Author: ln

The Hormuz Shock: EU’s Gas Security and Decarbonization Fragility

Posted on March 23, 2026 | Policy Brief

The February 2026 conflict in the Persian Gulf and the partial closure of the Strait of Hormuz sent European gas prices sharply higher, reviving questions about Europe’s energy vulnerability. While the EU successfully reduced its reliance on Russian gas after 2022, it has traded one dependency for another: globally traded LNG exposed to fragile shipping routes. We argue that dependence is not only a concern for energy security; it also creates decarbonization fragility — the risk that reliance on imported fossil fuels undermines the clean energy transition itself. Price spikes push producers toward coal, raise emissions, and give politicians reasons to delay climate action. The solution to both problems is the same: faster deployment of domestic clean energy, better electricity grids, and a coordinated EU industrial strategy. Reducing fossil-fuel demand at home is not only a climate goal — it is the most durable foundation for Europe’s energy security.

On 28 February 2026, US–Israeli strikes on Iran triggered a direct military conflict across the Persian Gulf. Iran moved to shut the Strait of Hormuz, a chokepoint for roughly one-fifth of global oil and gas trade (US EIA, 2025), while attacks on Qatar’s Ras Laffan complex resulted in force majeure, removing approximately one-sixth of global LNG supply from the market. Energy markets reacted immediately. European gas prices rose sharply: the TTF benchmark jumped from around €32/MWh in late February to above €50/MWh by mid-March, while Brent crude approached $100 per barrel.

While most attention has focused on the impact on the oil market (see, e.g., Gars, Spiro, and  Wachtmeister, 2026), the shock has also revived another crucial question in European energy policy: dependence on imported fossil gas. This brief examines what the Hormuz shock means for Europe’s gas market, focusing on its implications for supply security and the political momentum of the green transition.

How the 2022 Crisis Redefined EU Gas Security

Natural gas has long been central to Europe’s energy system, heating around 30% of EU households, supporting energy-intensive industries, and providing the flexible generation needed to balance renewables. But this economic importance also came with strategic risk – EU gas imports were dominated by a single supplier, Russia, which by 2021 accounted for around 45% of EU gas imports (IEA, 2022). After the invasion of Ukraine, that dependence turned into a major vulnerability. Russian pipeline gas flows to Europe fell by more than half in 2022, while the TTF gas price rose above €300/MWh in August 2022. The shock forced governments to spend over €680 bln to protect households and firms, and exposed the weakness of Europe’s industrial model.

Yet the crisis triggered a rapid policy shift. The EU responded with storage obligations, demand reduction, supply diversification, and REPowerEU, reframing clean energy and efficiency as tools of security as well as climate policy; the 2030 renewable target rose from 32% to (at least) 42.5% (EC, 2023).

The results were significant: storage reached 99% in the fall of 2023, demand fell by 18% by 2024, Russian gas imports dropped from 150 bcm in 2021 to about 40 bcm in 2025, with a full ban due in 2027 (Bruegel 2022 a, b), and EU gas imports became more diversified (see Figure 1). Between 2022 and 2025, Europe added around 250 GW of renewables (IEA, 2026), raising their share in electricity generation from 37% to 44%. The 2022 crisis had, paradoxically, done more to accelerate Europe’s green transition than a decade of climate negotiations.

The Hormuz Shock: Familiar Pattern, New Vulnerabilities

Given the lessons the EU learned from 2022, should we expect a similar “greening” in response to the Hormuz disruption?

There are clear parallels between the current shock and the 2022 crisis. In both cases, a sudden geopolitical disruption removed a major source of gas supply, pushed European buyers onto the spot LNG market, and drove TTF prices sharply higher. In both cases, uncoordinated competition among member states for scarce supply risked amplifying the price spike. 

Figure 1: Composition of EU natural gas imports in 2019-2025.

Source: Own graph based on data from Bruegel Dataset (2022a).

The differences, however, are equally important. In 2022, oil prices remained relatively contained, allowing some industrial sectors to switch away from gas. Today, with Brent above $100 per barrel, that option offers little relief. In 2022, weak Asian LNG demand, particularly from China, gave Europe room to attract cargoes at a premium. Today, Asian buyers are facing the same supply shock and competing for the same LNG volumes. Europe has also lost the limited buffer that Russian pipeline gas still provided in 2022: that supply has now largely disappeared and will soon be fully banned.

At the same time, the EU is better prepared than it was four years ago. Gas demand is already around 17% lower, regasification capacity has expanded over 50 bcm, reverse-flow interconnections have improved access across the bloc, and the institutional crisis-response framework has already been tested.

Most importantly, the supply directly at risk is much smaller than in 2022. Qatari LNG exposed to the current disruption accounts for no more than 6% of EU gas imports, far below the scale of the 2022 shock (EC, 2025a and ACER, 2024).

The global LNG market has also changed significantly since 2022. Then, Europe’s additional LNG needs hit an already tight global market: EU LNG imports rose by 64 bcm in 2022, while global incremental LNG supply was only 25 bcm. Regasification bottlenecks in Europe compounded the problem. Today, by contrast, the market is entering a major new wave of liquefaction capacity, while the EU has expanded regasification capacity by at least 50 bcm/year since mid-2022, easing the infrastructure constraints seen during the crisis. Any disruption to Qatari LNG would therefore likely create a more manageable, though still important, market squeeze than in 2022 (ACER (2024) and IEA (2025)

That said, the main vulnerability has not vanished; it has changed form. Roughly one-fifth of global trade passes annually through the Strait of Hormuz. A disruption there tightens the LNG market globally, especially in Asia, and because cargoes are traded internationally, price pressure is rapidly transmitted to Europe. That is, in replacing Russian pipeline gas with globally traded LNG, the EU reduced dependence on a single supplier but increased its exposure to geopolitical shocks affecting maritime trade. Europe is therefore more diversified than in 2022, but also more vulnerable to disruptions in strategic chokepoints far beyond its borders.

The Hormuz crisis thus reveals a deeper structural vulnerability in Europe’s post-2022 energy system — what we refer to as decarbonization fragility. The more the EU relies on LNG to secure its energy transition, the more its climate pathway becomes exposed to geopolitical shocks in global fossil-fuel supply routes.

The Environmental and Political Risks of Decarbonization Fragility

The Hormuz shock highlights that Europe’s new gas security model also carries environmental risks. As energy security increasingly depends on globally traded LNG moving through fragile maritime routes, disruptions can drive not only higher prices but also higher emissions.

First, the shock is likely to increase the carbon intensity of the EU gas supply. Facing a gas shortage, the EU may respond by replacing lost gas volumes with new, more emissions-intensive gas sources. In 2022, Russian pipeline gas was partly substituted with more emissions-intensive LNG (Campa, Paltseva and Vlessing, 2023). In the current context, the marginal supplier is likely to be the United States, whose LNG has a significantly higher lifecycle carbon footprint than Qatari LNG (Rystad 2026). (This shift may also raise renewed concerns about the concentration of supply, given that US LNG already accounted for 55% of EU LNG imports in the first half of 2025, EU (2025b)).

Second, higher gas prices can trigger substitution toward more polluting fuels. In 2022, this mainly involved switching from gas to oil products. Today, with Brent above $100 per barrel, oil is less competitive, increasing the likelihood of gas-to-coal switching in sectors unable to reduce demand quickly enough. Given that coal is significantly more carbon-intensive than natural gas, such a substitution would result in a substantial increase in emissions.

While these effects may in principle be temporary, the Hormuz shock occurs in a European political and economic context that makes them harder to reverse. Climate policy momentum in Europe was already weakening, with growing corporate caution and increasingly more firms scaling back or withdrawing net-zero commitments (Guardian, 2025).

By intensifying energy price pressures and supply uncertainty, the shock risks tilting policy priorities away from the energy transition. In a more unstable geopolitical environment, industrial competitiveness is increasingly treated as a component of Europe’s defense strategy, essential for economic resilience and strategic autonomy. At the same time, rising defense spending is placing additional strain on public finances. Together, these pressures shift political focus toward securing affordable energy for industry and maintaining economic strength, potentially at the expense of long-term decarbonisation.

This is the political dimension of decarbonization fragility. When industrial policy prioritizes energy affordability and security, external shocks are more likely to reinforce fossil-fuel dependence than to accelerate the move away from it.

The Green Transition IS Energy Security

The central lesson of both the 2022 energy crisis and the Hormuz shock is clear: energy (in)security and decarbonization fragility are closely intertwined. As long as the transition still relies on imported fossil fuels, external shocks affect more than energy supply and prices. They may also weaken the political and economic conditions on which decarbonization depends by undermining industrial competitiveness, increasing fiscal pressure, and shifting policy attention toward short-term crisis management. Fossil-fuel dependence therefore undermines not only Europe’s energy system, but also its transition pathway.

The answer is therefore not to slow the transition, but to accelerate and broaden it. A rapid transition to solar and wind alone is, of course, unrealistic, given their intermittency and the scale of investment required. Therefore, the transition must become broader in scope. The EU is already giving greater prominence to other net-zero technologies linked to security of supply and industrial resilience, including nuclear and small modular reactors. However, the expansion of domestic low-carbon capacity remains slowed by permitting bottlenecks, grid constraints, and insufficient investment in system flexibility. Moreover, as Figure 2 illustrates, it is largely uneven across the EU, which, per se, may undermine collective action and negatively affect EU energy security (Le Coq and Paltseva, 2022). Further, progress on reducing supply chain dependencies has been limited. The EU continues to rely heavily on imports for critical raw materials, clean-tech components, and key segments of manufacturing value chains, exposing the transition to new geopolitical risks. Reducing structural exposure to external shocks will require not only faster deployment but a more coordinated industrial strategy.

Figure 2. Battery, electric vehicle and solar manufacturing investments by status since 2019

Lasting resilience will not come from shifting between external dependencies, but from reducing them. Expanding domestic low-carbon capacity simultaneously lowers emissions and limits exposure to external shocks. Cutting fossil-fuel demand is therefore not only a climate objective, but the most durable form of energy security.

References:

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

The Hormuz Blockade: Winners, Losers, and Vulnerabilities

Posted on March 20, 2026 | Policy Brief, Policy Papers

This policy paper presents calculations and modeling of how oil producers and consumers in selected countries may be affected by the de facto blockade of the Strait of Hormuz. We study two scenarios: one where strategic inventories cushion the effects, and one where inventories have run out. Russia profits substantially, equivalent to 6-11% of GDP, driven by higher global oil prices and a potential reduction in the sanctions-induced discount on Russian oil. Net oil importers lose – most substantially India, to some extent China, and to a lesser extent Europe. Within Europe, most countries lose, with the exception of Norway and possibly Estonia. Gulf countries generally lose since they cannot export their oil. Surprisingly, Saudi Arabia can make a net profit by earning high prices for oil redirected to its western ports.
We also analyze oil inventories to measure importers’ vulnerability. India is by far the most vulnerable among larger economies, due to limited storage, high net imports, and an oil-intensive economy. China is less vulnerable, and Europe is the least. Finally, we discuss how the crisis may trigger a macroeconomic recession, reshape long-run oil demand, destabilize OPEC, and create domestic tensions between those who gain and those who lose from an oil-price shock.

Introduction

Since the end of February, the Strait of Hormuz has been almost fully closed for oil transports. Under normal circumstances, around 20% of the global supply passes through the Strait. In this policy paper, we present rough calculations and modeling of how producers and consumers of oil in selected countries may be affected by the de facto blockade of the Strait of Hormuz. We then briefly discuss some potential implications and uncertainties on the longer-run effects of the current crisis. A caveat throughout the analysis is that both the conflict and the oil market are evolving rapidly. The assessments and choices are based on our best judgment at the time of writing.

Disruption Scenarios – Short and Medium Term

The model we use to assess the changes in consumer surplus and producer profits is a simple supply and demand model of oil. It is akin to Gars et al. (2025), which studies how different countries would be impacted by a Russian oil-export restriction, i.e, a supply shock. In this policy paper, the restriction of supply comes instead from a reduction of the exports of countries inside the Strait of Hormuz. In the appendix, we describe the data and methods we use and briefly discuss their limitations.
Table 1 shows the key parameters for the situation before the disruption and for our two disruption scenarios. Before the war, the affected Gulf countries exported 21 mb/d, of which 18 mb/d is seaborne through the Strait of Hormuz. In our blockade scenarios, exports from Bahrain, Iran, Iraq, Kuwait, and Qatar are zero, since they have no alternative routes. Saudi Arabia has a pipeline to the Red Sea that normally runs at 2 mb/d; we assume this can be increased to 5 mb/d in our analysis. The UAE has a pipeline bypassing the strait that normally runs at 1.1 mb/d; we assume this flow can be increased to 1.8 mb/d.[1] Consequently, the supply disruption from the Gulf is the seaborne oil that cannot be redirected via pipelines, and this is a flow of 14.2 mb/d in both our short and medium-term scenarios. Since we assume that the domestic consumption in the Gulf states is unaffected (see Appendix), we do not include it in our analysis.
Our short-term scenario reflects the period in which non-Gulf countries have inventories to draw from, while our medium-term scenario reflects the situation in which all inventories are depleted. In the short-term scenario, we assume inventory draws of 5 mb/d.[2] Furthermore, a minor part of the disruption is compensated for by increased production in non-Gulf countries.[3] The final global supply disruption is 8.5 mb/d in the short-term scenario and 13.1 mb/d in the medium term. The model then yields a global oil price of 120 $/b in the short term and 158 $/b in the medium term.

Finally, in the pre-war scenario, we assume a total Russian sales discount of 20 $/b on Russian oil to China and India due to sanctions, while Russian exports to other countries have no discount. The total discount has two components, the buyer’s discount and transport cost premium. China and India receive the buyer’s discount of 10 $/b, while intermediaries receive the transport cost component of 10 $/b. In the disruption scenarios, we assume that the discount disappears due to relaxed sanctions. This is a key uncertainty in our analysis.[5]

Table 1: Quantities and prices (data and model) in different scenarios

[4]. Gulf domestic production/consumption is 8.31 mb/d in all scenarios.

