The sanctions against Russia have been a controversial topic in Germany. A recent study has investigated the impact of these measures on prosperity and trade. The Institute for World Economy (IfW) and the German Institute for Economic Research (DIW) conducted a study on the effects of sanctions against authoritarian regimes, using the examples of Russia (2014) and Iran (2012). The economists used a model simulation to analyze the impact of the sanctions on prosperity and international trade. The study found that sanctions have a significant effect, even if important countries are missing from a global coalition.
According to the simulation, both imports (-30%) and exports (-36%) in Russia decreased significantly due to the sanctions. This led to a ten percent decrease in trade gains and a 1.5 percent loss in prosperity. The effects of the sanctions on Iran were even more severe, with exports (-41%) and imports (-83%) plummeting. Trade gains (-12%) and prosperity (-1.7%) also decreased significantly. The study concludes that sanctions impose high costs on the sanctioned countries, while the sanctioning countries reduce their own expenses.
The study also examined the difference between the effects of a global sanctions coalition and bilateral sanctions. The model calculation showed that a smaller group of sanctioning countries could achieve about 60 percent of the effect of a global sanctions coalition. This means that even a few economically strong countries imposing sanctions on a country can significantly weaken its economy. However, it is important to note that China, Vietnam, Belarus, Turkey, and South Korea did not participate in the sanctions against Russia in 2014. The study concludes that the costs for the sanctioned countries are particularly high when many countries participate in the sanctions.
In addition to the effects on the sanctioned countries, the study also looked at the impact of the sanctions on the sanctioning countries. The study found that smaller countries such as Lithuania, Latvia, Estonia, and Ukraine suffered a particularly high loss of prosperity due to the sanctions against Russia. In the United States, United Kingdom, Japan, Canada, and Australia, the sanctions caused only a small loss of prosperity. The study emphasizes that coalitions are preferable to bilateral sanctions and that significant losses in prosperity can occur even if not all economically significant countries participate in the sanctions.
