Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277739 
Year of Publication: 
2023
Series/Report no.: 
SAFE Policy Letter No. 102
Publisher: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Abstract: 
This Policy Letter presents two event studies based on the pre-war data that foreshadows the remarkable way in which Russian economy was able to withstand the pressure from unprecedented package of international sanctions. First, it shows that a sudden stop of one of the two domestic producers of zinc in 2018 did not lead to a slowdown in the steel industry, which heavily relied on this input. Second, it demonstrates that a huge increase in cost of fuel called mazut in 2020 had virtually no impact on firms that used it, even in the regions where it was hard to substitute it for alternative fuels. This Policy Letter argues that such stability in production can be explained by the fact that Russian economy is heavily oriented toward commodities. It is much easier to replace a commodity supplier than a supplier of manufacturing goods, and many commodity producers operate at high profit margins that allow them to continue to operate even after big increases in their costs. Thus, sanctions had a much smaller impact on Russia than they would have on an economy with larger manufacturing sector, where inputs are less substitutable and profit margins are smaller
Subjects: 
Sanctions
Russian Economy
Commodities
Document Type: 
Research Report

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