Syndicated lending to Bahrain fell 33% between 2010 and 2015, comparable to the decline it sustained in the 2007–2008 financial crisis. Bahrain was not sanctioned; its exposure followed from proximity to Iran, which faced another round of sanctions in 2010. This figure shows how a chokepoint can be produced by over-compliance rather than by sanctions: banks decline transactions that the sanctions permit, with the affected states unable to use standard diplomatic means to address this.
Sanctions Over-Compliance and Financial Exclusion
Over-compliance with sanctions is producing systematic financial exclusion of firms and states outside the formal sanctions perimeter.
