Shooting down trade: Firm-level effects of embargoes

Uğur Aytun, Julian Hinz and Cem Özgüzel

Journal of Economic Behavior & Organization, 2025, vol. 231, issue C

Abstract: In November 2015, Turkey’s unexpected downing of a Russian military jet in Syria prompted Russia to impose a swift and comprehensive embargo on specific Turkish exports. This study leverages this quasi-natural experiment to estimate both the immediate and longer-term effects of the imposition and subsequent lifting of these sanctions. Utilizing administrative data encompassing all Turkish exporters, we first examine the impact on trade at the firm level, assessing the direct effects of the embargo, the redirection of trade to alternative markets, and the circumvention through other products. Second, we investigate broader repercussions on domestic operations, including firms’ sales, procurement, and employment. Our findings show that while the embargo caused immediate and substantial declines in exports of affected products to Russia, firms partially mitigated these losses through trade diversion. Although relative trade patterns normalized post-sanctions, absolute trade values remained subdued. The analysis reveals that affected firms experienced declines in domestic sales and supplier relationships, with temporary disruptions in employment. However, most negative effects dissipated following the embargo’s removal, except for some persistent reductions in procurement and supplier links, likely linked to persistent lower trade volumes after the lifting of the embargo.

Keywords: Sanctions; Embargoes; Firm-level effects; Gravity (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 F51 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:231:y:2025:i:c:s0167268124004359

DOI: 10.1016/j.jebo.2024.106821

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