Full-scale Russia's trade sanctions and their welfare outcomes — Evgenii Monastyrenko

Sprecher

Evgenii Monastyrenko (University of Luxembourg)

Abstract

In 2022-23 the Western countries turned to consolidate their efforts on sanctioning the fossil imports from Russia. The embargoes in place target coal and refined oil products. Since early 2023, the natural gaz and crude oil are also partially banned. This paper aims to quantify the outcomes of trade embargo on all involved counterparts. We rely on a general equilibrium model with domestic sectoral linkages, trade in intermediate goods and sectoral heterogeneity in production. We subsequently test the alternative scenarios where G7, EU, OECD countries or a larger bloc of countries introduce embargo on fossil exports from Russia. The embargoed sectors are gaz, crude and refined oil and coal. The results vary depending on the coalition of sanctioning countries and the selection of the banned sectors. In the most stringent scenario, where sanctions on all fossil exports are imposed, our analysis predicts a decrease in Russia's welfare of nearly 10%, coupled with a significant decline in real consumption. Our results further suggest the double-edge axe negative outcomes for sanctioning countries. They range from -0.43% under a G7 embargo to -0.73% with the broadest coalition. Real consumption impacts follow a similar pattern, from -0.38% up to -1.14% in the most extensive scenario. Finally, a pivotal role is played by the EU countries, whose participation in the sanctions can significantly influence expected outcomes.

Raum

Online und im Medienraum (A-211) (begrenzte Kapazität) am Kiel Institut für Weltwirtschaft

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