Tools of the weak? Economic sanctions, threat perception, and conflict escalation

In international crises, do economic sanctions increase or reduce the risk of conflict escalation? Some studies suggest that sanctions can serve as a costly yet non-violent tool to demonstrate resolve. Others argue that because states tend to avoid self-imposed costs, the logic of costly signaling often unravels in practice: sanctions instead reveal weakness and may heighten the risk of escalation. To reconcile this debate, I shift away from the self-imposed-cost rationale and argue that sanctions primarily operate by communicating and reshaping policymakers’ threat perception. Economic sanctions are associated with a higher risk of conflict escalation only when pre-existing threat perception is sufficiently high. In such situations, sanctions signal a willingness to intensify pressure and may foreshadow trade diversion, heightened coercion, and adverse power shifts for the target. They may also foster a political environment conducive to nationalism and diversionary conflict, thereby encouraging further escalation. By contrast, when threat perception is low, the association between sanctions and escalation weakens and may disappear. I test these expectations using actor-level data on international crises from 1950 to 2016 and find consistent support for the conditional effect of sanctions on military escalation.