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

Author

Listed:
  • Haishi Li

    (The University of Hong Kong)

  • Zhi Li

    (The Chinese University of Hong Kong)

  • Ziho Park

    (National Taiwan University)

  • Yulin Wang

    (The University of Hong Kong)

  • Jing Wu

    (The Chinese University of Hong Kong)

Abstract

We study how firms in neutral countries adjusted supply chains to Western sanctions on Russia. Firms with headquarters in sanctioning countries (sanctioning MNEs) reduced sanctioned product exports to Russia, showing MNEs' global 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 MNEs expanded exports to both sanctioning and Russia-friendly countries, blending compliance and evasion. Financial sanctions led sanctioning MNEs to reduce imports from Russia in risky sectors. To improve sanctions, stronger secondary sanctions and MNE 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," Working Papers 24-01, NET Institute.
    • Handle: RePEc:net:wpaper:2401
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    File URL: http://www.netinst.org/Li_24-01.pdf
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    Citations

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    Cited by:

    1. Jesus Fernandez-Villaverde & Yiliang Li & Le Xu & Francesco Zanetti, 2025. "Charting the Uncharted: The (Un)Intended Consequences of Oil Sanctions and Dark Shipping," PIER Working Paper Archive 25-005, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    2. Kwon, Ohyun & Syropoulos, Constantinos & Yotov, Yoto V., 2024. "Identifying and quantifying the extraterritorial effects of sanctions," European Economic Review, Elsevier, vol. 170(C).
    3. Jesús Fernández-Villaverde & Yiliang Li & Le Xu & Francesco Zanetti, 2025. "Charting the Uncharted: The (Un)Intended Consequences of Oil Sanctions and Dark Shipping," Economics Series Working Papers 1070, University of Oxford, Department of Economics.

    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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