The Economic Impacts of the EU-Russia Trade Conflict

The current trade conflict between the EU and Russia, which is a consequence of the destabilisation of the eastern Ukraine, in the face of the importance of Austrian exports to Russia, could have noticeable effects on the Austrian economy. These macroeconomic effects are not limited to individual goods that fall under the sanctions; they are much more a result of a general worsening of trade relations between the EU and Russia. If one assumes an only temporary reduction of exports and tourism, in which the realised export losses experienced by all EU countries in the first half of 2014 are extrapolated and no additional adjustments of consumption and investment expenditures occur, the economic effect on Austria would imply a reduction of around 9,000 employees and a loss of value added of 0.6 billion €. In case of a more long-term reduction in exports and tourism, in which in addition to the immediate input effects also reactions in income and consumption in individual EU countries are allowed for, the economic effect would be a loss of around 24,000 jobs and a reduction of gross value added by 1.5 billion €, while in the case of an intensified conflict (which leads to a 25 percent higher export loss than already realised), Austria would have to expect a loss of 45,000 jobs and 2.9 billion € in terms of value added.