But in this case oil and burnsTrade flows show that Russia will rent its petroleum products through third countries, which with its large refining capacity will buy Russian crude at a discount (about $60 a barrel) and then send it back to Europe. The process is relatively simple, legal, and therefore meets the parameters of the sanctions.
Russia sells its oil in large quantities to refineries in China and India to turn crude into diesel and other derivatives that ultimately end up in Europe. These are partly Russian exports. On the import side (what Russia needs to buy to continue producing), the process is similar but with other players.
The European Bank for Reconstruction and Development (EBRD) has published a report in which it tries to break trade, after the increase in exports from the European Union to countries that are considered allies of Russia. This economy could can act as a messenger (making a profit) and keeping Russian industry alive by supporting it with good means that it cannot buy directly from the European Union.
Disaggregated data allows EBRD experts to identify products or groups of products partially or fully subject to EU sanctions. They focus on exports to Russia, as do many of Russia’s neighbors. The main interests are trade flows to Armenia, Kazakhstan and Kyrgyzstan. These three countries are part of a free trade agreement with Russia, the Eurasian Economic Union.
“Trade through several regions of Russia’s neighbors can be bypassed to circumvent economic sanctions, but to a certain extent,” according to a recently published EBRD working paper titled “Eurasian bypass: Trade to Russia via the Caucasus and Central Asia.”
On the other hand, the document shows a sharp reduction in exports from the EU, Britain and the US to Russia after the introduction of economic sanctions in March 2022 following Russia’s invasion of Ukraine. At the same time, exports to Armenia, Kazakhstan and the Kyrgyz Republic (all members) show an increase. Eurasian Economic Union or UEE). The study also documents the sharp exchange between these states and Russia. The UEE is an economic union born in 2015, which is made up of Russia, Kazakhstan, Armenia and Kyrgyzstan and plans to open its doors to other countries such as Uzbekistan or North Korea.
The data until the end of 2022 speaks for itself. Armenia’s exports to Russia will increase by 77% to 2021, according to Russia, they have the rocks (this would explain the strength of the Armenian currency). However, official Armenian statistics show an even more drastic increase. Russian-Armenian trade grew by nearly 100% to $4.4 billion in one year. This figure represents more than a third of Armenia’s total foreign trade. Everything indicates that this sudden increase in Russian sales includes goods made in third countries and exported from Armenia to Russia again because of Western economic sanctions against Moscow.
“The war caused significant changes in regional trade patterns. Direct exports from Western democracies to Russia were threatened,” explain the experts who published this document. The EU, US and UK are trying to stop Russia from buying media goods and the capital of Moscow necessary to preserve its energy. However, Russia has managed to establish, for the modern production of oil, gas or metals, which are very capital industries (machinery), which suggests that the country should be managed. Vladimir Putin he was finding a way to acquire the good means so necessary to continue production.
“We see at the same time the emergence of the middle class: the growth of Western exports in the countries of Central Asia and the Caucasus with the growth of exports from these countries to Russia,” say these EBRD economists.
“This broken trade, however, is only a fraction of what was previously exported directly to Russia. This situation gave an opportunity to other suppliers, such as Turkey and China, which substantially increased its sales in Russia“Explained Beata Javorcik, chief financial officer at the EBRD and one of the authors of the new article. China was initially cautious after the start of the Ukrainian invasion, but later began to export and buy large amounts of resources from Russia.
Evidence suggests that trade-offs between neighboring economies can be used to circumvent economic sanctions, up to certain limits. former Soviet republicsThere are not the largest economies that can support all the trade that Russia needs. But “such trade has also been shown to be a tool for evading tariffs or taxes. This mediated trade is complemented by increased exports from China and Turkey to Russia,” say the report’s authors.
Furthermore, a document published by the EBRD argues that trade flows consistent with trade diversification into Russia are more pronounced for product groups in which goods are at least partially subject to sanctions and for goods similar to those sanctioned.
Why does Russia choose these regions to complement its satellite imports? In the case of Armenia or Kazakhstan, it should be noted that these two economies are part of the Eurasian Economic Union, so that “goods exported by these economies could potentially be sent to Russia with minimal controls (like sailors, enter. Even exports to Georgia (which is the only land bridge between Armenia and Russia provides, as the Armenia-Azerbaijan border remains closed), and other selected economies that share a land border with Russia and the rest of the world.
The samples of trade in the EBRD budget are based on official export data, but they do not include any illegal activity such as sanctioned or unauthorized adztification of goods, note the authors.