At the Russian border, 'parallel' imports to circumvent sanctions | War in Ukraine

Despite sanctions unpublished, Russia adapts and manages to import Western products without the permission of their manufacturers.

A line of trucks waits in Gudauri, Georgia, to cross into Russia.

The border crossing at Lars, Georgia, is arguably one of the most spectacular of the Caucasus.

Located at more than 1260 meters above sea level on the mountainside, it is also the most dangerous and the most likely to be the scene of the most difficult situations. unpredictable.

Early this morning an avalanche closed off a section of the trade route leading to Russia.

There is an endless line of immobilized trucks stretching for miles. Their drivers will have to wait days with their cargo to pass through customs 30 kilometers away in Russia.

They are used to monster traffic jams and Silo is not complaining about it more than the others.

The driver waves for us to board his truck, where he makes instant coffee which he distributes to co-workers who are smoking outside.

He tells us he is heading to Russia to look for gas. Over the past year, he has noticed that traffic has almost tripled on this vital trade route. This is largely due to the waves of sanctions imposed on Russia by Western countries.

The trucks arrive from Tajikistan, Kazakhstan, Turkey and Armenia.

Silo explains that they mainly transport local products such as fruits, cognac from x27;Armenia, textiles and construction materials.

Silo and his friends deliver gas from Russia to Yerevan, in Armenia.

Georgia, though pro-Western and despite its own war with Russia in 2008, has not followed suit in sanctions against its giant neighbour. This country is a hub for transporting goods that Russia imports from Central Asian countries, and vice versa. Its economy depends on it. But it's never been like that, ever: it's unheard of, Silo said, sipping his black coffee.

The export rate of member countries of the Eurasian Economic Union has been steadily increasing for a year. Increases of 77% for Armenia and 50% for Kazakhstan.

Ditto for Turkey. Although it is not a member of this Eurasian union, it multiplies exchanges with Moscow.

Such increases were predictable from the day Western countries decided to close the door to the Russian market. What was less so, however, was how quickly Russia was able to circumvent sanctions to get its hands on Western goods via a third country.

For example, Bagdam, another trucker who takes to the air, tells us that his tractor-trailer is full of Pringles brand potato chips. Those adapted to the tastes of Eastern Europe with flavors of mushrooms and even caviar were among the favorite products of the Russians.

Kellogg's, which makes Pringles, shut down operations in Russia on February 24, 2022 to protest the invasion of Ukraine. Bagdam explains that today he is delivering for an Armenian distributor who imported them from Europe to ship them back to Moscow.

It's called parallel imports. They have become commonplace since the Kremlin legalized and even encouraged them to circumvent sanctions and boycotts of major Western brands, without their consent.

The Russian Trade Minister already claimed last May that this type of transaction already represented more than 5% of Russian imports, the equivalent of 6.5 billion US dollars.

He even predicted that the value of parallel imports could total around $16 billion by the end of 2022.

The principle is simple, explains economist Hovsep Patvakanyan, whom we met in Yerevan, the capital of Armenia, where we spent a few days before heading to Georgia.

“You import products, you do the customs clearance, then you are free as an individual to sell them to whoever you want. »

— Hovsep Patvakanyan

Hovsep Patvakanyan, Economist of the Investment Board of Armenia

We didn't have to look far to see this modus operandi.

Social networks are flooded with private accounts where car dealers post their inventories in Russian.

In the suburbs of Yerevan, a dealer shows us around his car park, where dozens of cars are parked.

The vast majority are for Russian customers, he says.

While some models are second-hand and therefore exempt from penalties, most vehicles are brand new, Chevrolet to Lexus via Mazda and even a Corvette, of which he is particularly proud and which he even thinks of keeping for himself rather than reselling it.

A car dealer in Yerevan imports vehicles from North America and Europe.

He legally imported them from the United States, Dubai and even Canada.

His desk is decorated with license plates from the countries he does business with. business.

This one is going to Russia tomorrow, he said, pointing to a Hummer.

American cars are in demand in Russia, explains Lilit, a young blogger who works for this company.

Since the Russians cannot buy them from the United States, they import them from #x27;Armenia. These are parallel exports and it's perfectly legal.

She's not wrong, says economist Hovsep Patvakanyan.

Although the resale is done without the authorization of the firm which holds the rights to the intellectual property of its product, it is not counterfeit.

“Moraly questionable, but it's legal, and that's why distributors have carved out a niche for themselves and are increasingly taking advantage of it. »

— Hovsep Patvakanyan

Vladimir Putin with President of Turkmenistan Serdar Berdimukhamedov, Prime Minister of Armenia Nikol Pashinyan, President of Belarus Alexander Lukashenko and President of Kyrgyzstan Sadyr Japarov. Ilham Aliyev of Azerbaijan at the Commonwealth of Independent States Leaders Summit in October 2022 in Astana, Kazakhstan

It is indeed a gray area of ​​the international market, which escapes the sanctions regime. And the countries where the manufacturers have chosen to punish Russia do not have much leeway to prohibit this type of parallel transaction, explains Hovsep Patvakanyan, at least for the moment.

The European Union is no less irritated. She is particularly concerned about the dramatic increase in the number of household appliances that some Caucasus countries have been importing from Europe over the past year.

According to statistics published by the Bloomberg agency, Armenia and Kazakhstan imported more refrigerators in the first eight months of 2022 than they did in the previous two years.< /p>

Appliances are among the goods under embargo.

In a speech last September, the President of the European Commission, Ursula von der Leyen, claimed that the Russian army was so decommissioned that it recycled microchips from household appliances. to repair his military equipment.

The European Union, the United States and the United Kingdom all adopted a new set of sanctions on Friday aimed at weakening the Russian economy and cracking down on companies and countries that support Vladimir Putin's war machine.

Although it is an economic partner of Russia, Georgia committed itself from the first days of the invasion of Ukraine to respect the financial sanctions imposed by the international community, among other things to avoid parallel exports. to Moscow.

During our stay in the Caucasus, we spoke to several representatives of transport companies who told us that they considered it too risky to go #x27;adventure in the transport of sanctioned products since the goods are at risk of being confiscated at Georgia Customs.

Last summer, Georgia's Finance Minister Lasha Khutsishvili announced that 90 individuals suspected of violating the rules had been suspended by the country's customs service.

A border crossing in Georgia.

The profit isn't worth the risk, says David Avetisyan, whose Yerevan-based transport company Spyur continues to expand as exports to Russia grow.

< p class="e-p">However, in the line of trucks waiting for the reopening of the road leading to Russia, several drivers told us over coffee that it was an open secret.

“Look ahead: it's impossible to control everything. There are iPhones, computers, a whole range of products that will get through without a hitch, guaranteed. »

— A truck driver

Direct or parallel imports, Vladimir Putin's Russia can count on docile neighbors to weather the storm.

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