The impact of sanctions on Hungarian and Polish business in Russia

Leader of the project: HUN-REN CERS, Institute of World Economics, Hungary

Coordinator of the project: Csaba Weiner (HUN-REN CERS Institute of World Economics)

Participants: Kálmán Kalotay, Csaba Lakócai, Gábor Túry, Anna Wisniewski

Implementation period: 2024 – 2026

This research project supported by Kulturális és Innovációs Minisztérium, NKFI Alap

ABOUT THE PROJECT

The academic literature lacks a detailed long-term analysis of Central and East European (CEE) exports of goods to and foreign direct investment (FDI) in Russia and firm-level empirical investigation and explanatory power on these activities. Western sanctions and Russian countermeasures, especially those from 2022 onwards, have made this gap even more apparent, and sporadic non-academic sources cannot substitute for rigorous academic study. Although the Russian market constituted a small part of CEE exports and outward FDI activity even in the pre-sanctions period, it has continued to be important for selected CEE export products and investor firms, which have been challenged by hurdles caused by these sanctions regimes. In the proposed research, we take on the task of assessing how sanctions have affected Hungarian and Polish exports of goods to and FDI in Russia and the firms behind these transactions. We make an effort to fill this gap using a multiple methods approach, relying on both qualitative and quantitative methods, and integrating the insights of the institutional theory with the resource-based view and the resource-dependence theory in pursuit of interpreting sanctions and assessing the response strategies of firms to a new political and economic environment, as well as their explanatory variables. Our data will derive from aggregate and firm-level national statistics, corporate registers/databases, other sources of documentary research and our own questionnaires and interviews.

This research is organised around four main questions. The starting question we consider, using both aggregate and firm-level data, is how sanctions have affected Hungarian and Polish exports of goods to and investment presence in Russia and the performance of Hungarian and Polish firms involved in these transactions. The subsequent part of the research explains the above processes by taking a closer look at the specific areas where sanctions have impacted Hungarian and Polish firms, and at the types of difficulties and opportunities they have faced. The third task is to determine how individual Hungarian and Polish firms have responded to the new situation. This part of the project includes the adaptation strategies of firms. Questions to be addressed include whether Hungarian and Polish exporters and investors intend to stay in the Russian market, and if so, whether they are able to do so, and what strategies they apply to seize opportunities and overcome challenges related to sanctions. Finally, the fourth set of questions aims to determine which firm-specific factors influence firm performance and adaptation strategies. These questions cover the characteristics of the firms and their products and activities, such as the length of presence in the Russian market, the degree of dependency on the Russian market in terms of country-specific characteristics of the product or service, the general export experience, the knowledge acquired on a sanctioned market other than Russia or a market with a high level of political instability, and the firm size.

DISSEMINATION/OUTPUTS

Conferences/Workshops

Research papers/Publications