Russia Sidesteps Western Punishments, With Help From Friends

WASHINGTON — A strange thing happened to smartphones in Armenia last summer.

Shipments from other parts of the world into the tiny former Soviet republic began to skyrocket to more than 10 times the value of phone imports in the previous months. At the same time, Armenia recorded a boom in smartphone exports to a besieged ally: Russia.

This trend, repeated for washing machines, computer chips and other products in several other Asian countries last year, provides evidence of some new lifelines keeping the Russian economy afloat. develop. Recent data shows an increase in trade with some of Russia’s neighbors and allies, suggesting that countries like Turkey, China, Belarus, Kazakhstan and Kyrgyzstan are intervening to supply Russia with more products that Western countries have tried to cut out to punish Moscow. invade Ukraine.

Those sanctions – including restrictions on Russia’s largest banks along with the limit on technology trading that their military can use — blocking access to a wide variety of products. Maria Snegovaya, a senior fellow for Russia and Eurasia at the Center for Strategic and International Studies, says reports are regularly filtering out of Russia of consumers being frustrated with high-priced or poor-quality goods. products, from milk and household goods to computer software and medicines. an event at the think tank this month.

Even so, Russian trade appears to have largely recovered to what it was before the invasion of Ukraine last February. Analysts estimate that Russian imports may have recovered to pre-war levels, or will soon, depending on their model.

In part, that may be because many countries have find Russia hard to give up. Recent research shows that less than 9 percent of companies headquartered in the European Union and the Group of Seven have divested from one of their Russian subsidiaries. And marine tracking companies have seen an increase in the activity of shipping fleets that could help Russia export energy, seemingly ignoring Western restrictions on sales. there.

While Western countries do not ban shipping of consumer products such as mobile phones and washing machines to Russia, another scan penalty is expected to stifle its economy. They include a limit on the price Russia can charge for its oil as well as limited access to semiconductors and other key technology.

Several companies, including H&M, IBM, Volkswagen and Maersk, halted operations in Russia after the invasion, citing ethical and logistical reasons. But the Russian economy has proved surprisingly resilient, raising questions about the effectiveness of Western sanctions. Countries have struggled to reduce their dependence on Russia for energy and other basic commodities, and Russia’s central bank has been trying to support the value of the ruble and keep financial markets stable. .

On Monday, the International Monetary Fund said it expected the Russian economy to grow 0.3% this year, a sharp improvement from its previous estimate of a 2.3% contraction.

The IMF also said it expected Russian crude export volumes to remain relatively strong below the current price ceiling and that Russian trade would continue to be diverted to countries that have not yet imposed sanctions. .

Most container ships have stopped transporting goods such as phones, washing machines and auto parts into the port of St. Petersburg. Instead, such products are being transported on trucks or trains from Belarus, China and Kazakhstan. Fesco, the Russian shipping operator, has added new ships and new ports of call for route with Turkey transports Russian industrial goods and foreign electronic equipment between Novorossiysk and Istanbul.

Sergey Aleksashenko, a former Deputy Minister of Finance of the Russian Federation, said at an event this month that 2023 will be “a difficult year” for the Russian economy, but there will be “no catastrophe, no disaster. collapse”.

Some parts of the Russian economy are struggling, he said, pointing to car factories that have closed after being unable to secure parts from Germany, France, Japan and South Korea. But military spending and higher energy prices helped support it last year.

“We cannot say that the Russian economy is in ruins, that it is destroyed, that Putin lacks the money to continue his war,” Aleksashenko said. “No it’s not true.”

Russia stops publishing trade data after Ukraine invasion But analysts and economists can still draw conclusions about Russia’s trade pattern by adding up the trade other countries report with Russia .

Matthew Klein, an economic writer and co-author of the book “Trade War is a Class War,” is one of those who came to the conclusion about this Russian-sized hole in the global economy. . Based on my calculationsThe value of global exports to Russia in November was only 15% below the pre-invasion monthly average.

He said global exports to Russia are most likely to fully recover in December, although many countries have yet to release trade data for the month.

“Most of that recovery has been driven by China and Turkey,” said Klein.

“It’s not clear how much of this commercial activity violates sanctions imposed by the United States and Europe, but the patterns are ‘suspicious’,” he said. “That would be consistent with the idea that there are ways to try to get around some of the sanctions.”

Silverado Policy Accelerator, a Washington nonprofit, recently released a similar analysisestimated that the value of Russian imports from the rest of the world exceeded pre-war levels in September.

One of the case studies in that report is the spike in smartphone sales in Armenia. Andrew S. David, senior director of research and analysis at Silverado, said the trend reflects how supply chains have shifted to continue supplying goods to Russia.

Samsung and Apple, the former major Russian mobile phone suppliers, withdrew from the Russian market after the invasion. Exports of popular Chinese phone brands, such as Xiaomi, Realme and Honor, also initially dropped as companies struggled to understand and deal with new restrictions on sending technology or international payments to Russia.

But after a “period of adjustment”, Chinese brands started to take off in Russia, Mr. David said. Overall, China’s exports to Russia hit a record high in December, helping to offset a sharp drop in trade with Europe. Phones from Apple and Samsung also seem to be starting to find their way back to Russia, via friendly neighbours.

“Armenia is certainly not the only country,” David said. “There are a lot of people going through central West Asia, Turkey and the former Soviet republics.”

Shipments to Russia of other products, such as passenger vehicles, have also rebounded. And China has increased its semiconductor exports to Russia, although total Russian chip imports remain below pre-war levels.

A big open question is how effective Western price limit will reduce Russia’s oil revenues this year.

This cap allows Russia to sell its oil globally using marine insurance and Western financing as long as the price does not exceed $60 a barrel. That limit, essentially an exception to Group 7 sanctions, is designed to keep oil circulating on global markets while limiting the Russian government’s revenue from it.

Some analysts argue that Russia is seeking to avoid this effort by using vessels that are not dependent on Western insurance or financing.

Ami Daniel, chief executive officer of Windward, a marine data company, said he has seen hundreds of cases of people from countries like the United Arab Emirates, India, China, and the United Arab Emirates. China, Pakistan, Indonesia and Malaysia have bought ships to try to establish what has emerged. become a non-Western commercial framework for Russia.

“Fundamentally, Russia is moving towards being able to outlaw transactions,” he said.

Mr. Daniel said his company also saw increase in shipping operations appear to be Russia’s attempt to fend off Western sanctions. These include the transfer of Russian oil between ships far out at sea, in international waters not under the jurisdiction of any country’s navy, and attempts by ships to conceal their activities by turning off satellite tracking devices that record their positions or transmit dummy coordinates.

Much of this activity took place in the mid-Atlantic. But after media coverage of suspicious activities in the area, the center moved south, off the West African coast, Mr. Daniel said.

“They are exploding,” he said of fraudulent shipping practices. “It’s happening on an industrial scale.”

So far, the oil price ceiling seems to be fulfilling a price reduction target that Russia can count while maintaining global supply. However, it remains to be seen whether this submarine fleet is large enough to allow Russia to buy and sell oil off-limits, said Ben Cahill, a senior fellow at the Center for Strategic and International Studies. in a discussion in January.

“If that fleet is large enough for Russia to really operate out of reach” of the Group of Seven, the ceiling probably “wouldn’t have the kind of leverage that policymakers want,” Cahill said. “I think we should know within a few months.”

Alan Rappeport contribution report.


News7F: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button