Billions in dollar, euro shipped to Russia despite sanctions

By Aya El Sayed On Aug 12, 2024

Around $2.3 billion in dollar and euro banknotes have been shipped to Russia since the US and EU banned their banknotes exports in March 2022 following the outbreak of the Russian-Ukraine war, according to customs data reviewed by Reuters.

These shipments, largely from countries like the UAE and Turkey, which have not imposed trade restrictions on Russia, suggest that the country has managed to circumvent Western sanctions aimed at isolating its economy.

The data shows that dollars and euros continue to be in high demand in Russia, despite efforts to reduce reliance on these currencies. China’s yuan has overtaken the greenback to become the most traded foreign currency in Moscow. However, significant payment problems persist.

Dmitry Polevoy, head of investment at Astra Asset Management in Russia, told Reuters that many Russians still wanted foreign currency in cash for trips abroad, as well as small imports and domestic savings.

“For individuals, the dollar is still a reliable currency,” Polevoy stated.

The customs records indicate that cash was transported to Russia from various locations, though the country of origin for over half the shipments was not disclosed.

The largest single recipient of foreign currency was Aero-Trade, a company providing duty-free shopping services in airports; it disclosed around $1.5 billion in banknotes during the period. Despite denying involvement in supplying hard currency, Aero-Trade’s customs declarations reveal consistent shipments cleared at Moscow’s Domodedovo airport.

Significant cash imports were also linked to Russian banks, which received approximately $580 million in payment for precious metals such as gold and silver.

Some of these banks, including Vitabank, engaged in cash-for-gold transactions with Turkish companies, highlighting how Russian entities have adapted to continue international trade despite being cut off from traditional financial systems.

The data also points to involvement from Rostec, a state-owned military-industrial conglomerate under US sanctions since 2014.

Russia started labelling the dollar and euro as “toxic” in 2022 as sweeping sanctions slashed its access to the global financial system, hampering payments and trade. Around $300 billion of the Bank of Russia’s foreign reserves in Europe have been frozen. The influx of foreign currency into Russia underscores the country’s ability to mitigate the impact of economic restrictions.

Moreover, the documents showed a surge in cash imports just prior to the invasion. