Kansas businessman ships banned avionics equipment to Russia via Armenia, UAE and other third countries. A French company falsified documents to help unscrupulous European exporters avoid sanctions.
Despite more than two years of Western punitive measures, Russia is still taking banned goods, with the help of crafty businesses that go far enough to evade the embargo.
Last week, the United States announced new sanctions against 300 targets inside and outside Russia.
“(These actions) attack the remaining routes for international materials and equipment, including dependence on critical supplies from third countries,” said Treasury Secretary Janet Yellen. It may still not be enough.
“Unfortunately, when people want to commit fraud, it may take some time but they can succeed,” Claire Lavarde, a lawyer at international law firm Bryan Cave Leighton Paisner, said. AFP.
Russia was hit with the first wave of sanctions after the annexation of Crimea from Ukraine in 2014. The West tightened the screws after Moscow attacked its neighbor in February 2022.
But Russia’s economy has held off a surprise, growing 5.4% in the first quarter of this year as trade ties with Asia and the Middle East improve.
Some business leaders say they can’t control where their products end up in the supply chain.
“We shouldn’t be naive, but there’s nothing we can do,” said a senior executive at a European precision machine manufacturer who spoke on condition of anonymity.
For legal protection, he said, “our lawyers advise all our clients around the world to sign a document stating that they will no longer sell our products to Russia, Belarus and Iran”.
Mrs. Lavarde, who really helps banking, luxury and high-tech groups know that they can still work with, said: “One can imagine controlling the first re-export, but not ten.”
Despite export controls, Russia “continues to be able to import a large amount of goods needed for military production”, according to a January report by the Kyiv School of Economics.
Moscow’s imports of “battlefield goods” and “critical components” were affected after the invasion, but recovered in the second half of 2022 “as Russia was able to adapt its supply chain”, the report said.
Russia’s imports of battlefield goods reached $932 million between January and October 2023, only 10% lower than the pre-sanctions period.
Data compiled by Eric Dor, director of economic studies at the France-based IESEG School of Management, shows that EU exports to Russia of 50 “high priority items” fell by 95% between October 2022 and September 2023 compared to the same period in 2020. – 2021. Meanwhile, the study found that exports of these goods to former Soviet republics, Turkey and the UAE are on the rise. They more than tripled for Kazakhstan, quadrupled for Armenia and jumped almost 1,700% for Kyrgyzstan.
Kansas businessman Cyril Gregory Buyanovsky, 60, pleaded guilty in December to his role in “a long-running scheme to smuggle advanced US avionics equipment to Russia”, Assistant Attorney General Matthew Olsen said at the time.
After Washington tightened sanctions in 2022, Mr. Buyanovsky and other conspirators sent goods to Russia through intermediary companies in Armenia, Cyprus and the UAE, US authorities said.
They filed false export forms and used foreign bank accounts in Armenia, Kazakhstan, Kyrgyzstan, Cyprus and the UAE to funnel money from Russian customers to Mr. Buyanovsky’s company.
‘Shall I report it?’
Ted Datta, head of financial crime compliance at Moody’s Analytics, said companies need to conduct deeper investigations than ever before to trace these items through the supply chain.
He said companies should ask themselves: “If the volume of trade suddenly increases to Uzbekistan or another neighboring third country, or I have a transaction to Moldova, will I report this risk to the regulator?”
The company is expected to check that its partners are not on the Western blacklist. They must also verify that contracts on joint projects with Russian companies awarded before sanctions can be legally completed.
A European lawyer helping clients examine the scenario said they would comply with the rules. But not every Western firm plays by the rules, with some opening new factories in third countries to export products to Russia, he said.
Adding to the complexity, some products are stripped for parts. IESEG said the Russians are suspected of using electronic components of washing machines or dishwashers.
The EU is exporting 1.6 million euros worth of washing machines to Kazakhstan between 2020-2021, according to IESEG. The amount rose above 18 million euros two years later, an increase of 1,310%.
