Export Sanctions: Rerouting, Disruption, and the Reach of Economic Warfare

Konstantin Egorov, Vasily Korovkin, Alexey Makarin and Dzhamilya Nigmatulina

No 20601, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: To what extent are trade sanctions neutralized by rerouting through third countries? Do they nevertheless disrupt production and supply chains in a targeted economy? We study the large-scale export sanctions imposed on Russia after February 2022, which covered 36% of Russia’s prewar import value. We combine newly collected sanctions records with Russian customs data, firm balance sheets, domestic railway shipments, and government procurement contracts. We find that sanctions sharply reduced directly targeted country-product imports. Imports of the sanctioned products from friendly third countries increased substantially. Using records of both the country of shipment and the country of production for each transaction, we show that this increase was driven primarily by rerouting of goods produced in sanctioning countries. This adjustment offset about two-thirds of the direct import decline, but not fully. Firms that had relied on soon-to-be-sanctioned imports experienced a persistent 12% decline in output, with no offsetting expansion by competitors or entrants. These losses extended to manufacturing and technology firms, firms along the military supply chain, and firms indirectly exposed through trading partners. Affected firms also lost government procurement sales. The results show that export sanctions can impose substantial real costs even when rerouting absorbs a large share of the direct trade shock.

Keywords: Geoeconomics (search for similar items in EconPapers)
JEL-codes: D22 D74 F14 F51 H56 (search for similar items in EconPapers)
Date: 2025-08
New Economics Papers: this item is included in nep-cis and nep-iaf
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