The futility of economic sanctions in a globalized and interdependent world: a data-driven game theoretical study

Abstract

Abstract Economic openness and globalization are under rising pressure from the proliferation of economic sanctions over the past decades. Data-driven evidence is urgently needed to inform the heated debates about the effectiveness of various sanctions and counter-sanction measures. In this research, we provide a game theoretical framework to model the interplays between the sanction sender and target at different stages of political conflicts. Using real-world international trade data, our game-theoretical framework assesses each country’s capability of and vulnerability to economic sanctions and quantifies the feasibility and effectiveness of different counter-sanction measures. Our findings suggest that expanded international trade creates the potential to weaponize economic interdependence for giant economies, imbalanced trade relationships with which is the main source of sanction risk for vulnerable economies. Complete decoupling from these highly capable countries is a costly and ineffective strategy to combat economic sanctions. Bloc-type collective retaliation against the common adversary can be effective under certain scenarios but provides little benefit for major contributors in the bloc, making it impractical in addressing real-world conflicts. Promoting cooperation and dialogue is the ultimate solution to maintaining economic and political stability and security.