Results: Winners and Losers of a Blockade in the Short Run

Figures 1-3 show the results of a blockade scenario in the short run, that is, with inventory draws. Figure 1 depicts producer profit increase (dark) and consumer loss (light), both relative to GDP, for selected countries and groups of countries. The total of these (production minus consumption) constitutes the country’s change in net gains and is marked by the black bar. As can be seen, Russia profits considerably from the blockade. This is mainly due to the general price effect and to a lesser degree due to the assumed disappearance of the discount on its oil. The US profits marginally since it is a slight net exporter. EU+ (EU, Norway, Iceland, Switzerland, and UK) and OECD- in total lose marginally.[6] China loses more and India loses substantially. The reason for this pattern is that both China and India have a higher oil intensity than EU+ and that they lose both due to the world oil price increasing and due to the assumed elimination of the discount on Russian oil.

Figure 1: Producer profit and consumer loss, relative to GDP, induced by a blockade when inventory draws add 5 mb/d to the global market.

Figure 2 shows the equivalent producer profits and consumer losses broken down for the EU+ group. Notably, nearly all countries make net losses, with the major exception of Norway and the minor exception of Estonia.

Figure 2: Producer profit and consumer loss, relative to GDP, induced by a blockade when inventory draws add 5 mb/d to the global market.

Figure 3 shows the producer loss in the Gulf countries subject to the blockade. Most of them lose considerably from the blockade. The exception is Saudi Arabia, which enjoys a profit increase on the oil it does manage to export through its Western ports. This attenuates the loss it makes when not being able to export through its Eastern ports in the Gulf.

Figure 3: Lost export revenues for the Gulf states, relative to GDP, induced by a blockade, with inventory draws of 5 mb/d to the market.

Results: Winners and losers of the blockade after inventories have run out

Figures 4-6 show the results of a blockade scenario in the medium run. We here use the same parameters and quantities as in the short run, with the difference that we set inventory draws to zero. This is meant to capture the effects after the inventories have run out. This may happen should the blockade last for, say, 12 months. Here the price increases to 158 $/b. The transition between the previous short-run scenarios and the medium-run scenario will likely come gradually as the inventories are emptied.
Figure 4 shows the producer-profit increase (dark) and consumer loss (light), again relative to GDP, for selected countries. The results are similar to those in the short run, just more pronounced, so producers make larger profits and consumers make larger losses. Most pronounced is that Russia makes a net profit increase of around 11% of GDP while India’s consumers bear a cost equivalent to roughly 4% of GDP.

Figure 4: Producer profit and consumer loss, relative to GDP, induced by a blockade when there are no inventory draws.

Figure 5 shows the breakdown for the countries in EU+. The results are akin to those in the short run, but again more pronounced.

Figure 5: Producer profit and consumer loss, relative to GDP, induced by a blockade when there are no inventory draws.

Figure 6 shows the profit losses in the countries subject to the blockade. The difference to the short run is that now Saudi Arabia enjoys an even higher price effect on its western oil, so in total makes a substantial profit. Furthermore, the price effect is strong enough to make the United Arab Emirates increase its profits.

Figure 6: Lost export revenues for the Gulf states, relative to GDP, induced by a blockade, when there are no inventory draws.

Results: Inventories and Oil Reliance

In total, global oil inventories (crude and products) are estimated at 8210 mb as of January 2026, according to the IEA March 2026 Oil Market Report and other sources. Around half, 4088 mb, is held by OECD countries. OECD Europe holds 1285 mb, and the United States holds 1700 mb. China holds 1200 mb, India 250 mb, and other non-OECD countries hold 693 mb. Some of these consist of governments’ strategic reserves, while others consist of commercial stocks. Oil on water is estimated at 2000 mb. This is oil on tankers, either for storage or on the way to a buyer. Ignoring oil on water, the inventories could in theory cover 60 days of world consumption or around 400 days of disrupted supply due to the blockade.
On 11 March, the IEA and its 32 member countries decided to release 400 mb from their emergency stocks of 1200 mb and 600 mb of industry stocks held under government obligations. 400 mb is equivalent to 28 days of lost exports due to the blockade. In our short-term scenario, we assumed a draw of 5 mb/d. 1200 mb of emergency inventories would last for 240 days with such a draw. Under a slower release, of say 2 mb/d, the release will last for longer, but will then, of course, replace less of the blocked oil.
The oil released through this IEA decision will be released to the global market. It should thus have the same effects as increased production, benefiting any consumers of oil, wherever they reside. Should the blockade outlast this time span, and under the uncooperative nature of the current geopolitical landscape, it is, however, conceivable that some countries will choose to prioritize supplies for their own markets. In such a scenario, each country or geopolitical block may treat itself as an isolated market.
We briefly look here at how vulnerable different groups of countries would be to such a development. Figure 7 shows for select countries and groups of countries how much storage they have relative to their net imports. The values imply how many days of imports their storage can cover.[7] India could cover the shortest period of a disruption, followed by China.

Figure 7: Oil inventories divided by daily net imports.
Figure 8 shows oil consumption expenditures as a share of GDP in the pre-blockade scenario. This captures how reliant different economies are on oil. India has the most oil-intensive economy, while EU+ has the lowest oil intensity among these economies.

Figure 8: Oil intensity defined as oil expenditures divided by GDP pre-blockade.


Figure 9 shows an index of vulnerability that takes into account both how oil-intensive and how import-dependent the economies are. More precisely, it calculates as (net imports/storage)*(oil consumption expenditures/GDP). Here we clearly see that India is by far the most vulnerable: it has very high imports, low storage, and has an oil-intensive industry structure. EU+ is less vulnerable thanks to its economy having low oil intensity.

Figure 9: Vulnerability index defined as oil intensity multiplied by net imports relative to inventories.

Discussion of Further Considerations and Effects

Model Scenario Outcomes Vs Current Market Expectations:

Since the war started, global oil prices have been extremely volatile and have increased significantly. At the time of writing, Brent stands above $100/b.[8] A likely key driver of market movements is shifting assessments of how long the war and the de facto blockade will last. The current, relatively low price compared to our short- and medium-term scenarios (which assume prolonged disruptions), as well as sharply falling futures prices, indicates that the market expects a relatively short disruption. Our results thus show that if the disruption proves more persistent than currently priced by the market, oil prices could increase substantially from current levels, with significant implications for both energy markets and the broader macroeconomy.

Macroeconomic Effects and Inflation:

Our analysis is confined to the direct impact of the blockade on consumers and producers in various countries. The oil market is, however, large and fundamental in the sense that it constitutes a large share of GDP, and oil is an essential input to many production processes and economic activities. This means that a price shock can (and most likely will) spread throughout the macroeconomy in the form of inflation, reduced demand, and macroeconomic implications. Historically, such events have had profound effects (e.g., the oil shocks of the 1970s). While today’s economy is relatively less reliant on oil than it was then, the current disruption is larger. These contagious effects can happen both within a country (domestic buyers of oil-intensive products raise prices) or between countries (imports become expensive). This is not captured by our analysis but may ultimately become more serious and long-lasting than the initial direct effects.

Tensions Within Countries:

It is important to note that a country that on net gains from the blockade may still experience serious internal tensions since parts of its society gain (oil producers) while other parts lose (oil consumers). The net effects are informative to the extent that a country can reconcile these tensions, either by redistribution (such as in Norway), a high government take (such as in Russia and Norway), or by simply having a political system which can ignore the losers.

A Possible Excessive Rebound Effect:

Another factor not captured by the analysis is that the blocked countries have relatively flexible production allowing them to scale it up or down. This means that some of the oil they do not sell today because of the blockade can be sold tomorrow. Hence, over time they may recover some losses. Importantly, when the blockade disappears or easens, their exports of oil may be larger than Business as usual, implying excess supply and a substantial price drop. This may destabilize the world economy in the opposite direction of what we see now. Countering this, countries may start replenishing their storage.

Long-run Structuring of Oil Demand and Supply:

Following the oil-supply shocks in the 70s, importers of oil and more generally energy-intensive industries made substantial investments into alternative energy sources and into energy efficiency. We may, rationally, expect a similar change following this blockade should it last. But there are also forces pulling in the opposite direction. After the energy disruptions and price surges following Russia’s full-scale invasion of Ukraine, some countries (not least in the EU) decided to roll back fuel taxes (Gars et al., 2022). The motive for that was to mitigate the increased price facing consumers. Notably, many of these tax reductions remained even after the global oil price fell back. Basic economic theory would suggest an importer should keep fuel taxes when facing a supply disruption and use the proceeds to make transfers to the population. In particular, realizing oil supply shocks do occur, especially in a rivalrous geopolitical world, an oil importer should make efforts to reduce long-run reliance on oil. In the longer run this may benefit China who has a large market share in green technologies and associated materials.
Another pathway, not mutually exclusive with reducing demand, is that countries would increase domestic oil production where possible. Even though it is difficult to fully insulate an economy from global price shocks, the effects could be mitigated.

The Effect on Opec Cooperation:

The blockade and, in particular, Iran’s attacks on its neighbors’ oil production is a stress test for OPEC. How cooperation will evolve is difficult to predict. One possibility is that Iran is formally or informally left out of OPEC. Another is that Russia breaks out of OPEC+ or that the whole organization collapses. True, key members of OPEC (e.g., Iran and Saudi Arabia) have been regional adversaries for many years. But the escalation during this war is a substantial step into an open conflict.

Conclusion

This policy paper has – based on simple modeling of the oil market, – analyzed the immediate economic effects of the blockade of the Strait of Hormuz across countries and producers and consumers of oil. The effects are substantial, in particular for Russia (which profits significantly, 6-11% of GDP) and India (which incurs costs of around 2-4% of GDP). Europe is less affected compared to other countries and regions (0.5-2% of GDP), despite being a net importer of oil. This is thanks to its economy having low oil intensity. The US gains on net, since it is a net exporter of oil, but its consumers are subject to costs of around 1-2% of GDP due to its economy being oil-intensive. Perhaps surprisingly, even some of the Gulf countries can profit from the blockade if they manage to redirect their exports to ports outside the Strait of Hormuz.
The analysis shows that the existence and usage of oil inventories are of great importance. The inventories can only cover the supply disruption for about a year, or, if they are to last longer, replace only a small part of the shortage from the Gulf. If and when these inventories run out, the economic effects will be substantially larger. The inventories are not spread evenly: India is very vulnerable to a shortage, while the EU is much less vulnerable.
The blockade puts the oil market under substantial stress. The paper attempts to gauge the direct effects, which are by themselves very uncertain. The indirect and longer-run effects are naturally even more uncertain and may be even more severe, as discussed in the report.

References

  • Gars, J., Spiro, D. and Wachtmeister, H., 2022. The effect of European fuel-tax cuts on the oil income of Russia. Nature Energy, 7(10), pp.989-997.
  • Gars, J., Spiro, D. and Wachtmeister, H., 2025. Winners and losers of a Russian oil-export restriction. Public Choice, pp.1-31.
  • Kilian, L., Rapson, D. and Schipper, B., 2024. The impact of the 2022 oil embargo and price cap on russian oil prices. The Energy Journal, p.01956574251414076.
  • Spiro, D., Wachtmeister, H. and Gars, J., 2025. Assessing the impacts of oil sanctions on Russia. Energy Policy, 206, p.114739.

Appendix: Data, Method, and Its Limitations

We use data on oil production and consumption of different countries (from US EIA for 2024, the most recent year for which the full data set is available) to parameterize a model and compare how they fare without and with a blockade. For GDP, we use World Bank data for 2024.
The model used to assess the changes in consumer surplus and producer profits is a simple supply and demand model of oil. It is akin to Gars et al. (2025) , but with the restriction of supply coming from a reduction of the exports of countries inside the Strait of Hormuz rather than sanctions on Russia. We assume demand elasticity is the same in all countries at -0.2 and a supply elasticity of 0.02.[9] For the short-run analysis, we assume an inventory draw of 5 mb/d. We abstract from the profits made when selling these. These assumptions are crude and naturally do not capture all the effects and nuances, some of which we discuss at the end of the brief.
The model implicitly assumes that oil on the market can be traded and rotated freely. In other words, even if the blocked oil was originally bound to, say, China, supplies from elsewhere will be redirected to China until prices equalize across destinations. Consequently, our analysis focuses on the price effects of the blockade, and this price effect is assumed to apply equally across countries (though see the discussion below about the discount on Russian oil).
To analyze the impact on the Gulf countries directly affected by the blockade, we need to take a stance on what happens in their domestic oil markets. When these countries cannot export their oil, their domestic market will face excess supply. The producers in these countries can then either reduce production or flood their domestic market with oil. Since these countries are overwhelmingly net-exporters of oil, their domestic market cannot absorb all the excess supply that is stuck behind the blockade. Furthermore, these countries have historically had low domestic oil prices, making it unlikely that prices could fall much further and increase consumption significantly. We therefore assume that domestic consumption remains unchanged and that producers instead reduce excess production. Based on this assumption, we measure the effects on these countries as lost export revenues. Note that these countries’ production costs are rather low, so lost export revenues are nearly equivalent to profit losses. In analyzing profit gains in other producing countries, we base the costs implicitly on a constant-elasticity supply function. Hence, we do not take into account possible country differences with respect to this cost change, or if their costs would imply a non-constant elasticity. This is a simplification, but without greater loss of precision, since the main source of increasing profits is that the oil price goes up rather than from increased production (this follows from the supply elasticity being very low).

