What prevents third parties from bypassing an economic sanction?

Question

What measures do governments take to prevent foreign companies from acting as middle men to bypass their trade embargoes/sanctions? Example: Let's say the US makes it illegal to sell cell phones to Iran. Maybe France has no such sanction against Iran. A French supplier buys the cell phones from the old American supplier and ships them to Iran, effectively making the sanction useless. The only difference is that now the French company gains some business and the US and Iran may each have a slightly worse price.

What do governments do to prevent this from ruining their sanctions? Do other circumstances prevent this from happening?

Answer 1

In many cases, sanction regulations include secondary sanctions. In addition to the main target, sanctions are applied to everybody who deals with the main target of the sanctions in a proscribed way.

This complicates the trading of sanctioned countries greatly. For instance, North Korea went through the Banco Delta Asia for financial transactions before that scheme was uncovered, and they transfer fuel from ship to ship on the high sea. (Usually only warships do that kind of thing, other ships come into port.)

This was the case with both Iran and North Korea sanctions. Banks everywhere on the world had the "free choice" -- no deals with e.g. North Korea or people who trade with North Korea, or no deals with or in the US. Most banks would look at the trading opportunities at Wall Street, and those in Pyongyang, and make the obvious decision.

Before the latest deal, Iran was forced to conduct much of their trade in gold bars because no bank would take transactions from them. And when an Iranian delegation came to an international security conference in Munich, their plane was refueled by the German air force because no commercial fuelers would risk US displeasure.

Answer 2

Usually sanctions have provisions which penalize parties that try to subvert them. If sanctions don't have effective enforcement provisions attached to them, they get called "toothless."

Answer 3

Products sold by the US are covered by either ITAR (for military items) or EAR (for civilian items)

These are a set of rules covering what can be exported from america and to who. Anyone that buys an item from america covered by these rules has to sign an agreement that they will also follow these rules, this is also enforced by the host country (France in your example) through treaty agreements with the US.

So if you were to buy cell phones from the US you would be signing an agreement under EAR regulations which would prevent you from selling them on any countries on the embargo list.

If other countries start ignoring their responsibilities under ITAR and EAR then the US could start putting trade tariffs on them or even add them to the embargo list which could have a major impact on their ecomomy