What happens if a country blocked external Bitcoin traffic?
Is their local chain just completely wiped out due to lower POW?


Yep. Lower proof of work means orphan, invalid chain.


  Would local nodes be forced to go back to the time of the fork and download international blocks?


Yes, because the chain they followed before they reconnected, has no value after the re-connection.


  All those valid transactions at the time, gone?


Yes. This is also why the 51% attack is bad. One with more hash power could

1) cash out their coins

2) publish the new, alternative chain with more PoW

3) start mining secretly again

4) repeat until the coin price decreases enough to make mining inefficient


  And roles reversed, what if this country amassed enough mining power to have more POW?


Then everyone loses money. This'll also indirectly affect Russia because of the changes in coin price.