Trade Integration and Supply Disruptions: Sharing the Pain From a Russian Gas Shut-off to Europe

Silvia Albrizio, John Bluedorn, Rachel Brasier, Christoffer Koch, Andrea Pescatori and Martin Stuermer

The Energy Journal, 2025, vol. 46, issue 3, 1-24

Abstract: How does market size—which increases with greater trade integration—affect the economic propagation of supply shocks? We examine this question through the case of a Russian gas shut-off to the European Union (EU). An open-economy, multi-sector general equilibrium model suggests that the adverse economic impact on the EU shrinks five-fold if trade integration with the global liquefied natural gas (LNG) market is considered. Greater international integration provides a buffer for the EU through trade. The flip side of integration is that other LNG importers around the world see adverse effects from higher prices. Still, the overall, combined economic damage for the EU and other LNG importers with integration is less than half of that in the counterfactual case without. Fostering more trade integration can help make economies more resilient to supply shocks. JEL Classification: E23, E32, F51, N70, N74, Q41, Q43

Keywords: Supply disruptions; commodities; natural gas; energy; international trade; sanctions; spillovers (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:46:y:2025:i:3:p:1-24

DOI: 10.1177/01956574241309558

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