Page 56 - bne magazine September 2023

56 I Eurasia bne September 2023
Russia has been able to avoid many sanctions by routing banned good imports via Central Asia / bne IntelliNews
Exports from the West to Central Asia boom as sanctions on Russia remake global trade routes
bne IntelliNews
Extreme sanctions on Russia have dramatically remade global trade flows. Russia turns to its friends to act as transit countries for banned goods. And most have cooperated, both because of pressure placed on them by Moscow, their predominant trade and security partner, and partly because of the large amounts of money they can earn.
A comprehensive analysis of export data from 24 advanced nations and key emerging markets reveals a significant upsurge in exports to Central Asian countries, according to a deep dive into international trade by the Institute of International Finance (IIF).
“We find a widespread surge in exports to Central Asia, which is most pronounced for countries where direct
www.bne.eu
exports to Russia have fallen sharply
or where there is geographic proximity to Russia, as in the cases of Poland
or Lithuania,” says Robin Brooks,
chief economist with Institute of International Finance (IIF) in the report.
“Our results should not be read as indicating an obvious violation of export controls, as we only look at aggregate level export data, which do not shed light on what goods are being exported. However, the unprecedented boom in trade with Central Asia raises important questions. After all, why incur the added transportation cost of shipping goods to landlocked countries with often limited cargo capacity, unless shipments in question are at the very least questionable under current export controls ,” says Brooks.
Much of this diversion trade is happening at the level of corporates
and it is not clear if it is local companies owned by locals, or Russian-owned front companies set up in third countries that are behind the boom in trade.
According to a recent investigation by IIF, it appears the boom in semiconductor exports from Estonia to Russia was due to two companies registered in Estonia by Russian businessmen.
In another investigation, the soaring trade between Russia and the United Arab Emirates (UAE) was largely being conducted by local UAE companies that simply ignored sanctions and boosted trade.
Government’s are now increasingly trying to crackdown on their own