Global Economic Consequences of the War in Ukraine: Sanctions, Supply Chains and Sustainability

EditedbyLuisGaricano,DominicRohnerandBeatriceWederdiMauro GlobalEconomicConsequencesoftheWarinUkraine Sanctions,SupplyChainsandSustainability GlobalEconomicConsequencesoftheWarinUkraineSanctions,SupplyChainsand Sustainability CEPRPRESS CentreforEconomicPolicyResearch33GreatSuttonStreet London,EC1V0DX,UK 187boulevardSaint-Germain 75007,Paris,France Tel:+44(0)2071838801 Email:cepr@cepr.orgWeb:www.cepr.org ISBN:978-1-912179-64-0 Copyright©CEPRPress,2022. GlobalEconomicConsequencesoftheWarinUkraineSanctions,SupplyChainsand Sustainability EditedbyLuisGaricano,DominicRohnerandBeatriceWederdiMauro CENTREFORECONOMICPOLICYRESEARCH(CEPR) TheCentreforEconomicPolicyResearch(CEPR)isanetworkofover1,500researcheconomistsbasedmostlyinEuropeanuniversities.TheCentre’sgoalistwofold:topromoteworld-classresearch,andtogetthepolicy-relevantresultsintothehandsofkeydecision-makers. CEPR’sguidingprincipleis‘Researchexcellencewithpolicyrelevance’. Aregisteredcharitysinceitwasfoundedin1983,CEPRisindependentofallpublicandprivateinterestgroups.IttakesnoinstitutionalstandoneconomicpolicymattersanditscorefundingcomesfromitsInstitutionalMembersandsalesofpublications.Becauseitdrawsonsuchalargenetworkofresearchers,itsoutputreflectsabroadspectrumofindividualviewpointsaswellasperspectivesdrawnfromcivilsociety. CEPRresearchmayincludeviewsonpolicy,buttheTrusteesoftheCentredonotgivepriorreviewtoitspublications.TheopinionsexpressedinthisreportarethoseoftheauthorsandnotthoseofCEPR. ChairoftheBoardSirCharlieBeanFounderandHonoraryPresidentRichardPortes PresidentBeatriceWederdiMauro VicePresidentsMaristellaBotticiniUgoPanizzaPhilippeMartinHélèneRey ChiefExecutiveOfficerTessaOgden Contents Forewordviii Introduction1 LuisGaricano,DominicRohnerandBeatriceWederdiMauro SectionI:TheImpactofenergysanctions 1Winteriscoming:EnergypolicytowardsRussia13 PhilippeMartinandBeatriceWederdiMauro 2Rublepayments:Shieldingtherublefromfinancialsanctions18 MicheleSaviniZangrandi 3WesternsanctionsonRussiaareworking,anenergyembargonowisacostlydistraction23 MarkHarrison 4“CrimeandPunishment”:HowRussianbanksanticipatedanddealtwith globalfinancialsanctions28 MikhailMamonov,AnnaPestovaandStevenOngena 5The‘GlobalSanctionsDataBase’:Mappinginternationalsanctionpolicies from1950-201936 GabrielFelbermayr,AleksandraKirilakha,ConstantinosSyropoulos,ErdalYalcinandYotoYotov 6Sanctionsandtheexchangerate44 OlegItskhokiandDmitryMukhin 7Aprincipal,multi-agentmodelofsanctions49 SandeepBaliga 8Beyondmacro:Firm-leveleffectsofcuttingoffRussianenergy54 RaphaëlLafrogne-Joussier,AndreiLevchenko,JulienMartinandIsabelleMejean 9Strengthinunity:TheeconomiccostoftraderestrictionsonRussia60 FrançoisLangot,FranckMalherbet,RiccardoNorbiatoandFabienTripier 10HowtoimplementanEUembargoonRussianoil66 AnetteHosoiandSimonJohnson 11Thepriceofwar:Macroeconomiceffectsofthe2022sanctionsonRussia71 AnnaPestova,MikhailMamonovandStevenOngena 12ThesimpleeconomicsofatariffonRussianenergyimports79 JohnSturm 13Ukraineinvasion:Fromoilsanctionstoacceleratingtheenergytransition84 RabahArezkiandPerMagnusNysveen 14HowtosolveEurope’sRussiangasconundrumwithatariff88 DanielGros 15WhatifGermanyiscutofffromRussianenergy?94 RüdigerBachmann,DavidBaqaee,ChristianBayer,MoritzKuhn,AndreasLöschel,BenjaminMoll,AndreasPeichl,KarenPittelandMoritzSchularick 16CuttingRussia’sfossilfuelexports:Short-termpainforlong-termgain102 MaksymChepeliev,ThomasHertelandDominiquevanderMensbrugghe SectionII:TheImpactofthewaronworldtradeandsupplychains 17ImplicationsofRussia’sinvasionofUkraineforitsvaluechains109 DeborahWinklerandLucieWuester 18HowthewarinUkrainemayreshapeglobalisation115 MicheleRuta 19Widespreadfoodinsecurityisnotinevitable:Avoidescalatingfoodexport curbs120 AlvaroEspitia,SimonEvenett,NadiaRochaandMicheleRuta 20Russia’swaragainstUkrainemightpersistentlyshiftglobalsupplychains126 TobiasKornandHenryStemmler SectionIII:TheImpactofthewarondevelopingcountries 21WarinUkraine,worldfoodprices,andconflictinAfrica133 EoinMcGuirkandMarshallBurke 22AgriculturalandenergyimportersinthedevelopingworldarehithardestbytheUkrainewar’seconomicfallout139 MaksymChepeliev,MarylaMaliszewskaandMariaFilipaSearaePereira 23China’soverseaslendingandthewarinUkraine147 SebastianHorn,CarmenReinhartandChristophTrebesch 24War-inducedfoodpriceinflationimperilsthepoor155 ErhanArtuc,GuillermoFalcone,GuidoPortandBobRijkers SectionIV:TheImpactofthewaronUkraine 25Ukraine’srecoverychallenge164 OleksiyBlinovandSimeonDjankov 26ThelossofhumancapitalinUkraine169 NoamAngrist,SimeonDjankov,PinelopiGoldbergandHarryPatrinos 27Learningthehardway:Theeffectofconflictoneducation175 TilmanBrück,MicheleDiMaioandSamiMiaari 28LessonsfromhistoryforourresponsetoUkrainianrefugees181 SaschaO.Becker SectionV:Thelong-runImpactonmultilateralismandtheinternationalsystem 29ExternalmilitarythreatshelptocreateastrongerEuropeanidentityandcooperation187 KaiGehring 30Sanctionsandtheinternationalmonetarysystem193 MarkusKBrunnermeier,HaroldJamesandJean-PierreLandau 31Theimpactofgeopoliticalconflictsontrade,growt