Footnotes

  • [1] We deem the assumed redirected volumes as optimistic, as such flows have not been seen historically, and that both routes could be targeted in a prolonged conflict. ”.
  • [2] On 11 March, IEA members decided to release 400 mb of their inventories. At a release speed of 5 mb/d that will last for 80 days.
  • [3] This increase is endogenously generated by the model. The increase is 0.7 mb/d and 1.1 mb/d in the short- and the medium-run scenario respectively.
  • [4] Gulf domestic production/consumption is 8.31 mb/d in all scenarios.
  • [5] In January 2026 the total discount on Russian oil was around 30 $/b. This discount consisted of a transport cost premium and a buyer’s discount at the importer’s port. Both of these were driven by sanctions and bargaining power (see Spiro et al., 2025; Kilian et al., 2025) which we assume have disappeared under the blockade. This is a key uncertainty. Should the discount not disappear, our results overstate Russian gains, and the losses for China and India.
  • [6] OECD- consists of OECD except EU+ and US: Canada, Chile, Mexico, Australia, Japan, South Korea, New Zealand and Turkiye.
  • [7] Russia and US are net exporters so they do not, in theory, rely on storage should the market become fragmented. Hence we omit them from the figure. In practice, the US and Russia may still be vulnerable as they, especially the US, rely on both imports and exports of various kinds of crude and products to optimize refineries and production, etc.
  • [8]Many physical crude benchmark prices are even higher, as well as certain refined products, indicating a stressed oil market under volatile reconfiguration.
  • [9]We view these parameter assumptions as conservative in the sense that it implies assuming the oil market is more adaptable than it may be in practice. Estimates of demand elasticity in the literature are typically -0.125, though there are reasons to believe elasticity is higher for larger price shocks and due to new technologies making a switch between energy sources easier.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Antagonistic Information Threats: Lessons from Ukraine

Posted on March 16, 2026 | Policy Brief

Control room with multiple broadcast monitors showing a political speech, illustrating “antagonistic information threats” in modern media environments.

Russia’s full-scale invasion of Ukraine highlights how modern conflict increasingly relies on antagonistic information threats alongside military force. This policy brief examines how such threats operate and what lessons they offer for European resilience. First, it outlines a framework through which hostile actors gradually weaken societies’ capacity to interpret events and trust institutions. Second, the brief analyzes Ukrainian cyber operations, highlighting that sustained defensive investment can reduce destructive impact even as attack activity intensifies. The brief further examines the economic implications, showing that antagonistic threats create continuous fiscal pressure as monitoring, detection, and incident response become permanent public expenditures rather than temporary crisis measures. Finally, the brief draws policy implications for Europe, stressing the need to treat cyber and information resilience as macro-critical infrastructure and to strengthen coordination across policy domains.

Introduction

Ukraine’s experience since the full-scale invasion of 2022 illustrates how antagonistic threats operate in contemporary conflict. The war demonstrates that modern confrontation extends far beyond conventional military force. Instead, it functions as a hybrid system in which military, informational, economic, and political instruments are combined into a coordinated architecture of pressure. While this dynamic is most visible in active war, its underlying mechanisms are not confined to the battlefield. Similar forms of antagonistic pressure are increasingly directed at European societies despite the absence of open military confrontation.

Within this broader system, information threats have become particularly significant, largely due to technological change and the digitalization of communication. Networked information environments allow hostile actors to combine cyber operations, disinformation campaigns, and other forms of manipulation at low cost and large scale, amplifying the effects of other forms of pressure. Information operations can shape how events are interpreted, undermine institutional trust, and influence political behavior, often reinforcing technical disruption or economic coercion.

This brief focuses on antagonistic information threats — hostile activities that include disinformation campaigns, cyber operations, and other forms of manipulation targeting the information environment. We first outline a structural framework for understanding the targets and effects of such threats. We then examine how cyber operations have been used in Ukraine and assess their associated costs. The brief concludes with policy lessons relevant for strengthening resilience in European societies.

Layers of Antagonistic Information Influence

Understanding antagonistic information threats requires moving beyond viewing disinformation or cyber incidents as isolated events. Instead, these activities form a structured and multi-layered architecture of pressure aimed at gradually degrading democratic governance. Rather than aiming for immediate institutional breakdown, these operations gradually weaken a society’s capacity to interpret events, trust institutions, and act collectively across four interconnected layers: cognitive, institutional, informational, and behavioral. This four-layer framing synthesizes Ukraine’s wartime practice with established research on cognitive warfare and decision-making manipulation, hybrid warfare, and institutional effectiveness (NATO STO, n.d.; Havlík & Horáček, 2026; Tsybulska, 2023; World Bank, 2017).

At the cognitive layer, hostile actors target how individuals interpret reality, shaping threat perception, responsibility attribution, and identity boundaries. This dynamic is well documented in research on cognitive warfare and reflexive control, which demonstrates that perception manipulation can redirect strategic decision-making without direct confrontation (Havlík & Horáček, 2026; Thomas, 2004). By exploiting uncertainty, fear, and emotional triggers, adversaries influence how citizens understand crises before institutional responses even occur. Cognitive distortion thus lays the foundation for broader destabilization.

At the institutional layer, hostile actors target trust in government, elections, and public authority. Evidence from hybrid warfare analysis demonstrates that weakening institutional legitimacy degrades both crisis response and democratic resilience (OECD, 2022; World Bank, 2017). As Tsybulska (2023) argues, delegitimization, rather than outright destruction, is often the central objective of a hybrid strategy. When public trust erodes, policy implementation fragments, and crisis communication loses authority.

The informational layer addresses narrative dominance and agenda-setting. Hostile actors use saturation, repetition, and cross-platform amplification to ensure that adversarial frames define the terms of public debate (McCombs & Shaw, 1972; Paul & Matthews, 2016). The goal is not simply to spread falsehoods but to normalize certain interpretations over time, embedding them into how societies process political reality (Tsybulska, 2024).

Finally, the behavioral layer translates perception and narrative control into observable outcomes, from voting behavior and protest mobilization to compliance with policy measures and support for defense decisions. Research on misinformation and political behavior demonstrates that even marginal shifts in turnout, polarization, or policy support can generate significant strategic consequences (Allcott & Gentzkow, 2017). Behavioral influence does not require majority conversion; small distortions at scale can reshape political outcomes.

Ukraine’s post-2022 experience shows that antagonistic information threats function as a long-term governance pressure system, designed for erosion. This is why recognizing the layered architecture of these threats is essential for building durable resilience.

Threats at the Operational Level: Lessons from Ukraine

Ukraine’s wartime experience illustrates how antagonistic information threats operate in practice, particularly through cyber operations. Unlike kinetic warfare, cyber operations continue even during ceasefires: they are relatively low-cost, scalable, and persistent, generating both technical disruption and information that can later be exploited in influence campaigns.

The Computer Emergency Response Team of Ukraine (CERT-UA) recorded 4,315 cyber incidents in 2024, nearly a 70% increase over 2023 and more than triple the 2021 level (SSSCIP/CERT-UA, 2025c). In the first half of 2025 alone, incidents increased by a further 17% (SSSCIP/CERT-UA, 2025b). These figures reflect strategic structural pressure, as shown in Table 1.

Table 1. Registered cyber incidents in Ukraine, 2021–2024

Source: CERT-UA / State Service of Special Communications and Information Protection of Ukraine (SSSCIP), Russian Cyber Operations: Analytics for the Second Half of 2024.At the same time, a parallel trend deserves attention: while overall incident volume rose sharply, critical and high-severity incidents declined by 94% between 2022 and 2024 (SSSCIP/CERT-UA, 2025a). Ukrainian authorities attribute this to strengthened monitoring networks, early detection mechanisms, and international cooperation. The policy conclusion is clear: sustained defensive investment reduces destructive impact even as attack frequency increases.

The operational model has also evolved. Rather than prioritizing spectacular disruption, campaigns increasingly emphasize persistent access, credential theft, and selective data exfiltration, so-called ‘steal and go’ tactics (SSSCIP/CERT-UA, 2025b). The objective is chronic degradation rather than dramatic collapse. Data theft supports later narrative exploitation; minor disruption normalizes instability; repeated low-grade incidents strain administrative capacity.

This shift aligns with the broader strategic goal identified in Ukrainian cybersecurity reporting: producing distrust, paralysis, delayed response, societal fatigue, and long-term strategic advantage. The sectoral and methodological breakdown confirms this pattern (Table 2).

Table 2. Target sectors and attack methods in Ukraine in 2024

Source: CERT-UA/SSSCIP, Russian Cyber Operations: Analytics for the Second Half of 2024. Sector figures are incident counts; method figures reflect malware-specific incidents.

Artificial intelligence (AI) further accelerates this dynamic. Large-scale content saturation campaigns, such as the Pravda/Portal Kombat network, have been documented flooding digital ecosystems and targeting AI retrieval environments (American Sunlight Project, 2025; Sadeghi & Blachez, 2025). While academic debate continues over the scale of LLM manipulation (Alyukov et al., 2025), the strategic investment in content flooding is well documented.

Generative AI reduces the marginal cost of producing multilingual disinformation. CERT-UA has also identified indications of AI-assisted scripting in phishing and malware deployment (SSSCIP/CERT-UA, 2025b). As Havlík and Horáček (2026) warn, AI increasingly enables the precision targeting of cognitive vulnerabilities, thereby compressing defenders’ response time.

These dynamics illustrate how cyber operations generate effects across the four layers of antagonistic information influence identified earlier. Repeated incidents and data leaks shape the informational environment; narrative exploitation of stolen or manipulated data affects how events are cognitively interpreted; persistent disruptions undermine institutional credibility and crisis response; and accumulated uncertainty ultimately influences political and societal behavior.

Crucially, antagonistic information threats do not operate alone. They are part of a synchronized system of persistent pressure. Cyber operations, Foreign Information Manipulation and Interference, economic coercion, electronic warfare, and kinetic activity are integrated into a unified strategy. Ukrainian authorities report temporal synchronization between cyber intrusions, energy-sector targeting, and missile strikes (SSSCIP/CERT-UA, 2025a). Narrative campaigns frame events before and after disruption; cyber operations generate exploitable material; economic pressure increases uncertainty; kinetic or electronic actions amplify fear. The compound effect exceeds what any single domain could achieve on its own.

Ukrainian experience highlights vulnerabilities relevant for Europe more broadly. Hybrid pressure operates as a synchronized, multi-domain system in which military, informational, economic, and political instruments reinforce one another. European governance, however, addresses these domains through separate institutional channels. Energy security, cyber defence, strategic communications, and democratic resilience are managed in distinct policy silos with different authorities and threat perceptions. This fragmentation creates exploitable gaps: an adversary operating through tightly coordinated cross-domain pressure can exploit exactly the delays and blind spots that institutional separation produces.

The lesson from Ukraine is therefore not limited to wartime resilience. Even without open conflict, antagonistic actors can pursue gradual systemic pressure by targeting infrastructure, information, economic vulnerabilities, and institutional trust simultaneously. Effective resilience, therefore, requires moving beyond sectoral responses toward integrated governance capable of anticipating and responding to coordinated cross-domain pressure.

Economic Costs of Antagonistic Information Threats

Antagonistic information threats are persistent and structurally embedded, which means their economic implications extend beyond isolated incidents. Ukraine’s experience provides a rare empirical case showing how these costs accumulate and how sustained investment can mitigate them. Hybrid pressure does not produce only one-off destruction; it generates continuous fiscal demand. Monitoring, detection, and incident response systems have therefore become permanent budget items rather than crisis expenditures.

In 2024 alone, national monitoring systems processed hundreds of billions of telemetry events, identified around 3 million security events, and confirmed 1,042 cyber incidents requiring formal response (SSSCIP, 2024). These figures illustrate that antagonistic threats impose a constant administrative and financial burden, underscoring the fiscal consequences of inaction.

Ukraine’s cybersecurity market reached approximately 138 million USD in 2024, having quadrupled over eight years (SSSCIP, 2024). This growth reflects systemic adaptation under sustained pressure rather than discretionary digital modernization. The statistics in Table 1 show that investment did not eliminate the threat, but it fundamentally reduced its destructive impact. The burden falls disproportionately on public administration. With 76% of recorded incidents targeting government, local authorities, and the defense-industrial sector, the fiscal weight of cybersecurity concentrates where the budgets are most constrained. In this way, the institutions most essential to democratic governance bear the highest cost of defence.

Beyond direct-response spending, antagonistic threats impose systemic economic costs. Insurance premiums rise while cyber coverage narrows; compliance costs increase under frameworks such as NIS2, and procurement and crisis coordination become slower and more complex. As public administration becomes a primary target, trust and institutional credibility weaken, raising coordination costs across markets and public systems. As a result, governance efficiency itself becomes economically vulnerable.

At the same time, the costs of inaction are substantial. At the European level, ENISA estimates total cyber-related losses over five years at approximately €300 billion, with Germany alone reporting €205.9 billion in losses in 2023 (Nagy, 2023). While these figures do not isolate state-linked hybrid operations, they indicate the fiscal environment in which antagonistic threats operate and suggest a scale of what unmitigated exposure would cost.

The EU’s persistent security workforce deficit of 260,000 to 500,000 specialists (ENISA, 2024) further constrains the capacity for the type of sustained defensive investment that Ukraine’s experience shows to be effective.

Table 3 highlights a central policy lesson. In Ukraine, both the number of detected threats and the capacity to identify them increased sharply, while the share of destructive incidents declined significantly. This demonstrates that rising incident volume does not necessarily translate into rising damage. It thus indicates that the economic trade-off is not between security spending and fiscal savings, but between investing in preventive resilience and absorbing escalating systemic costs.

Table 3. The Returns on Sustained Investment, Ukraine

Sources: CERT-UA/SSSCIP (2025a, 2025b, 2025c); SSSCIP (2024); ENISA (2024); Howden (2025).

In economic terms, resilience reduces the probability of high-impact shocks, whereas delayed investment merely defers their costs. For European policymakers, cyber and information resilience must be treated as macro-critical infrastructure, with financial consequences extending well beyond IT systems into fiscal stability, labour markets, and long-term growth.

