The Price of Resilience: Input-Cost Shocks in European Supply Chains under EU Sanctions on Russia

Version 1.1, 17.09.2026. Abstract Do broad-based sanctions break supply chains, or can open economies absorb geopolitical shocks through costly substitution? This paper studies the 2022 EU sanctions against Russia as a quasi-experimental input-cost shock to European manufacturing. I map the legal sanctions regime into HS 6 trade data and propagate sanctioned upstream inputs through the AI-generated Production Network (AIPNET), constructing a country–product measure of pre-war vulnerability to Russian supply. A dynamic difference-in-differences design separates physical adjustment from changes in landed procurement costs. The main result is a sharp price–quantity asymmetry. In 2022, a 10 percentage point increase in exposure raises CIF unit values by approximately 11.3%, while the corresponding quantity response is small and statistically insignificant. An import-value-weighted specification implies a 9.7% increase in expenditure incidence for the same exposure change. Applying this estimate to the 2021 import base yields approximately 11.4 billion USD of additional first-order border expenditure across nine EU economies—about 0.4% of the corresponding exposed import base. The estimate is not a welfare loss: it captures only the immediate import-side cost of adjustment and does not trace subsequent pass-through, firm margins, production responses, or higher-order network effects. The paper contributes a granular framework for linking legal trade restrictions to downstream production-network exposure, provides direct evidence on whether adjustment occurs through quantities or landed costs, and quantifies one component of the sender-side economic incidence of sanctions. The evidence suggests that European supply chains were considerably more flexible in the immediate shock period than a cascading-shortage scenario would imply. But realised resilience is a historical outcome, not a forecast: inventories, alternative suppliers, policy regimes, and simultaneous shocks can change the capacity to absorb the next disruption. Resilience, in this sense, is not the absence of cost, but the capacity to absorb a shock without losing the economic function that matters. JEL Codes: F13, F14, F51, L23Keywords: Sanctions; Supply Chain Resilience; Production Networks; Trade Diversion; Import Prices