Trade sanctions: Evidence from Russia

Trade sanctions are restrictive measures that limit commercial exchange between countries to achieve political objectives. Their economics can be studied at two levels-the aggregate effects on trade and welfare, and the adjustment of individual firms-with the sanctions imposed on the Russian Federation in 2014 and 2022 as central case studies for both. At the macro level, a multi-country, multi-sector general-equilibrium trade model with input-output linkages is calibrated to quantify welfare effects under alternative coalition and intensity scenarios. Relative to 2014, the 2022 measures imposed substantially larger costs on Russia (about -2.6% of real income) while the average cost for EU/UK senders remained modest (around -0.1%), with larger losses concentrated in highly exposed small economies. Coalitions amplify pressure on the target at limited additional cost for most senders. Hypothetical extensions bound the potential of sanctions through global participation or embargoes. At the micro level, French customs data (monthly firm-product-destination flows, 2021-2023) and a triple-difference design reveal that exports to Russia fell by roughly three quarters after February 2022. The adjustment is dominated by the extensive margin, with smaller but significant intensive-margin declines among continuing firms. Targeted products contracted far more than non-targeted ones, with dual-use goods most severely affected. Financial channels that propagate losses beyond listed goods, the limits of "smart" sanctions when governments shield strategic firms, and political responses-including rally-around-the-flag effects in the targeted country-complete the picture.