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Collateral damage: The Western sanctions on Russia and the evaluation of implications for Russia’s post-communist neighbourhood

Vugar Bayramov, Nabi Rustamli and Gulnara Abbas

International Economics, 2020, vol. 162, issue C, 92-109

Abstract: This paper reviews the Western sanctions on Russia and endeavours to evaluate the medium-term implications of these sanctions for post-communist neighbours of Russia. Growth spillovers are examined via VAR model. This model reveals that the Western sanctions against Russia have significant impact on Russia’s post-communist neighbours: the accumulated response of CIS GDP to a 1% shock to Russian GDP is −0.72, while the accumulated response of CEE GDP is −0.22. Export, remittance and FDI links of these countries with Russia are examined using panel regressions. Almost all CEE countries are less integrated with Russia compared to CIS countries. Oil and gas exporting CIS countries are not directly dependent on Russia. The remaining CIS countries are the most vulnerable group, and the remittance channel retains its importance for their economies. Costs of Western sanctions for the CIS countries can be minimised by integrating these implications to the design and implementation process of sanctions.

Keywords: Western sanctions; Russia; CIS; CEE countries; Baltic states; Spillover channels (search for similar items in EconPapers)
JEL-codes: C22 C23 F15 F24 F44 F51 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.inteco.2020.01.002

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Handle: RePEc:eee:inteco:v:162:y:2020:i:c:p:92-109