For decades, economic sanctions – seen as one of the most powerful tools of global influence — but the system they relied on is now changing.
Cutting a nation off from the dollar-based financial system. Blocking their access to the international banking system. Curbing their ability to trade with other countries. The belief was simple — if you put pressure on a country’s economy, they would change their political behaviour.
This assumption has changed.
During the past several years, events such as Russia’s wartime economy and Iran’s continued oil exports show that economic sanctions may not achieve the desired results. While the use of sanctions as tools has not diminished, their ability to isolate and enforce compliance is becoming weaker. This is because the global economic system has changed.
When sanctions were imposed during the unipolar world order, the United States and allies controlled many of the key building blocks of the world economy — the dollar, the global banking network (e.g., SWIFT), the international capital markets — and as a result, when economies were blocked from the global financial network, they were also effectively cut off from the rest of the world.
That system has changed dramatically.
By 2024, the balance of global economic power has changed significantly, with BRICS+ (inclusive of an expanding number of nations like the UAE, Iran, Indonesia) contributing more to global economic output (on a PPP basis) than the G7 countries.
This development is highly relevant because sanctions fundamentally rely upon the exclusion of nations from the global economic system.
Sanctions no longer isolate — they redirect
Sanctioned countries are finding new ways to adapt.
Example – Russia is now a major supplier of energy; they have successfully redirected their trading patterns solely toward Asia. China and India have become their largest consumers of energy by using various non-dollar settlement methods. Similarly, Iran has continued exporting oil via informal networks & alternative means of shipping. Adjustments are the result of sanctions, rather than the collapse of economies.
Shifts occur in trade flow, payment mechanisms, & intermediary companies. Instead of completely shutting down existing economic networks via sanctions, they are now modifying the size & structure.
In order to adapt to this change in sanctions, there is now a much greater degree of complexity and challenges related to enforcement than there was from 2020 – 2025. Hundreds of “secondary sanctions” by the US were targeted at third-party actors doing business with Russia during this time frame alone.
The rationale of why: if you cannot isolate your target, isolate those connected to them.
However, there are limits on this.
The “weaponisation paradox” of the dollar
The dollar is the lynchpin that drives the ability to impose economic sanctions.
While the dollar continues to dominate world trade, foreign reserve currency holdings, and finance; the power associated with the dollar creates an inherent risk for the US ($) because of the “Geopolitical Misuse” of the dollar ($) through asset seizures or financial exclusion pushes involved countries to reduce their dependency on the US dollar.
The emergence of alternative financial infrastructure represents a significant shift in global economics. For instance, BRICS Pay and other digital currencies that enable countries to transact directly with each other bypass traditional banks. Likewise, a growing number of international trade networks have created “shadow fleets” of oil tankers that deliver oil in defiance of US sanctions through tactics such as ship-to-ship transfers and flagging vessels under different countries.
By 2026, a substantial percentage of oil traded internationally was passed through these networks by vessels not truly connected to the global oil market.
This development is more than just an act of circumvention; it is indicative of the growth of an alternative economic system.
Countries such as India, Turkey and the UAE are among the largest “connector economies” in the world.
Rather than being passive participants in this growing two-block world, these nations actively negotiate between multiple consolidating blocs and maintain active roles with countries in both blocs as well as the US.
India is a prime example; over the past five years, it has strengthened its strategic partnership with the United States while increasing imports of Russian oil and using its position as a connector to negotiate greater flexibility than if it had made a definitive choice between the two above-mentioned blocs.
The current approach reflects a larger trend
In a multipolar world, nations are less inclined to adhere completely to a single world’s authority. Economic interests are the primary concerns when establishing strategic autonomy and maintaining flexibility. As such, it has created greater difficulty in maintaining comprehensive sanctions.
Even though comprehensive sanctions continue to work, they do so in a different way.
Comprehensive sanctions do not imply that sanctions no longer have relevance. They continue to create costs.
For example, while Russia’s economy is not experiencing a collapse due to sanctions, it is experiencing long-term systemic stress due in large part to reduced accessibility to technology, increased borrowing costs, and increased reliance on government expenditure.
Consequently, sanctions are capable of producing pressure but not of generating decisive results such as regime change or total economic isolation.
The effects of sanctions are slower, increasingly complex, and often indirect.
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The bigger shift: from control to constraint
Rather than being an endpoint, we are witnessing the changing nature of how sanctions work.
In a fragmented global system:
- Power is decentralised;
- Trade routes are pliable, rather than fixed
- Financial systems are diversifying, rather than centralised.
Sanctions now function in accordance with these constraints.
They are available for effecting behaviour changes.
They will generate costs.
They will not be able to control the outcome of events in full
Economic sanctions were originally created for a world with economic power concentrated in one location. With new governments and alternative systems emerging and building their own autonomy and the increasing weakness of the current ability to cut countries off from each other, we are moving into a more complex environment where businesses and nation states are able to adapt to economic pressures placed on them rather than collapse from those pressures.
The fundamental question has now changed from whether sanctions will be applied to whether sanctions can achieve their intended purpose.
Increasingly, it appears that the answer to this question is “no to achieving the intended purpose.”
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