Page 44 - RusRPTMar23

Germany is especially vulnerable to sanctions leakage. Before the war it had ten-times the number of companies registered in Russia than any other EU nation. Moreover, since the war started only 9% of foreign
companies that said they would leave have actually pulled out; amongst the German companies working in Russia,
only 4% have closed shop.
Habeck proposed clamping down on the practice of companies selling goods to Russia via third countries and threatened them with criminal prosecution for false export declarations if caught. Habeck said sanctions evasion was "no minor misdemeanour" and called for a stricter regime to police sanctions abuse across all the EU member states.
The most recent EBRD Transition report contains details of the rapidly changing trade
flows since sanctions were imposed a year ago. While Russian trade turnover with the EU has plunged, that of its trade with “friendly countries” has
soared. Turkey in particular has overtaken Germany as the Exportweltmeister and become the major entrepot for goods
travelling to Russia from the rest of the world. The EBRD noted that while Turkey’s exports to Russia soared, its imports from Europe have not changed much suggesting that most of the goods being sent to Russia from Turkey are made in Turkey.
That is not the case with other countries in the Commonwealth of Independent States (CIS) that have seen their imports of Western goods soar and exports to Russia likewise balloon. Kyrgyzstan, Armenia, Georgia and even Estonia have all seen sharp rises in trade turnovers, the EBRD reports. The export of washing machines to Armenia in particular has jumped, which contain chips that can be used in missile manufacture.
The sanctions leakage is particularly worrying with technology and machinery, which Russia is almost entirely dependent on Western supplies. In theory the technology sanctions are one of the easiest to police as the Western companies have an almost monopolistic control of the sector. In practice Russian companies have said they have been able to replace almost all of these imports, with China playing a leading role (67%).
However, in a recent survey by the Gaidar
Institute in Moscow in
Russia 15% of Russian companies polled said they had “somehow” managed to
continue to import Western sanctioned machines and technology. Russian manufacturers have also stepped into the breach, investing heavily into retooling to fill the hole left by departed Western supplies and now account
for two fifths (39%) of sourcing needs. The countries of the Eurasian Economic Union (EUU) and Turkey account for another 21% and 17% respectively.
The Gaidar Institute also found that Russian companies have also replaced the bulk of sanctioned spare parts with imports from friendly states. China again plays the leading role accounting for almost two thirds (63%) of the imports for industrial companies switching suppliers. Russian analogues of imported parts were bought by 46% of enterprises, and another 22% reported that they can still import sanctioned spare parts from the West via schemes. Suppliers from
44 RUSSIA Country Report March 2023 www.intellinews.com