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

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.