Paper long abstract:

In this paper we assess with difference-in-differences methodology how financial sanctions imposed by Western countries against Russia in 2014 have affected banks' investments in Russia. We utilize partially confidential BIS data on bilateral cross-border capital flows, and find that investments into Russia declined from all countries after 2014. However, investments declined more from the countries that imposed sanctions related to financing of Russian entities. As especially the European Union countries had traditionally supplied Russia most of its external financing, this curtailment of financing is significant. We calculate that sanctions have meant at least $700 million less external investments per quarter since mid-2014.