Conclusions

Ukraine’s experience since 2022 demonstrates that antagonistic information threats must be treated as a systemic governance challenge, not just a communication problem. Operating simultaneously across cognitive, institutional, informational, and behavioral layers, these threats aim to erode decision-making capacity rather than trigger immediate collapse. The strategic objective is gradual fragmentation of perception, trust, narrative coherence, and ultimately political action. For policymakers, the implication is straightforward: resilience must be built across all four layers.

Moreover, Ukraine’s operational data demonstrates that antagonistic information threats are persistent, adaptive, AI-accelerated, and strategically synchronized. Resilience must therefore be systemic, coordinated, and anticipatory, not reactive and sector-bound.

Ukrainian experience shows that sustained investment did not eliminate cyber pressure, but it dramatically reduced high-severity impact while expanding detection capacity. At the same time, the burden of defense falls disproportionately on public administration. Treating resilience spending as macro-critical infrastructure investment could be part of the solution.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Discrimination in Work Conditions: The Case of Sexual Harassment

Posted on March 9, 2026 | Policy Brief

Blurred silhouettes of office workers behind glass symbolizing discrimination work conditions in a modern workplace environment.

The #MeToo movement put a spotlight on the severe and highly prevalent workplace problem of sexual harassment. New research argues that economists should treat sexual harassment as gender discrimination in work conditions. Both men and women are subject to this discrimination when their gender is in the minority in the workplace. These patterns reinforce segregation in the labor market and, by extension, economic gender inequality. By reducing the prevalence of sexual harassment, we not only reduce individual suffering but also have positive impacts at a societal level.

Introduction

Throughout the world, the sorting of women into lower-paying occupations and workplaces fundamentally determines economic gender inequality (see Penner et al. 2023 for an overview). The academic discussion about causes of this gender segregation typically centers on gender differences in preferences for work conditions. Women who have more responsibilities for children and the household prefer occupations and workplaces with more flexible schedules, work-from-home opportunities, and shorter commutes. To get these good work conditions (so-called work amenities), they accept jobs in occupations and workplaces with lower wages (Goldin 2014, Wiswall and Zafar 2016, Mas and Pallais 2017, Le Barbachon et al. 2019).

There is mounting evidence that the interpersonal work environment also matters greatly for job choices. Workers seem to put a large negative value on negative interpersonal work conditions such as hostility, bullying, and sexual harassment (see, for example, Folke and Ricke 2022, Collis and Van Effenterrre 2025, and Le Page et al. 2025). Unlike traditional amenities related to aspects such as schedule flexibility, training, or bonuses, the social work environment does not form part of the employment contract and is not under direct control of the employer. This implies that even among the most well-intentioned employers, the social work environment could differ across individuals – and, in particular, between men and women.

Gender differences in exposure to negative social behaviors may meet the standard definition of discrimination in empirical economics research. The mistreatment may imply that women and men with the same qualifications doing the same job receive different pay. Women and men may have the exact same job contracts and receive the exact same compensation on paper, but one gender may be exposed to negative treatment that dramatically reduces their total payoff from the job.

Sexual Harassment and Gender Inequality in the Labor Market

Folke and Rickne (2022) study how sexual harassment by colleagues and managers affects gender segregation across workplaces and, by extension, gender inequality in the labor market. The starting point is a general equilibrium model where the total pay of a job is a function of the wage and the gender-specific sexual harassment risk.

The model shows that sexual harassment leads to larger gender inequality in the labor market under three conditions. Sexual harassment risks need to increase in the share of opposite sex co-workers, wages should increase in the share of men in the workplace, and sexual harassment should affect labor market choices. The model explains that sexual harassment creates gender segregation by operating as a wedge in the payoff from jobs in gender-imbalanced workplaces. All else equal, women get a lower total compensation in male-dominated workplaces, and vice versa for men in female-dominated ones. This will create gender segregation as both women and men have smaller incentives to become a workplace gender minority. It will also create a larger gender wage gap by channeling women into lower-paying workplaces and men toward higher-paying ones.

Harassment Risks and Pay Across Workplaces

To empirically assess how harassment risks vary across workplaces, Folke and Rickne (2022) use survey data on self-reported sexual harassment from the Swedish government’s biannual survey on work conditions (N=40,000). This nationally representative survey contains questions on unwanted sexual advances, sexist hostility, and gender harassment from colleagues or managers in the last 12 months. The survey data can be linked to administrative data on the full Swedish workforce, enabling the computation of the share of men in each survey respondent’s occupation and workplace.

The relationship between self-reported harassment and sex ratios is shown in Figure 1. Clearly, both women and men self-report more harassment when they are the gender-minority in their workplace. The higher self-reported rate of harassment among gender minorities is not caused by systematically different demographic traits. Nor is it caused by gender minorities being more likely to have opposite-sex supervisors, or to themselves hold subordinate or supervisory positions, or by them having opposite-sex managers. Folke and Rickne (2025) show that these patterns also hold at the occupation level.

Figure 1. Sexual Harassment Incidence across Workplace Sex Ratios.

Source: Replication of the left-hand side of Figure II in Folke and Rickne (2022). Note: The figure shows binned averages of a binary variable for self-reports of sexual harassment in the last 12 months from colleagues or managers. Each sub-sample of men and women is split into 100 equally sized bins of the X-variable. N=19,975 for women, and 17,482 for men.

To examine how wages relate to sex composition, Folke and Rickne (2022) rely on the empirical framework developed by Abowd et al. (1999). This framework estimates workplace fixed effects in a wage regression that also includes individual fixed effects and a host of occupational and demographic controls. The workplace fixed effects (i.e., the wage premiums) capture how much a workplace pays in wages compared to other workplaces with the same occupation structure and workers’ socio-economic traits. The analysis shows that a 10-percentage-point larger share of men is, on average, associated with a 1-percentage-point higher wage premium.

To summarize the first set of results, male-dominated workplaces pay more. At the same time, both men and women face a higher risk of sexual harassment when they work in an occupation or workplace with more men. The combination of these results suggests that women have an incentive to work in lower-paying jobs, while men have an additional incentive to work in high-paying jobs.

Sexual Harassment and Job Choice

Sexual harassment can affect job choice in two ways: it can deter an individual from taking a job, or make a person leave a job that they have previously chosen. Folke and Rickne (2022) examine both these channels.

To examine if sexual harassment risks deter individuals from taking a job, Folke and Rickne (2022) use a survey experiment sent to ~4,000 employed Swedish citizens. The survey experiment follows the standard economic approach of exposing respondents to a hypothetical job choice experiment where they choose between fictional job offers with randomized wages and work conditions (for prominent examples of this approach, see, for example, Wiswall and Zafar 2017 and Mas and Pallais 2017).

Sexual harassment was incorporated into the experiment by showing respondents vignettes of sexual harassment incidents that took place in fictional workplaces (as in Hulin, Fitzgerald, and Drasgow 1996). These vignettes mimic the types of anecdotes or rumors that a prospective employee might hear about a potential employer. Importantly, the vignettes make it possible to vary the victim’s gender, which allows comparison of job choices among respondents who are exposed to a harassment victim of their own gender and respondents exposed to a victim of the opposite gender.

The experiment showed a large negative valuation of sexual harassment—the equivalent of a 10% lower wage in the full sample. This large valuation makes sexual harassment a relevant work condition for shaping people’s total remuneration from work and is quantitatively similar to the valuations of time/space flexibility in previous research (Wiswall and Zafar 2017; Mas and Pallais 2017; Maestas et al. 2018). While men and women had similar valuations, there was a substantial difference between those who see a victim of their own sex compared to the opposite sex: the negative valuation is equivalent to a 17% lower wage for same-sex victims but just 6% for opposite-sex ones.

Figure 2. Event Study of Workplace Transitions.

Source: Replication of Figure V in Folke and Rickne (2022). Note: The figure shows estimated differences in the proportion of employer-to-employer transitions out of the workplace in the Work Environment Survey between people who self-report sexual harassment in that survey or not. The X-axis denotes the number of years since the survey. Demographics controls from administrative records are four dummies for marital and parental status, four dummies for age categories, two dummies for having secondary or tertiary education, and two dummies for being born in a different European country or outside Europe.

Folke and Rickne (2022) rely on the work-environment survey matched to the administrative data to show that sexual harassment also affects the probability of leaving a workplace. Conditional on a host of controls, women who report sexual harassment are about 5 percentage points more likely to have left their workplace 3 years after having answered the survey than women who did not report sexual harassment. The equivalent gap for men was about 3 percentage points.

Conclusions

The case study of sexual harassment in Sweden highlights this work condition as an important barrier to gender equality in the labor market. It shows a higher prevalence of sexual harassment for workplace gender minorities and how it imposes costs on these minorities relative to their gender majority colleagues. The disincentive created by sexual harassment to become—and remain—a workplace gender minority reinforces gender segregation across workplaces. The gender wage gap also grows as women prefer not enter male-dominated workplaces with higher pay, or leave these workplaces and head to ones with more women and lower monetary compensation.  These macroeconomic impacts add to the “business case” for governments to prevent sexual harassment.

Sexual harassment is just one of many forms of discrimination in work conditions that could reinforce inequalities in the labor market. If we want to reduce gender inequality, it is clearly not enough to focus on gender differences in preferences for work conditions. We also need to pay attention to factors, such as sexual harassment, that lead to men and women facing different work conditions in the same job. Addressing this form of discrimination could not only yield large payoffs for individual well-being but also reduce inequalities in the labor market.

References

  • Abowd, J.M., Kramarz, F. and Margolis, D.N., 1999. High wage workers and high wage firms. Econometrica, 67(2), pp.251-333.
  • Folke, O. and Rickne, J., 2022. Sexual harassment and gender inequality in the labor market. The Quarterly Journal of Economics, 137(4), pp.2163-2212.
  • Folke, O., & Rickne, J. (2025). Sexual harassment across occupations: new evidence from Swedish Nationally representative data. European Sociological Review, 41(6), 903-918.
  • Collis, M.R. and Van Effenterre, C., 2025. Workplace Hostility. IZA-Institute of Labor Economics.
  • Goldin, C. (2014). A grand gender convergence: Its last chapter. American Economic Review, 104(4): 1091-1119.
  • Hulin, C.L., Fitzgerald, L.F. and Drasgow, F., 1996. Organizational influences on sexual harassment. Sage Publications, Inc.
  • Le Barbanchon, T., Rathelot, R. and Roulet, A., 2021. Gender differences in job search: Trading off commute against wage. The Quarterly Journal of Economics, 136(1), pp.381-426.
  • Lepage, L.P., Li, X. and Zafar, B., 2025. Anticipated discrimination and major choice (No. w33680). National Bureau of Economic Research
  • Maestas, N., Mullen, K.J., Powell, D., Von Wachter, T. and Wenger, J.B., 2023. The value of working conditions in the United States and implications for the structure of wages. American Economic Review, 113(7), pp.2007-2047.
  • Mas, A, and A Pallais (2017), “Valuing Alternative Work Arrangements”, American Economic Review, 107(12): 3722–3759.
  • Penner, A.M., Petersen, T., Hermansen, A.S., Rainey, A., Boza, I., Elvira, M.M., Godechot, O., Hällsten, M., Henriksen, L.F., Hou, F. and Mrčela, A.K., 2023. Within-job gender pay inequality in 15 countries. Nature human behaviour, 7(2), pp.184-189.
  • Wiswall, M. & Zafar, B. (2017). Preference for the workplace, investment in human capital, and gender. The Quarterly Journal of Economics 133(1): 457-507.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Do Election Results Shape Legitimacy Perceptions in Autocracy?

Posted on February 23, 2026 | Policy Brief

Elections remain a central feature of many authoritarian regimes despite widespread manipulation and limited political competition. Using a survey experiment with a nationally representative sample of Russian voters, this study examines whether improving perceptions of legitimacy can help explain why autocrats hold elections. The results show that information about high turnout increases trust in government, while information about low turnout reduces it, with effects driven by government supporters and individuals who believe in election integrity. This suggests that authoritarian leaders may use elections and reported electoral outcomes strategically to reinforce legitimacy among their support base and manage public perceptions over time.

Puzzle of Autocratic Elections

In recent decades, many authoritarian regimes have increasingly adopted institutions resembling those of democracies, particularly elections (Guriev and Treisman, 2019). Autocrats often organize multiparty elections and invite international observers, even as they manipulate outcomes through widespread fraud. This combination raises an important puzzle: if elections do not truly determine political power, why do authoritarian leaders hold them?

A large body of research has examined how authoritarian elections are organized (Gandhi and Lust-Okar, 2009; Gehlbach et al., 2016; Egorov and Sonin, 2020), including strategies such as limiting competition (Gandhi and Przeworski, 2007; Egorov and Sonin, 2021), managing media and information (Egorov et al., 2009; Edmond, 2013), and using elections to signal regime strength or monitor elites (Gehlbach and Simpser, 2015). However, less is known about whether these elections actually shape voters’ perceptions of government legitimacy (Dukalskis and Gerschewski, 2017).

One seemingly straightforward way to approach this question is to look at the relationship between electoral participation and trust in government, a key measure of political legitimacy. For example, across OECD countries, higher turnout is strongly correlated with greater trust in national governments (Figure 1). However, this descriptive pattern does not establish causality. Economic conditions may simultaneously shape both trust and electoral outcomes, creating omitted variable bias, while legitimacy itself may influence participation, leading to reverse causality.

These limitations point to the need for causal evidence on whether election results influence perceptions of legitimacy, particularly in non-democratic settings. The importance of such evidence is underscored by recent policy interest, including a commissioned report for the European Parliament on authoritarian legitimation through elections (Demmelhuber and Youngs, 2023). This policy brief presents findings from a recent study that addresses this issue, using a Russian election as a case study.

Figure 1. Trust in government and voter turnout in parliamentary elections in OECD countries (2017-2020)

Note: Trust is measured as a percentage of the population over 15 years old who answered ”Yes” to the following question in a nationally representative survey: “In this country, do you have confidence in the national government?” (Source: OECD). Turnout is the percentage of the registered voting population who voted in the last parliamentary election (Source: IDEA). Countries with compulsory voting are excluded.

