Author: Ilona Dumanska
Date: 17.09.2025
In the global fight against illicit trade, sanctions have become the weapon of choice. From asset freezes to export bans, governments increasingly rely on economic pressure to isolate bad actors and enforce international norms. Yet a paradox emerges: the more aggressively sanctions are deployed, the more they may incentivize alternative alliances, shadow economies, and geopolitical polarization.
This is the essence of Drezner’s paradox – the idea that isolation, intended to dismantle illicit networks, may instead reinforce them. Sanctioned states often find common cause, creating parallel systems of trade, finance, and diplomacy that operate beyond the reach of traditional enforcement. The result is a fragmented global order where illicit trade doesn’t disappear – it migrates.
So the question becomes: Can the world afford to pursue policies that divide, when the problem itself thrives in the cracks?
Sanctions: A Double-Edged Instrument
Sanctions remain central to the global response to illicit trade and geopolitical aggression. Since 2022, the EU has imposed over 11 rounds of sanctions on Russia, targeting more than 1,800 individuals and entities, freezing assets, and banning exports of dual-use goods. The U.S., through OFAC, has sanctioned over $300 billion in Russian central bank assets and removed major banks from SWIFT.
While these measures have disrupted formal trade and financial flows, they’ve also triggered systemic adaptations:
- Russia’s SPFS payment system now connects over 500 banks across 13 countries.
- The MIR card network has expanded into more than 10 jurisdictions, including Turkey and Vietnam.
- Trade deflection is rampant: EU-sanctioned goods re-enter Russia via Kazakhstan, Armenia, and the UAE, with customs data showing a 40–60% surge in rerouted exports.
In Ukraine, enforcement gaps persist in occupied territories. Asset recovery efforts are hampered by jurisdictional mismatches and opaque ownership structures. Institutions like NABU and ARMA face capacity constraints, while cross-border cooperation remains uneven. The fragmented enforcement architecture has enabled illicit trade to adapt and migrate – rather than disappear.
Sanctions, while powerful, can also act as a wedge – dividing nations, straining alliances, and triggering unintended consequences. The more aggressively they are applied, the more they risk incentivizing evasive behavior, economic deflection, and diplomatic realignment.
The Drezner Paradox: Isolation Breeds Resilience
The Drezner paradox warns that isolation may breed resilience. Sanctioned actors often respond by forging alternative systems of trade, finance, and diplomacy –operating outside the reach of traditional enforcement. These adaptations are not theoretical:
- Iran’s oil exports, once crippled by sanctions, rebounded via barter deals and opaque shipping networks, reaching 1.5 million barrels/day in 2023.
- Venezuela turned to gold exports and crypto mining to bypass U.S. restrictions.
- Russia’s pivot to China has deepened: bilateral trade hit $240 billion in 2023, up from $108 billion in 2020, with settlements increasingly in yuan.
These parallel structures enable continued illicit activity and foster new alliances among sanctioned states. The result is a fragmented and polarized global order – where enforcement is uneven and illicit trade thrives in blind spots.
Rethinking Enforcement Strategy
The migration of illicit trade into shadow economies and alternative jurisdictions underscores a critical challenge: enforcement strategies that divide may ultimately empower the problem they seek to contain.
Global sanctions enforcement remains fractured:
- Only 37% of UN member states fully implement multilateral sanctions.
- Beneficial ownership transparency is lacking in over 60 jurisdictions.
- Cryptocurrency mixers and offshore trusts continue to facilitate sanctions evasion, with over $20 billion in illicit flows traced to such channels in 2022.
To counter the Drezner paradox, a recalibrated approach is essential:
- Multilateral coordination: Harmonize sanctions lists, enforcement protocols, and asset recovery frameworks across G7, EU, and allied jurisdictions.
- Transparency infrastructure: Expand beneficial ownership registries, blockchain analytics, and cross-border data sharing.
- Strategic targeting: Focus on enablers – banks, brokers, logistics firms – not just state actors. Sanctions must evolve from blunt instruments to precision tools, embedded in a broader strategy of resilience, cooperation, and institutional reform.
Beyond the Sanctions Binary
The Drezner paradox invites us to move beyond binary assessments of sanctions as either effective or ineffective. Instead, it challenges policymakers to confront the systemic consequences of isolationist enforcement – especially when deployed without multilateral coordination or institutional safeguards.
In Ukraine, sanctions have disrupted Russia’s formal economic channels. Yet they’ve also catalyzed the emergence of alternative systems – financial, diplomatic, and logistical – that now operate beyond traditional enforcement. These adaptations are strategic, resilient, and increasingly transnational.
Sanctions alone cannot dismantle illicit trade networks that thrive on opacity, asymmetry, and institutional weakness. They must be part of a broader strategy – one that includes transparency infrastructure, cross-border legal cooperation, and capacity-building for asset recovery.
Ultimately, the Drezner paradox is not a critique of sanctions per se, but a call for strategic humility. Enforcement is not just about pressure – it’s about precision, partnership, and long-term resilience.
