UC Irvine

Financial Sanctions have become a major component of American foreign policy. Since 2015, the number of blacklisted actors has nearly tripled, coinciding with US financial campaigns against Iran, North Korea, and Russia. Financial sanctions often limit the economic benefits promised to target states, as banks and other financial institutions risk hefty material and reputational costs if they are to cooperate with previously sanctioned actors. However, while financial sanctions are effective at producing negative market reactions against a target, they can be hugely damaging if market actors do not cooperate with the lifting of sanctions, and previously-sanctioned economies may struggle to recover economically. This dissertation uses a mixed-methods approach to assess why some economies fail to recover after the removal of financial sanctions, while others do not. I assess three key variables – political risk, state signaling, and reputational risk – and how such variables impact on market actors’ investment decision-making toward post-sanction economies. This dissertation finds that high levels of reputational risk in post-sanction economies is highly-correlated with failed economic recovery.