What effect do economic sanctions for human rights violations have?
Sanctions can be devastating, even seemingly benign sanctions, It depends upon who supports them and how they are implemented. Take the August 7th U.S. sanctions on the 11 Chinese officials deemed responsible for the Hong Kong crackdown which are playing out now. Originally they were being laughed off by chinese officials, like the reciprocal Chinese Sanctions were laughed off by Marco Rubio and Ted Cruz and other US Congressional leaders.
China sanctions 11 US politicians, including Cruz and Rubio, and heads of pro-democracy organizations
Now it appears the personal sanctions on 11 Chinese officials could have significant consequences for Hong Kong and China's economies.
The UN has no standing army, nor any ability to take action removed from its member states, most importantly it's security council states each of which can veto any UN action. Thus the UN's ability to pass sanctions specifically for human rights violations is exceedingly limited due to disagreements on prioritization of human rights with regards to state rights of the security council members.
Having said that if we take the Sanctions the United States imposed August 7th upon 11 Hong Kong officials including chief executive Carrie Lam the current and former police chiefs and several mainland chinese security officials responsible for the Communist's crackdown on Hong Kong. As the Sanctions say: "Undermining Hong Kong’s autonomy and restricting the freedom of expression or assembly of the citizens of Hong Kong.", these sanctions have some serious teeth.
They have the potential to have a huge effect on Hong Kong's economy and even significantly affect mainland China's economy, as well as the wealth of Chinese communist party officials.
Initially the Sanctions on the specific individuals, include.
- Banned from traveling to the US
- Banned from owning assets in the US
- Banned from doing business with US individuals or companies
A few of the 11 sanctioned individuals have laughed off the sanctions,
Liaison office director Luo ridicules Trump over latest sanctions
"I don't have any assets abroad. Isn't it a waste of effort to impose sanctions? Of course, I could send $100 to Mr. Trump for him to freeze," said Luo Huining, director of the central government's liaison office in the Hong Kong Special Administrative Region (HKSAR), in a humorous response on Saturday to US' sanctions imposed on 11 officials from the Chinese mainland and Hong Kong.
U.S. Sanctions Chinese Officials Over Hong Kong Policy—Including Carrie Lam
I have no assets in the U.S. , and I don't particularly like going to the U.S. Mrs. Lam told Hong Kong Open T.V."
Then 10 days later....
Hong Kong Leader Carrie Lam Has Credit Card Trouble After U.S. Sanctions
Hong Kong’s financial institutions gripped by anxiety over United States sanctions
That's because the sanctions don't just require US firms stop doing business with the 11 targeted officials. They require all companies who do business or use US services to stop doing business with the 11 targeted officials or face sanctions themselves. That means any bank doing business with the 11 targeted officials risks being cut off from the U.S monetary infrastructure.
The US bipartisan Hong Kong Autonomy Act gives the Trump Administration 60 days to identify any foreign financial institution that knowingly conducts a significant transaction with the 11 officials.
Within One year of such a disclosure, the US President by law has to impose 5 of 10 actions on the offending bank. Within two years all of these penalties must be imposed.
- banned from getting loans from US banks
- banned from being primary dealers in US treasuries
- banned from depositing US government funds
- banned from foreign exchange transactions within US jurisdictions
- banned from transfers or payments with other banks in the US jurisdictions
- banned from buying, selling, or holding any assets within the US
- banned from importing US technology or software
- banned from selling stocks or bonds to US residents
- Bank officers banned from entering the US
- bank offices subject to first eight sanctions
That's up to 2 years. Under the Hong Kong Autonomy Act the Trump administration had 3 months to name the officials and 1 year to sanction them. The Trump administration named and sanctioned the officials in 3 weeks.
So while the sanctions on the individual officials are politically important. The real pain and ultimate target of the sanctions will be the Chinese banks.
Now the Hong Kong banks have tried to reassure their customers:
Hong Kong regulators see limited sanctions impact as banks weigh action
The Hong Kong Monetary Authority, the banking regulator, said in a circular that 'unilateral sanctions' had no legal status in Hong Kong, and unlike United Nation sanctions, banks in Hong Kong were under no obligation to comply with them."
However the banks are caught in the middle.
If they continue doing business with the sanctioned officials they themselves will face sanctions. If they don't do business with the officials they will run afoul of the new national security laws from Communist China with outlaws them from participating in any foreign sanctions on hong kong or mainland china officials.
If the bank decide to close up shop and leave Hong Kong to avoid US sanctions and face being cut off from the international financial infrastructure it could devastate Hong Kong's Economy.
Chinese banks prepare contingency plans over threat of U.S. sanctions, sources say
In worst case scenarios... the lenders are looking at the possibility of being cut off from the U.S. dollars or losing access to the U.S. dollar settlements"..... The dollar is the dominant global currency for international payments and central bank reserves......
The world’s money transfer system is China’s Achilles heel in its sanctions battle against the US
Since the bulk of dollar transactions are cleared through American banks, the US can argue that those transactions pass through US soil, thereby giving the US legal jurisdiction over them.
Also Hong Kong's currency is pegged to the US dollar. The dollar is what allows Hong Kong to be an international financial center.
US Autonomy Act unlikely to undermine Hong Kong dollar peg in short-run, but poses long-term risk, analysts say
the freely convertible and stable hong kong dollar is especially important to china for attracting foreign investment and in turn allowing Chinese companies to easily raise hard currency in the city.
Hong Kong is the primary place where Mainland Chinese businesses can obtain U.S Dollars. Threatening that is a big deal because; China's banks are running out of dollars.
China’s Banks Are Running Out of Dollars
The major Chinese commercial banks once had more dollar assets than liabilities. No longer.
And they need dollars to conduct business overseas.... for example...
China’s Banks Are Running Out of Dollars
"Belt and Road projects are overwhelmingly financed in U.S. currency"
And these sanctions also dramatically effect the wealth of Chinese Communist officials which are tied to Hong Kong.
Luxury Homes Tie Chinese Communist Elite to Hong Kong’s Fate
Three top leaders of China’s Communist Party have relatives who own assets in Hong Kong, including more than $51 million in luxury real estate, a New York Times investigation shows..... “Members of the Red aristocracy in China, including the princelings, have made huge investments in Hong Kong,” said Willy Lam, an adjunct professor of China studies at the Chinese University of Hong Kong. “If Hong Kong suddenly loses its financial status, they cannot park their money here.”