Survey Experiment

To causally assess whether reported election outcomes influence perceptions of government legitimacy, the study implemented a survey experiment using a nationally representative sample of 1,603 Russian voters. The central feature of the design was a randomized information treatment that generated exogenous variation in respondents’ exposure to election results.

After completing the initial socio-demographic questions, respondents reported their prior political participation as well as their recollections of how past elections were conducted and their outcomes. Respondents were then randomly assigned to one of five treatment arms and asked to evaluate a hypothetical government formed after an upcoming election, with information about the election outcome randomly varied across treatment arms.

A control group received no information about hypothetical election results. Two groups were informed only about hypothetical voter turnout, which was presented as either low (38%) or high (66%). Two additional groups received information about turnout, either low or high, combined with a high vote share for the leading party (72%).

Following the information treatment, respondents reported their levels of trust in government, perceptions of whether the government represented national and personal interests, and their approval of and willingness to comply with hypothetical laws. These outcomes served as proxies for different dimensions of political legitimacy.

Election Outcomes Shape Trust in Government – but Only for Incumbent Supporters

By comparing responses across treatment groups, the experiment isolated the causal impact of election outcomes on legitimacy perceptions while holding constant respondents’ other characteristics. Respondents exposed to information about low turnout express significantly lower trust in government compared to those who received no information. On average, low turnout reduces trust by approximately 0.77 points on a ten-point scale, equivalent to about 0.25 standard deviations. In contrast, exposure to high turnout increases trust by around 0.68 points, or 0.22 standard deviations.

Providing additional information about the ruling party’s vote share does not significantly alter these effects. When high vote share information was combined with low turnout, trust increased slightly by 0.07 points, while adding vote share information to high turnout reduced trust by about 0.40 points; neither difference is statistically significant.

The impact of turnout information is highly heterogeneous. The observed effects are driven by individuals who expressed support for the ruling party, United Russia. Among these respondents, low turnout substantially lowers trust, while high turnout leads to a significant increase in trust. In contrast, opposition supporters do not update their perceptions in response to any of the information treatments: their trust levels remain statistically indistinguishable from those of the control group.

Moreover, the study examines heterogeneity based on baseline perceptions of electoral fraud. Before administering the information treatments, respondents were asked how frequently they believed irregularities in vote counting occur in Russian elections. Individuals who reported frequent violations are likely to view election outcomes as non-transparent and therefore to distrust official results, suggesting that information about turnout and vote share should have limited impact on their perceptions. Consistent with this expectation, no significant effect of turnout information on trust in government is observed among respondents who report a higher frequency of such violations.

Figure 2. Effect of information on trust relative to the control group

Note: This plot shows the effects of information treatments on trust in government relative to receiving no information (control group). Black circles are coefficient estimates for each group, with horizontal lines showing 95% confidence intervals.

Mechanisms: Expectation Shock and Anchoring

To examine how election information affects perceived legitimacy, the study relies on respondents’ reported recollections of past election results, including turnout and leading party performance. These prior beliefs provide a baseline against which new information is interpreted, as respondents tend to anchor their expectations about future elections to what they remember from previous ones.

When information about hypothetical election outcomes is presented, it generates exogenous shocks to these expectations. The magnitude and direction of each shock is defined as the difference between a respondent’s prior belief and the reported hypothetical outcome. By varying turnout between low and high values and combining turnout with high ruling party results, the experiment produced both positive and negative expectation shocks.

The results indicate that positive shocks, when the reported turnout exceeds prior beliefs, increase legitimacy across treatment groups, while negative shocks, when reported turnout is below the expected one, decrease legitimacy regardless of the treatment arm.

These findings suggest that election outcomes shape legitimacy by generating expectation shocks, and that respondents anchor beliefs about future elections to their perceptions of past results; in the absence of such anchoring, deviations between reported outcomes and respondents’ priors would have had little effect.

However, in the case of the leading party’s vote share, the resulting shock was rather small: an average respondent reported recalling the past vote share as 65%, while the value used in the information treatments was 72%. If respondents indeed anchor expectations about future election outcomes to past results, this may explain the absence of an additional effect of the vote share information, as the treatment did not generate a sufficiently strong expectation shock.

Conclusion

Do election results affect an autocrat’s perceived legitimacy? Using a survey experiment with a nationally representative sample of Russian voters, this study provides evidence that information about election outcomes can shape trust in government in an authoritarian setting. The results show that exposure to high (low) voter turnout increases (decreases) trust in government, with these effects concentrated among government supporters and individuals who believe elections are generally fair. This pattern suggests that autocrats may have limited ability to influence opposition supporters and instead rely on reinforcing legitimacy within their existing support base.

In addition, because voters anchor their expectations to past results, autocrats may be incentivized to generate higher outcomes while exercising caution in revealing lower ones in future elections. This underscores the role of autocratic elections as a tool to manage public perceptions over time.

The results of this study show that information about election outcomes holds strategic significance in non-democracies, as it can shape perceptions of government legitimacy. Policymakers should therefore prioritize support for independent media that provide credible information about election outcomes, even when results in authoritarian contexts appear predictable.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Do Remittances Keep Households Out of Poverty? Evidence from Georgia

Posted on February 16, 2026 | Policy Brief

Remittances play an important role in household living standards in Georgia, alongside labor income and public transfers. Using 2024 household data, this brief estimates the contribution of remittances to poverty reduction by simulating household welfare in their absence. The results indicate that removing remittance income would raise the share of households below the subsistence level by more than four percentage points, with smaller increases in relative poverty and inequality. Income composition patterns further show that poorer and rural households rely more heavily on remittances. Overall, the findings underscore the significant role of private transfers in shaping household welfare and vulnerability in Georgia.

Introduction

Despite notable progress in recent years, poverty reduction remains a central development challenge in Georgia. An important policy concern is whether recent poverty reductions are sustainable or leave households vulnerable to economic shocks.

Assessing this vulnerability requires understanding what keeps households above the poverty line. In Georgia, household consumption is financed not only by labor earnings but also by non-labor income sources. Many households rely heavily on remittances from family members working abroad as well as public transfers such as pensions and social assistance.

While official poverty indicators track overall trends in household welfare, they do not reveal how different income sources contribute to keeping households above the poverty line. Understanding whether poverty reduction is primarily driven by labor income, private transfers, or public support is essential for assessing household vulnerability and the sustainability of poverty reduction.

This question is especially salient in Georgia, where remittance inflows amounted to around 10 percent of GDP in 2024. Such dependence raises concerns about the resilience of household welfare to external shocks that could disrupt migration or remittance flows.

Recent World Bank analysis of fiscal incidence in Georgia highlights that transfers and social expenditures have played a significant role in reducing poverty and inequality, with overall taxes and benefits lowering the share of the population in poverty and compressing the distribution of income (World Bank, 2025). Evidence from studies on international migration and remittances also suggests that private transfers help smooth household consumption and provide critical support to low-income families in contexts with high migration and remittance flows (World Bank, 2023).

Building on this body of evidence, this brief quantifies the short-run welfare impact of remittances in Georgia by simulating household consumption in the absence of remittance income. Comparing observed outcomes with the counterfactual scenario provides clear evidence on the contribution of private transfers to household living standards and the vulnerability of households to changes in remittance flows.

Descriptive Statistics

Household incomes in Georgia are composed of labor earnings, public transfers, and private transfers. Labor and market income, including wages, self-employment, and agricultural sales, accounts for roughly two-thirds of total household resources on average. Transfers nonetheless play a substantial role in household welfare: public transfers such as pensions and social assistance represent over one-fifth of total income, while private transfers, largely driven by remittances from abroad, contribute more than one-tenth. Capital and other income sources remain marginal. In level terms, average monthly cash income and transfers amount to GEL 1,714 per household but fall to GEL 971 among households below the subsistence minimum and rise to GEL 1,814 among those above it. Rural households report lower average cash resources (GEL 1,434) than urban households (GEL 1,877), underscoring both welfare gaps and the differing reliance on income sources across population groups.

Figure 1. Income composition by source and household group

Source: Household Incomes and Expenditures survey, Geostat, 2024.

Income composition differs markedly across household groups, indicating that transfer flows play a particularly important role for households at the lower end of the welfare distribution and in rural areas. Among households below the subsistence minimum, public transfers account for nearly half of total cash resources – roughly equal to labor and market income – highlighting a strong reliance on transfer income for meeting basic living standards. In contrast, households above the subsistence minimum derive over two-thirds of their income from labor earnings, with transfers playing a much smaller role. Rural households are also substantially more dependent on public transfers than urban households, where labor income dominates. Private transfers, largely driven by remittances, constitute a meaningful but secondary income source, particularly among urban and better-off households.

Data and Methodology

The analysis uses microdata from Georgia’s Integrated Household Survey (IHS) for 2024. Household welfare is measured using total consumption expenditure per equivalent adult, which is widely regarded as a reliable indicator of living standards than income, as it better reflects households’ ability to smooth temporary income fluctuations. All results are weighted using survey weights adjusted for household size to reflect population-level outcomes.

Absolute poverty is assessed using the national subsistence level, which varies by quarter to account for seasonal price changes. Relative poverty is defined as consumption expenditure below 60 percent of the median within each quarter. Inequality is measured using the Gini coefficient, and Lorenz curves are used to illustrate changes in the consumption distribution.

To quantify the role of remittances, a counterfactual welfare scenario is constructed by simulating household consumption in the absence of remittance income from abroad. The simulation subtracts the estimated consumption-financed portion of remittances from observed household consumption, while allowing for the share of remittances saved or used for non-consumption purposes. Poverty and inequality indicators are then recalculated under this counterfactual scenario. The approach captures the short-run direct impact of remittances.

As with any short-run simulations, this analysis assumes no behavioral adjustment by households following the removal of remittance income. In practice, households may respond through changes in labor supply, borrowing, or expenditure patterns, which are not captured. In addition, the estimation of the consumption-financed share of remittances is based on observed saving behavior and may vary across households and over time. Despite these limitations, the approach provides a transparent and relevant estimate of the direct welfare role of remittances.

Results

Remittances from abroad play a substantial role in sustaining household living standards in Georgia. In 2024, 13.7 percent of households lived below the subsistence minimum. Simulating household welfare in the absence of remittance income shows that the poverty rate would rise to 18.1 percent, an increase of more than four percentage points. This implies that remittance inflows keep a significant share of households above the minimum living standard threshold.

Table 1. Poverty and inequality indicators with and without remittance income

Source: Author’s calculations based on Geostat data, 2024. Note: The Gini coefficient is a numerical measure of income or wealth inequality that summarizes how evenly income or wealth is distributed across a population. It ranges from 0, indicating perfect equality where everyone has the same income or wealth, to 100, indicating perfect inequality where all income or wealth is concentrated in a single individual.

Relative poverty also increases in the counterfactual scenario, rising from 18.7 to 21.4 percent, though the magnitude is smaller than for absolute poverty. This reflects the stronger role of remittances in preventing extreme vulnerability rather than reshaping the overall income distribution.

Inequality, measured by the Gini coefficient of consumption expenditure, increases modestly from 32.4 to 32.8 in the absence of remittances. The corresponding shift in the Lorenz curve confirms that remittances slightly compress the lower tail of the distribution, benefiting poorer households disproportionately.

Figure 2. Lorenz curves with and without remittances

Source: Author’s calculations based on Geostat data, 2024. Note: A Lorenz curve is a graphical representation of income or wealth distribution that plots the cumulative share of the population (ordered from poorest to richest) against the cumulative share of total income or wealth they receive, illustrating the degree of inequality in a society.

Conclusion

The results indicate that remittances from abroad play a substantial role in sustaining household living standards in Georgia.  In  2024,  removing remittance income would increase the share of households living below the subsistence minimum by more than four percentage points, with a smaller but noticeable rise in relative poverty. The persistence of this pattern under both absolute and relative poverty definitions confirms the robust poverty-reducing role of remittances. Inequality, measured by the Gini coefficient, also increases modestly in the counterfactual scenario, consistent with remittances disproportionately supporting lower-income households.

Income composition patterns further show that poorer and rural households rely more heavily on transfer income than better-off and urban households, underscoring the importance of remittances as a buffer against economic vulnerability. Overall, the findings highlight the significant contribution of private transfers to poverty reduction and the sensitivity of household welfare to changes in remittance flows.

As reliance on external income sources remains high, diversifying income opportunities and improving domestic labor market conditions will be essential for sustainable poverty reduction in the long term.

References

  • World Bank, 2023. Migrants, Refugees, and Societies.
  • World Bank, 2025. Navigating Fiscal Realities for Equitable Growth in Georgia

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Strategic Integration of the Belarusian Business and Policy Implications for the EU

Posted on February 9, 2026 | Policy Brief

The forced internationalization of Belarusian businesses since 2020 has transformed a localized economic crisis into the formation of a sophisticated, high-growth-potential economic diaspora within the European Union. Drawing on a novel survey of over 114 Belarusian-rooted businesses, this brief analyzes their integration patterns and value alignment with Western markets. The findings reveal a cohort characterized by high entrepreneurial orientation, a rejection of state paternalism, and significant growth potential. This makes them a valuable asset to host-country development and a vital resource for Belarus’s future economic reconstruction.

The Context: Scale and Scope of the Exodus

Before 2020, Belarusian business migration was a predominantly economically driven phenomenon of “gradual Europeanization” – businesses strategically pursued access to larger markets, more stable legal frameworks, and new technologies. Moreover, many Belarusian companies were born-globals (Vissak & Zhang, 2016) and considered the domestic and even Russian market as a launch pad for further expansion into developed technological markets (Marozau et al., 2021). By 2020, the private sector’s contribution to Belarus’s GDP reached 55%, surpassing that of state enterprises (Daneyko et al., 2020). However, the political crisis following the 2020 elections and the 2022 invasion of Ukraine fundamentally altered this trajectory, turning migration into a “survival strategy”.

