The Boomerang Effect of Energy Sanctions and Informational Contagion in a Low-Liquidity Emerging Market (2022-2024)
Author:Narciz Bălășoiu, Alexandru Nazare, Roxana Clodnițchi, Ioana-Gabriela Bălășoiu and Alexandra-Carmen Bran
JEL:F51, Q41, C32, L60.
DOI:10.24818/EA/2026/73/1342
Keywords:weaponised Interdependence, energy crisis, GARCH-MIDAS, sanctions, industrial resilience, boomerang effect, disinformation.
Abstract:
This paper investigates the quantitative mechanisms through which the EU sanctions regime against the Russian Federation destabilised the energy market in Romania, a low-liquidity emerging energy market. Diverging from the classical theory of complex interdependence, we adopt the "weaponised interdependence" framework to analyse how sanctions functioned as structural shocks to price variance. Using daily data from the Day-Ahead Market (DAM) and the Geopolitical Risk Index (GPR) for the period 2021-2024, we employ a GARCH-MIDAS econometric approach to isolate the impact of sanctions intensity on electricity price volatility. The results confirm a significant "boomerang effect": while intended to penalise the target, sanctions generated a persistent volatility premium in the Romanian market, decoupled from physical scarcity. Furthermore, using the Synthetic Control Method, we quantify the sanctions risk premium paid by energy-intensive industries (metallurgy and chemicals), revealing a significant divergence between actual industrial production and its counterfactual potential. The novelty of this study lies in three contributions: (i) the construction of a continuous Sanctions Intensity Index (SII) that captures the escalating nature of EU restrictive measures; (ii) the first application of the GARCH-MIDAS framework to Romanian DAM data in a sanctions context; and (iii) the first SCM-based quantification of the industrial risk premium for a low-liquidity emerging EU energy market. The study contributes to the literature on economic security by demonstrating that in low-liquidity emerging markets, "fear" acts as a transmission channel as potent as physical supply disruption. Critically, we argue that this fear premium was amplified by informational contagion, including disinformation narratives surrounding energy weaponisation, which distorted market expectations beyond what fundamentals alone would warrant. The paper thus contributes to the emerging literature on the economic impact of fake news by providing quantitative evidence that media-transmitted panic, whether factual or fabricated, has measurable consequences for price formation in low-liquidity emerging energy markets.