The impact of sanctions on firms’ financial performance in Russia

Abstract This study examines the impact of international sanctions on the financial performance of Russian firms, utilizing a dataset comprising 21,263 companies from 2014 to 2023. The analysis reveals that, since the imposition of sanctions in 2014, the overall financial performance of Russian firms has significantly deteriorated. However, these adverse effects appear to have attenuated following the escalation of the Russo-Ukrainian conflict in 2022. Notably, the financial efficiency of firms in the mining and banking sectors remained largely unaffected by sanctions, whereas firms in non-mining sectors experienced substantial declines. Furthermore, a rise in imports from sanctioning countries was associated with a much greater deterioration in financial performance compared to a rise in exports from those countries. Based on these empirical findings, two key conclusions emerge. First, the effects of sanctions are heterogeneous across industries, firm categories, and trade types. Second, Russia’s proactive foreign policy efforts to diversify its economic partnerships beyond Europe since 2014 have likely enhanced the country’s overall resilience to sanctions.