Western Firms Circumvent Sanctions, Fuel Russian Economy Through Complex Trade Networks
October 17, 2024Despite the initial wave of major Western companies exiting Russia following the onset of the war, many have found ways to resume operations through intermediaries and complex trade networks.
These Western companies are employing intricate trading routes to legally sell banned technology, with some supply chains reportedly involving up to 40 stops before reaching Russia.
Additionally, European firms are exporting goods to neighboring countries like Kyrgyzstan and Belarus, which then re-export these products to Russia, creating significant economic benefits for those nations.
Currently, only a small fraction—about 9%—of Western companies have completely exited the Russian market, with some, such as Raiffeisenbank and Auchan, choosing to maintain their presence due to the market's size and profitability.
The effectiveness of sanctions against Russia is undermined by the reluctance of sanctioning countries to endure economic pain, as they often prioritize their own business interests.
Moreover, countries outside the Global North, including China and India, continue to engage with Russia, further diluting the impact of sanctions aimed at isolating the nation.
Reports have emerged indicating that Russia is acquiring Starlink units through friendly nations, effectively circumventing sanctions, while Starlink has not disabled the units being used on the front lines.
Starlink initially provided free communication services to Ukrainian forces in 2022, significantly enhancing their battlefield communication capabilities against Russian forces.
However, Elon Musk, the owner of Starlink, later cut off these free services, leading the Pentagon to cover a substantial $14.1 million bill for a six-month contract.
The EU's new sanctions mandate that manufacturers track the ultimate beneficiaries of their products, yet enforcement remains challenging and often ineffective.
There are increasing calls for improved Know Your Customer (KYC) practices in trade, but a lack of resources and interest in enforcing these measures poses a significant barrier.
Ultimately, the sanctions regime faces a fundamental contradiction, as efforts to impact Russian business are frequently countered by the desire to protect Western economies from adverse effects.
Summary based on 1 source
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bne IntelliNews • Oct 15, 2024
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