Biting without teeth: The effectiveness of European countermeasures against US secondary sanctions on Iran

The ability of a country to protect its economic relations with other countries amid secondary sanctions is a vital determinant of its strategic autonomy. Although several studies in the field of law analyzed blocking statutes, there is no political-economy study of the incentives politicians and companies face from blocking statutes. I argue that blocking statutes, while capable of forcing companies to adhere to their governments demands, are frequently implemented ineffectively without active enforcement. Weighing their costs and benefits, politicians decide not to implement an effective blocking statute against their allies and use it as a symbolic instrument. I test this theory using monthly export data against the 2018 reimposition of secondary US sanctions on Iran. This case is a natural experiment to identify the impact of secondary sanctions on trade flows to a target. Within the first year of reimposed secondary sanctions on Iran, exports from many developed economies, China, and the United Arab Emirates decreased to less than 60% of previous levels. The European blocking statute could not moderate this effect for European exports. My findings implicate that blocking statutes against allies are likely to be symbolic, but that they are a vital foreign policy tool against adversaries. This has important implications for growing European concerns about secondary sanctions by China and Russia.