How Russia Circumvented Sanctions: $2.3 Billion in Foreign Cash Shipped Amid US, EU Bans
In a surprising turn of events, Russia managed to bypass sanctions imposed by the United States and the European Union by importing $2.3 billion in dollar and euro bills since March 2022. This revelation comes from customs data obtained by Reuters, shedding light on how Moscow continues to use hard currencies for trade and travel despite efforts to reduce reliance on them.
The records show that cash entered Russia from countries like the UAE and Turkey, which have not restricted trade with Russia, with the origin of more than half of the total amount remaining undisclosed. The US government has threatened penalties for financial institutions aiding Russia in circumventing sanctions, leading to sanctions on third-country companies through 2023 and 2024.
Although the dollar has been labeled as “toxic” by Russia since 2022 due to sweeping sanctions limiting access to the global financial system, it remains the most traded foreign currency in Moscow. Dmitry Polevoy, head of investment at Astra Asset Management in Russia, noted that many Russians still prefer foreign currency in cash for trips abroad, small imports, and domestic savings.
The surge in cash imports just before the invasion of Ukraine indicates that some Russians sought to protect themselves against possible sanctions. However, Russia’s central bank swiftly restricted foreign currency cash withdrawals following the invasion to bolster the weakening rouble. Limited outflows of $98 million in dollar and euro banknotes left Russia between February 2022 and the end of 2023, while foreign currency inflows were significantly higher.
Notably, more than a quarter of the imported banknotes were linked to banks, often used for purchasing precious metals. Russian banks received $580 million in cash from abroad and exported similar amounts of precious metals, with some shipments going back to the original banknote suppliers.
In conclusion, the import of foreign cash amid sanctions reveals the resilience of the Russian economy and the ongoing efforts to adapt to restrictions. Understanding these dynamics is crucial for individuals and businesses navigating the complex landscape of international finance and trade. Title: How Demas Successfully Navigated Cash-for-Gold Transactions Amidst Western Sanctions
In a recent period, Vitabank exported $59.5 million in gold and silver to a Turkish company. Sources familiar with Demas’ operations revealed that the company engaged in cash-for-gold transactions with Vitabank and two other Russian lenders between March 2022 and September 2023. The challenge arose due to Western sanctions cutting Russia off from the traditional financial system, making wire transfers impossible for settling bills. To navigate this, Demas resorted to having banknotes delivered from the UAE to Russia to honor long-term contracts with Russian gold suppliers while adhering to Turkish and international regulations on cross-border payments.
Reneging on existing agreements would have exposed Demas to financial penalties and reputational risks. However, the company ensured compliance by never doing business with entities under Western sanctions and strictly following national and international procedures. Once all pre-war contracts with Russian companies were fulfilled in the third quarter of last year, Demas ceased the two-way trades.
Entities controlled by Rostec, the state-owned military-industrial conglomerate under U.S. sanctions since 2014, were also significant cash importers as per documents. Rostec did not respond to inquiries about the cash payments it received.
Analysis:
In the midst of Western sanctions affecting financial transactions, companies like Demas had to find innovative solutions to honor agreements and navigate cross-border payments. By understanding the challenges and risks involved, individuals can learn the importance of compliance with national and international regulations to avoid financial penalties and reputational damage. It highlights the impact of geopolitical events on global trade and the need for strategic financial planning in uncertain times.