Sanctions, Sales, and Stigma: Intermediary Online Firms' Market Role in Sustaining Trade

In the wake of Russia’s full-scale invasion of Ukraine in February 2022, intermediary online shops enabled brands to retain a presence in the Russian market, even as many global companies - presumably or actually - withdrew due to legal and reputational concerns. This paper examines how sales by intermediaries responded to international sanctions. Using novel, detailed information on customer transactions of 95 global brands from 1,761 web shops, we show that sales to Russia dropped significantly after the invasion, especially among shops from countries that imposed direct export restrictions. This drop was substantial yet not absolute. Guided by a stylized conceptual framework, we explore which types of intermediary shops helped sustain sales to Russia, linking it to economic incentives and the need to consider brand-specific legal and reputational concerns. Overall, we show how the role of market structure shapes firms’ decisions to comply with sanctions and explore economic incentives through which they are likely undermined.

Journal of International Economics, Vol.159