Academic journal article Houston Journal of International Law

The New Cold War: A Novel Regulatory Takings Theory on Economic Sanctions against Exploration and Production in Russia

Academic journal article Houston Journal of International Law

The New Cold War: A Novel Regulatory Takings Theory on Economic Sanctions against Exploration and Production in Russia

Article excerpt

  I. Introduction  II. Economic Sanctions      A. Historical Background      B. Legal Procedure & Executive Authority III. Economic Sanctions on Russia  IV. Takings Jurisprudence      A. Economic Impact of Regulation      B. Investment-Backed Expectations      C. Character   V. Conclusion 


"Western sanctions against Russia are costing America's most powerful company a few hundred million bucks. A billion to be exact." (1) Historically, sanctions have been considered one of the least effective methods for inciting change. (2) Why, then, have sanctions increasingly been an foreign policy tool of choice in the face of a slow American economy and an ever-competitive oil and gas market?

This Comment will focus on the primary issues arising out of the use of targeted economic sanctions and how a novel regulatory takings claim would work to counteract the negative effects of sanctioning regimes. The first section provides background information on the purpose and process of economic sanctions. The second section discusses the most recent economic sanctions imposed against Russia in response to its illegal annexation of Crimea in 2014. The third section explains foundational regulatory takings jurisprudence and applies it to a novel regulatory takings claim. A case study on ExxonMobil is used to illustrate how national corporations with business in Russia could be justly compensated for regulatory takings as a result of economic sanctions.


Economic sanctions are "deliberate government-inspired withdrawal, or threat of withdrawal, of customary trade or financial relations." (3) They are imposed for reasons ranging from stopping nuclear proliferations to promoting peaceful and democratic change. (4) Currently, Western sanctions against Russia aim to punish the participants of a militarized dispute--that is, the hostile takeover of Crimea from the sovereign Ukraine. (5)

A. Historical Background

Sanctions are not a modern invention. As far back as the fifth century, the ancient Greeks enacted a variety of sanction-like activities on their enemies, using coercive government action in lieu of military force to facilitate favorable results. (6) While this sanctioning method typically involved taking hostages and other similar tactics, the idea of coercive diplomacy was already in place for a number of civilizations between the ancient Greeks and modern society. (7)

By the end of the 19th century, coercive strategies were the norm in foreign policy, as "classic international law recognised the right of states to employ such coercive measures in certain circumstances." (8) The rise of coercive measures led to the creation of the League of Nations and the United Nations, although the League was the first international organization to set forth a true sanctions provision. (9) The Covenant of the League of Nations, drafted in 1919, provided for "sanctions against any state party resorting to aggressive war in violation of the Articles." (10) The United States, along with other nations, did not ratify the Covenant; thus, the dissolution of the League was inevitable. (11) The United Nations Charter, which followed in 1945, however, established a sounder foundation for international law. (12)

The United States played a vital role in the development of international sanctions law. The earliest example of U.S. sanctions was against Great Britain during the Revolutionary War when the colonists imposed a boycott on English goods, ultimately leading to the Boston Tea Party. (13) Since then, sanctions have remained an important component of U.S. foreign policy, though the reasons for enacting sanctions have varied. (14) With the growth of media outlets leading to increased public knowledge of foreign policy, it has been argued that politicians have been forced to use sanctions as a public relations tool "to appease public demand for a U. …

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