The Price of Resilience: Input-Cost Shocks in European Supply Chains under EU Sanctions on Russia — Mark Spektor

Sprecher

Mark Spektor (Uni Hamburg)

Abstract

Do broad-based sanctions cause physical supply chain breaks, or do they operate primarily as input-cost shocks? This paper studies the 2022 EU sanctions against Russia as a natural experiment to identify the adjustment margins of European manufacturing. I map legal sanctions into trade data and propagate the shock downstream using the AI-generated Production Network (AIPNET), yielding a product-specific exposure measure capturing indirect reliance on sanctioned inputs. Using a dynamic difference-in-differences design for five major industrial economies (Germany, Denmark, Spain, France, Italy), I find that supply chains bent but did not break. While there is no robust evidence of a collapse in physical import volumes, import prices (unit values) for exposed goods rose sharply. In the benchmark specification – weighted by pre-war import values to capture aggregate economic relevance – a 10 percentage point increase in exposure is associated with a 9.7% increase in relative landed costs (CIF). This “price of resilience” amounted to approximately 11.1 billion USD for the nine considered EU economies in 2022. I show that unlike the US trade war, where policy uncertainty caused extensive margin adjustments, the hard constraint of the 2022 embargo resulted in a pure price premium on stable quantities. The sanctions thus operated effectively as a targeted input-cost shock: they successfully cut direct ties with Russia, but the costs were borne by European industry through a broad-based resilience premium rather than a collapse in output.

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Raum

Medienraum (A-211)

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