Trade Sanctions and Customs Union Partners of the Target Country: Evidence from Kazakhstan

Abstract This paper analyses the effects of trade sanctions between Russia and Western countries on Kazakhstan. The nature of these sanctions is characterized by unilateral sanctions from Russia and multilateral sanctions against Russia. Although Kazakhstan refused to participate in these sanction wars, this might affect its economy significantly as it is highly integrated into the Russian economy. An empirical analysis is performed on the product level and time series techniques are used to estimate the effects of the sanctions. The paper assesses the overall effectiveness of trade sanctions through aggregating product level results into a sanction index. The derived sanction index shows that multilateral sanctions did not divert the trade flows from Western countries. On the other hand, the index indicates the existence of sanction busting activities against Russian unilateral counter-sanctions, confirming the hypothesis that unilateral sanctions are ineffective and allow for third-country effects.