How has Russia circumvented sanctions?

Yet what distinguishes the Russo-European dynamic is the way Russia responds with surprising ingenuity to the economic pressures imposed by the EU. By deploying cunning tactics, exploiting state structures and implementing sophisticated circumvention strategies, Russia has succeeded in lessening the effects of European sanctions.
In this article, we take a closer look at the subtleties of Russia's response to EU sanctions, highlighting the strategies and implications of this struggle for influence.

How has Russia responded to the sanctions?

In response, Russia has reacted significantly to the economic sanctions imposed by the European Union and the United States in order to be able to adapt its economy to the new restrictions. Here are various examples:

• 1

  Economic counter-sanctions : Russia has responded to the restrictive measures by imposing economic counter-sanctions, banning the import of food products from countries sanctioning Russia. This initiative aims to reduce dependence on imports, promote domestic production and support the wheat strategy. Global wheat exports, representing 30% of Russia's and Ukraine's exports, reveal a maneuver aimed at reinforcing Russian domination of the global wheat market, accentuating Ukraine's economic isolation. The USDA reports that since 2023, Russia has become the world's leading producer, accounting for a quarter of global wheat trade.

• 2

  Wheat strategy during the conflict: Russia skilfully implemented this wheat strategy during the conflict, enabling the Kremlin to exert pressure on hesitant countries. They adopted an unconventional approach using Russia state-sponsored negotiations and basing prices on Russian interests. This approach, extended to the energy field, and combined with Western sanctions, the COVID-19 pandemic and the war, contributed to increased global inflation, consolidating blackmail diplomacy due to Russia's dominant position on the wheat market.

• 3

  Promoting intra-regional trade : Faced with the challenges of sanctions, companies are exploring various alternatives, such as using intermediaries and establishing partnerships with countries not subject to the same sanctions. For example, there has been a marked increase in trade between Kyrgyzstan, Kazakhstan and Turkey, making it possible to avoid the restrictions imposed by the EU and Russia.

• 4

  Restructuring energy partnerships : Russia has drawn up new energy agreements and stepped up its exports to countries that do not issue sanctions. Joint energy projects have been promised, notably with nations such as China, India and Turkey. However, an underlying strategy is revealed in this approach. Among Russia's main revenues are hydrocarbons, targeted by European sanctions aimed at avoiding a global price rise, which would have repercussions for many countries. As a result, these sanctions focus specifically on the maritime transport of Russian hydrocarbons. Nevertheless, these restrictions are circumvented in undetectable ways, such as re-flagging ships to avoid restrictions in the Bosphorus Strait. Some ships even go so far as to cut their transmitters and change their cargoes at sea, making it difficult to trace their origin.

• 5

  Redirecting trade flows : Russia has reoriented its trade flows, turning to new markets and diversifying its exports. It has stepped up its efforts to increase exports to Asia-Pacific countries, notably by developing the Northern Sea Route and the New Silk Road.

• 6

  Cooperation with other sanctioned countries : Russia is strengthening its alliances and economic and political partnerships with other countries that are subject to economic sanctions, by reinforcing trade and diplomatic relations. For example, with Iran, Venezuela and North Korea, which also face international sanctions to access stockpiles of weapons, technology and other goods.

How does Russia use the Commonwealth of Independent States (CIS) to maintain its trade with the EU?

In the face of the losses caused by the sanctions, Russia has taken steps to promote intra-regional trade, particularly within the IEC. This strategy aims to use these countries as intermediaries to maintain trade with the European Union and other nations that have imposed sanctions on Russia.

A recent example of such maneuvering arose following the European Union's ban on the import of certain Belarusian and Russian timber in March 2022, following Russia's invasion of Ukraine via Belarusian territory. Despite this ban, Belarusian and Russian timber continued to arrive at its usual customers with false documents, according to an investigation carried out by the due diligence of the Belarusian Investigative Centre (BIC).


However, the in-depth investigation reveals a disturbing reality: much of the wood continues to originate mainly from Russia and Belarus. It reaches its destination in Europe by circumventing border restrictions, claiming Kazakh or Kyrgyz origin, without having officially transited through these countries.

These figures, multiplied by 74 and 18,000 respectively compared to the previous year, underline the scale of the problem and raise serious questions about the authenticity of trade flows. The European Union should be alerted to these anomalies, particularly in view of the significant discrepancy between the volumes of timber exported and the actual production capacities of these Central Asian countries, which are known to be arid. This situation highlights the need for reinforced monitoring of trade flows and the strict application of sanctions to prevent any exploitation of loopholes in the system.




For example, we note that some European semiconductor companies doubled their exports to Russia following the imposition of sanctions, and some of them reach Russian army suppliers via a cascade of intermediaries passing through border countries. Despite increased vigilance on the part of Europe, this process continues, as it is impossible to trace each individual chip.

How does Russia circumvent sanctions?

Russia has circumvented the sanctions by developing alternative financial mechanisms, such as the National Payment System (SPFS), since their actions were limited on the SWIFT system, or the National Payment Card System (NSPK).

There are also shortcomings in European sanctions, such as the fact that Russian financial institutions were denied access to the SWIFT system. This was a blow to the Russian financial world, albeit a short-lived one. In order to adapt, Russia set up new banks. This gave them access to the system with the only modification being the addition of an intermediary, which didn't really have a major impact.
Although a member of NATO, Turkey has been criticized for its role in facilitating the circumvention of sanctions between Europe and Russia. Despite the political implications of the sanctions, Turkey has chosen to profit from this embargoed trade, showing a lack of commitment to international measures. Its acceptance of payment in Russian rubles and crypto-currencies underlines its disinterest in the political implications of sanctions and highlights its opportunistic attitude to international transactions.

As for Switzerland, although it has stepped up its efforts to combat the circumvention of Russian sanctions, criticism persists as to its effectiveness in preventing the use of its neutral financial system for circumvention purposes. Despite the actions of the State Secretariat for Economic Affairs to investigate and enforce sanctions, the fact that billions of assets have been frozen indicates the scale of the problem and suggests that Switzerland has historically been lax in its enforcement of international sanctions, allowing companies and individuals to circumvent the restrictions.

Russia's budget for 2024: Military priorities at the expense of the domestic economy

As far as Russia is concerned, the Russian government's proposed budget for 2024 reveals a clear vision of the country's future, marked by continued involvement in a protracted conflict in Ukraine.

With military spending reaching unprecedented levels, even exceeding social spending, Russia seems determined to maintain its military power and regional influence. However, this strategy entails significant economic risks, particularly in view of the sanctions, which require an increasingly frequent drawdown of the National Wealth Fund of the Russian Federation (NWF).


Moreover, the decision to prioritize military spending at the expense of essential social sectors could lead to internal tensions and negative consequences for the Russian population.

Ultimately, the Kremlin's decision to embark on a prolonged war in Ukraine could have lasting repercussions on the Russian economy and society, highlighting the challenges facing the country in the years ahead.