Grandstand. Faced with the arbitrariness of a war unleashed by a dictator, the first financial sanctions were a strong reaction, which then seemed adequate. But the evolution of the conflict shows that they are not enough. The time has come to go further, considering a total embargo on energy imports (gas, oil and coal) from Russia.
The United States and the United Kingdom have already taken the plunge without yet being followed by the European Union, which showed its differences during the council of its foreign ministers on March 21. The arguments against this proposal refer to the loss of purchasing power that these sanctions would induce. But what would really be the extent of this loss of purchasing power?
For a coordinated implementation of this embargo, it is crucial to have an assessment of its economic cost for each of the States participating in it. The difficulty of this assessment is that a halt in energy imports from Russia disrupts the entire world economy with cascading effects on the production chain, made up of different sectors of activity, all interdependent via international trade.
Economists David Baqaee and Emmanuel Farhi have developed a methodology to quantify the contribution of international trade to the evolution of the purchasing power of the citizens of each country on the planet. This method takes into account all the sectoral and commercial links that make up the global production chain (“Networks, Barriers, and Trade”, “NBER Working Paper” no. 26108, 2021).
This methodology was used by a group of economists to assess the cost to Germany, which is known to be particularly dependent on Russian gas, oil and coal (“What If? The Economic Effects for Germany of a Stop of Energy Imports from Russia”, Rüdiger Bachmann, David Baqaee, Christian Bayer, Moritz Kuhn, Andreas Löschel, Benjamin Moll, Andreas Peichl, Karen Pittel and Moritz Schularick, ECONtribute, “Policy Brief” n° 28, 2021). This very fine initiative by our colleagues is motivated by the refusal of the German government “to go too far” in the sanctions against Russia.
But their analysis must also be applied to other countries: sharing an assessment that would cover all European countries is essential with a view to promoting a common decision on this embargo. This assessment must be interpreted with caution, given the greater or lesser ease with which economic players can substitute energy sources imported from Russia with another.
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