Editors' note: This column is part of the Vox debate on the economic consequences of war.
Did the Western ‘sanctions Blitzkrieg’ against Russia fall through, as Putin has recently claimed?1 The effectiveness of sanctions to stop wars is – given their costs for the imposing countries and the lack of evidence – heatedly debated. Empirical evidence on whether, how fast, to what extent, and in which spheres sanctions work is urgently needed to aid policy decisions. This is also the case for the sanctions introduced against Russia as a response to its aggression in Ukraine. Data on daily volumes of cross-border and inner-Russian trade by globally operating online trading companies open new opportunities for an almost real-time analysis of the economic changes associated with the introduction of the 2022 sanctions. Transaction-level data from 2,288 selected companies show that the economic sanctions imposed by the West have been followed by a substantial decline in the volume of online cross-border trade, whereas online trade within Russia declined only slightly.
Russian e-commerce in the aftermath of the 2022 invasion
Early sanctions by Western governments were orchestrated with the goal of decoupling the Russian market from the global economy. After initial asset-freezing measures were imposed on selected individuals and entities, immediate economic sanctions by the US, UK, Canada, and the EU were introduced to target the financial sector on 26 February 2022, two days after the intensification of the war. Financial transactions of seven Russian banks were blocked within the SWIFT system on 12 March 2022, while major credit cards and networks withdrew from the Russian market, making trade for users of Russia’s leading banks more difficult.
The effects of financial sanctions were amplified by the simultaneous withdrawal of many foreign companies from the Russian market for ethical and reputational reasons, either voluntarily or following public pressures. Similarly, e-commerce shippers and logistics companies halted operations.2 More general changes in demand and supply as well as in Russia’s exchange rate provided channels through which the economic sanctions have likely been working. However, some large companies remained in the country (e.g. AliExpress) or sanctions imposed on them were lifted (e.g. for Ozon), potentially allowing them to absorb customers. By contrast, services provided by the IT and gaming industries were not limited by logistical problems and stockpiling behaviour, which were observed in sectors where goods need to be physically shipped. Finally, despite Western sanctions, financial transactions within the country remained possible with seemingly acceptable additional transaction costs. Online financial transactions, for instance, worked due to past agreements with Russia’s National Payment Card System as well as thanks to alternative credit cards and payment systems that have been flourishing in recent years. Payments outside of the country were facilitated by several creative circumventing mechanisms.3
Before the 2022 invasion, Russia was highly integrated into the global economy. In 2020, it had imported 20.6% of GDP in goods and services, surpassing China’s (16%), Brazil’s (15.5%), or India’s (19.2%) import shares. Russia’s digital economy has experienced fast growth over the past years, promoted by strategic government support that aimed to foster national actors. In 2018, the revenue of Russian digital platforms exceeded $17 billion with a value of about 1% of Russian GDP (World Bank Group 2018). Although the new set of sanctions introduced against Russia after the 2022 invasion is more extensive than in 2014, the country is believed to also be better prepared and resilient (van Bergeijk 2022, Schrader and Laaser 2022), having almost halved its bilateral trade with the EU prior to the new invasion, and having prepared alternatives to the SWIFT system.
Evidence on the effects of sanctions on international trade remains mixed (Felbermayr et al. 2020). Relying on data from Iranian Customs, Haidar (2013) shows that, in a globalised world, traders divert their trade, making sanctions ineffective. By contrast, following the 2014 sanctions, Russia reportedly did not manage to fully substitute imports from suppliers located in sanctioning countries, leading to declining overall Russian imports (Bělín and Hanousek 2019). Analysing detailed firm- and individual-level data, Ahn and Ludema (2020) show that indeed, companies that were targeted by sanctions in 2014 lost about 25% of their operating revenue, yet, at the same time, the government protected important, strategic firms. Similarly, in 2022, for some industries such as travel, the state counteracted the sanctions by offering large discounts to customers, such as for Aeroflot’s inner-Russian flights. Moreover, Russian countersanctions, imposed in retaliation, resulted in an even more pronounced decline in imports from the West (resulting in about $1.3 billion versus $10.5 billion of lost trade). In fact, investigating monthly customs data, Crozet et al. (2021) find that French firms affected by the 2014 sanctions were 5.7 percentage points less likely to export to Russia. Detailed and disaggregated micro-level evidence of the effects of the 2022 invasion and sanctions on trade is so far missing.
Descriptive evidence from a large sample of online shops
Our descriptive analysis relies on proprietary, high-quality, first-party data provided by an unnamed business analytics firm. The data are collected via direct data sharing agreements with various data partners and capture websites’ performance data (including transactions), using web analytics services.4 In contrast to consumer panels, the data are not collected at the customer level but directly through the merchants’ tracking systems, therefore delivering information of much higher quality. For each of the data partners, all sales are tracked and no sampling occurs.
In our sample, we observe 1,041 (46%) online shops operated by European firms, 509 (22%) by US ones, 617 (27%) from other countries,5 and 121 (5%) by Russian firms, capturing about 3.6 million customer transactions between 1 October 2021 and 2 April 2022. Of these cross-border transactions, 91% involve sales of consumer products, 6% are in IT and other services, 2% are in travel, and 0.6% in the games sector.
Table 1 Average daily revenues from Russian customers (units of $1000) before and after the outbreak of the war
Notes: The descriptive statistics are based on an unbalanced panel of online shops. Data are restricted to cover roughly the same period length before and after the outbreak of the war (i.e. 37 days before/after the 2022 invasion).
