Recently, in news stories, the word “embargo” can often be heard. But what is an embargo? This is such an economic or political trick, as a result of which some states can put pressure on other countries economically or politically.
What is an embargo?
In the scientific literature, this term is given the following definition: a state ban on the export or import (or, perhaps, both) of capital, technology, and certain goods to specific countries. This word itself, translated from Latin, means “interfere” or “obstruct”, and from Spanish it means “prohibition”.
It should be noted that the main goal of the embargo is not to obtain economic benefits, but to put pressure on a specific country or countries. Success from this can only be guaranteed by observing three principles:
- High elasticity of the economy of the country - the initiator of the embargo. This means that the economy of this state can easily do without export.
- Low elasticity of the embargoed country. That is, this state depends on imported goods, since its own production cannot satisfy the needs of the population.
- Introduced economic constraints are widespread and unexpected.
A striking example of this pressure is the oil embargo during the 1973 oil crisis, when OPEC countries banned the supply of oil to the United States and raised prices by 70% for US allies from Western Europe.
Kinds
Embargoes can be divided into three types:
- Sanctions that are temporary. Introduced to solve problematic situations in relation to climate, ecology or health.
- Sanctions of an economic nature aimed at solving problems in the economy.
- Sanctions of a political nature. They are imposed either by a UN decision or by the governments of some states in relation to others.
Embargo goods may vary in origin and purpose. It can be vegetables and fruits, dairy products, oil, weapons or something else. A complete “blockade” is also possible when the import or export of absolutely any goods is prohibited.
Peace embargo
Bans are mainly imposed with the aim of putting pressure on certain states by economic tricks. Such methods of influence can also be collective if a country threatens security in the world. The consequences are ambiguous. If a country with respect to which sanctions are imposed has a low elasticity of the economy, that is, it is highly dependent on imported goods, then they will be successful and this country will incur losses.
But what is an embargo for a state with a high elasticity of the economy? An example is the economic sanctions of the EU against the Russian Federation. European farmers for a long time focused on the Russian consumer, having a large market. After the imposition of sanctions, they were forced to stop deliveries to the Russian Federation and change their focus on the European consumer. As a result of this, demand fell on the European markets due to a sharp influx of goods, therefore, farmers are forced to lower the price, incurring huge losses. But what about the rogue country? Domestic manufacturers have noticed an increase in demand, this makes it possible to raise prices and profitability of production within the country. Local farmers are actively involved in the market, receiving material benefits.
Wartime embargo
The main goal during the war is violation of the country's economic activity, deprivation of sales markets and raw materials. Such bans look like the termination of credit, trade and financial relations with the "blocked" country.
The effect of "who is the boss in the house", or what is the embargo in a demonstrative sense? The prohibitions that are not always introduced are tough economic in nature. Most often, these sanctions have as their goal the showing of a leading country with which it is better not to quarrel. However, in certain cases of world politics and economics, such prohibitions have serious consequences. And if a country conducting hostilities is heavily dependent on the import of weapons or raw materials (for example, iron or oil), as a result of the imposition of sanctions, it can reduce its activity on the fronts; the cost of acquiring the same products will also increase, but from other channels and at higher prices.
In the end, it must be said that economic and political prohibitions or restrictions are very ambiguous. They can lead both to a positive effect and to a negative one - it all depends on the specific states involved in economic or political “blockades”. Most often, such a ban on goods (embargoes) or services has a boomerang effect when the consequences of sanctions are returned to their initiators.