Can Sanctions Backfire?

The use of economic sanctions has significantly risen in the past few years, most recently as a reaction towards the war between Russia and Ukraine. A future increase seems plausible given the global level of geopolitical tensions. In particular, sanctions among major powers cause major economic disruptions at the global level. Against this background, this article develops a quantitative model for estimating the economic effects of sanctions. It exerts production shocks on a detailed representation of the world economy and minimises economic disruption to determine its post-shock state. We apply the model to two scenarios: the Russia–Ukraine war and a possible conflict across the Taiwan Strait. In both scenarios, the Global South is the main loser. For the West, a potential embargo of Mainland China results in higher losses than those from the Ukraine war, because of the West’s asymmetrical dependence on Mainland China’s manufacturing. Interestingly, Mainland China suffers the least in both scenarios. As a consequence, the analysis cautions that the use of sanctions as an instrument of Western politics has severe limitations as sanctions, especially against Mainland China, can be costly and painful for the sending states. Furthermore, it significantly hurts third states which raises severe normative issues.