How have the sanctions against Russia and their counter sanctions affected the Russian trade? - An anlaysis of panel data using the gravity model

Abstract

Economic sanctions are prevalent in the modern world as an alternative to war, instead aiming to maim economic growth and power by hindering trade. In recent times, sanctions have been imposed against many countries, Russia being one of them. Often seen as a response to questionable political and economic acts. The western countries and the UN being the main actors behind recent sanctions have faced relatively small negative effects of their imposed sanctions. The receiving countries however, often faced large consequences. With this thesis we aim to explain how Russia was affected and possibly still is affected by the sanctions imposed by the EU, the US, and their own counter sanctions. Searching for patterns to see if trade was diverted and if the sanctions have had lasting effects in a longer term. To research the question, we use descriptive statistics and regression analysis to explain and predict the effects over time. Our conclusions are that sanctions had a great immediate impact on trade. In the first year a decrease of up to 31.75% in bilateral trade between Russia and the EU and US was observed. As time passed, all parties significantly diverted their trade to a degree. The initial trade diversion of Russia being 42.48% in the first year.