The Impact of Sanction on Czech Economic Relations with Russia



Year of publication 2017
Type Article in Proceedings
Conference Economic and Social Development: 23rd International Scientific Conference on Economic and Social Development
MU Faculty or unit

Faculty of Economics and Administration

Field Economy
Keywords Economic sanctions; exports; FDI; Russian Federation; tourism
Description As a member of the European Union, the Czech Republic was one of the countries that introduced sanctions on Russia. These were supposed to affect the economic relations between both economies. We generally recognize three channels by which the sanctions can affect the Czech economy – a decline in exports and outflow of FDI to Russia, a drop in the inflow of investment from Russia and a decrease in number of Russian tourists in the country. It was often argued that the Czech economy depends on exports to Russia, especially exports of mechanical engineering products, which at least partially balanced huge imports of Russian oil and gas. At the same time, there has been supposedly strong inflow of Russian foreign direct investment into the Czech economy, even though the Russian official FDI inflows are declared as negligible. In addition, the Czech Republic has also benefited on a long-term basis from the influx of Russian tourists. Recent political events as well as the decline of the Russian economy may have led to disruption of such economic relations between both countries. For this reason, we aim to provide a complex analysis of the dependence of the Czech economy on the Russian one and the impact of sanctions on mutual relationship. Our analysis will be primarily descriptive, due to nearly total absence of credible data about real Russian investment in the Czech Republic. We found that there was a possible small direct impact of the sanctions on specific Czech exports. Otherwise the impact is highly questionable.
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