# Understanding Embargoes: Definitions, Examples & Economic Impact

![Embargo: A trade restriction, typically adopted by a government, a group of countries, or an international organization as an economic sanction.](https://www.investopedia.com/thmb/6WJELH1ZIczLRisN7cmCw52LtrA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/embargo.asp-final-dc4b1a09a0ca42cf9480301b938f9987.png)

*— Theresa Chiechi / Investopedia*

## Embargo Definition in Economics

An embargo is a trade restriction, typically adopted by a government, a group of countries, or an international organization as an [economic sanction](https://www.investopedia.com/articles/economics/10/economic-sanctions.asp). Embargoes can bar all trade, or may apply only to some of it—for example, to arms imports. They aim to punish the targeted country and deny it the resources to continue its objectionable policies. However, they rarely influence the embargoed country to change its policies; instead, they cause it to retaliate with similar actions.

### Key Takeaways

*   Embargoes are trade restrictions used to penalize countries for objectionable policies.
*   The United States has long-standing embargoes on countries such as Cuba, North Korea, Iran, and Syria.
*   Embargoes often fail to change a targeted country's policies but succeed in disrupting its economy.
*   Historical examples, such as the Arab oil embargo, highlight the economic impact of embargoes.
*   Critics argue that embargoes can harm civilian populations rather than instigate political change.

## Mechanisms and Impact of Embargoes

Countries use embargoes to deter objectionable behavior without military force, often responding to human rights violations and conflicts. A well-supported embargo can isolate the targeted country and deny it international trade benefits.

Countries that rely on global trade or technology imports are especially vulnerable to embargoes. However, some authoritarian regimes have resisted embargoes for decades, often at great cost to living standards.

## Key U.S. Trade Embargo Examples and Policies

The U.S. has imposed long-running and comprehensive trade embargoes on Cuba, North Korea, Iran, and Syria, countries whose policies it finds particularly objectionable. Those embargoes are backed by a variety of legislative acts and presidential orders.

The U.S. president has the authority to impose embargoes and other sanctions during times of war under the Trading with the Enemy Act.

Another act, the International Emergency Economic Powers Act, authorizes the president to enact commerce restrictions during strictly defined periods of national emergency.

In the United States, the [Office of Foreign Assets Control](https://www.investopedia.com/terms/o/ofac.asp), a division of the Department of the [Treasury](https://www.investopedia.com/terms/u/ustreasury.asp), administers embargoes. The office also plays a central role in tracking down and freezing sources of funding for terrorist and drug-trafficking organizations.  

## Impact and Effectiveness of Embargoes

Embargoes rarely result in a change in policy, much less in the targeted country’s government. For example, the U.S. [embargo on Cuba](https://www.investopedia.com/articles/investing/022415/impact-ending-us-embargo-cuba.asp), in effect since 1962, has failed to oust the country’s governing communist party or to persuade it to tolerate dissent.

Similarly, the embargo on oil exports to the U.S. imposed by Arab members of the [Organization of the Petroleum Exporting Countries (OPEC)](https://www.investopedia.com/terms/o/opec.asp) during the 1973 Arab-Israeli War failed to end U.S. support for Israel.

Embargoes can be successful in their goal of punishing the targeted country, however. For example, the 1973–1974 Arab oil embargo caused fuel shortages, rationing, and soaring gas prices, increasing the cost of America’s foreign policy.

In the 1980s, limited trade restrictions imposed on South Africa along with [investment and other economic sanctions](https://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp) by several countries, including the U.S., hastened the end of apartheid.

Limited trade sanctions imposed on Russia following its invasion and occupation of parts of Ukraine in 2014 failed to deter renewed Russian aggression in 2022. The broader U.S. and allied sanctions imposed since February 2022 have reportedly deprived the Russian military of semiconductors vital for military electronics as well as parts needed to manufacture tanks.

The boycott, divestment and sanctions movement, which uses the South Africa model to promote sanctions punishing Israel for occupying Palestinian territory, has prompted fierce opposition from Israel and its allies in an indication of the high costs such sanctions could impose.

## Critiques and Challenges of Embargoes

In addition to their limited likelihood of prompting a policy change by the targeted country, embargoes have been criticized for hurting subject populations with no role in setting or carrying out the objectionable policies.

Notably, the international economic embargo imposed on Iraq following its 1990 invasion of Kuwait drew criticism for hurting the poorest and sickest Iraqis the most. Similar arguments have been made in opposition to the [U.S. embargo on Iran](https://www.investopedia.com/terms/p/p51.asp) over violations of the Nuclear Non-Proliferation Treaty.

## What Countries Are Subject to a U.S. Embargo?

Trade with Cuba, North Korea, Iran, and Syria is prohibited under broad U.S. embargoes. U.S. restrictions on trade with Russia and Ukrainian territories under Russian occupation have also been described as an embargo.

## Can an Embargo Be Effective?

Embargoes have been more effective in punishing the targeted country than in changing its policies, though trade was included in the economic sanctions credited for encouraging South Africa to end apartheid. The trade sanctions imposed on Russia following its 2022 invasion of Ukraine have been credited for disrupting Russian military supplies.

## What Are the Legal Underpinnings of U.S. Trade Embargoes?

U.S. trade embargoes are based on laws passed in Congress and executive orders signed by U.S. presidents. The U.S. Treasury’s Office of Foreign Assets Control administers the embargoes and fields applications for exemptions.

## The Bottom Line

An embargo is a trade restriction used as an economic sanction by governments or groups to respond to objectionable behaviors of other countries. While embargoes aim to punish and limit objectionable actions without military conflict, they often fail to induce significant policy changes in targeted countries.  

 Embargoes have faced criticism for disproportionately affecting the civilian population rather than the regimes they target. They remain complex tools of international diplomacy—more effective at economic punishment than policy change—requiring careful consideration of their intended impacts.

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