Tricks For Dodging Sanctions — Or, Why You Can Still Buy A Coca-Cola In Moscow
After a year of full-scale war, Russian businesses have figured out tricks to get around international sanctions: reselling, repackaging, rerouting: Almost everything is available — for a price.
Since the beginning of the full-scale invasion of Ukraine, Russia has found ways to acquire and replace the goods of companies which have left Russia or been prohibited by sanctions. They may be available in smaller quantities for higher prices, but consumers can still get almost everything they want.
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“By and large, sanctions have made no difference,” the owners and employees of logistics and foreign trade companies responded unanimously to the latest news about Russian import sanctions. They have adjusted over the past year and are confident that they can procure everything they need.
But questions remain as to how long it now takes to import goods, and how much they cost. While there will be no noticeable shortage of goods and technologies in Russia, the usual products of global brands — from Hollywood blockbusters to construction equipment and machine tools — will gradually turn into a luxury item, they believe. Consumers will have to be content with domestic or Asian substitutes.
Importing smaller quantities
Data on imports and exports for the most important goods are published by the Federal Customs Service. For many items, such as food, the lack of detailed breakdowns makes it impossible to draw conclusions about the supply situation, but it's still possible to get a general idea about the effect of sanctions. Food imports have decreased by 11.7%, while other investment imports (hardware and machinery) fell by 19%, analysts with Hard Figures calculated.
Among consumer goods, the supply of products prohibited by sanctions, including luxury goods, has decreased most. Immediately after the start of the war, the U.S., EU, Japan, Canada and other countries banned the supply of luxury goods to Russia, including clothes and shoes costing more than €300 from the EU or $150 dollars from the U.S. Importing cars that cost over $50,000 is also prohibited. In addition, according to various estimates, hundreds or even thousands of international companies left Russia, and when they did, they stopped delivering their goods (at least officially).
There are, then, occasional problems when purchasing familiar goods.
One of the most notable categories is drugs. Last year, 99% of pharmacies faced shortages, surveys of pharmacists showed, including fever-reducing drug Nurofen and the antibiotic Amoxiclav to insulin and antitumor drugs Tamoxifen and Temodal. Roszdravnadzor, Russia's Federal Service for Surveillance in Healthcare, acknowledged the shortage of some drugs, but promised that they would be temporary.
If problems arise with medicines for people, it's even worse for animals. In fall 2022, it was almost impossible to vaccinate a cat or dog with popular imported vaccines, including the Dutch Nobivak and the French Eurikan (both companies stopped deliveries to Russia). Persistent pet owners could still find some of the Dutch and French drugs, but for a much higher price. In winter, however, veterinary clinics found a replacement in Czech and South American vaccines.
Stands with a Belarusian substitute drink for Coca-Cola are seen in a grocery store in Moscow. After Coca-Cola announced it was haling business in Russia, the new product hit the shelves in Moscow supermarkets.
Parallel imports of Consumer Goods
Consumer goods are now acquired through a similar outsourcing process.
After many companies refused to work with Russia, the Ministry of Industry and Trade compiled a list of products allowed for parallel import — that is, import into Russia without the permission of the brand owner. As a result, if desired, almost any product of these companies can be found on sale in marketplaces and in niche stores, but not in the largest chains.
Many market leaders have not lost hope.
Hermes and Louis Vuitton, Prada and Chanel now go not to branded stores (which are all closed) or the main department stores in Moscow and St. Petersburg, but to private buyers. TSUM and GUM (Moscow’s two largest fashion and retail stores) do not sell imported luxury brands, but work with those who have remained (these are mostly Italian fashion houses, but others also remain, like Swiss jewelry house Chopard), and eagerly search for new brands from Russia, South America and Asia.
The Ministry of Industry and Trade allows for the import of clothing and accessories of any brand, with a few non-luxury exceptions. But many intermediaries have appeared too: from large companies to private traders, luxury goods are delivered to Russia both directly from Italy and in parcels through Eurasian Economic Union countries.
Many market leaders have not lost hope that relations with sellers will be restored — and it seems that this is a mutual feeling. “Most brands, such as Dior and Prada, maintain relations with us; many keep us updated with news, new products, send gifts for the holidays. They say they are looking for opportunities to resume work,” explained an employee of one Russian luxury department store.
The French luxury jeweler Cartier arranged a trip to Kazakhstan for its regular customers last year to get acquainted with local boutiques and managers. “Just the other day, a representative of (Japanese cosmetics company) Shiseido came to us, asked us not to forget them, said that they were looking for a new path to us. As soon as they find it, they will resume deliveries,” says a consultant in a luxury cosmetics department store.
Pepsi or Coca-Cola can still be obtained, although not in large supermarkets, but rather in subway shops and small tobacco shops. After Feb. 2022, both American corporations stopped selling their brands to Russia, and Russia was forced to replace them with local substitutes. Still, American Cola and Pepsi products weasel their way into Russia through parallel imports.
Imports to Russia now live according to their own laws and do not appear to follow general trends. For example, while container shipping has become cheaper all over the world since 2022, in Russia it has become more expensive. The world's largest operators have refused to bring goods into the country, and because of this there are not enough ships (instead of large-capacity container ships, only small-capacity vessels of smaller companies operate) to keep a steady supply chain going. As a result, the cost of delivering goods by sea to Russia is now five times higher than before the pandemic, and three times higher than in 2021.
Switching to goods from "friendly" countries has not led to lower prices, either. Though cheaper than European and American equivalents, Chinese goods are much more expensive in Russia than in China. For example, at a former Renault plant in Russia, teams began to produce Moskvich 3 cars, an adapted replica of the Chinese JAC S4. In China, the car costs roughly 1.1 million rubles ($13,500) to manufacture, but in Russia it easily sells for more than 2 million rubles ($24,500). According to Avtostat, a Russian agency for statistics in automobile business, “Chinese has ceased to be synonymous with cheap.”
Hundreds of companies are now engaged in parallel imports to Russia. The vast majority are small businesses or even individual entrepreneurs. It is the abundance of small intermediaries that means American and European attempts to stop the import of sanctioned goods to Russia end in one thing: a rise in the prices of such goods, but not a cessation of their import.
For example, the United States banned the supply of semiconductors to Russia, but last year the supply of American chips through China and Hong Kong increased 11-fold, from $51 million to $570 million. Deliveries went through many small firms, so that even if sanctions stopped some companies, it wasn’t a big deal overall.
Empty statements for a Western audience.
After the February visit of US Secretary of State Anthony Blinken, Turkey, which is often seen as the closest "friendly" international trade and transport hub to Russia, promised to stop the transit of sanctioned goods to Russia.
While Turkey formally complied with the ban, and there is no direct transit of sanctioned goods from Europe or the United States to Russia, unauthorized transit has continued as normal.
“The sanctions partially stopped things, but not forever; it just took time to find new moves,” said a logistician.
Sanctioned goods sometimes travel through intermediaries, clearing customs in Turkey and, for example, becoming “Turkish” goods when they are repackaged. Other goods transit through third countries, employees of foreign trade companies say. It just takes longer to ship, and costs more. Depending on the scheme and how sanctioned the product is, the cost can increase by three to five times.
“This is how we live,” one logistics company manager said. "On the one hand, new difficulties constantly arise — partners are either afraid to cooperate, or use risks to raise prices, but in the end, options are found. So when I read in Reuters or Bloomberg that authorities of friendly countries are promising to restrict trade or not let some goods into Russia, I don’t really worry. These are largely empty statements for a Western audience. When one of their officials says the same thing to Russia Today, then I’ll get worried.”
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