Foreign corruption helps Russia bypass sanctions: “Finnish window” and other schemes

Life under pressure

Back in March last year, after the first wave of restrictions, Russia broke the record for the number of sanctions imposed against it, leaving far behind the former leaders of this anti-rating – Syria, Venezuela, Cuba, North Korea and Iran. And now, a year and a half has already passed since the beginning of the NWO, and unfriendly countries are not going to stop. The Cairo newspaper Al Araby calculated in February that more than 14,000 various restrictive measures were introduced against our country. For comparison: there are currently more than 2,000 sanctions against North Korea, and over 2,600 against Syria. Before our country’s record, the situation of Iran, which survives under the yoke of more than 4,000 restrictions, was considered the most difficult.

But in relation to Russia, this, as it turned out, is not the limit. Western countries are not going to stop and increase pressure. On May 19, on the eve of the G7 summit, the UK imposed restrictions on 86 people and organizations associated with the Russian military-industrial complex. London also intends to ban the import of copper, nickel and aluminum from our country. The authorities of Foggy Albion also assume that the new restrictions will “freeze” the export of diamonds in the amount of $4 billion.

Washington does not lag behind its European counterparts. According to USA Today, the White House wants to impose sanctions against 70 companies that export from the United States, as well as more than 300 individuals and legal entities, ships and aircraft. The American authorities plan to limit the work of “financial intermediaries” in Europe, the Middle East and Asia.

Expanded sanctions against Russia and Australia. This time, the restrictions affected 21 Russian companies, including several large banks, and 3 high-ranking citizens of our country – Assistant to the President of Russia Maxim Oreshkin, Head of Rosfinmonitoring Yury Chikhanchin, Head of the State Legal Department of the President Larisa Brycheva.

At the same time, following the results of the G7 summit, the number of restrictions will increase even more, since the countries included in this association have already stated that they want to tighten our country’s access to the global financial system, reduce dependence on its energy carriers, keep Russia’s assets in a blocked state, as well as discuss possible measures to counter intermediaries who continue to trade with our state. This time, the focus is on “sanction holes”, which they will try to eliminate, as well as damage Russian nuclear energy and the diamond trade.

Package with packages

But do not worry too much about the listed hostile steps. Even at the beginning of the Western sanctions war against Russia, Elena Afanasyeva, a member of the Federation Council of the Russian Federation, commenting on one of the first restrictive packages, indicated that our country would put this “package in a package with packages”. “We all know why these bags exist in our homes,” the senator said, alluding to the garbage disposal.

If we switch from the figurative language of the senator to the dry language of numbers, it becomes clear: Russia has coped with the unprecedented sanctions pressure, and has basically adapted to numerous economic restrictions. The main achievement is that our country increased its foreign trade turnover by 8.1% last year. It reached $850.5 billion. According to the customs service, last year Russia’s trade with China increased by 28% compared to the previous year, with Turkey – by 84%, with Belarus – by 10%. Germany lost most of all from the rupture of relations: trade with it decreased by 23%. It is curious that the EU countries as a whole turned out to be not in the red, but in the black! The total trade turnover between our country and the European Union has reached a record eight years, Eurostat reported. Mostly Europeans imported Russian products rather than exported them to Russia. Thus, the EU bought goods from our country at once for 203.4 billion euros, while the growth compared to 2021 turned out to be incredibly large – almost 25%. At the same time, the Geneva World Trade Center noted that EU exports to the Russian Federation for 11 months of 2022 turned out to be about 5 times lower than for the whole of 2021, which “indicates a significant decrease in supplies from the EU to the Russian Federation.”

Well, with this ratio, who suffered more from the sanctions? The answer is obvious: our former Western “partners”. “Russian companies no longer need to come up with mechanisms to circumvent sanctions,” says Artem Tuzov, director of the corporate finance department at IVA Partners Investment Company. “Western countries and corporations are successfully coping with circumventing sanctions on their own. The main thing is not to interfere with them: allow parallel imports and allow payments in a currency other than dollars and euros. It’s done. Capitalism will do the rest on its own.”

ghost trade

Of course, if the sanctions did not work at all, they would not have been introduced. But neither the Russian authorities nor representatives of domestic business have been sitting idly by all this time. Russia began to actively refuse the dollar and, in general, the currencies of unfriendly countries in foreign trade, parallel, or “gray” imports were allowed. Energy carriers began to be transported by tankers marked “destination unknown” by analogy with the method of circumventing sanctions, which were previously used by Iran and Venezuela. In addition, Russian oil was often mixed with raw materials from other countries in small proportions and, on this basis, the country of origin of the goods was changed in customs declarations, and then it was quietly traded. But that’s not all. More than $1 billion worth of European dual-use goods disappeared in transit through Russia to destinations in Armenia, Kazakhstan and Kyrgyzstan, the Financial Times (FT) business newspaper recently reported. The publication made such conclusions on the basis of a study of open data, calling this phenomenon “ghost trading”. It is noted that a total of $2 billion worth of goods were sent from the European Union to the listed countries, including aviation components, optical equipment, gas turbines, broadcasting products and other sanctioned products. And some of this list of “prohibitions” simply did not reach the recipients. “The inconsistency in the records suggests that Russia circumvented massive sanctions by providing intermediaries, agents or suppliers with fake destinations on EU customs declarations,” the publication concludes. “This method has helped Moscow retain access to key European goods.”

