The effect of economic sanctions on world trade of mineral commodities. A gravity model approach from 2009 to 2020

Abstract

This article employs a gravity model to examine the impact of sanctions on the trade of mineral commodities, classified at a detailed level (using the six-digit code of the Harmonized System — HS, a global classification system for traded goods), from 2009 to 2020. The dataset covers flows from 239 exporter countries to 38 OECD members. The primary findings highlight that: (i) a significant trade disruption is evident, characterized by an immediate 90 percent reduction, with a growing impact observed over time; (ii) sanctions-busting appears effective only in the very short term, albeit with weak supporting evidence; (iii) sender countries experience a decline in trade not only with target countries but also with third countries (negative network effect).

An analysis by regions and commodity groups provides different evidence. First, North American sender countries exhibit the ability to replace imports from target countries with alternative suppliers, while EU countries experience a clear trade disruption. Second, when examining different mineral commodities, findings indicate that sanctions lead to a reduction in trade of Ores and Slag (HS Chapter 26) and Mineral Fuels and Oils (HS Chapter 27), but not in Salt and Cement (HS Chapter 25). Regarding sanctions-busting, it is evident for Ores and Slag. However, sender countries importing Salt and Cement seem to be able to shift to other sources, whereas sender countries importing Mineral Fuels and Oils experience a substantial trade disruption