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GTAP Resource #6883

"Possible economic effects of Russia’s war of aggression and resulting sanctions"
by Arriola, Christine, Przemyslaw Kowalski and Frank van Tongeren

In reaction to Russia’s invasion of Ukraine in 2022, many countries have imposed a progressive series of economic sanctions on Russia. International trade with Russia and the associated financial flows are some of the key channels targeted by these sanctions. The sanctions are aiming at hurting Russia economically while making sure the policy measures inflict as limited damage on the sanctioning countries and the rest of the world as possible.

This paper presents results of work aiming at better understanding the trade dependencies and economic impacts of the war using the OECD’s computable general equilibrium (CGE) model METRO.

Three sets of “what if” simulations with METRO are used to assess the economic impact of reduced trade relations between Russia and a select group of countries. Given the importance of oil and oil products in Russian exports and the importance of Russia in global exports of oil, the first analysis examines the economic impact of a scenario where G7 and Europe cut oil imports from Russia by 100% under different assumptions as to how extra demand for non-Russian oil can be met from most existing alternative sources.

The second set of simulations examines the economic impact of a stylised scenario of reduced bilateral trade with Russia in all sectors. In this scenario, trade volumes in all sectors between Russia and G7, Europe, and Australia are reduced by 40%. The scenarios are designed to gauge the exposures of sectors and regions to a reduction in bilateral trade with Russia and to compare the economic impact of the different types of trade reductions.

In the third set of simulations, the model is used to analyse the impact of a scenario where OECD economies would contemporaneously increase trade links among each other. Would this lessen the effect of reduced trade links with Russia?

Resource Details (Export Citation) GTAP Keywords
Category: 2023 Conference Paper
Status: Not published
By/In: Presented during the 26th Annual Conference on Global Economic Analysis (Bordeaux, France)
Date: 2023
Created: Kowalski, P. (4/13/2023)
Updated: Kowalski, P. (4/13/2023)
Visits: 337
- Economic crisis
- Europe (Eastern)

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