"BERLIN -- A group of former Soviet republics has emerged as a major transshipment hub for U.S. and European computer chips, lasers and other products with civilian and military uses headed for Russia, according to Western officials and data compiled by The Wall Street Journal.
U.S. and European Union exports of sensitive, so-called dual-use goods to countries in Russia's neighborhood rose sharply in 2022. So did these countries' shipments of these products to Russia, often by a similar multiple, an analysis of United Nations trade data shows.
The data suggests Moscow continues to acquire crucial Western goods -- whose sale is mostly restricted by U.S. and European sanctions -- as it seeks to keep its economy afloat and its miltary running.
In total, U.S. and EU goods exports to Armenia, Georgia, Kyrgyzstan, Uzbekistan and Kazakhstan rose to $24.3 billion last year from $14.6 billion in 2021. These countries collectively increased their exports to Russia by nearly 50% last year to around $15 billion.
This booming trade route -- which analysts at the European Bank for Reconstruction and Development call the Eurasian roundabout -- is a sign of Russia's success in finding new ways to acquire sought-after goods despite Western sanctions, European officials say.
Russian companies advertise their ability to acquire sanctioned goods this way. For example, Imex-Expert offers to "import sanctioned goods from Europe, America to Russia through Kazakhstan." Its website boasts: "Bypassing sanctions 100%."
The company didn't respond to a request for comment.
Digging into the numbers shows a substantial trade in dual-use items. The U.S. and the EU exported more than $8.5 million worth of integrated circuits to Armenia last year, for instance, more than 16 times the $530,000 exported in 2021, according to U.N. data.
At the same time, Armenia's exports of the circuits to Russia jumped to $13 million from less than $2,000 in 2021.
A similar picture emerges with Western shipments of lasers to Kyrgyzstan and measuring instruments, including tools for checking voltage and power, to Uzbekistan. Both countries saw a boost in those exports to Russia.
Washington and Brussels have barred the sale to Russia of various types of these goods since the start of events in Ukraine in February 2022.
While the amount of trade between the former Soviet republics and Russia is small compared with Russia's trade with China, which has become Russia's main supplier and economic backstop, the new trade route allows Moscow to get its hands on Western technology it has trouble getting elsewhere (still possible getting elsewhere).
Russia has limited ability to replace Western components with its own products.
"Electronics are needed everywhere from aircraft and cruise missiles manufacturing to command, control and communication systems in armored vehicles and tanks," said Pavel Luzin, an expert on Russia's military and visiting scholar at Tufts University.
Sarah Stewart, chief executive officer of Silverado Policy Accelerator, a Washington-based think tank that analyzes Russian trade data, said small volumes moving through a number of countries "add up to make a significant contribution" to Moscow's efforts to get hold of foreign technology.
"Russia's continued access to these items, including rerouted foreign brands that would otherwise be banned from direct export to Russia, feeds rather than disables Russia's efforts," she said.
Representatives of the governments of Kazakhstan, Uzbekistan, Kyrgyzstan and Georgia didn't respond to requests for comment.
A spokesman for the Armenian government said the country wasn't "involved in any processes or actions aimed at bypassing EU or U.S. sanctions." He said Armenian customs had increased controls for sanctioned goods and that authorities had discussed the issue with the U.S.
In the latest proposed package of European sanctions, which must be approved by member states, the European Commission for the first time recommended sanctioning companies from the region, including two from Uzbekistan and one from Armenia, for supplying dual-use products to Russia.
In late February, on a visit to Kazakhstan, U.S. Secretary of State Antony Blinken said Washington is "watching compliance with sanctions very closely," including with its Central Asian partners.
Complicating sanctions compliance, Central Asian officials say, is the membership of Kazakhstan, Armenia and Kyrgyzstan in the Russia-led Eurasian Economic Union, which largely eliminates customs borders among its members.
Since the events in Ukraine began, the EU has banned the sale of products worth around half of pre-events exports to Russia and prohibited the import of around two-thirds of the bloc's pre-events purchases from Russia.
Companies that facilitate trade of Western goods through third countries have been offering their services in Russia. Moscow last year legalized so-called parallel imports of goods, meaning that importers can legally bring in products via third countries without the original manufacturers' consent.
One company, Moscow-based customs broker Standard Group, describes on its website a process whereby its subsidiary in Armenia buys goods from the U.S. or Europe that then arrive, clear customs and pay value-added tax there. The cargo is then sold to a Russian business, in rubles, and sent to Russia.
The company didn't respond to a request for comment.
In one example on their website, Standard Group says it can deliver a 900-pound compressor from the U.S. that costs $13,900 via Armenia to the Russian Black Sea port city of Novorossiysk. It charges around $770 for customs-brokering services and $30,000 for delivery to Moscow.
Exports of Western-made household items via the former Soviet states have also surged. Western officials have said that Russia is stripping some appliances for their chips. Last year, after its imports of washing machines from the EU surged, Uzbekistan's exports of the appliances to Russia jumped to $10.6 million from around $90,000 the year before.
It isn't clear that sellers in the West or buyers in these countries are breaching sanctions by participating in the roundabout trading system. U.S. and European businesses aren't selling directly to Russian buyers, while none of the Central Asian and Caucasus countries involved are party to the sanctions.
Western officials are racing to close the loophole. As part of its 11th package of sanctions on Russia, the EU has proposed setting up sanctions regimes for export bans of certain products to non-EU countries or companies believed to be helping Russia circumvent Western restrictions. It is also considering tightening EU rules on what goods can transit through Russia to its neighbors.
Senior U.S., U.K. and EU sanctions officials have visited Uzbekistan, Kyrgyzstan and Kazakhstan in recent months to press the governments to choke off trade patterns they believe are helping Russia evade sanctions.
"What is very suspicious is that suddenly, exports of these products increase to Central Asia and the Caucasus after sanctions are increased," said Beata Javorcik, the European Bank for Reconstruction and Development's chief economist." [1]
In the end golden billion of people (the West) will sanction all the rest billions of people on Earth, and one another. This is how civilizations go extinct, from stupidity and hubris.
1. World News: Sanctioned Goods Flow Into Russia --- Cluster of ex-Soviet republics is hub for shipments of Western products to country. Kantchev, Georgi; Hannon, Paul; Norman, Laurence.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 15 May 2023: A.8.
