Abstract
We study the macroeconomic effects of shocks to the EU-Russian oil market, using Bayesian panel structural vector autoregressions. A drop in EU demand for Russian oil reduces output similarly in both regions. A cut in Russian oil supply has roughly the same output effects. Structural scenarios suggest that an EU oil import stop would lower output by 4-10% in both regions, the Urals price by 5-30%, and Russian oil revenues by 6-40%, depending on the degree of coordination. A Russian supply cut stabilizes the price. The results suggest that oil market sanctions are an effective but not efficient geoeconomic instrument.
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