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Trade Integration and Supply Disruptions: Sharing the Pain From a Russian Gas Shut-off to Europe

Author

Listed:
  • Silvia Albrizio
  • John Bluedorn
  • Rachel Brasier
  • Christoffer Koch
  • Andrea Pescatori
  • Martin Stuermer

Abstract

How does market size—which increases with greater trade integration—affect the economic propagation of supply shocks? We examine this question through the case of a Russian gas shut-off to the European Union (EU). An open-economy, multi-sector general equilibrium model suggests that the adverse economic impact on the EU shrinks five-fold if trade integration with the global liquefied natural gas (LNG) market is considered. Greater international integration provides a buffer for the EU through trade. The flip side of integration is that other LNG importers around the world see adverse effects from higher prices. Still, the overall, combined economic damage for the EU and other LNG importers with integration is less than half of that in the counterfactual case without. Fostering more trade integration can help make economies more resilient to supply shocks. JEL Classification: E23, E32, F51, N70, N74, Q41, Q43

Suggested Citation

  • Silvia Albrizio & John Bluedorn & Rachel Brasier & Christoffer Koch & Andrea Pescatori & Martin Stuermer, 2025. "Trade Integration and Supply Disruptions: Sharing the Pain From a Russian Gas Shut-off to Europe," The Energy Journal, , vol. 46(3), pages 1-24, May.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:3:p:1-24
    DOI: 10.1177/01956574241309558
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    References listed on IDEAS

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    1. Emi Nakamura & Jón Steinsson & Patrick Sun & Daniel Villar, 2018. "The Elusive Costs of Inflation: Price Dispersion during the U.S. Great Inflation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(4), pages 1933-1980.
    2. John Sturm, 2023. "How Should Sanctions Account for Bystander Countries?," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 39-42, May.
    3. Richter, Philipp M. & Holz, Franziska, 2015. "All quiet on the eastern front? Disruption scenarios of Russian natural gas supply to Europe," Energy Policy, Elsevier, vol. 80(C), pages 177-189.
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    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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