Corporate responses to economic statecraft: explaining strategic choices in the implementation of EU sanctions against Russia by Estonian private sector firms

Abstract

While EU sanctions are legally binding in all Member States, the practical part of the implementation is largely done by private companies. This thesis examines why firms who are operating in Estonia and are facing the same regulatory sanctions framework have different responses to EU sanctions against Russia. Some follow only the formal legal requirements, while others act more cautiously and avoid transactions, partners, or goods even when they are not clearly prohibited. Therefore, the study recognises three response types: compliance, overcompliance, and undercompliance. To address the puzzle through a small-N, theory-guided comparative case study based on semi-structured interviews with ten Estonian firms from the financial, energy, and industry/trade sectors supported by background interviews with state officials. The findings confirm that overcompliance was the dominant response pattern with eight out of ten interviewed companies doing more than they were legally obliged to. One firm was classified as compliant, and one as compliance bordering on undercompliance. The findings also concluded that legal ambiguity did shape the initial response of overcomplying in the majority of cases at the beginning of the sanctions regime that has remained unchanged. Overcompliance was also likely when firms felt reputational risk, but even more so when it was combined with other external pressures. The thesis concludes that company responses depend not only on the law itself, but also on uncertainty and reputational concerns combined with external pressure, sector, internal capacity, and previous dependence on Russia-related business.