Exposure to trade disruptions in case of the Russia–Ukraine conflict: A product network approach

Abstract

This study provides a product network‐based analysis of the impact of the Russia–Ukraine war on the economy of third countries. While recent studies based on input–output data already revealed several economic consequences of the conflict, our approach allows for more detail regarding geographical coverage and heterogeneity of the affected products. The method also provides a decomposition of exposures on a country‐by‐country basis. After identifying the most important products exported by Ukraine and Russia, we apply a comprehensive indicator of exposure and measure the dependence of third countries on products imported from Ukraine or Russia. Results reinforce that Ukraine dominates in iron and agricultural products, while Russia is important through exporting energy sources, raw materials and iron products. Post‐Soviet and European countries have high exposure to Russian imports, confirming the energy dependence of these countries. Middle Eastern and African countries heavily depend on Ukraine, especially for grain imports, possibly causing food security problems. Using data on trade restructuring over the past year, we also analyse the relationship between trade exposure and the extent to which countries were willing to support Ukraine. Results show that it is not exposure itself, but the decrease of exposure over time which correlates with military support.

Untitled

“…The refusal of energy carriers from sanctioned sellers forced them to diversify their energy activities and find more reliable suppliers of natural oil and gas. A similar network analysis of the impact of war on the economy of third countries was also conducted by E. Braun et al (2023), who came to the same conclusions -the rejection of the products of the aggressor country and the diversification of energy suppliers added constancy and predictability to European economy.…”

Russia-Ukraine War's Effects on the World Economy

“…Furthermore, both countries have large uranium reserves around the world. The cost of several of these goods has increased significantly since the conflict began, despite the fact that production and export levels haven't moved significantly [9].…”

Impact of the Russia–Ukraine war on grain and fertilizer supply: Evidence from Kenya

“…Wheat was one of the most affected commodity given the outstanding exporter status of Russia and Ukraine. Studies have also examined the impact of the war on economic costs across geographical locations and find that Europe is the region most affected by the war given its proximity to Ukraine and Russia and its reliance on energy and food supplies from the two countries (Braun et al, 2023;Hall, 2022;Liadze et al, 2022). The war has also contributed to global inflation.…”