As Russia’s invasion of Ukraine continues and many call for a strengthening of sanctions, some scholars and other writers have advocated that the European Union establish import tariffs on Russian gas as an alternative to a full energy embargo. Chicago Booth’s Initiative on Global Markets invited its European and US panels of economic experts to express their views on this proposal, asking both panels whether they agree or disagree that such tariffs could mitigate economic disruption to Europe while effectively limiting energy revenues to Russia. Large majorities of both panels agreed that such a policy could succeed in striking that balance.

Nearly three-quarters of the panelists agreed or strongly agreed with the statement (among whom European experts were more likely to say they strongly agreed), most of the rest were uncertain, and a handful disagreed.

Among those who agreed or strongly agreed, Franklin Allen of Imperial College London said, “This would reduce the money going to Russia, lessen the damage for European economies and potentially provide funds for rebuilding Ukraine.” William Nordhaus of Yale added, “High and rising tariffs are clearly the best approach, mainly to avoid quantitative restrictions.” And Christopher Udry of Northwestern pointed to a recent VoxEU piece on “the simple economics of a tariff on Russian energy imports.”

Among the panelists who said that they were uncertain, Beata Javorcik of Oxford commented, “Russia is likely to retaliate and cut off gas supplies to Europe.” Austan Goolsbee of Chicago Booth noted, “It would hurt them but would also hurt Europe.” And Chicago Booth’s Lubos Pastor argued, “This would hurt EU countries unevenly. Within-EU solidarity would be necessary. Gas is hard to substitute in the short run.”

All of the experts who disagreed with the statement added short explanatory comments for their opinions. They include Pinelopi Goldberg at Yale who stated, “Sanctions have never worked. And in the present context, the EU would be paying a high price.” Richard Schmalensee of MIT protested: “WTO-illegal, may violate contracts, Russian response uncertain. EU economists seem to favor disruption-contingent price caps.” And Bengt Holmstrom of MIT concluded, “If effective means bringing the war to an end, tariffs won’t do it.”

Elasticities and price-setting mechanisms

Several panelists mentioned the significance of the elasticities of demand for and supply of Russian gas—how responsive supply and demand are to price changes—as well as the mechanisms by which prices are set. Among those who agreed, David Autor of MIT remarked, “High substitutability of non-Russian and Russian gas means that Russia should bear most of the incidence.” Olivier Blanchard of the Peterson Institute mentioned, “Russia might decide to sell elsewhere, but at a lower price (Ural discount). May not decrease world supply much.” And Patrick Honohan of Trinity College Dublin warned: “But the effectiveness depends on elasticities of substitution in the importing countries, on which there is a wide range of opinion.”

Others who agreed were similarly cautious. Larry Samuelson of Yale observed, “There is a tradeoff—higher tariffs would be more effective in limiting revenue, but would also pose more disruption.” And Pol Antras of Harvard declared, “Given likely tariff incidence, it sounds like a good policy. But I am less sure supply won't be disrupted. In any case, a risk worth taking.” He pointed to a piece written shortly after the invasion on the case for punitive taxes on Russian energy.

Panelists who said they were uncertain also mentioned elasticities and likely incidence. Karl Whelan of University College Dublin replied, “Unclear where the short-run incidence of this tariff lies. With difficulties in sourcing alternative supplies, it may just raise EU prices.” Anil Kashyap of Chicago Booth stated, “Hard to know about the demand elasticity and speed at which adjustments can be made.” Daniel Sturm of the London School of Economics added, “It is unclear whether the tariffs would lead to substantial declines in Russian export prices over a relevant time horizon.” And Christian Leuz of Chicago Booth concluded, “Could send a very important political and symbolic message. But the economic effect is hard to predict; depends on demand and supply elasticities and pricing mechanisms.”

Opinions on likely elasticities were also expressed by experts who disagreed with the statement. Jan Pieter Krahnen of Goethe University Frankfurt stated, “This is a question of tariff incidence; demand for gas is currently price inelastic, revenues for the exporter may thus not fall at all.” And Michael Greenstone of the University of Chicago suggested that “Near term, tariffs would do little: there aren't substitutes. Longer-term phase-in would work better.”

Full embargo

Finally, two of the experts who agreed alluded to the alternative of a full embargo. Daron Acemoglu of MIT said, “‘Effective’ yes, but probably not as effective as complete bans. The exact effect on Europe is also hard to know.” And Peter J. Klenow of Stanford linked to a widely discussed report on the potential economic effects on Germany of a stop on all energy imports from Russia.

All comments made by the experts are in the full survey results for the US and European panels.

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