This “forced internationalization” occurred in two distinct waves. The 2020-2021 wave primarily consisted of individual entrepreneurs, top managers, and IT specialists who fled direct political repression. In turn, the post-2022 wave was driven by the relocation of entire high-tech and knowledge-intensive companies in order to preserve client bases and financial access after international sanctions were imposed on Belarus following Russia’s invasion of Ukraine.

Today, the EU has inadvertently become the custodian of a substantial portion of Belarus’s future economic potential. Over 300,000 Belarusians have emigrated, with an estimated 87% of them holding higher education degrees—a dramatic “brain drain” for Belarus that translates into a “brain gain” for the EU (Lvovskiy et al., 2025).

Figure 1. Origin of surveyed Belarusian-rooted businesses

Source: Authors’ estimation.

The number of enterprises with Belarusian founders operating across Central and Eastern Europe is estimated at approximately 10,000 (Marozau & Danilchuk, 2024).

This study utilizes a mixed-methods approach, centered on a 2024 proprietary survey of 114 founders and executives of Belarusian-rooted businesses, primarily located in Poland and Lithuania. The sample covers micro- (62%), small- (30%), and medium enterprises across ICT (39%), services/trade (48%), and manufacturing (13%).

Portrait of the Belarusian Business Diaspora

The Belarusian business presence in the EU is characterized by heavy geographic concentration on the eastern flank (Poland, Lithuania, Latvia), though it shows signs of maturing into a global network.

Nearly half (49%) of the surveyed companies were new local startups that were established from scratch in the current primary jurisdiction (Figure 1). Meanwhile, relocated firms – those that operated in Belarus and have fully or partially moved – make up 42% of the sample. Only 6% continue to operate in Belarus while opening branches abroad. This distribution underscores a shift toward local entrepreneurial formation, suggesting that the diaspora is not merely transplanting existing structures but actively generating new ones. The nearly even presence of relocated and new local startup firms reflects a dual pathway: one of continuity and adaptation, and another of innovation and reinvention.

Analysis of workforce composition reveals a heavy reliance on Belarusian talent, both from recent relocations and the existing local diaspora (Figure 2). Many businesses are still relatively small and founder-driven, with hiring networks often rooted in trusted Belarusian professional circles. However, as these companies grow and mature, many may begin to prioritize specialized skills and experience over nationality, leading to more diverse and internationalized teams over time. In their current phase, however, they continue to play a crucial role in employing and integrating Belarusian talent across EU labor markets (Lvovskiy et al., 2025).

Figure 2. Staff composition of surveyed Belarusian-rooted businesses

Source: Authors’ estimation.

Business Dynamics and Resilience

Despite the trauma of forced relocation, these businesses exhibit a remarkably entrepreneurial orientation and a focus on expansion rather than mere survival. An overwhelming 74% of firms prioritize expansion, a stark contrast to businesses remaining inside Belarus, where only about one-quarter plan to expand (BEROC, 2023). 64% of respondents anticipate increasing their staff over the next year. While they initially provide a “safety net” for other Belarusian emigrants, 40% of firms are now actively recruiting local Polish or Lithuanian specialists to help with localization.

Only 18% of firms would consider moving back to Belarus even if the political situation changed immediately. This indicates that the “exodus” has resulted in a permanent structural change; these businesses are becoming European entities with Belarusian roots.

Navigating the European Market: Challenges, Responses, and Support Needs

As the Belarusian-rooted business becomes more established in new countries, issues of initial adaptation and legalization are becoming a thing of the past.

The most frequently reported barrier is difficulty entering new markets, selected by 39% of respondents (Figure 3). This is followed by high labor costs, particularly in terms of salary expectations (30%), and disparities in treatment of companies with Belarusian origins (29%). These three factors reflect a combination of structural and perception-based challenges that affect firms’ ability to scale operations across borders.

Figure 3. Key barriers hindering growth and expansion

Source: Authors’ estimation.

A substantial share of firms, citing a lack of qualified personnel or management (25%) and noting difficulties related to the legalization of founders and employees (23%), point to significant constraints in human capital and the administrative burdens associated with cross-border employment and residency requirements.

Meanwhile, Belarusian entrepreneurs have shown a high entrepreneurial orientation, focusing on two main strategic directions: optimization of internal processes and adaptation of product/market strategy (Figure 4).

Figure 4. Steps taken to minimize the impact of risks and enhance competitiveness

Source: Authors’ estimation. Note: Several options could be selected.

When asked what would most help the company’s development, Belarusian entrepreneurs in the EU expressed a strong consensus that political and legal normalization is far more relevant than immediate economic aid or market-specific support. The end of the war in Ukraine (58.8%) as the highest-ranked factor underscores that the geopolitical instability caused by the war is the single largest drag on their business, impacting everything from security to market perception (Figure 5).

Figure 5. What would most help business development?

Source: Authors’ estimation. Note: Several options could be selected.

The Analysis of Value Alignment

In general, previous research collectively positions the entrepreneurial class – and by extension, the business diaspora – as a proactive, motivated, and democratically aligned segment of Belarusian society (Bornukova & Friedrich, 2021). The combination of a long-term societal shift toward market principles (Daneyko et al., 2023) and the unique psychological profile of Belarusian entrepreneurs has profound political implications. Their strong preference for self-reliance over state welfare, their belief in the benefits of competition, and their demonstrated risk tolerance are not merely business characteristics; they are foundational democratic values centered on individual agency and responsibility (Audretsch & Moog, 2022).

Compared to a survey of businesses inside Belarus in 2018, the 2024 the Belarusian business diaspora operating outside the country holds a stronger commitment to self-reliance, risk-taking, and core market principles than business representatives operating inside Belarus just a few years earlier (Marozau & Apanasovich, 2026). It strongly supports free pricing, the end of subsidies to uncompetitive firms, and rejection of economic paternalism (e.g., guaranteed jobs over higher salaries) (Figure 6). This alignment means that the diaspora has internalized the “European” institutional mindset, making them natural partners for EU economic initiatives and the primary “agents of transformation” for a future democratic Belarus.

Moreover, the shared experience of forced migration, combined with the resilience and adaptability of Belarusian entrepreneurs (Marozau, 2023), has fostered collaboration and ecosystem-building across Poland and the Baltic states. This commitment to market principles is evident in the rapid emergence of Belarusian business associations and informal networks across the EU (Krasko & Daneyko, 2022). While such spontaneous civil society development is atypical for Belarus, it aligns closely with the EU’s decentralized business environment (Greenwood, 2002). In contrast to post-2020 Belarus, where the state restricts independent business organizations and advocacy (Marozau, 2023), the diaspora has quickly formed self-governing, trust-based networks. These organizations substitute for weak institutional trust at home, mitigate geopolitical risks,   and   provide   advocacy,   networking,   and representation to host-country and EU institutions (Marozau & Danilchuk, 2024), demonstrating the diaspora’s capacity for democratic self-organization.

Source: Marozau & Apanasovich (2026)

Conclusion and Implications

The relocation of Belarusian entrepreneurs to the EU does not represent a break with the past so much as a fulfillment of long-standing aspirations, but these values appear to have developed before, often in defiance of a more centralized and restrictive policy environment in Belarus. Consequently, success abroad is based on the entrepreneurial principles already cultivated under challenging conditions and is not merely the result of adapting to new institutional settings. Strong alignment with liberal market values – including private ownership, individual initiative, fair competition, and transparent governance – positions Belarusian entrepreneurs as a foundational pillar of a future democratic Belarus integrated into the European family. Therefore, supporting this diaspora is not merely a question of solidarity or migration management. It is a high-return strategic investment that strengthens the EU’s economic base, supports democratic transition in its neighborhood, and affirms the values that underpin the Union itself. Tailored interventions are needed to address their legal vulnerabilities and enable their full participation in EU markets.

To unlock the full value of this asset for regional growth and long-term transformation, a strategic recalibration of policy is needed.

First, the Belarusian business diaspora should be understood as a distinct and underutilized contributor to the European economy—shaped by geopolitical disruption yet strongly aligned with EU market norms and integration pathways. The barriers these businesses face are not typical SME challenges but structural frictions that limit investment, scaling, and value creation in host countries. Addressing these frictions would deliver direct benefits to local economies through job creation, tax revenues, and industrial capacity. Fuller market participation could be supported through trust-building within local business ecosystems, consistent access to finance, greater legal predictability for founders and key staff, and appropriate risk-sharing instruments for capital-intensive sectors such as manufacturing. In parallel, regulatory clarity enabling banks to distinguish between sanctioned or state-linked entities and independent Belarusian firms would reduce unnecessary de-risking that suppresses legitimate economic activity within the EU.

Second, the Belarusian business diaspora represents a strategic asset for the future economic and democratic reconstruction of Belarus, whose value depends on being anchored and strengthened within the EU today. Operating in European markets allows these entrepreneurs to accumulate capital, managerial experience, institutional trust, and familiarity with EU regulatory and governance standards – assets that will be critical in a post-authoritarian transition. Retaining this community within the European economic space ensures that future reconstruction efforts can draw on actors already embedded in EU value chains, rather than relying solely on external assistance or ad hoc capacity-building.

Targeted funding mechanisms and professional networks can support this long-term role by enabling transparent links with the remaining private sector in Belarus, preserving skills, business relationships, and market knowledge that would otherwise erode over time. Finally, cross-sectoral initiatives involving entrepreneurs, civil society, and democratic actors can strengthen diaspora cohesion and amplify its contribution as a carrier of economic know-how and democratic practices. Joint efforts around education, skills development, and employability are particularly valuable, as they address EU labor market needs while preparing the groundwork for Belarus’s eventual reintegration into the European economic and institutional space.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Income Polarization and Climate Policy Backlash

Posted on February 2, 2026 | Policy Brief

20231201 The Impact of Rising Gasoline Prices Image 03

A recurring challenge for climate policy is political backlash. Over the last decade, we have seen prominent examples like the repeal of the carbon tax in Australia in 2014, the ‘Yellow Vests’ protest against the French carbon tax between 2018 and 2020, and the rollback of climate policy in the transport sector in Sweden between 2022 and 2024. A common argument put forward to explain this backlash is distributional concerns – that carbon and fuel taxes are regressive, disproportionately burdening low-income households. Yet, these prominent episodes often look like middle-class revolts. Studies find that the Yellow Vests supporters in France had ‘modest incomes’, but few came from the poorest deciles of the income distribution. Similarly, a study of Swedish fuel tax protesters found that they had relatively high incomes. This brief proposes a complementary explanation to regressivity: when the income distribution becomes more polarized – with stronger growth at both tails relative to the middle – the tax burden can shift toward the middle. A simple three-agent example illustrates how polarization can ‘squeeze’ the middle class, potentially undermining the durability of climate policy even when the poorest are compensated.

Climate Policy Backlash: Why “Not Just the Poor”?

Fuel and carbon taxes have repeatedly triggered political controversy and, in some cases, reversals. In France, the planned 2018 increase in the carbon tax became a focal point of the Yellow Vests protests. In Australia, the economy-wide carbon pricing introduced in 2012 was repealed just two years later. And in Sweden, the current government has reduced transport fuel taxes and the biofuel mandate to lower pump prices.

These episodes are often interpreted through the lens of tax progressivity (Douanne and Fabre 2022; Ewald et al. 2022): if energy and transport fuels are necessities, the tax-to-income burden can be higher for low-income households, with implications for policy stability. But the political patterns are frequently more complex. In France, many protesters were working or middle-class rather than poor (Dormagen et al. 2022). In Sweden, fuel tax protesters had, on average, relatively high incomes (Ewald et al. 2022), and households in the bottom third of the income distribution have no transport fuel expenditure at all, which weakens a simple “regressivity” narrative.

Figure 1. Share of Swedish households with zero transport fuel expenditure, by income decile.

Source: Household expenditure survey data 1999-2012 from Statistics Sweden.

This motivates the question: what if the distributional conflict that matters politically is not only bottom-versus-top, but, more importantly, concerns what happens to the middle class?

This brief introduces a three-agent model to show that under income polarization, the relative tax burden may shift to the middle. Traditional tax progressivity indices may fail to capture this shift as they weight different parts of the income distribution. At the same time, such a change is likely to have large implications for the political action and ultimately, the environmental policy design.

A Simple Model of Tax Burden Shifts

Consider an economy with three types of households: low-income (L), middle-income (M), and high-income (H). When a good like gasoline is taxed at a constant rate, each household’s tax burden depends on how much of their budget they spend on the taxed good; their ‘budget share.’

As incomes grow over time, these budget shares change. The direction of change depends on whether the taxed good is a necessity or a luxury. For necessities — goods where spending doesn’t keep pace with income growth — the budget share falls as income rises. For luxuries, the opposite occurs. The speed at which budget shares change over time is thus governed by two factors: how responsive spending is to income changes (the income elasticity), and each household’s income growth rate.

To track how tax burdens shift between different income groups, we can examine the relative changes in their budget shares. With three income groups, we need to make three comparisons: poor versus rich, poor versus middle, and middle versus rich. If the budget share falls faster for the relatively richer household in all three comparisons, the tax becomes more regressive. If it falls faster for the relatively poorer in all three comparisons, the tax becomes more progressive.

However, a third pattern is possible: the burden can shift in a ‘polarized’ way, where the middle class loses ground relative to both the poor and the rich. In this case, whether the tax is progressive or regressive is ambiguous – it depends on which comparison we prioritize in our social welfare function.

Polarization Squeezes the Middle

We use the example of income polarization to illustrate how this middle-squeeze can occur. Following Esteban and Ray (1994) and Wolfson (1994), we define income polarization as a situation where the middle group’s income grows more slowly than both the bottom and top groups. Under polarization, the middle class shrinks as a share of total income, while both the poor and rich expand their shares. Such income polarization has been well documented in the US and Europe (e.g., Goos et al. 2009; Autor 2022).

