This paper specifically examines the consequences of a one-year suspension of exports from Italy and Spain to Russia. The study focuses primarily on the effects on exports and does not consider potential reductions in imports from Russia, energy prices, or uncertainty. Distinguishing between these effects is crucial as it can lead to different policy implications in various areas. Additionally, the impacts discussed in this paper primarily affect exporting companies and their suppliers. It is essential to identify the sectors that experience the greatest reductions in production, value-added, or employment in order to proactively address and mitigate potential losses.

Our results show that Italy would appear to be more greatly affected than Spain by export disruption to Russia. The reason is twofold: on the one hand, as Italy presents a higher share of exports to Russia, the direct impact is greater than in Spain. On the other, the sectors affected in Italy are more connected internally with other sectors. Hence indirect effects in Italy outweigh those of Spain. To draw up effective policies it is important to identify the sectors most affected by this external shock. As may be seen in the findings, overall production or employment in several sectors are affected by more than 1 per cent. Although this effect seems small it could be particularly high in small companies dependent on this market.

Additionally, since both countries have different economic and exporting structures the sectors affected also differ.

Social effects should also be taken into account. In the Spanish case, the sectors most affected in terms of work may differ from those which are more affected in terms of production or value-added due to differences in the labour intensities by sector.

In absolute terms, we saw major effects in the wholesale and retail trade sector which is only driven by indirect effects and is more intensive in the labour effect.

Our research findings should be interpreted with caution since they are based on some powerful assumptions, such as a complete halt of exports to Russia for one year and the inability of the countries observed (Spain and Italy) to find alternative markets for their products. On the other hand, we are not considering other negative effects such as a decline in imports or an increase ¶{p. 107}in energy prices which can also affect exporting companies and result in a greater effect than suggested by our estimates. Despite these limitations, our results can offer policymakers valuable insights in terms of identifying the sectors that may be most affected and exploring alternative solutions and compensatory measures while alternative markets are being sought.

A critical aspect for policymakers is to identify the most vulnerable sectors impacted by the halt in exports. By understanding which sectors are most at risk, policymakers can develop targeted measures and strategies to alleviate the impact. Such measures could include finding alternative markets, promoting diversification of industries or products, or providing support and incentives to affected sectors.

In the case of exports, finding alternative solutions may be a challenging task, as reduced trade between Europe and Russia could lead to an increase in international product competitiveness. Policymakers must also consider the indirect effects, which can differ between job and production losses. It is crucial for policymakers to determine whether their policies aim to target industry or workers, especially if alternative markets are insufficient for Spanish production in the short term.

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