KCG Seminar on Aug. 18: Full-scale Russia’s Trade Sanctions and their Welfare Outcomes

Since 2014 the EU has imposed a number of sanctions and restrictive measures against Russia in response to the illegal annexation of Crimea. Alone in the past two years as response to Russia’s invasion of Ukraine, the EU has adopted eleven sanction packages against Russia, including individual sanctions, economic sanctions and diplomatic restrictive measures.

Focusing on the economic sanctions, particularly the trade embargo, Dr. Evgenii Monastyrenko (University of Luxembourg) will give a seminar “Full-scale Russia’s trade sanctions and their welfare outcomes” this Friday at the Kiel Institute for the World Economy (and online) to share his most recent findings of the welfare effects of the Western countries’ trade sanctions against Russia.

Abstract: In 2022-23 the Western countries turned to consolidate their efforts on sanctioning the fossil imports from Russia. The embargoes in place target coal and refined oil products. Since early 2023, the natural gas and crude oil are also partially banned. This paper aims to quantify the outcomes of trade embargo on all involved counterparts. We rely on a general equilibrium model with domestic sectoral linkages, trade in intermediate goods and sectoral heterogeneity in production. We subsequently test the alternative scenarios where G7, EU, OECD countries or a larger bloc of countries introduce embargo on fossil exports from Russia. The embargoed sectors are gas, crude and refined oil and coal. The results vary depending on the coalition of sanctioning countries and the selection of the banned sectors. In the most stringent scenario, where sanctions on all fossil exports are imposed, our analysis predicts a decrease in Russia’s welfare of nearly 10%, coupled with a significant decline in real consumption. Our results further suggest the double-edge axe negative outcomes for sanctioning countries. They range from -0.43% under a G7 embargo to -0.73% with the broadest coalition. Real consumption impacts follow a similar pattern, from -0.38% up to -1.14% in the most extensive scenario. Finally, a pivotal role is played by the EU countries, whose participation in the sanctions can significantly influence expected outcomes.

The seminar will take place in the Medienraum at the Kiel Institute for the World Economy and online via Zoom on Aug. 18, 2023 (Friday, 12:00-13:00, CEST).

Interested participants who cannot join the seminar in Kiel are welcome to send an Email to kcg-office@ifw-kiel.de for the access link to the seminar.

Image: © Presidential Office of Ukraine