Welfare implications of trade sanctions against Russia

Since the beginning of the war between Russia and Ukraine in 2022, Western countries have been discussing and then implementing new trade sanctions against Russian fossil fuels. This paper quantifies such policies' trade and welfare effects using a general equilibrium model with 92 countries and 65 intermediate products and sectoral linkages. The paper breaks down the effects of the bans on gas, crude and refined oil, and coal, and discusses the impact of alternative coalitions of sanctioning countries. In the most stringent case, the model predicts welfare losses of about 16.8% in Russia and 0.42% in the sanctioning countries. These losses are very heterogeneous across sanctioning countries. The OECD countries have an important role as their participation in sanction policies significantly influences expected outcomes in Russia. Meanwhile, should only EU countries implement fossil fuel sanctions, their welfare losses are predicted to be 3.3% on average.