Trade Patterns under conflict: A comparative study of "active traders" and "non active traders" throughout the Russia-Ukraine War.

Details

Supervisors

Guilhem Cassan

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [60] en sciences économiques, orientation générale

Abstract

Russia and Ukraine are significant exporters of agricultural commodities, along with the latter also specializing in mineral fuels. The literature has shown that trade patterns tend to change when wars break out. Taking that into account, the escalation of the Russia-Ukraine war threatened the global supply chain. In this research, I sought to see if countries who actively traded, or the “active traders”, tended to experience a change in their import trends relative to the “non active traders”, or those that do not relatively actively trade. I collected data from 32 countries for each supplier in the agricultural market, and 54 countries in the energy market, both over the time period of 2004-2023. I accounted for the first phase (2014-2021) and the second phase (2022+) of the war. Using a fixed effects model that treats the year as a continuous variable, I find in the agricultural market that with Ukraine as the supplier, when the war enters its second phase, active traders tend to experience a significant decline in trade by 82.44% relative to non-active traders while accounting for the previous period. Trade with Russia on the same market, unlike Ukraine, lacked statistical evidence to suggest that import patterns have changed for both groups. However, the energy market is a different story. Rather surprisingly, I find that active traders relative to non-active traders tended to experience a significant decline in trade of 94.81% when the war is at its first phase, whereas the deviation of the first phase, or the transition of the first to the second phase, is not statistically associated with a change of imports for active traders compared to the other group. Given the rise of oil prices that happened in the background, I was expecting a significant change in the active traders’ imports compared to the non-active traders’ imports. The relative change in imports of active traders from Ukraine could be explained by how countries adapted to the situation, by switching to different suppliers and to different commodities. However, alternate suppliers are not always guaranteed due to limited market share: this could explain why trade did not appear to change with Russia on the agricultural market. Changes in the energy market in the first phase of the war could be explained by a decline in oil prices, in which the latter happened due to changes in global demand and supply. As for the second phase, trade patterns appear not to change possibly due to how sanctioners that lowered their imports and non-sanctioners who increased their imports both belong to the active traders group. The effects could cancel out. Nevertheless, having sanctioners and non-sanctioners in the same group made the results harder to interpret, and so the research suggests that to capture a better and clearer understanding of the trade patterns in the energy market, it would be more optimal to split the groups based on whether a country imposed a sanction or not.