Table 1 shows a stylized numerical example of income polarization. Low- and high-income households have higher income growth compared to the middle, whose income share shrinks. Furthermore, gasoline is a necessity (in high-income countries), and we assume uniform income elasticities so that the budget share declines as income grows for all three income groups.

Table 1: Example of income polarization

What happens to relative tax burdens under these conditions? Because low-income households have the fastest income growth, their gasoline budget share falls the quickest. The middle class, with much slower income growth, sees its budget share fall more slowly. This means the middle class shoulders more of the tax burden relative to the poor.

Similarly, high-income households also experience faster income growth than the middle class, so their budget share also falls faster. Again, the middle class ends up shouldering more relative to the rich. The middle is thus ‘squeezed’ from both directions.

Importantly, when we compare the poor directly to the rich, the tax burden shifts in a progressive direction — the poor’s relative burden falls compared to the rich. Yet this ‘traditional’ progressive pattern masks the fact that the middle class is bearing an increasing share of the burden compared to everyone else.

The political implication is clear: when taxing a necessity under income polarization, the middle class can become relative losers even when the tax appears progressive in traditional comparisons between top and bottom. In this case, climate policy backlash would come from working and middle-class groups rather than the absolute poorest, and compensating mainly the poor may be insufficient for political durability.

What This Suggests for Climate policy design

The mechanism illustrated above does not deny that tax progressivity matters. Rather, it highlights an additional vulnerability: in a polarized economy, a carbon tax on necessities may face backlash when the middle class is squeezed. Three practical implications for climate policy design follow from this.

First, protecting the bottom is essential, but may not be sufficient for political durability if the middle becomes the relative ‘loser.’ The traditional focus in the economics literature on the political economy of climate policy and its potential distributional effects is on measures like revenue recycling (‘carbon dividends’) – especially to the poor – to counter regressivity. This compensation may be insufficient for policy stability, however, and targeted measures toward the middle class may be needed (such as a reduction in middle-income tax rates).

Second, backlash may potentially be lower when there are credible substitutes, thereby reducing the budget share of the taxed goods over time. If, for instance, the middle-class are relatively more dependent on private transport, compensatory policies aimed at making electric vehicles more affordable may reduce both the objective burden and the intensity of climate policy aversion.

Third, summary indices of tax progressivity — like the Kakwani (1977) and Suits (1977) indices — may obscure ‘middle-squeeze’ patterns. A useful complement to these summary measures would thus be to report incidence separately for bottom–middle and middle–top comparisons, and to track how polarization changes these margins over time.

References

  • Andersson, J. J., & Atkinson, G. (2025). The Progressivity of Gasoline Taxation: The Role of Income Inequality. Working Paper.
  • Autor, D. (2022).  The labor market impacts of technological change: From unbridled enthusiasm to qualified optimism to vast uncertainty. National Bureau of Economic Research.
  • Dormagen, J-Y., & Michel, L., & Reungoat, E. (2022).  United in diversity: Understanding what unites and what divides the Yellow Vests. French Politics, 20(3), 444–478.
  • Douenne, T., & Fabre, A. (2022).  Yellow vests, pessimistic beliefs, and carbon tax aversion. American Economic Journal: Economic Policy, 14(1): 81–110.
  • Esteban, J.-M., & Ray, D. (1994).  On the measurement of polarization. Econometrica, 62(4), 819–851.
  • Ewald, J., & Sterner, T., & Sterner, E. (2022).  Understanding the resistance to carbon taxes: Drivers and barriers among the general public and fuel-tax protesters. Resource and Energy Economics, 70.
  • Goos, M., & Manning, A., & Salomons, A. (2009).  Job polarization in Europe. American Economic Review, 99(2): 58-63.
  • Kakwani, N. C. (1977).  Measurement of tax progressivity: An international comparison. Economic Journal, 87(345), 71–80.
  • Suits, D. B. (1977).  Measurement of tax progressivity. American Economic Review, 67(4), 747–752.
  • Wolfson, M. C. (1994).  When inequalities diverge. American Economic Review, 84(2), 353–358.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

A Highly Likely Turning Point for Belarus: Can Early Action Shape the Outcome?

Posted on January 26, 2026 | Policy Brief

Turning Point for Belarus illustrated by a Ferris wheel overlooking a Belarusian city park in autumn

This policy brief analyzes Belarus’s likely return to economic stagnation as the post-2022 growth rebound fades, and assesses the political-economy implications of this trajectory. Recent growth, primarily driven by cyclical export dynamics and favorable shocks from Russia, is shown to be unsustainable and consistent with a low equilibrium growth path constrained by weak productivity and the prevailing institutional regime. As growth slows and income dynamics deteriorate, stagnation is expected to reshape social preferences and intensify pressures on the existing political-economic status quo. The brief argues that this environment makes a future turning point increasingly likely, while path dependence strongly biases outcomes toward deeper dependence on Russia. Against this backdrop, it discusses whether early, preventive external actions focused on reshaping incentives and expanding the set of perceived strategic options can influence Belarus’s post-turning-point trajectory.

Belarus’ Economic Path: A Likely Return to Stagnation

The years 2021–2025 were dramatic, leading to significant structural changes in the Belarusian economy. However, there are increasing indications that the positive dynamics observed during this period may be reaching their limits, with 2025 potentially marking a dividing line between the short- and long-term effects of Belarus’s economic adjustment to the new environment.

After two and a half years of accelerated growth (around 4%), economic growth began to slow markedly in 2025 and is expected to end the year at 1.3–1.5%. The key reason for this sharp deceleration was the weakening of external demand. Its contraction implies that the physical volume of exports in 2025 is roughly 10% lower than in 2024: approximately two-thirds due to a decline in exports to Russia and one-third due to reduced exports to other countries (see Figure 1).

Figure 1. The Dynamics of Physical Volume of Belarusian Exports by Geographical Destinations, total exports 2022=100

Source: Own calculations based on Belstat data.

The growth in the physical volume of exports was precisely the foundation of the recovery and accelerated growth observed in 2023–2024. First, it constituted a positive demand shock that directly stimulated output growth. Second, it created a buffer for the external position (the current account balance), mitigating one of Belarus’ chronic growth constraints. This consideration has become particularly relevant in recent years, as access to external financing has been severely limited due to the war, sanctions, and the country’s status as a default borrower. Third, in 2023–2024, the accumulated buffer in the external position enabled export growth, creating additional space to stimulate domestic demand.

Export dynamics by destination indirectly indicate that the export surge in 2023–2024 was cyclical rather than a reflection of productivity improvements. Significant export growth occurred only to Russia, reflecting major disruptions to the operating environments of both the Belarusian and Russian economies amid sanctions. The gradual decline in export volumes to Russia since the second half of 2024 signals that even after these disruptions, the existing productivity base does not allow Belarusian exporters to sustain output near previously reached peaks. Exports to other countries have been excessively volatile. It again points to insufficient productivity as their underlying constraint, especially in a new environment.

Assessing likely developments in 2026–2027, the prevailing status quo implies that a slowdown in growth to 1.0-2.0% per year is the most likely scenario. This range corresponds to the growth forecasts produced by major professional forecasters for Belarus (BEROC, IMF, World Bank, WIIW, EDB). Qualitatively, nearly all forecasters converge on the same baseline scenario: the Belarusian economy remains overheated and exposed to inflationary pressures and accumulated macroeconomic imbalances (a weakening external position and a fragile financial position of firms); favorable external demand shocks from Russia have largely been exhausted (with Russia’s growth expected at 1.0-1.5%); and economic authorities will be forced to reduce domestic demand stimulus, leading growth to slow and converge toward its equilibrium level.

This leads to an important conclusion for the medium-term outlook: the elevated growth observed in 2023–2024 was the result of cyclical factors, while Belarus’s long-term equilibrium growth rate remains weak, likely in the range of 1.0–2.0% (which aligns with the estimates based on statistical filtering methods). Estimates of equilibrium growth were in the same range in 2020, prior to the economy entering a period of large-scale shocks (Kruk, 2020). From a long-run growth perspective, the period of 2023–2024 should therefore be interpreted either as a one-off positive level shift in equilibrium output or purely as a cyclical shock. Accordingly, all key considerations regarding Belarus’ weak long-term growth environment (Kruk, 2020) and the lack of productivity growth drivers remain fully relevant today.

It is therefore not surprising that long-term growth models produce a similar picture: growth in the range of 1.0–2.0% per year, under two basic assumptions: (i) productivity growth remains weak and does not exceed its average over the previous 20 years; and (ii) demographic dynamics follow long-term UN projections. Figure 2 presents simulations based on the World Bank’s Long-Term Growth Model (Loayza & Pennings, 2022) under three scenarios: (1) an inertial scenario, in which key exogenous variables (except demography) are extrapolated from historical data; (2) an optimistic scenario, assuming somewhat stronger productivity and human capital growth till 2050; and (3) a pessimistic scenario, assuming slower productivity and human capital growth till 2050 combined with a higher current account deficit.

Average growth over 2026–2100 ranges from 0.9 to 1.5% per year across these scenarios. The core constraint on long-term growth remains insufficient productivity growth (Kruk & Bornukova, 2013), largely driven by the current political regime’s unwillingness and inability to remove existing barriers to productivity growth (Kruk, 2018; Kruk, 2020). In other words, this is not a technologically predetermined growth ceiling, but a political economy equilibrium shaped by the prevailing system of institutions, incentives, and constraints, compounded by demographic trends.

Figure 2. Belarus: Long-term Per Capita GDP Growth Projections, % per annum

Source: Own calculations based on WB LTGM Model (Loayza & Pennings, 2022.

Any of these scenarios implies a highly disappointing future for Belarus. By domestic standards, such sluggish growth effectively amounts to stagnation for a middle-income country. In the worst-case scenario, incomes double over the next 75 years compared to 2025. Essentially, with such a growth path, it will take Belarus 75 years to reach income levels already attained by the world’s richest countries today.

However, given that other countries will also continue to grow, this trajectory implies that Belarus will keep falling behind in relative terms. For instance, compared with Poland (the baseline LTGM simulations), Belarus will become increasingly poorer (see Figure 3). The only question is how fast and by how much.

Figure 3. GDP per capita (PPP, int$, 2024): Belarus as % of Poland, % per annum, projections

Source: Own calculations based on WB LTGM Model (Loayza & Pennings, 2022) and World Development Indicators Database.

The Political Economy of Stagnation and a Likely Turning Point

A return to stagnation will inevitably generate new social effects. The political economy literature documents a wide range of consequences associated with prolonged stagnation in income and economic performance. For example, persistent negative economic patterns are often associated with political anomalies such as polarization and households’ increased openness to political experimentation – such as voting for non-traditional/extremist parties as well as other forms of political backlash (Funke et al., 2016; Rodrik, 2018). These effects are largely driven by shifts in the political preferences of the middle class, which are more sensitive to relative decline and loss of social status than to absolute income levels (Gidron & Hall, 2017). Stagnation can also reduce the likelihood of gradual institutional reform while increasing the risk of abrupt political shifts (Acemoglu & Robinson, 2006; Guriev & Treisman, 2022). Which combination of these effects ultimately materializes, and in what sequence, is highly context-dependent.

As early as 2026, Belarusian households are likely to begin feeling the constraints to economic growth in their incomes. During 2022–2025, real wages and incomes grew much faster than the economy as a whole: by 2025, GDP was roughly 5% higher than in the pre-war, pre-sanctions year of 2021, while average real wages rose by approximately 37%. This huge gap was driven by labor supply shortages amplified by adverse demographic trends and mass emigration. Much of the adjustment burden was absorbed by a deterioration in corporate sector financial health. By 2026, the corporate sector will have limited capacity to continue sustaining such a divergence between economic growth and labor costs, while overall growth will slow. Consequently, already in 2026, income growth and consumer optimism are likely to weaken. As the economy settles into stagnation, this pattern is expected to intensify.

Exhausted income growth and declining consumer optimism, coupled with an increasingly tangible sense of relative impoverishment compared to Western neighbors, will almost certainly alter the social climate and household preferences in Belarus. But in what direction? And which political anomalies are most likely under Belarusian conditions?

An obvious analogy is the period of 2012–2020. Economic stagnation during that time generated public demand for expanded economic and political freedoms, culminating in the attempted democratic revolution of 2020. The internal state of Belarusian society and its prevailing attitudes (Chatham House, 2024) support such an analogy for future perspective. However, that period was characterized by fundamentally different domestic and external conditions. Domestically, policy was framed around gradual quasi-liberalization across social spheres. In foreign policy, authorities pursued a ‘multi-vector’ strategy, seeking to balance relations with several external partners. Economically, the state refrained from encroaching on the private sector’s autonomy and occasionally even created incentives for its development, alongside strengthening macroeconomic policy frameworks. Today, the situation across all these dimensions is almost the exact opposite. The Belarusian authorities have eliminated virtually all space for civic activity (Center for New Ideas, 2025), isolated the country from the developed world, and chosen total dependence on Russia (Kruk, 2024) as the lesser evil. While the private sector remains significant in scale (BEROC, 2025), its dependence on and subordination to political authorities has increased substantially.

The Belarusian case is too complex and context-specific to confidently identify a single dominant scenario. What can be stated with high probability is that the current political-economic status quo predetermines the search for a new steady state. Economic stagnation will make the environment more malleable and prone to change. Moreover, aware of this, key actors are likely to increasingly attempt to shape developments preemptively in order to strengthen their positions. From this perspective, there is a high likelihood that Belarus will pass through a new turning point in the foreseeable future. The key strategic question is which development trajectory will prevail afterward.

