Sanctions, strategy, and the rise of parallel economies

Our Global Sanctions Review suggests that sanctions are now increasingly being used to also shape geopolitical outcomes, influence commercial activity, secure strategic interests, and restructure global economic relationships, alongside their traditional role of imposing economic costs.

The report highlights a broader trend: the gradual reorganisation of parts of the global economy around competing political and economic blocs. For organisations operating internationally, sanctions exposure is no longer just a compliance issue but an operational, strategic, and geopolitical challenge.

Do sanctions change behaviour more than they restrict it?

Sanctions are rarely imposed in isolation and are increasingly adjusted, expanded, suspended, eased, and reintroduced as a means of exerting geopolitical leverage. Rather than simply restricting activity, sanctions are often used to influence behaviour, shape negotiations, and create incentives for behavioural change. 

Venezuela and Iran are notable examples. Following the launch of Operation Absolute Resolve, the US eased several longstanding restrictions affecting Venezuela's oil and gas sector, while partially relaxing measures affecting the central bank and state-linked financial institutions. The sanctions regime was not dismantled but recalibrated to encourage political concessions while allowing limited commercial engagement. Iran demonstrates the reverse dynamic, with restrictions linked to its nuclear programme, military activity, and regional proxy network repeatedly (re-)imposed, eased, and expanded. 

Political developments can rapidly alter what is permissible, commercially viable, or reputationally acceptable for organisations with assets in countries that face sanctions, creating an environment that is increasingly dynamic and difficult for organisations to forecast.

Sanctions effectiveness

Whether sanctions are achieving their objectives depends largely on how success is defined. Major sanctions programmes targeting Iran, Russia, Belarus, and Syria have generated significant economic pressure, affecting growth, investment, and access to international markets. Economic pressure alone, however, does not necessarily produce political change, particularly where governments view strategic, security or government-survival objectives as outweighing economic costs.

Many heavily sanctioned government structures have spent years developing alternative payment mechanisms, trade routes, technology ecosystems, and political partnerships designed to reduce dependence on Western-controlled systems. As sanctions have become more prevalent, states have developed increasingly sophisticated methods of adaptation. The result therefore is that sanctions may prove more effective at constraining economic activity, limiting access to resources, and restricting strategic capabilities than altering state behaviour itself.

The rise of the parallel economy

One of the most significant themes identified in our review is the growing cooperation between heavily sanctioned states. Russia, Iran, Venezuela, and North Korea are no longer responding to sanctions independently; economic, military, and technological relationships between sanctioned governments continue to deepen, facilitating alternative payment systems, trade routes, and sanctions-evasion capabilities.

The significance of these relationships extends beyond sanctions circumvention. Growing cooperation between sanctioned states is contributing to the development of parallel economic networks with reduced reliance on Western financial infrastructure, creating alternative channels for trade, investment and technology exchange. The continued expansion of these networks suggests a gradual fragmentation of the global economy, with organisations increasingly likely to operate across environments shaped by different regulatory, political, and commercial priorities.

Cryptocurrency as a geopolitical tool

Cryptocurrency represents one of the clearest examples of this shift. The review identifies cryptocurrency as one of the most significant emerging sanctions risks, with illicit cryptocurrency activity reportedly reaching record levels during 2025 as sanctioned states seek alternatives to conventional financial infrastructure. Russia's adoption of a rouble-backed token and Iran's growing use of digital assets for trade demonstrate how cryptocurrency is evolving from a speculative asset class into an instrument of economic and geopolitical policy. 

Traditional sanctions controls were designed around regulated financial institutions and payment systems. Decentralised finance introduces additional complexity by reducing visibility, increasing transactional opacity, and making indirect sanctions exposure more difficult to flag. As sanctioned actors continue to explore alternative financial ecosystems, organisations may face greater operating risks.

Sanctions creating commercial opportunities

Sanctions are not solely a source of risk, they can also create commercial opportunities. Easing restrictions in jurisdictions such as Syria and Venezuela may generate opportunities across the energy, infrastructure, logistics, and mining sectors, particularly where sanctions relief improves market accessibility and increases investor confidence. 

Such opportunities remain closely linked to political and regulatory developments, with residual sanctions exposure, policy uncertainty, and potential reversals continuing to present challenges. Therefore, organisations must conduct thorough risk assessments prior to operating in post-sanction emerging markets and environments.