The Impact of Sanctions on the Russian Financial Market

The study analyzes the impact of international sanctions on the Russian financial market in the context of the Russian-Ukrainian conflict that began in 2022. The analysis covers the period from January 4, 2021 to April 29, 2024 and is based on the ARCH family models, known for their quality in modelling the volatility of financial time series. The research contributes to the study of the topic dedicated to the impact of sanctions by providing a detailed overview of the Russian-Ukrainian conflict, analysing the effects of different types of sanctions on the domestic financial market. According to the results of the study, it was revealed that the logarithmic returns of the RTS index are significantly influenced by oil prices and the S&P500 index, emphasising the dependence of the Russian economy on the energy sector and the presence of spillover effect between financial markets. Despite the imposition of sanctions by “unfriendly” countries, no statistically significant direct impact on the stock or foreign exchange market was found, with the exception of the positive impact of travel sanctions on the exchange rate. However, the sanctions Russia imposed in response have a statistically significant impact on the RTS index. The study also demonstrates the lack of leverage effect in Russian markets - a situation in which positive and negative innovations cause different reactions. The findings can be useful both for regulators and policymakers, and for investors seeking to optimize their strategies. However, given the limited time period and short duration of sanctions, future research could expand the analysis to include the long-term impact of sanctions, the use of additional variables, and alternative methods for modeling volatility.