This paper is part of the Fall 2024 edition of the Brookings Papers on Economic Activity (BPEA), the leading conference series and journal in economics for timely, cutting-edge research about real-world policy issues. Its conference draft was presented at the Fall 2024 BPEA Conference on September 26-27, 2024. (Drafts, presentation recordings, and slides are available via the link.) Submit a proposal to present at a future BPEA conference here.
Final version posted: June 2025
Download final paper with discussion comments and conference discussion summary
The sanctions imposed to isolate Russia economically after it invaded Ukraine in February 2022, though “unprecedented in scale and scope,” have failed so far to significantly alter Russia’s behavior, according to a paper discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 27.
“Their impact on Russia’s economy has been mixed, with only moderate contraction reported by official Russian statistics” write the authors, Oleg Itskhoki of Harvard University and Elina Ribakova of the Peterson Institute for International Economics.
Their paper—”The Economics of Sanctions: From Theory into Practice”—explores the complexities and trade-offs involved in using sanctions. It notes that “sanctions are likely more effective when implemented decisively and comprehensively, rather than through a piecemeal approach, which allows the target country to adapt gradually.”
“Sanctions are an important tool in the arsenal of economic statecraft, but they are not a magic wand,” the authors write. “Their success often hinges on the clarity of their objectives and robustness of their enforcement.”
“It makes sense to use them, but you have to have the right expectations of what they can achieve and their cost,” Itskhoki said in an interview with The Brookings Institution. “There should be a technocratic way of designing them that is not political.”
Among the topics the paper examines are:
- The effect of sanctions depending on the size and global integration of the target country and the size and breadth of the coalition of countries imposing sanctions.
- The cost of sanctions to the countries imposing them.
- And whether sanctions have an immediate but reversible impact or a longer-lasting effect.
According to the authors, sanctions are more powerful against smaller and less globally integrated target countries such as North Korea and Venezuela. Russia, in contrast, is a large, complex and globally integrated economy.
And the coalition of countries imposing sanctions against Russia, though broad, has exceptions. The authors note that China is now Russia’s largest trade partner in both imports and exports and that India and China have replaced the European Union as the most significant importers of Russian energy.
Ribakova, in an interview, said the economic costs to coalition countries of imposing sanctions were “the elephant in the room” and were not discussed in a structured way. It took the United States and the European Union almost a year to reduce their purchases of Russian oil and natural gas. Ironically the war contributed to surging commodity prices that benefited Russia. The surge, along with restrictions imposed on Russian imports, allowed Russia to achieve it highest-ever trade surplus in 2022.
Still, even though sanctions were not as catastrophic as anticipated, Russia’s economy contracted moderately in 2022, while other commodity exporters’ economies grew. Its trade surplus fell substantially in 2023 and its medium-term economic outlook (five years and beyond) is bleak, the authors note.
“Ideally, we need a doctrine on economic statecraft and international rules of engagement to make sanctions a genuinely effective tool,” Ribakova said. “Without such guidelines, there is a risk of overuse resulting in further fragmentation of the world economy, which in turn reduces the effectiveness of sanctions.” The authors said they hope their paper will serve as a foundational step toward the development of this much-needed doctrine.
Authors
Authors
Discussants
Citations
Itskhoki, Oleg, and Elina Ribakova. 2024. “The Economics of Sanctions: From Theory into Practice.” Brookings Papers on Economic Activity, Fall: 425–470.
Brooks, Robin. 2024. “Comment on ‘The Economics of Sanctions: From Theory into Practice’.” Brookings Papers on Economic Activity, Fall: 471–483.
MacFarquhar, Rory. 2024. “Comment on ‘The Economics of Sanctions: From Theory into Practice’.” Brookings Papers on Economic Activity, Fall: 483–493.
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Acknowledgements and disclosures
The authors are grateful to the BPEA conference organizers Jan Eberly and Jón Steinsson; to the discussants Robin Brooks, Rory MacFarquhar, and Gabriel Felbermayr; to the conference participants at Brookings and at the Kiel Institute for helpful comments; and to Tom Basin, Ekaterina Gurkova, Chang He, and Lucas Risinger for excellent research assistance.
The discussant, Rory MacFarquhar, is the chief economist of Gemsstock, an investment firm that has at times owned Ukrainian and Russian securities.
David Skidmore authored the summary language for this paper. Chris Miller assisted with data visualization.
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