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To Comply or Not to Comply: Understanding Neutral Country Supply Chain Responses to Russian Sanctions

Author

Listed:
  • Haishi Li
  • Zhi Li
  • Ziho Park
  • Yulin Wang
  • Jing Wu

Abstract

Using transaction-level bill of lading data from major neutral countries, we study how their firms adjusted supply chains in response to Western sanctions on Russia following the 2022 invasion of Ukraine. Firms with headquarters in sanctioning countries reduced sanctioned product exports to Russia, showing multinationals’ geopolitical influence. However, domestic firms in neutral countries increased sanctioned exports, weakening sanctions. Firms exporting more to sanctioning countries complied more, while those sourcing more inputs rerouted sanctioned products to Russia. Sanctioning multinationals expanded exports to both sanctioning and Russia-friendly countries, blending compliance and evasion. Financial sanctions led sanctioning multinationals to reduce imports from Russia in trade finance intensive sectors. To improve sanctions, stronger secondary sanctions and multinational involvement are essential.

Suggested Citation

  • Haishi Li & Zhi Li & Ziho Park & Yulin Wang & Jing Wu, 2024. "To Comply or Not to Comply: Understanding Neutral Country Supply Chain Responses to Russian Sanctions," CESifo Working Paper Series 11110, CESifo.
    • Handle: RePEc:ces:ceswps:_11110
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    More about this item

    Keywords

    global supply chains; geopolitical risk; international conflict;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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