War in Ukraine and Western sanctions : how vulnerable are German firms?

Russia's invasion of Ukraine has led to a sudden reassessment of political and economic relations with Russia, including financial and trade relations. This policy brief analyzes a new firm-level dataset for Germany to examine the involvement of German firms in the Russian and Ukrainian markets. We analyse the impact of the annexation of Crimea and related sanctions in 2014 and identify the degree and shape of vulnerability of German trade with respect to these two markets on the firm level. The firm-level data reveals that Russia and Ukraine have become less important as trading partners at both the extensive margin and the intensive margin. So far, recovery effects have been observed merely for German-Ukrainian trade. Within the group of firms trading with Russia and Ukraine, we see a clear heterogeneity, which in turn is reflected in individual vulnerability towards the affected markets.