The Impact of Economic Sanctions on the Russian Economy and Russian Ruble Depreciation

This diploma thesis investigates the impact of the Western sanctions imposed on Russia in March 2014 as a reaction to the Russian invasion of Ukraine and the illegal annexation of Crimea. The economic sanctions were implemented by the United States, the European Union, and a number of international organizations and countries on the various Russian sectors and individuals. This work focuses on the impact of sanctions on the Russian economy in terms of the annual GDP growth rate, GDP per capita growth rate, exports and imports growth rate, and the exchange rate development. As a result, the Russian Federation have registered economic contraction by 3.7%, a decline in nominal exports by 40.02% and imports by 38.75%, and a fall of the Russian ruble by almost a half. Within the framework of the empirical part, this thesis introduces synthetic control subjects by building a model of an alternative Russia in order to estimate the effect of the impositions of sanctions on the real GDP per capita, and on the annual growth of imports and exports of good in services in the Russian Federation. The effect on the Russian currency is being examined using the difference-in-difference method. The results of the model estimations affirm that the impact of the implementation of sanctions on indicators presenting the economic welfare and the international trade, along with the exchange rate, is significant, even though rather in the short run.