Gigantic Increase in Russia-adjacent Exports

So if you believe the official figures, exports from the US and EU have fallen dramatically since sanctions came into place. 

From the EU, there has been a 45% decrease in exports to Russia. From the US the fall has been ever larger, at a 90% decrease.

Yet during the same period, Russia’s total imports increased. That’s according to François Valentin of the UK Onward think-tank. So what is going on? 

How Russia and Western Firms are Dodging Sanctions

In essence, Western firms are taking what they used to sell to Russia and selling it to Central Asian intermediaries instead. This becomes incredibly blatant when one looks at the import-export trends for these countries.

Kazakhstan, for example, became an overnight industrial powerhouse if you believe its foreign trade figures. The country has increased its machinery exports to Russia by 76% and its vehicle exports to Russia by 267% since 2021.

From next to nothing in 2021, Armenia is now exporting tens of millions of dollars worth of semiconductors and integrated circuits to Russia.

German firms have been some of the worst offenders. According to Valentin, “German exports of cars and parts (blue) are up 5,500% to Kyrgyzstan, 720% to Kazakhstan, 450% to Armenia and 340% to Georgia.”

Instead of selling directly to Russia, Chinese exports to all of these countries have also increased. An analysis at The Diplomat argues China is seeking to play down its growing trade with Russia in order to manage the risk of falling subject to sanctions itself.

Meanwhile, Robin Brooks of Brookings Institute crunched the numbers on the new destination of Russia’s exports. It appears much of these are now being routed through the Middle East.

This obvious ineffectiveness of economic sanctions is a deep structural issue. For decades, governments have looked on while the elite off-shore their finances and shipping as a way to dodge taxation, labour and environmental regulations. We can hardly expect anti-Russian regulations to effectively corral international commerce when nothing else does.

Thumbnail image courtesy of @fin21 via Unsplash.

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