Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300038 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11110
Publisher: 
CESifo GmbH, Munich
Abstract: 
How do firms in neutral developing countries adjust their supply chains in response to geopolitical and economic fragmentation? Do they comply with or circumvent Western sanctions on Russia? Using comprehensive transaction-level bill of lading data from major developing countries, we study these questions in the context of the Russo-Ukrainian War. We find that firms in non-sanctioning countries significantly reduced exports of sanctioned products to Russia (and Belarus) if their headquarters are located in sanctioning countries (i.e., sanctioning MNEs), highlighting MNEs' role in propagating sanctions globally. Domestic firms in developing countries observed a relative increase in such exports, weakening the effect of Western sanctions. Sanctioning MNEs expanded exports of sanctioned products to both sanctioning and Russia-friendly countries, indicating a blend of compliance and non-compliance. Sanctioning MNEs significantly reduced imports from Russia (and Belarus) in financially risky sectors, consistent with the effect of financial sanctions. To strengthen the effectiveness of sanctions, sanctioning countries should use their MNE networks, induce domestic firms in neutral countries to comply, and prevent sanction avoidance of MNEs through indirect exports.
Subjects: 
global supply chains
geopolitical risk
international conflict
JEL: 
F14
F63
O19
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.