The Effect of Economic Sanctions on World Trade of Mineral Commodities. A Gravity Model Approach from 2009 to 2020

This study employs a gravity model to investigate the impact of sanctions on trade of mineral commodities (HS 6-digit level) from 2009 to 2020, employing a dataset encompassing flows from 239 exporter countries to 38 OECD members. Main results highlight that: (i) a substantial trade disruption is evident, marked by an immediate 90 percent reduction, with a growing impact observed over time; (ii) sanctions-busting appears effective only in the very short term, albeit with weak supporting evidence; (iii) sender countries experience a decline in trade not only with target countries but also with third-party nations (negative network effect). When scrutinizing by world regions and HS chapters, the evidence becomes nuanced. It appears that sender North American countries demonstrate the capability to replace imports from target countries with alternative suppliers, while EU countries experience a clear-cut trade disruption. When examining different HS chapters, findings indicate that sanctions lead to a reduction in trade of mineral commodities classified under chapters 26 and 27, but not in those under chapter 25. As for sanctions-busting, it appears to be evident for commodities under chapter 26. Yet, sender countries importing commodities under chapter 25 appear to be able to shift to other sources whereas sender countries importing commodities under chapter 27 experience a substantial trade disruption.