The conflict between Ukraine and Russia, which began in February 2022, heightened tensions between Russian and European authorities. In response, the European Commission implemented economic sanctions on Russia as an initial step, with the intention of encouraging the withdrawal of Russian troops from Ukraine. In the meantime, over 700 companies decided to halt their operations or exports in Russia, expressing their stance against the war and focusing on trade with other countries. These international companies belong to several sectors, such as the textiles sector like Inditex, Decathlon or Adidas and food services like Burger King.

In the case of the European Commission, several restrictive measures were published in different packages from 23rd February 2022 to 25th February 2023, to limit trade with Russia [1] . The objective of isolating Russia led the European Union (EU) to adopt further sanctions, targeting key sources of profit in sectors such as energy, technology, finance and transportation. These measures also deprived Russia of key trade advantages as a World Trade Organisation (WTO) member. As in the past, these actions had a direct and/or indirect impact on the EU’s economy, varying in intensity among member states, which had to react to the new market dynamics. It is important to note that the COVID-19 pandemic, which emerged in 2019, added another layer of complexity to the economic challenges already created by the sanctions and bans. The outbreak of COVID-19 ¶{p. 92}and the measures taken worldwide to combat the pandemic have caused substantial disruptions in global supply chains, resulting in adverse effects on supply chain linkages and export activity for companies engaged in international trade. These negative impacts were particularly notable between September 2020 and the end of 2021, as disruptions to global supply chains continued to intensify [Lebastard, Matani and Serafini 2023], thereby contributing to a slowdown in the pace of export recovery between Russia and the EU.

The effects of the sanctions in particular and the conflict in general were felt in European and Mediterranean economies in various ways: there was a reduction in international trade, an increase in energy prices, and uncertainty affecting household and firm decisions [Qintana 2022]. In addition to such long-term effects, European restrictions on trade have had direct consequences in the short term for exporting companies in the European Union as well as for the companies’ suppliers of exporters with Russia as the main market.

In the short term, the immediate repercussions of halting exports to Russia for exporting EU companies can have significant ramifications on their financial performance, entailing a sudden decline in revenue and profits, leading to potential financial instability. Moreover, such companies may be compelled to implement cost-saving measures, which could include downsizing and shedding part of their workforce.

Furthermore, the disruption in trade with Russia may present challenges for exporters in identifying and accessing alternative markets for their products. This can further compound the adverse effects on their income streams and overall business operations. Additionally, the suppliers of such companies, which heavily rely on the Russian market, may also face direct consequences. They may witness a substantial decrease in demand for their goods or services, resulting in reduced revenue and potential financial strain.

Overall, the immediate direct consequences of halting exports to Russia have significant implications for the financial viability and sustainability of EU exporters, as well as the economic stability of their associated supply chains. European exporting companies may strive to improve their productivity levels as a means of mitigating the short-term impact of the crisis. However, the effectiveness of such measures will depend on various ¶{p. 93}factors, including the specific industry, resource availability and the competitive landscape in the global market. Importantly, productivity improvements often need substantial investments and time, which may not be feasible for all companies in the short term. Therefore, while productivity enhancements may provide a potential solution, their universal applicability in mitigating the impact of the crisis on European exporters cannot be guaranteed.

Economic sanctions on Russia are important from the European Union’s political point of view, and one of the few tools that Europe can use to reduce the probability of military conflicts within EU borders, which would have major social, political and economic consequences. For this reason, to implement the restrictions and mitigate the direct and indirect effects of a complete suspension of exports to Russia, it is essential to anticipate the potential consequences for Spain and Italy and develop policies to address them.

While the complete closure of trade between Europe and Russia will lead to a decline in direct exports from Spain and Italy, it is equally important to assess the magnitude of the indirect impact of export firms’ suppliers. Multisectoral models based on input-output tables [Miller and Blair 2009] allow us to calculate the direct and indirect effects caused by the export stoppage to Russia [2] . Thus, the aim of this paper is to estimate lost production and job opportunities in Italy and Spain arising from companies and their suppliers that can no longer export to Russia. It is worth noting that many Spanish and Italian companies had already faced significant operational restrictions in dealing with the Russian market, particularly after the Russian invasion of Crimea in 2014. As a result, the complete closure of the Russian relationship may have a mitigated effect on these countries.

Europe is expected to suffer severe economic consequences due to the ongoing conflict, particularly as it is still recovering from the COVID-19 pandemic. This research examines the year 2021, which marks the resumption of economic activity following the pandemic crisis. This enables us to assess the impact on the economies of Italy and Spain resulting from the disruption of trade with Russia subsequent to the onset of the conflict with Ukraine.¶{p. 94}

The impact of the COVID-19 pandemic on Spain’ s trade has been significant, particularly in key sectors such as transport equipment, capital goods, outdoor goods and tourism, which are all critical for Spanish exports. Spain’s total exports contracted by 31 per cent, a more substantial reduction compared to the average decrease of 17.6 per cent observed in the other 22 EU member states. Similarly, Italy also experienced a significant decline in trade due to the COVID-19 pandemic, with a 9.5 per cent decrease in total exports during 2020 compared to the previous year. The automotive, fashion and machinery industries bore the brunt of the impact.

While the recovery of the tourism industry, a significant component of both Spain and Italy’s service exports, is likely to be prolonged, subject to effectively addressing health risks and enhancing international perceptions of the health situation, the trade in goods is expected to recover more quickly once health risks subside [Minondo 2021].

This paper examines the consequences of a one-year suspension of exports from Italy and Spain to Russia, with a primary focus on export effects. By differentiating the effects of exports from other potential impacts, such as reductions in imports or energy prices, this paper provides valuable insights for policymakers in identifying the sectors that may be most affected and exploring alternative solutions and compensatory measures. Our results show that Italy would be more affected than Spain by the exporting disruption to Russia, and it is important to identify the sectors that experience higher reductions in production, value-added or employment. The outcomes of this research must be interpreted with caution, as they are based on some assumptions and limitations. However, policymakers can use this information to develop targeted measures and strategies to alleviate the impact of the halt in exports, such as finding alternative markets, promoting diversification of industries or products, or providing support and incentives to affected sectors.

This article is divided into four sections. The second section provides a literature review, while the third section outlines our methodology and database. In the fourth section, we present our results, and in the final section, we draw our conclusions.¶{p. 95}

The relationship between Russia and the EU officially began to deteriorate in 2014, following the crisis in Ukraine. A war of sanctions and reciprocal bans ensued, leading to a complete deterioration in 2022 with the start of the Russian «special operation» in Ukrainian territory.

In the summer of 2014, the EU imposed restrictive measures targeting various sectors such as finance, arms, dual-use goods, and specific technologies for oil production and exploration. In response, Russia implemented a political ban on imports of various EU agricultural and food products. These actions had a negative economic impact on both sides, considering the significant volumes of trade. In 2013 Russia was the EU’s third largest trading partner, accounting for 9.5 per cent of total exports and being the second largest for agri-food exports.

Conversely, the EU was Russia’s most important trading partner, representing 46.5 per cent of total exports [European Parliament 2014; House of Lords 2015].

With the new scenario, the European agricultural sector came under pressure, affecting the income of millions of people due to the loss of an important market and having significant implications for the EU energy sector, as gas and oil shipments crossing Ukraine faced difficulties. In 2013, Spain generated more than $51 billion in revenue from exporting agricultural, fish and forestry products, and Russia was the second-largest non-EU market with sales valued at $0.8 billion.