auditing, certification, and reporting requirements to ensure full transparency with Treasury

These weren'tcosmetic changes—they represented fundamental restructuring ofcorporate ownership and control. After careful evaluation, OFACdetermined that the significant restructuring and corporategovernance changes would meet the criteria for delisting. In December2018, Treasury notified Congress of its intention to terminatesanctions on EN+, RUSAL, and JSC EuroSibEnergo.

Critically,Deripaska himself remained sanctioned. His property remained blocked,and his investment in these companies became effectively frozen. TheTreasury Department achieved its objective: severing Deripaska'scontrol while allowing the companies themselves to return tolegitimate business once they demonstrated fundamental change.

In January 2019,sanctions on the companies were formally lifted. Treasury SecretarySteven Mnuchin was clear about the rationale: "Treasurysanctioned these companies because of their ownership and control bysanctioned Russian oligarch Oleg Deripaska, not for the conduct ofthe companies themselves. These companies have committed tosignificantly diminish Deripaska's ownership and sever his control."

This caseexemplifies the principle that sanctions should be conditional anddynamic. When the targeted behavior changes—when ownershipstructures are reformed, when malign actors are removed from control,when transparency is established—sanctions relief becomes not onlyappropriate but essential to maintaining the credibility of thesanctions system itself.

Other Examplesof Successful Sanctions Appeals

The RUSAL caseisn't unique. According to recent analysis of sanctions challenges inU.S., U.K., EU, Canadian, and Australian courts, approximately 48% ofsanctioned Russian individuals have successfully overturned or hadsanctions lifted through legal challenges. Out of 88 legal challengesanalyzed, 42 individuals had sanctions lifted while 39 cases wererejected.

Sanctionedindividuals have achieved success through several strategies:

Cutting tieswith Russia: Demonstrating that business operations and personalconnections with sanctioned activities have been genuinely severed.

Provingbusinesses are not Russian-based: Establishing that companiesoperate independently of Russian control or influence.

Identifyingprocedural errors: Documenting mistakes in the sanctionsdesignation process that resulted in improper listings.

Corporaterestructuring: Similar to RUSAL, implementing fundamental changesto ownership and governance structures.

The relativelyhigh success rate of these challenges demonstrates that Westerngovernments do take seriously the principle that sanctions should betargeted, justified, and subject to reversal when circumstanceschange. This isn't a weakness in the system—it's evidence that thesystem maintains due process and responds to genuine behavioralchange.

StrategicCrisis Management and Sanctions Compliance

For businessescaught in sanctions crosshairs, understanding this dynamic nature ofsanctions is crucial for developing effective response strategies.Industry professionals who specialize in sanctions compliance andcrisis management emphasize several key principles:

Earlyengagement matters: Companies that proactively engage withsanctioning authorities, demonstrating willingness to addressconcerns and implement changes, fare better than those that take anadversarial posture.

Transparencyis essential: Comprehensive disclosure and ongoing reportingbuild credibility with regulators and demonstrate genuine commitmentto compliance.

Structuralchange must be substantive: Cosmetic adjustments won't satisfyserious scrutiny. Changes to ownership, control, and governance mustbe real and verifiable.

Timing iscritical: The window for effective response may be limited, anddelays can result in compounding damage to business relationships andmarket position.

Legalexpertise is non-negotiable: Navigating the complex web ofsanctions regulations across multiple jurisdictions requiressophisticated legal counsel familiar with both the technicalrequirements and the policy objectives driving sanctions decisions.

Why ThisMatters for Your Business

If your companyor your clients face sanctions-related challenges, understanding thatsanctions are designed to be reversible changes everything about yourstrategic approach. Rather than viewing sanctions as a permanentsentence, you should evaluate whether genuine behavioral change couldcreate a pathway to relief.

This doesn't meansanctions relief is easy or automatic. It requires:

• Comprehensive understanding of the specific concerns that triggered designation
• Willingness to implement substantial, verifiable changes to address those concerns
• Sophisticated legal and strategic counsel to navigate the delisting process
• Patience and persistence through a complex bureaucratic process
• Ongoing compliance mechanisms to maintain relief once granted

The stakescouldn't be higher. Companies operating under sanctions face severerestrictions on business operations, frozen assets, reputationaldamage, and loss of market access. However, companies thatsuccessfully navigate the relief process can restore businessoperations, unlock frozen assets, and rebuild market position.

How OmnistratCan Help

At Omnistrat, webring decades of combined experience in sanctions compliance,strategic crisis management, and navigating complex geopoliticalchallenges. Our team understands both the technical requirements ofsanctions regulations and the broader strategic context in whichsanctions decisions are made.

We help clientsin several critical ways:

StrategicAssessment: We evaluate whether your situation presents genuineopportunities for sanctions relief, identifying the specificbehavioral changes that would need to be demonstrated and assessingthe realistic prospects for success.

RestructuringGuidance: Drawing on cases like RUSAL/EN+, we help design andimplement corporate governance changes that address regulatoryconcerns while preserving business value and operational capability.

RegulatoryEngagement: We guide communications with sanctioning authorities,helping craft proposals that demonstrate credible commitment toaddressing the concerns that triggered designation.

Multi-JurisdictionalNavigation: Sanctions regimes vary across the U.S., EU, UK, andother jurisdictions. We help coordinate compliance across multipleregulatory frameworks, ensuring your approach satisfies all relevantauthorities.

CrisisCommunications: When sanctions hit, managing stakeholderperceptions becomes critical. We help craft messaging thatacknowledges challenges while demonstrating competence and commitmentto resolution.

Long-termCompliance Architecture: Successfully obtaining sanctions reliefis only the beginning. We help build monitoring and reporting systemsthat maintain compliance and prevent re-designation.

Our team hasguided numerous organizations through sanctions-related crises,helping them understand their options, develop realistic strategies,and navigate the complex process of seeking relief. We combine deepexpertise in international law, geopolitical risk assessment,strategic communications, and crisis management—all essential whenyour business faces sanctions challenges.

Moving Forward

The internationalsanctions landscape grows more complex each year, with geopoliticaltensions driving increased use of economic statecraft as a policytool. Understanding that sanctions are meant to change behaviorrather than punish permanently isn't just philosophical—it'spractically essential for any organization operating in thisenvironment.

If your companyfaces sanctions, if you're concerned about potential designation, orif you're simply working to ensure robust compliance in anincreasingly fractured global economy, having experienced partnersmakes all the difference.

At Omnistrat,we've built our reputation on helping organizations navigate theirmost challenging moments. We understand that every situation isunique, but we also know that with the right strategy, the rightteam, and demonstrated willingness to address legitimate concerns,pathways to resolution often exist—even in seemingly impossiblecircumstances.

Don't wait untila crisis becomes unmanageable. Whether you're currently facingsanctions challenges or preparing for potential future scenarios,we're here to help you protect your business, demonstrate crediblechange, and find a way forward.

ContactOmnistrat today. With decades of combined experience in sanctionscompliance, crisis management, and strategic advisory services, wecan help you and your business overcome sanctions challenges andchart a path to resolution.

Omnistratspecializes in crisis management, geopolitical risk assessment,sanctions compliance, and strategic advisory services fororganizations operating in complex international environments. Ourteam combines deep expertise in law, finance, internationalrelations, and strategic communications to help clients navigatetheir most challenging situations. Reach out to learn how we cansupport your organization through sanctions-related challenges.

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