Import Sanctions: A Blunt Sword?

Abstract

How do import sanctions affect targeted firms’ performance? While economic sanctions are imposed more frequently than ever, the literature’s evidence on the impact of economic sanctions remains inconclusive and ranges from significant economic downfalls to little or no economic costs. Based on a novel firm-level dataset and interviews, this research investigates the effect of the 2014 Russian import sanctions on Danish food and agriculture firms. Unlike most previous research on economic sanctions, which has focused on the state-level and macroeconomic effects, this thesis takes an innovative firm-level perspective to obtain a better understanding of the impact of import sanctions and the mechanisms which sanctions operate through. The study shows that actors at both the firm- level and the state-level managed to utilize a broad range of sanctions busting methods to alleviate the negative impact of the sanctions, whereby the import sanctions did not affect targeted firms’ performance. These findings challenge the theorizing from international economics, while they confirm much of the existing literature on sanctions busting and add new mechanisms on how actors can mitigate the firm-level impact of import sanctions. In practical terms, this suggests that both firm and state actors have incentives and tools available to mitigate the impact of import sanctions on targeted firms’ performance.