Of course, the FT was not going to “praise” our country with its publication. As Tuzov points out, the “disappearance” of cargo on the territory of the Russian Federation means that transit through our country is unreliable, that there are victims who the cargo did not reach, but in practice this is not the case. “But there is no one affected by such a “loss” of cargo,” the expert emphasizes. “This means that both the sender and the recipient of the goods are satisfied with the outcome of transit through Russia.”

The very fact of publication in the respected FT publication can probably be seen as a signal that the cunning of Russian business and the authorities has been noticed. “Any scheme works until regulators find out about it,” recalls Vladislav Antonov, financial analyst at BitRiver. “Once the gap in the sanctions is fixed, the scheme stops working or adapts to the new conditions.” But even here there is no reason to be sad. If this method of circumventing the sanctions of the G7 countries is blocked, the Russian authorities and business will find other ways. For example, they will purchase products in other countries that do not participate in sanctions against Russia or use third-party companies that are not associated with our state.

We can and should use the international experience of circumventing sanctions. “North Korea adapted to the sanctions by falsifying customs and shipping lists or separating goods into components that are not included in the sanctions lists,” recalled Maxim Osadchy, head of the analytical department at BKF-Bank. “For example, the delivery of tanks to the Republic of the Congo in 2009 was carried out under the guise of spare parts for bulldozers, and the shipment of missiles to Yemen in 2002 was listed as cement on the consignment note.” Bypassing sanctions is possible through the creation and expansion of transport corridors connecting our country with states that do not support sanctions, for example, along the Russia-Iran route. According to Dmitry Mazanov, a representative of Trader Income, domestic companies can resort to such methods of circumventing sanctions as the use of intermediaries, the establishment of branches abroad and the use of cryptocurrencies.

There is always a window

An interesting way to circumvent the restrictions was the so-called “Finnish window” for the USSR or “Belarusian transit” in the period 2016–2017, when consumer goods and products that fell under restrictions entered our domestic market through neighboring countries. “Wherever there are any difficulties, a new model and niche for business always appears,” Yulia Korchagina-Ozdzhan, founder of the Academy of Business and Strategic Marketing, continues the conversation. – I think that this way of circumventing sanctions will continue, or simply the inscriptions in the documents will be replaced with a friendly country. This is the so-called re-labeling, the application of new stickers, and everything will be transported, as it was recently with parmesan.”

It is appropriate here even to talk about the benefits of corruption in foreign countries if it helps Russia cope with restrictions. Almost everywhere in the world, including Western-pressured Iran and Cuba, there are places where you can buy sanctioned goods, just the price is high. And do not wrinkle your nose about the not entirely legal ways of international trade listed above. A real “sanctions war” has been declared against Russia, and for survival, and even more so for victory, all means are good in it.

In addition, we should not forget about real import substitution. “It is necessary, not in words, but in deeds, to develop national import substitution, to establish localized production of equipment necessary for the domestic market, in particular, with the help of China or Belarus,” says Nikita Maslennikov, a leading expert at the Center for Political Technologies. – Initially, parallel imports were conceived as a temporary measure, and now such a mechanism is acquiring all the signs of a long-term practice. You can come up with effective ways to circumvent Western sanctions as much as you like, but without the simultaneous development of our own technological base, we risk marking time in one place for many years.”

The forthcoming introduction of the 11th package of sanctions on Russian companies may be reflected in different ways. “For some, this will be the final push to cooperate with the countries of Latin America and the Middle East and, of course, with China,” says Vadim Nekrasov, an expert in international procurement. “Besides, the Latin American countries themselves are set to cooperate: for example, recently Mexico announced its readiness to supply vanilla and cocoa to Russia in exchange for the supply of iron, grain and fertilizers.” On the other hand, there are Russian firms that are fundamentally interested in purchasing certain European goods and which are now importing them through Turkey, Uzbekistan, Turkmenistan, Azerbaijan, Armenia… If these countries refuse to cooperate with Russia because of possible adverse consequences from the EU, then a new India can become a transit country. Many experts see in it the potential to become a “new China” in the near future. If desired, it can even completely separate from the global economy (as, for example, North Korea did), its own capacities and potential will be enough for this. Therefore, it will be much more difficult to impose sanctions on India than on other countries: for her, such measures will be less tangible. And this, in turn, provides Russian companies with additional opportunities, the expert explained.

In general, in world trade in the near future, a kind of competition will continue between the imposition of sanctions against Russia and their circumvention, and often the same countries will deal with both. Well, the domestic economy has been living under restrictions for many years, so it will cope with the 11th package of sanctions – there is no doubt!