As Russia continues its offensive in Ukraine and many have called for tougher sanctions, the option of a full energy embargo in the form of EU tariffs on Russian gas imports has been discussed. The IGM Forum in Chicago has invited a panel of leading US and European economists to express their views. As this column reports, about three-quarters of experts think that higher tariffs would be an effective way to reduce revenue flows to Russia and limit supply to Europe. Several panelists suggested the significance of the resilience of demand and supply of Russian gas, as well as the method by which prices are determined.
Editors’ note: This column is part of the Vox debate on the economic consequences of war.
As Russia’s aggression in Ukraine continues and many have called for tougher sanctions (International Working Group on Russian Sanctions 2022, Storm 2022, Cheney et al. 2022), the option of a full power embargo has been discussed in the form of EU tariffs. Russian gas imports. The IGM Forum in Chicago Booth, which for more than a decade has been regularly voting for the views of some of the top economists in the United States and Europe, has invited its panels to express their views on the proposal. .
Following the standard format of the IGM poll, experts were asked if they agreed or disagreed with the following statement, and if so, how strongly and with what confidence:
The high tariffs imposed by the European Union on Russian natural gas imports would be an effective measure to reduce supply disruptions in Europe in order to reduce Russia’s revenue flows.
Of the 43 U.S. experts, 41 took part in the survey; Of the 47 European experts, 36 participated – for a total of 77 expert responses. About three-quarters of the panelists agreed or strongly agreed with the statement (of which European experts said they strongly agreed), while the rest were uncertain, and a handful disagreed.
Weighed by the confidence of each expert in their response, 27% of the European panel strongly agreed, 48% agreed, 22% uncertain, and 3% disagreed. Among the US panels (again weighed by the confidence of each expert in their response), 6% strongly agreed, 67% agreed, 18% uncertain, and 9% disagreed. Overall, across both panels, 16% strongly agreed, 57% agreed, 20% disagreed, and 6% disagreed (the total sum is not always 100 due to rounding).
More detailed brief comments about the opinions of the experts come which they are able to include when participating in the survey. Among those who agree or disagree, Franklin Allen of Imperial College London said: “This will reduce the flow of money to Russia, reduce the damage to the European economy and potentially fund the reconstruction of Ukraine.” Yale William Nordhaus adds: “High and rising tariffs are clearly the best way, mainly to avoid quantitative constraints.” And Christopher Woodry of the Northwest points us to the recent VoxEU section on “The Easy Economy of Tariffs on Russian Energy Imports” (Storm 2022).
Among the panelists who said they were unsure, Oxford’s Beta Javarsik commented: “Russia will probably retaliate and cut off gas supplies to Europe.” In Chicago, Astan Gulsabi notes: “It will hurt them, but it will also hurt Europe.” And the Lubos priest in Chicago argues: “This will hurt the EU countries unequally. Solidarity is needed within the EU. It is difficult to substitute gas in the short term. ”
All experts who disagree with the statement add brief explanatory comments to their opinion. This includes Yale’s Pinelope Goldberg, who says: “Sanctions never worked. And in the current context, the EU will have to pay a higher price. “Richard Schmelensi in the MIT protest:” WTO-illegal, could violate the agreement, Russian response is uncertain. And at MIT, Bennett Holmstr্রমm concludes: “If effective war ends money, tariffs won’t.”
Resilience and price-setting process
Several panelists suggested the significance of the resilience of demand and supply of Russian gas, as well as the method by which prices are determined. Among those who agreed, David Otto of MIT commented: “The high substitution of non-Russian and Russian gas means that Russia should bear most of the burden.” Olivia Blanchard of the Peterson Institute notes: “Russia may decide to sell elsewhere, but at a lower price (Ural discount). World supplies may not be too low, “said Patrick Honohan, of Trinity College Dublin.
Others who agree are equally cautious. Yale Larry Samuelson observes: “There is a trade-off – higher tariffs will be more effective in limiting revenue, but will cause more disruption.” And at Harvard, Paul Antras announced: “Given the potential tariffs, this sounds like a good policy. But I’m less sure supply will not be disrupted. In any case, it’s risk-taking.” He instructed us in a piece written immediately after the attack on the case of the punitive tax on Russian power (Houseman 2022).
Panelists who say they are uncertain also point to resilience and potential events. Carl Wheylan of University College Dublin replies: “It is not clear where the short-term effects of this tariff are. With difficulties in sourcing alternative supplies, it could only push up the price of the euro, “said Anil Kashyap in Chicago.” It is difficult to know which demand elasticity and speed can be adjusted. “Daniel Storm of the London School of Economics added: It is unknown at this time what he will do after leaving the post. “And it is not clear what the cost will be,” said Christian Lজw, who is in Chicago.
Opinions about potential resilience are also expressed by experts who disagree with the statement. Jean-Peter Cranen of the University of Goethe in Frankfurt said: “This is a question of tariffs; Demand for gas is currently price resilient, revenue for exporters cannot be reduced at all. And in Chicago, Michael Greenstone suggests: “In the near term, tariffs will do little: no alternative. Long-term phases will work better.”
Finally, two experts who hinted at an alternative approval of full sanctions energy tariffs. Darren Asemoglu at MIT said: “Yes, it is effective, but not as effective as a complete embargo. It is difficult to know the exact effect on Europe.” And at Stanford, Pete Kleino linked a widely discussed report on the potential economic impact of a halt to all energy imports from Russia on Germany (Bachmann 2022).
Bachmann, R, D Baqaee, C Bayer, M Kuhn, B Moll, A Peichl, K Pittel and M Schularick (2022), “What if? Economic Impact for Germany on Stopping Energy Imports from Russia “, ECONtribute Policy Brief 28/2022 (abbreviated here in VoxEU).
Chaney, E, C Gollier, T Philippon and R Portes (2022), “The Economics and Politics of Measures to Stop Financing Russian Aggression Against Ukraine”, VoxEU.org, 22 March.
Chepeliev, M, H Hertel and D van der Mensbrughe (2022), “Reducing Russia’s Fossil Fuel Exports: Short-Term Pain for Long-Term Profits”, VoxEU.org, 9 March.
Houseman, R. (2022), “Punitive tax lawsuit on Russian oil”, Project Syndicate, 26 February.
International Working Group on Russian Sanctions (2022), “Energy Sanctions Roadmap: Recommendations for Sanctions Against the Russian Federation”, Freeman Spagley Institute for International Studies, Stanford.
Sturm, J (2022), “Easy Economy of Tariffs on Russian Energy Imports”, VoxEU.org 13 April.