War, sanctions, and third-party trade partners: Evidence from South Africa

The European Union's sanctions against Russia following the invasion of Ukraine have reshaped global trade dynamics. While direct effects on sanctioning and sanctioned countries are anticipated, the consequences for neutral third-party nations are relatively unknown. This study examines how these sanctions have shifted trade patterns and evaluates broader economic effects on South African firms and the labour market. Using a stacked event study framework and rich employer-employee customs-matched administrative data, we find that the exports and imports of sanctioned products to the European Union rise, alongside a smaller increase in imports of non-sanctioned products. The surge in exports to the European Union is concentrated in the energy sector. Meanwhile, exports of sanctioned products to Russia decline. Despite South Africa's neutrality, South African firms do react to the European Union–Russia sanctions and ultimately benefit due to their disproportionately larger trade volumes with the European Union relative to Russia.