Policy Implications for the Future

In the tradition of modern political economy, a development trajectory depends on the balance of interests among key actors and the behavioral patterns they generate. From this view, following a new turning point, the most realistic scenarios for Belarus involve a continued drift toward deeper dependence on Russia. The already intensified de facto dependence on Russia (Kruk, 2024) strengthens actors whose interests align with such a trajectory. The interests of the Belarusian and Russian political regimes, as well as those of a broad range of Belarusian businesses, are largely tied to Russia. Society, whose dissatisfaction is likely to grow amid stagnation, has a limited set of instruments to influence outcomes. Those segments of society that oppose this drift may simply be ignored. Moreover, in the current environment—marked by modern authoritarian tools such as propaganda and manipulation (Guriev & Treisman, 2022) and reinforced by large-scale repression (Center for New Ideas, 2025)—there are signs that the range of publicly expressed demands in Belarusian society is narrowing (Chatham House, 2025). Taken together, this suggests a strong path-dependence dynamic in which stagnation is likely to deepen Belarus’s entrenchment within Russia’s orbit of influence. Within this paradigm, the only way to influence Belarus’s future development trajectory today is to preemptively shift the spectrum of interests. The desired strategic direction would be to constrain Russia’s capacity to provide patronage to Belarusian interest groups, while simultaneously strengthening Belarus’s institutional capacity as a country, rather than as the property of the current political regime.

Rodrik (2014) highlights a key shortcoming of contemporary political economy models: insufficient attention to ideas. In that context, ideas refer to actors’ perceptions of (i) their optimization specifications, (ii) how the external environment functions, and (iii) which instruments are at their disposal. Standard political economy approaches tend to assign actors a fixed, predefined set of such perceptions. In reality, however, this set is contextual, shaped by numerous factors, and subject to change.

This insight complements the desired strategic shift outlined above. Escaping the emerging political path will require new ideas – a new mental map through which actors can reinterpret their interests. At present, this ideation space, at least for actors within Belarus, is almost entirely monopolized by the concept of development within Russia’s orbit.

Efforts to distance Belarus from Russia (at least to some extent) and, more importantly, to construct a new mental map can already be undertaken today. Their primary temporal reference point, however, is the future turning point. The work by Bushilo et al. (2025) can be viewed as an example of translating these principles into practical policy terms today.

It argues for a calibrated adjustment of the international community’s approach toward Belarus within clearly defined limits, while fully acknowledging the Lukashenka regime’s complicity in Russia’s aggression against Ukraine. Central to this approach is a distinction between the regime and the country of Belarus itself—a distinction that remains analytically and strategically relevant.

This perspective has at times been mischaracterized as an effort to normalize relations with the Belarusian regime. However, the approach does not question the security rationale of sanctions or the responsibility of the regime; rather, it situates them within a broader strategic framework that seeks to avoid conflating pressure on the regime with the long-term prospects of Belarusian statehood.

Above all, it is about shaping a new strategic position, developing new ideas, and redefining the mental map regarding Belarus. Beyond the regime, it is important to recognize something more fundamental: the country of Belarus itself. A country whose future is not predetermined, and which retains the potential to alter its development trajectory beyond the lifespan of the current political regime. This is not about an immediate shift in actors’ preferences, but about reducing the rigidity of the dominant path dependence by expanding the set of strategies perceived as feasible, above all in the long-term perspective following a turning point. For international actors who recognize this potential and are interested in its realization, preventive action is already warranted today.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Russia’s New Strategy in Africa: Big Ambitions, Limited Gains

Posted on January 19, 2026 | Policy Brief

Russia’s renewed engagement with Africa has expanded rapidly since 2022, as Moscow seeks to counterbalance its growing international isolation. Drawing on trade, diplomatic, and UN voting data, this brief finds that while Russia has intensified relations with a handful of African states, the overall involvement remains limited in scope and depth. Economic ties are concentrated in fragile and politically isolated countries, while indicators of political alignment, such as UN General Assembly voting, suggest declining rather than increasing support. Russia’s new strategy may yield short-term geopolitical leverage but shows little sign of delivering durable economic or political gains.

Since the introduction of Western sanctions in 2014, and especially following its full-scale invasion of Ukraine in 2022, Russia has intensified its geopolitical and economic engagement across Africa. A previous brief (Berlin, 2024) outlined the main areas of Russian activity and the strategic objectives behind this renewed focus. As discussed there, Russia’s approach stands in sharp contrast to the longer-term strategies of both traditional Western partners and newer actors such as China. Rather than pursuing sustained investment or development-oriented cooperation, Moscow has adopted a realist and opportunistic stance, prioritizing short-term gains while paying little attention to potential side effects such as heightened instability and conflict. This brief examines whether this strategy is yielding tangible results for Russia; specifically, whether it has succeeded in strengthening ties with valuable new partners on the African continent and securing broader diplomatic legitimacy.

Uneven Economic Footprint

Trade statistics show a modest expansion of Russia–Africa trade since 2022, with growth concentrated among a few countries. Egypt shows the strongest increase in its share of Russia’s exports, while other countries with noticeable gains include Ethiopia, Tanzania, Uganda, and Madagascar. Many of these states are resource-rich, supplying Russia with minerals and agricultural goods, ranging from citrus, olives, and cocoa to gold, diamonds, and uranium. Some are former French colonies that harbor various degrees of anti-French or anti-colonial sentiment and, except for Egypt, maintain a degree of distance from Western trade and aid networks. This pattern suggests that Russia’s growing import links are concentrated among commodity-exporting and geopolitically flexible countries, reflecting a pragmatic effort to diversify supply sources rather than the emergence of deep economic partnerships.

Figure 1. Average change in export share to Russia, 2022-2024 vs 2019-2021.

Source: Mirrored trade data from CORISK.The countries showing the strongest increases in imports from Russia since 2022 include Libya in the north; Côte d’Ivoire, Ghana, and the Republic of the Congo in the west; and Tanzania, Uganda, Kenya, and Zimbabwe in the east and south. Most of these economies are net-importers of fuel, fertiliser, and grain. In the immediate aftermath of the full-scale invasion, Russia appears to have sought to gain market advantage over Ukrainian exports (and did so in part by capitalising on the Ukrainian port blockade). Several countries have also entered into cooperation in nuclear technology. These are all sectors in which Russia has for a while actively sought to expand its market presence. Arms sales had also been among Russia’s most profitable exports to the continent, until the escalation of the war in Ukraine tied up most of its capacity. Nevertheless, the overall volume of trade with Russia remains modest compared with Africa’s exchanges with other major partners.

Figure 2. Average change in import share from Russia, 2022-2024 vs 2019-2021.

Source: Mirrored trade data from CORISK.

Few of Africa’s most dynamic economies, those experiencing sustained growth and deeper integration into global markets, feature prominently in this trend. Only Ethiopia, Tanzania, and, to some extent, Kenya stand out as moderately growing economies with notable trade expansion toward Russia. This pattern could indicate that Russia’s engagement is driven more by short-term political expediency than by prospects for durable economic cooperation. At the same time, it may also reflect a reactive strategy, with Russia focusing on partners that remain accessible, while wealthier and more stable countries have limited need or willingness to risk established ties with Western markets.

Politics Over Partnership

Diplomatic data reveal a similar pattern. Between 2022 and 2023, Moscow’s state visits to Africa focused heavily on slower-growing or politically isolated countries, including Mali and Sudan. Only Egypt and Ethiopia, both larger economies with diversified external relations, received higher-profile visits and strategic agreements. Participation in the 2023 Russia–Africa Summit in St Petersburg, although broad, with 49 of 54 African countries represented, was lower than at the inaugural summit in Sochi in 2019, with only 17 heads of state compared to 43 in Sochi. Further, these came predominantly from slower-growing or politically isolated countries, including Mali, Burkina Faso, the Central African Republic, the Republic of the Congo, Eritrea, Libya, and Zimbabwe. While larger economies such as Egypt, South Africa, and Senegal also participated at a high level, the overall pattern suggests once more that Russia’s recent outreach has concentrated on politically receptive or less globally integrated states, reflecting both the reluctance of more dynamic economies to risk established ties with Western partners and Moscow’s limited room for maneuver.

In turn, Russia’s military cooperation agreements with African states have increased markedly in recent years. Documented cases include, again, many of the countries already mentioned above, such as the Central African Republic, Mali, Libya, Sudan, Burkina Faso, and Niger.

The combination of arms deals, Wagner-linked security arrangements, and elite-level political support reflects a transactional approach, where immediate influence outweighs sustainable cooperation.

UNGA voting patterns

If Russia’s growing presence were translating into stronger political alignment, one way this would be visible would be in international voting patterns. Yet UN General Assembly data indicate the opposite trend. While several African countries abstained, rather than siding against Russia on the three major resolutions on Ukraine, which has concerned many observers, in general, the average agreement rate of African countries with Russia, historically around 75–80 percent, has fallen to its lowest level since the 1970s.

Figure 3. Average agreement with Russia/USSR in UN resolutions over time

Source: Bailey et al., 2017

 

Figure 4. Distribution of agreement with Russia/USSR in UN resolutions over time

Source: Bailey et al., 2017. Lighter shades from blue to red to yellow represent more recent voting distributions.

The distribution of votes has become increasingly polarized, with more countries distancing themselves or adopting neutral positions. These patterns suggest that Russia’s efforts to leverage security and diplomatic engagement into broader political loyalty have met limited success. Despite increased activity, Russia’s influence appears confined to a narrow set of partners rather than expanding across the continent.

The Battle Over Hearts and Minds

Foreign presence, whether in the form of military, economic, or diplomatic engagement, can shape public attitudes in complex ways. During the Cold War, for example, development cooperation to Africa was widely used as a tool to project ideological influence and promote alternative institutional models, values, and norms. As the foreign aid paradigm came under critical scrutiny from the 1980s onward, the question of how aid affects attitudes toward donors and development models has become increasingly salient (Andrabi and Das, 2005).

The impact of foreign actors on local perceptions has been explored across various settings. A substantial literature has examined the United States and, to some extent, the USSR as two of the most prominent power actors in the international arena, spanning foreign aid, economic and diplomatic relations, and military involvement (Allen et al., 2020; Vine, 2015). Similarly, Chinese investment and lending have gained popularity in many countries but have also been linked to increased corruption and weakened governance in some contexts (Isaksson & Kotsadam, 2018a, 2018b).

In fragile or politically unstable regions, especially those marked by weak state control, violent conflict, or active competition for power among domestic or international actors, public opinion is particularly vulnerable to external influence. In such contexts, and particularly where Russia is present, disinformation campaigns, anti-Western narratives, and appeals to historical grievances can play a significant role in shaping attitudes and perceptions. Russian propaganda efforts are often focused on delegitimizing Western actors by invoking anti-colonial rhetoric and promoting authoritarian, revisionist alternatives (Lindén, 2023; Akinola & Ogunnubi, 2021). Indeed, information influence remains one of the domains where Russia can achieve the greatest impact at minimal cost. While resource constraints are beginning to limit Moscow’s ability to “buy” influence through trade incentives, arms deals, and other forms of economic cooperation, manipulating audiences on platforms such as X or Facebook through coordinated networks of bots remains inexpensive and effective. A recent study by Cedar reports that RT France (formerly Russia Today) has expanded its following on X by 80 percent and on Facebook by 35 percent since 2022. Ukraine’s military intelligence (HUR) notes that in 2025 RT also began translating content into Portuguese to reach audiences in Mozambique and Angola, and plans to launch programming in Amharic to target viewers in Ethiopia by the end of the year.

Western organizations must do a better job at communicating the benefits of their engagement and the values behind it. In regions saturated with Russian media messaging, proactively engaging local narratives by highlighting successful projects, promoting transparency, and countering misinformation is key to maintaining public goodwill.

Figure 5. Share of African audiences increased as RT’s access in Europe was restricted

Source: Cedar.

Conclusion

Russia’s engagement in Africa is driven less by economic partnership and more by opportunistic, short-term goals: access to strategic resources, military presence, and symbolic legitimacy. While these ties may help Moscow navigate temporary diplomatic isolation, they do not appear to generate lasting political or economic gains for Russia, for the time being.

A pressing question is whether they impact development outcomes for African counterparts, and in what direction. Ongoing work within the FREE NETWORK is now using geolocated data to identify how Russian and Wagner-linked activity shapes donor engagement, local development, and public sentiment across affected regions (see preliminary results in Berlin and Lvovskyi, 2025). The analysis is expected to provide a clearer assessment of whether Russia’s outreach in Africa delivers tangible influence or remains largely symbolic.

References

  • Akinola, Akinlolu E., och Olusola Ogunnubi. ”Russo-African Relations and Electoral Democracy: Assessing the Implications of Russia’s Renewed Interest for Africa”. African Security Review, 03 juli 2021. https://www.tandfonline.com/doi/full/10.1080/10246029.2021.1956982
  • Allen, Michael A., Michael E. Flynn, Carla Martinez Machain, och Andrew Stravers. ”Outside the Wire: U.S. Military Deployments and Public Opinion in Host States”. American Political Science Review 114, nr 2 (may 2020): 326–41. https://doi.org/10.1017/S0003055419000868.
  • Andrabi, Tahir, Jishnu Das. “In aid we trust: Hearts and minds and the Pakistan earthquake of 2005″. Review of Economics and Statistics, 99 (3), (2017) pp. 371 – 386
  • Bailey, Michael A., Anton Strezhnev, and Erik Voeten. “Estimating dynamic state preferences from United Nations voting data.”Journal of Conflict Resolution 61.2 (2017): 430-456.
  • Berlin, Maria P., 2024. “Russia in Africa: What the Literature Reveals and Why It Matters”, FREE Policy Brief.
  • Berlin, Maria P., and Lev Lvovskyi 2025. “Russia’s Involvement on the African Continent and its Consequences for Development: The Aid Channel”, SITE Working Paper No 64.
  • Isaksson, Ann-Sofie, och Andreas Kotsadam. ”Chinese aid and local corruption”. Journal of Public Economics 159 (2018a): 146–59. https://doi.org/10.1016/j.jpubeco.2018.01.002.
  • Lindén, Karolina. ”Russia’s Relations with Africa: Small, Military-Oriented and with Destabilising Effects”, 2023.
  • Vine, David. 2015. Base Nation: How U.S. Military Bases Abroad Harm America and the World. New York: Metropolitan Books/ Henry Holt.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.