The economic sanctions on Russia: the direct and “third-country” effect

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2019-07-12
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en
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By using disaggregated trade data, this paper analyses the effects of both Western sanctions and the retaliatory Russian sanctions on Russian imports. More importantly, it was examined whether Russia manages to circumvent the imposed sanctions by conducting trade elsewhere. First, a theoretical framework provides a foundation of how sanctions affect a target country’s imports and what consequences this could have in terms of welfare. Thereafter, the hypotheses were empirically tested using a Poisson Maximum Likelihood (PPML) panel data estimation. The data set includes all countries with which Russia conducted trade over the course of 2011-2017. The results indicate that the Western sanctions do not seem to affect Russian imports. Yet when distinguishing between dual-use products and products that are not dual-use, Russia appears to import more dual-use products from countries that have not imposed sanctions. The Russian sanctions were found to negatively affect Russian imports. However, Russia compensates for this by increasing trade with non-sanctioning countries. Lastly, Russian imports in products that were not subject to a sanction were not affected in this period.
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Faculteit der Managementwetenschappen