What goes around comes around: The effects of sanctions on Swedish firms in the wake of the Ukraine crisis

Abstract

This study uses the sanctions imposed on and by Russia in 2014 as an exogenous shock on Swedish firms. The results suggest that the total short‐run cost of these sanctions on the Swedish economy amounted to around 1 billion SEK in 2013 prices, which implies a rather limited impact (around 0.025% of the Swedish GDP). The sanction effects were, however, highly asymmetric, and the direct effect on firms exporting banned products to Russia was a 70% drop in exports to Russia and an increased probability of exiting this market with 0.6 units. The indirect effects on nonbanned products were a 36% drop in sales and an increased probability of exiting of around 0.2 units. The disruption on the Russian market also created ripple effects outside this market, which was manifested in a 20% drop in the domestic production of banned products, a 12% drop in sales on markets outside Russia and a new export pattern. These negative ripple effects were also found to be pronounced in firms with their core products exposed to these sanctions, in firms with financial distress and in regions with a relatively low level of labour productivity.

Smart or Smash? The Effect of Financial Sanctions on Trade in Goods and Services

“…The most recent uptake in research pertaining to sanctions is due to sanctions imposed on Russia, both in response to its invasion of Crimea in 2014 and the entire Ukraine in 2022, and Iran, in response to its nuclear arms program and support of terrorism. Crozet and Hinz (2020), Miromanova (2019), and Gullstrand (2020) examine the effects of various sanctions on Russia, while Haidar (2017), Draca et al (2017), andFelbermayr et al (2020a) examine the consequences of recent sanctions on Iran. Unlike the literature focusing on a single targeted country, our effort examines the effect of several episodes of EU sanctions for a single sender country, Germany, which is more in line with Hufbauer and Oegg (2003), Caruso (2003), Yang et al (2004), andAfesorgbor (2018).…”

Who cares about sanctions? Observations from annual reports of European firms

“…Using a rich dataset of French firms, Crozet and Hinz (2020) show that the sanctions on financial instruments caused significant obstacles for firms that rely on financial intermediation and led to a sizable cut in sales in Russia. Gullstrand (2020) uses data on Swedish firms to show that the total short-run cost of sanctions was quite limited, but highly asymmetric. For a small number of companies and industries, the sanctions led to significant loss of firm value and ultimately financial distress.…”

Global commodity market disruption and the fallout

“…Boulanger et al (2016) evaluate the market impacts of the Russian import ban on food imports using a computable general equilibrium (CGE) model and find that fruit and vegetable prices were most affected. In an analysis of Swedish firms, Gullstrand (2020) finds that export prices for food products banned by Russia dropped significantly after 2014.…”