Trade sanctions
Egorov, Konstantin; Korovkin, Vasily; Makarin, Alexey; Nigmatulina, Dzhamilya (11.12.2025)
Numero
11/2025Julkaisija
Bank of Finland
2025
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe20251211117943Tiivistelmä
How effective are trade sanctions? We study the unprecedented sanctions imposed on Russia following February 2022, when Western countries banned exports accounting for 36% of Russia’s prewar import value. Combining novel, hand-collected records of these sanctions with Russian customs data, firm balance sheets, domestic railway shipments, and government procurement contracts, we provide the most comprehensive analysis to date of the economic impact of trade sanctions on a target country. Using a difference-in-differences approach, we find that imports of sanctioned country-product varieties into Russia saw a sharp 55% decline after the war’s onset. Although we document substantial rerouting through third countries, it has not fully offset the direct import losses: total imports of sanctioned products fell by 27% through 2023. Russian firms that had relied on soon-to-be-sanctioned imports experienced a 14% decline in output during the same period, not offset by competing firms or entrants. Similar declines are present for manufacturing and technology firms, and firms along the military supply chain. Affected firms have also experienced reduced government procurement sales and incurred additional losses when their buyers or suppliers were exposed to sanctions. Overall, our findings suggest that, contrary to widespread claims of ineffectiveness, export sanctions on Russia have had far-reaching adverse effects.
Julkaisuhuomautus
NON-TECHNICAL SUMMARY
FOCUS
The paper analyses how effective the export bans and trade sanctions imposed on Russia following February 2022 have been at reducing its imports and at inflicting real economic damage. The authors ask to what extent did sanctions reduce Russia’s imports of targeted goods—and how did this affect Russian firms, especially those dependent on sanctioned inputs or tied to military supply chains.
CONTRIBUTION
This is the most comprehensive micro-level empirical evaluation of sanctions’ impact on a major economy so far. Unlike high-level or aggregate studies, it uses a novel, hand-collected sanctions data set merged with detailed customs import data, firm balance sheets, domestic railway shipments, and government procurement contracts. Using a difference-in-differences design, the paper compares trade flows and firm performance before and after the sanctions, between sanctioned and non-sanctioned products — enabling a causal interpretation of the effects.
FINDINGS
The authors find a sharp 62% drop in imports of sanctioned country-product varieties after the war’s onset; rerouting and substitution through third countries occurred, but did not fully offset the losses, so that total imports of sanctioned products including all the channels for substitution and rerouting remained down by 27% through 2023. On the firm side, those previously reliant on soon-to-be-sanctioned imports suffered a 14% drop in output. The decline was observed not only broadly in manufacturing, but especially among technology firms and firms linked to the military supply chain. Affected firms also saw smaller government procurement contracts and additional losses when their suppliers or buyers were hit. Overall, the paper shows that import sanctions have generated substantial and persistent economic pain — challenging narratives that sanctions are merely symbolic or easy to circumvent.
FOCUS
The paper analyses how effective the export bans and trade sanctions imposed on Russia following February 2022 have been at reducing its imports and at inflicting real economic damage. The authors ask to what extent did sanctions reduce Russia’s imports of targeted goods—and how did this affect Russian firms, especially those dependent on sanctioned inputs or tied to military supply chains.
CONTRIBUTION
This is the most comprehensive micro-level empirical evaluation of sanctions’ impact on a major economy so far. Unlike high-level or aggregate studies, it uses a novel, hand-collected sanctions data set merged with detailed customs import data, firm balance sheets, domestic railway shipments, and government procurement contracts. Using a difference-in-differences design, the paper compares trade flows and firm performance before and after the sanctions, between sanctioned and non-sanctioned products — enabling a causal interpretation of the effects.
FINDINGS
The authors find a sharp 62% drop in imports of sanctioned country-product varieties after the war’s onset; rerouting and substitution through third countries occurred, but did not fully offset the losses, so that total imports of sanctioned products including all the channels for substitution and rerouting remained down by 27% through 2023. On the firm side, those previously reliant on soon-to-be-sanctioned imports suffered a 14% drop in output. The decline was observed not only broadly in manufacturing, but especially among technology firms and firms linked to the military supply chain. Affected firms also saw smaller government procurement contracts and additional losses when their suppliers or buyers were hit. Overall, the paper shows that import sanctions have generated substantial and persistent economic pain — challenging narratives that sanctions are merely symbolic or easy to circumvent.