LTV's De Facto looks at exports jumps to Central Asia

While exports of sanctioned goods to Russia are shrinking, volumes have grown rapidly to countries that continue to trade with Russia. This has raised concerns about the circumvention of sanctions. Latvian Television's broadcast De Facto attempted to look into the issue on September 3.

In order to degrade Russia's capacity to develop technology and military capabilities, the European Union has prohibited exports of a number of goods, including electronic integrated circuits. They also arrived in Russia via Latvia – in 2021, the group's goods were exported to Russia with a value of more than €6.5 million.

Following the introduction of sanctions, the volume has fallen to zero, but at the same time, Latvia started exporting to Kazakhstan, which is a joint customs union with Russia.

Compared to the pre-war year, exports of schemes to Kazakhstan climbed from €100,000 to €3.6 million in 2022.

“Any peaks in the data are those who to which we have to pay attention,” said sworn lawyer Edgars Pastars, who works daily on sanctions issues: “There are some exporters who still export legitimately with final consumption, the end user in these countries, but of course if the company has exported to Russia and Russia is sanctioned, and suddenly the commodity is starting to be exported to one of the countries of Central Asia, there are issues."

A similar picture appears in many export categories where some of the goods are sanctioned: against a drop in export to Russia, there is a rapid jump to one of the countries of Eurasian economic cooperation, which facilitates customs procedures for Russia: Kazakhstan, Kyrgyzstan, or Armenia.

This is particularly apparent in the category of mechanical and electrical equipment, where exports to Russia fell by a quarter last year, while growth in the three countries was between five and 12 times. This year, exports have continued to grow particularly rapidly to Kyrgyzstan.

The circumvention of sanctions, including the export of banned goods to Russia through third countries, is subject to criminal liability. Deputy Director of State Revenue Service (VID) Customs Administration Sandra Kārkliņa-Ādmine says the authority is working actively with customs authorities in Central Asian countries to understand what is happening with cargo.

She said that if the exporter's documents are in order, there is no reason for customs to suspend the cargo: “We may in such cases let these goods through in the first consignments because we do not have a legal basis [to refuse], but at the same time we ask our counterparts in the countries concerned, and we often get answers that such goods have not been received. This means that we are stopping these shipments at once,” said Kārkliņa-Ādmine.

Since the Russian invasion of Ukraine, the VID has launched more than 200 criminal proceedings for the violation of sanctions.

A list of sanctioned goods is also being made for Russian trading partners. Since June, a ban on transit through Russia has been imposed on many commodity groups, which limits the possibility for goods to "disappear" along the way. VID representative Kārkliņa-Ādmine said that the arrival of sanctioned goods in Russia after being legally transported to Central Asia should be addressed at the European Commission or diplomatic level because customs cannot prevent them.

“What we can do on our own is that we find out these true beneficiaries and, if we have information available, we can look at who these companies are, who are maybe their founders, and make some conclusions. But it must be understood that any denial of the goods procedure – this is an administrative act and we must have a legal basis to prevent some goods from being exported,” said the representative of the VID.

Lawyer Edgars Pastars said that in order not to violate sanctions, responsibility is also on the exporter. In criminal proceedings, the undertaking must be able to demonstrate that it has at least sought to find out who will receive the goods.

He stressed that the European Commission, too, has now turned its attention to the recent sanctions amendments, but the changes are slow:

“The European Union will be able to identify countries and goods in a combination that are banned from carrying, for example, to Kazakhstan, because the risk of re-export is likely to be very high. At the moment, such sanctions are not yet specified precisely in this special annex, and the commission will probably consider it too late.  [..] I must say that I assume that, from my experience, some companies do not know at all that they actually violate something,” said Pastars.

The Central Statistical Bureau previously published lists of exporting companies to Russia and Belarus, which allowed the public to see which companies from Latvia continue to operate in the aggressor countries. LTV also requested the same lists to be created for Central Asian countries potentially used to circumvent sanctions, as well as a list of companies importing goods from Russia. The Central Statistical Bureau refused to give the information.

The CSB stated in its reply that, following the publication of the exporters, it had received explanations from the companies that had a significant impact on the analysis. For instance, goods being exported to different countries but customs formalities sorted on the border of Russia, or logistics companies carrying out tasks for other companies.

CSB stated it will refrain from creating and publishing lists of exporting and importing companies to any country in order to avoid risks of misinterpretations.


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