To capture the drop in e-commerce, we focus on the five weeks before and after the start of Russia’s recent invasion of Ukraine.6 Between 18 January and 23 February 2022, online purchases by Russian customers in our sample amounted to about $2.2 million daily. Sales by EU firms reached a trading volume of about $1.3 million daily, followed by inner-Russian trade (amounting to $614,000 daily), whereas daily imports from the US or other countries amounted to $119,000 and $126,000, respectively. This changed dramatically with the 2022 invasion, and especially after international sanctions were imposed on Russia. The aggregate daily trading volume in our data plummeted to $1.1 million, with drastic declines in purchases from EU companies (by 67%). Sales from other parts of the world roughly halved, whereas the average volume of sales by Russian shops exhibited a smaller decline of about 13%.
Figure 1 Revenue from daily transactions of Russian customers (log scale)
Note: The graph shows the daily value of aggregate daily transactions (on a logarithmic scale, $1000).
The adjustments followed the stepwise introduction of economic sanctions against Russia, as shown in Figure 1, with no signs of prior hoarding behaviour or immediate extensive substitution from Russian online merchants. They varied between the sectors in which the companies operated. The largest drop has been experienced in the e-commerce trade of consumption goods. E-commerce in travel experienced a smaller drop and quickly recovered for merchants located and trading in Russia. IT and other services dropped, while the gaming sector remained stable, even experiencing a slight increase in sales from EU.
Figure 2 Transactions of Russian customers by shop type
Notes: Graphs show aggregate daily transactions (on a logarithmic scale) for selected shop categories.
Our analysis provides a partial picture of the ongoing adjustments in online trade following the 2022 invasion. Within a short period of time, Russian customers are observed to purchase only half of the customer products online that they purchased before the war. How do these results compare to predictions made in other studies? We are not aware of similar analyses of the impact of wars or subsequent sanctions specifically on the e-commerce market. Thus, we can offer only a simplified comparison in Table 2 below, exploring the implications of the war for Russian trade.
Table 2 Empirical estimates of the costs to e-commerce trade in Russia in the aftermath of war and sanctions
We conclude with a few words of caution. The e-commerce market observed by us, although extensive, relies on a convenience sample of online shops and by its very construction does not capture all economic transactions in e-commerce trade with Russia. We are not aware of the availability of such a complete database. Moreover, the fact that we analyse daily information, as opposed to monthly or yearly aggregates, allows us to display a detailed immediate picture of the drop in e-commerce before it consolidates. Finally, the causal effect of sanctions themselves is likely to be lower than the above estimates, given a range of simultaneous measures and policies taken.
Ahn, D P and R D Ludema (2020), “The sword and the shield: The economics of targeted sanctions”, European Economic Review 130:103–587.
Bělín, M and J Hanousek (2019), “Making sanctions bite: The EU–Russian sanctions of 2014”, VoxEU.org, 29 April.
Chepeliev, M, T W Hertel and D van der Mensbrugghe (2022), “Cutting Russia’s fossil fuel exports: Short-term pain for long-term gain”, Working paper.
Crozet, M, J Hinz, A Stammann and J Wanner (2021), “Firms’ exporting behaviour to countries under sanctions”, VoxEU.org, 5 March.
Federle, J, G Müller, A Meier and V Sehn (2022), “Proximity to War: The stock market response to the Russian invasion of Ukraine”, CEPR Discussion Paper 17185.
Felbermayr, G, A Kirilakha, C Syropoulos, E Yalcin and Y V Yotov (2020), “The global sanctions data base”, European Economic Review 129:103–561.
Haidar, J I (2013), “Sanctions and trade diversion: Exporter-level evidence from Iran”, VoxEU.org, 9 April.
Langot, F, F Malherbet, R Norbiato and F Tripier (2022), “Strength in unity: The economic cost of trade restrictions on Russia”, VoxEU.org, 22 April.
Pestova, A, M Mamonov and S Ongena (2022), “The price of war: Macroeconomic effects of the 2022 sanctions on Russia”, VoxEU.org, 15 April.
Schrader, K and L Claus-Friedrich (2022), “Deutschlands Russlandhandel und der Krieg in der Ukraine: Was steht zur Disposition?”, Kiel Policy Brief 163.
van Bergeijk, P A (2022), “Sanctions and the Russian-Ukraine conflict: A critical appraisal”, Working paper.
World Bank Group (2018), Competing in the Digital Age: Policy Implications for the Russian Federation.
1 TASS Russian News Agency, 12 April 2022, https://tass.com/politics/1436653 (accessed 13 May 2022).
2 Examples of e-commerce shippers, logistics companies include UPS, FedEx, and DHL. Examples of marketplaces include Amazon, Ebay, Asos, and Zalando.
3 (1) Via innovative approaches to mobile phone payments (e.g. via Apple store, Google play, or mobile phone operators such as MTS, Yota and Megafon), (2) by creating accounts in countries using a VPN or by accessing directly or indirectly financial services of other countries (e.g. through Qiwi in Kazakhstani currency which is used for instance to pay for Steam, the leading gaming platform), (3) by buying keys (codes) from third-party sites or using shared libraries (for Xbox and Playstation), and (4) by paying in crypto-currencies via other countries. See a popular link at www.the-village.ru for instructions on how to make online payments after the February 2022 invasion. (https://www.the-village.ru/city/howto/kak-oplachivat-podpiski, accessed 13 May 2022).
4 The company does not obtain individual consumers’ data or personally identifiable information and is by design GDPR compliant.
5 Information on transactions with China is not available.
6A time window like the one chosen by Federle et al. (2022) who have recently estimated the impacts of the war on neighbouring countries.