The impact of 2014 sanctions on the Russian economy

Abstract

After annexing the Crimea in March 2014, the international community imposed wide-ranging sanctions on the Russian Federation with the aim of changing Russia’s foreign policy. However, did not sit idly and responded by imposing counter-sanctions on most of the sanctioning countries. This study aims to examine the impact of the sanctions on the Russian economy. The paper takes two approaches. Firstly, it applies a gravity model to compare the impact of the sanctions on Russian exports and imports. Secondly, the paper uses synthetic control method to investigate how the Russian economy, identified with per capita GDP in PPP, would have involved without the imposition of the sanctions. The estimation results from the gravity model suggest that Russian exports suffer more than imports. Besides, the estimation results based on the synthetic control method approach show that per capita Russia GDP declined more than &2,714 in PPP.