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

Abstract

AbstractThis 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.