Russian Invasion of Ukraine: The Role of Private Sanctions

Abstract

Following Russia’s invasion of Ukraine in February 2022, Western Nations have imposed an array of severe sanctions with the goal of thwarting Russia’s ability to finance the war. While in modern history economic sanctions are used with great frequency, the novelty of the war in Ukraine is represented by the first massive use in a warfare context of private sanctions, meaning sanctions decided by private companies (also called “self-sanctioning”).

This paper examines private sanctions as a new geopolitical tool, studying how they interact with economic sanctions and analyzing both the factors that can encourage and inhibit their use.

To this purpose, we compare the companies that exited or suspended most of their operations in Russia after the invasion of Ukraine with the ones that decided to continue to operate in the country. Our analysis shows that companies that chose to leave Russia had a significantly higher net private sanctions variable (0.31 vs. -0.81) compared to those that continued operations. This positive variable indicates stronger incentives for imposing private sanctions, with drivers like economic sanctions, market pressure, and boycott campaigns outweighing brakes such as revenue exposure and operational and regulatory obstacles. The difference is primarily driven by significantly fewer private sanction brakes for companies that left. This highlights the importance of obstacles in influencing the decision to exit.

Overall, our results indicate that private sanctions have the potential to be exploited by governments to reinforce the effectiveness of economic sanctions in modern warfare. To the contrary, private sanctions cannot be relied on as a geopolitical tool that allows policymakers to replace the deployment of costly economic sanctions.

Keywords: Economic sanctions, international law, Russia, Ukraine, boycott, stakeholder governance

JEL Classification: D62, F51, G34, K33, L21