Causal Impacts of the 2014 Russia-Ukraine Conflict on Machinery and Pharmaceutical Trade: A Synthetic Control Analysis

This study examines the long-term geopolitical and economic impacts of the 2014 Russia-Ukraine conflict on the industrial sectors of both nations, with a focus on pharmaceuticals (HS code 30) and machinery (HS code 84) trade. Utilizing the Synthetic Control Method (SCM) with data from 2009 to 2022 across 105 countries, we assess the causal effects of the conflict and subsequent sanctions on trade flows. The results reveal severe and persistent trade disruptions with clear asymmetries. Russia experienced a sharp and enduring collapse in machinery and pharmaceutical imports, reflecting the effectiveness of targeted sanctions on technology transfers and financial access. Its pharmaceutical exports showed only modest gains, suggesting limited success of import-substitution policies. Ukraine faced substantial declines in machinery exports, driven by the loss of the Russian market and conflict-related supply disruptions, while its pharmaceutical exports proved remarkably resilient, indicating successful reorientation toward European and other markets. Pharmaceutical imports in Ukraine declined moderately, and machinery imports showed only minor disruption. These findings highlight the enduring relevance of 2014 trade shifts, exacerbated by the 2022 escalation and underscore the need for targeted policy interventions to enhance trade resilience. This research is original in its sectoral focus and application of SCM to understudied industries.