Most measures of security contribution focus on investment. But states also forego economic gains in support of common security. The effect of enforcing agreed upon sanctions against a potential adversary is one metric that could be used to measure this sacrifice. When one state imposes sanctions on another, that state is inflicting economic harm on itself as well as the target. Seen in this light, sacrificing trade in order to advance the alliance’s goals is a form of security contribution.
To measure the economic sacrifice made by NATO members and partners in support of economic sanctions policy, this report examines the trade relationships of each country with Russia and Iran. The Russian Federation has historical and sizeable economic ties with many European nations. After its 2014 illegal annexation of Crimea and aggression in Eastern Ukraine, EU members and other Western states (including the United States and Canada) imposed sanctions on Russia. In the case of Iran, decades of sanctions were ramped up following reports from the International Atomic Energy Agency detailing Iranian nuclear activity. Between 2010 and 2012, many Western nations worked together to develop and impose deep-cutting sanctions on Iran. Following the July 2015 signing of the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear program, trade began to increase.
Examining year-to-year trade data between NATO and EU members with Iran and Russia shows clear drops in trade activity surrounding the imposition of sanctions. In the case of Russia, many states were already slowing their economic activity before 2014, but these levels dropped steadily after the imposition of sanctions. The percent change over time in the years surrounding sanctions (2012 to 2016 for Russia) is another way to show the economic costs borne by Allies and partners for these decisions. Unsurprisingly, Ukraine had the biggest drop, at 88 percent. Iceland, Turkey, Sweden, Canada, and the Netherlands followed, all with drops over 60 percent.
The year-to-year trade data with Iran also reveals a sharp drop in economic activity with NATO members in and around 2011. Trade activity picks up again in 2015, following the conclusion of the JCPOA, which lifted many of the prior sanctions when it came into effect in October 2015. Measuring the change over time surrounding the imposition and lifting of these sanctions supports the finding that NATO members and partners paid an economic cost for sanctions policy. Of the countries studied, the majority showed drops in the percent change over time surrounding 2011 (in a 2009 to 2013 window), and growth surrounding 2015 (from 2013 to 2016).
While the available trade data shows certain trends suggestive of economic sacrifice resulting from sanctions imposition, there are several shortcomings of this metric. One limiting factor of the data is its scope: the year-to-year data considers all imports and exports, and while these measurements help to give a broad picture of trade activity during the periods studied, they fail to account for the specific targets of sanctions. Over the course of the sanctions on Iran, many targeted the country’s major banks and oil industry. Trade data for all goods, used in this study, may not show the economic costs of sanctions on these entities as well as industry-specific economic data would. Similarly, in the case of Russia, much of the trade with the EU is in energy. Due to the reliance on Russian resources like oil and natural gas for energy production, the industry was not targeted as heavily through the 2014 sanctions. This metric does not help to measure a state’s willingness to reduce energy dependence on Russia.
Another issue with the metric, common across many economic measurements, is its reliance on a counterfactual. Without controlling for other factors, and absent deeper research, it is impossible to attribute changes in trade values entirely to sanctions. Additionally, the sanctions were not from NATO but imposed from the EU and the United States. Some politicians and analysts might reject conflating EU and NATO objectives, however this overlooks that the EU and United States have a security partnership themselves. Finally, it is also important to note that there are significant differences between the economies of NATO members and partners—size, industries, historic factors, and geographic location all play roles in shaping economic patterns. Developing a single metric to measure economic sacrifice is an attractive idea but unlikely to account for all the nuances of bilateral trade.
For more information on transatlantic security investment, see the authors’ full report Counting Dollars or Measuring Value: Assessing NATO and Partner Burden Sharing here or download the PDF version below.
 Valerie L. Schwebach, “Sanctions as Signals: A Line in the Sand or a Lack of Resolve?,” in Sanctions as Economic Statecraft, ed. Steve Chan and A. Cooper Drury (London: Palgrave Macmillan, 2000), 191.
 “Timeline: Sanctions on Iran,” Al Jazeera, October 16, 2012, https://www.aljazeera.com/news/middleeast/2012/10/20121016132757857588.html.
Photo Credit: NATO