Page 8 - bne_May magazine 2023_20230503 BRICS

8 I Companies & Markets bne May 2023
Russia’s parallel imports hindered by Central Asia bottleneck
Eurasianet
When the flow of Western goods to Russia was choked in the wake of the Ukraine invasion, attention turned to Central Asia.
In part by funnelling goods through Kazakhstan and Kyrgyzstan, Russia managed to bring in $20bn worth of goods between March and December 2022, Kommersant business daily reported on April 10. Other countries relied upon
for this parallel import strategy include Armenia, Belarus, Georgia and Uzbekistan.
Industry insiders are warning, however, that there is a ceiling to capacity for this arrangement because the nations that are most heavily used for parallel imports are suffering from
a chronic shortage of warehouse space.
Demand for foreign-sited warehouses from Russian logistics companies and retailers has doubled since last spring, around the time when Moscow embarked on its invasion of Ukraine, according to analysts cited by Kommersant. Real estate consulting company NF Group said Russian companies looked for almost 400,000 square metres of warehouse space over that period. But the space is simply not there.
A shortfall of skilled logistics facilities developers across the Commonwealth of Independent States (or CIS, common Russian industry shorthand for describing a large chunk of the former Soviet Union) means fixing this problem will not be easy. Russian companies are said to be able and willing to take up the challenge, but then there is the lack of suitable, ready-to-go construction sites to worry about.
Armenia, Georgia, Kazakhstan, Kyrgyzstan and Tajikistan are said by analysts to have no vacant sites. Uzbekistan has some marginal capacity to offer newcomers.
Kommersant cited NF Group as saying that the demand for fresh warehouse capacity in the CIS is coming from online retailers and logistics operators. According to Alexander Perfilyev, commercial director at Ghelamco, a logistics park developer, fully 80% of requests are coming from two companies alone: Wildberries and Ozon.
Warehouses are in short supply across Central Asia. / Kazakhstan govt website.
Wildberries is focusing considerable energy on Kazakhstan. In February, the mayor of Almaty, Yerbolat Dosayev, met with Wildberries founder Tatyana Bakalchuk to discuss plans for building a $100mn logistics facility in the city. Bakalchuk talked up this investment as an opportunity for Kazakh producers to sell more of their goods abroad, but the real prize may lie, for as long as Russia is trapped in a state of diplomatic and economic isolation from the West, in the re-export market.
The road has been far from straightforward for Wildberries, though.
In December, Trade and Integration Minister Serik Zhumangarin travelled to Moscow to meet with Bakalchuk to discuss a number of options. One was to set up a cross-border hub in Khorgos, a giant trade zone on the border with China.
“A shortfall of skilled logistics facilities developers across the Commonwealth of Independent States means fixing this problem will not be easy”
Contrary to what analysts told Kommersant, Zhumangarin seemed to suggest this location did in fact have free areas for building new warehouses.
Another idea pushed by the Kazakh government was to create a cross-border trade centre dubbed Eurasia in the West Kazakhstan region, which shares a long border with southern Russia. Zhumangarin said the centre could capitalise on continent- straddling transport corridors running north-south and west-east.
But it does not sound like Wildberries is especially interested in all this lofty talk. It just needs to solve a pressing business problem and wants to do so without incurring too much financial pain. This strong pragmatism may be ruffling some feathers in Astana.
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