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Estimating the economic effects of sanctions on Russia: An Allied trade embargo

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  • Kornel Mahlstein
  • Christine McDaniel
  • Simon Schropp
  • Marinos Tsigas

Abstract

This article contributes to the ongoing discussion on the use of sanctions as a coercive tool of international policymaking, focusing on the economic effects of the sanctions on Russia following its invasion of Ukraine. Using CGE modelling, we explore the short‐ to medium‐term economic effects of a possible trade embargo by Allied countries imposed on Russia. We consider the Allied trade embargo as a set of comprehensive trade sanctions that include (i) import‐related measures, (ii) export‐related measures, (iii) FDI‐related measures and (iv) increased trade costs between Russia and non‐Allies. We find that Russia would sustain sizable losses upwards of 14% of real GDP from an Allied trade embargo, even in the short run. Allied economies are unevenly affected by the sanctions, with real GDP losses between 0.1% and 1.6%. Non‐Allied economies benefit from some trade diversion but experience even larger losses from the increased costs of trading and doing business with Russia. China joining the embargo resulted in greater economic losses for Russia; Allied economies and China would be adversely affected by this move. Finally, Russia would suffer significantly higher losses if it were enacting countersanctions, rather than resigning itself to being a sanction target.

Suggested Citation

  • Kornel Mahlstein & Christine McDaniel & Simon Schropp & Marinos Tsigas, 2022. "Estimating the economic effects of sanctions on Russia: An Allied trade embargo," The World Economy, Wiley Blackwell, vol. 45(11), pages 3344-3383, November.
    • Handle: RePEc:bla:worlde:v:45:y:2022:i:11:p:3344-3383
    DOI: 10.1111/twec.13311
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    References listed on IDEAS

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    2. Gros, Daniel, 2022. "Optimal tariff versus optimal sanction: The case of European gas imports from Russia," CEPS Papers 36006, Centre for European Policy Studies.
    3. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
    4. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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    Cited by:

    1. Luca Fantacci & Lucio Gobbi & Dario Luciani, 2022. "Bene pubblico globale o arma finanziaria? L'egemonia del dollaro alla prova delle sanzioni (Global public good or financial weapon? Dollar hegemony to the test of sanctions)," Moneta e Credito, Economia civile, vol. 75(298), pages 123-147.
    2. Steinbach, Sandro, 2023. "The Russia–Ukraine war and global trade reallocations," Economics Letters, Elsevier, vol. 226(C).
    3. Oleh Semenenko & Maryna Sliusarenko & Andrii Onofriichuk & Vitalii Onofriichuk & Artem Remez, 2024. "Impact of the Russian–Ukrainian War on the National Economy of Russia," Journal of Interdisciplinary Economics, , vol. 36(1), pages 41-57, January.
    4. Simon Schropp & Marinos Tsigas, 2023. "Designing ‘optimal’ sanctions on Russian imports," The World Economy, Wiley Blackwell, vol. 46(3), pages 498-531, March.
    5. Ahn, Soojung & Kim, Dongin & Steinbach, Sandro, 2023. "Global Grain Trade Implications of the Russia-Ukraine War," 2023 Annual Meeting, July 23-25, Washington D.C. 335482, Agricultural and Applied Economics Association.

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