Economic Sanctions

The chapter provides a brief overview of the concept, history, and effectiveness of sanctions, as well as a stocktaking of the sanctions against Russia and their potential impact on the Central and Eastern European economies (CEEE). Given the limited non-energy trade and financial ties with Russia, individual, trade, and financial sanctions are likely to have affected the CEEE only to a limited extent. Notwithstanding the heavy dependence of the region on imports of Russian commodities, the impact of energy-related sanctions was also mitigated by several factors. First, the sharp increase in coal, petroleum, and natural gas prices started before the war in Ukraine, and reversed in the second half of 2022 despite the ongoing announcements on sanctions. Second, in order to minimize disruptions to supply, sanctions related to oil included several exemptions for countries with limited alternative options. Third, against the backdrop of high dependence on Russian imports, no sanctions were introduced on natural gas. Nonetheless, the assessment of the impact of sanctions is a challenging task as it requires a distinction between the impact of the war and sanctions, and thus an understanding of a no-sanction counterfactual scenario under which there could still be major disruptions to supply, and shocks to prices given the elevated uncertainty caused by the war.