Signal Model results: US-China conflict and Russia sanctions are the main short-term drag on northern cooperation gains

Summary

The study used a computable general equilibrium model to estimate GDP, total consumption and total investment effects of economic cooperation with northern countries centred on Russia, preferring general to partial equilibrium to capture effects across the whole economy. Russia, Central Asia (Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan), China and Mongolia were included. Simulations covered logistics and power grid links, energy and industrial cooperation, strategic industries such as ICT, and cultural exchange and tourism, in order to gauge the effects that could follow the war, including an easing of sanctions on Russia. The results indicate that in the short term US-China conflict and sanctions on Russia are the biggest obstacles to economic spillovers and consumer welfare. The authors conclude that economic cooperation should be planned over the medium to long term with geopolitical change in mind, while preparing for a possible easing or lifting of sanctions.