The role of duopolistic rivalry in reducing the cost of sanctions for the sender?

Abstract

This study explores the strategic use of sanctions as a tool for managing international power dynamics, focusing on the role of third-party regional rivals in offsetting the sender’s costs. Building on game-theoretical models and case studies, the research introduces the concept of "intended collateral damage," where sanctioning powers transfer some of the burden to third parties, thus mitigating their own economic losses. Specifically, the U.S. sanctions on Iran are examined through a three-player contest framework, where Saudi Arabia acts as the regional rival absorbing part of the cost. The analysis highlights how sanctions can be leveraged not only as coercive measures but also as strategic investments that exploit regional rivalries for geopolitical advantage. This approach challenges conventional views of sanctions as purely punitive, offering insights into their role as flexible, cost-sharing tools in international strategy. The findings have implications for policymakers seeking to refine sanctions as instruments of geopolitical influence.