The Price of Resilience: Input-Cost Shocks in European Supply Chains under EU Sanctions on Russia

This working paper studies whether the 2022 EU sanctions against Russia caused physical supply-chain disruptions in European manufacturing or primarily operated as input-cost shocks. The paper maps legal sanctions into trade data and propagates the shock downstream using the AI-generated Production Network (AIPNET), yielding a product-specific exposure measure of indirect reliance on sanctioned inputs. Using a dynamic difference-in-differences design for five major industrial economies (Germany, Denmark, Spain, France, and Italy), the paper finds that supply chains bent but did not break. While there is no robust evidence of a collapse in physical import volumes, import prices (unit values) for exposed goods rose sharply. In the benchmark specification, weighted by pre-war import values, a 10 percentage point increase in exposure is associated with a 9.7% increase in relative landed costs (CIF). The estimated aggregate “price of resilience” amounts to approximately 11.1 billion USD for the nine considered EU economies in 2022. The findings suggest that, unlike tariff shocks driven by policy uncertainty, the hard constraint of the 2022 embargo generated a resilience premium on largely stable quantities. The sanctions thus operated as a targeted input-cost shock transmitted through global production networks. Version 1.0. This record contains the March 2026 working paper version.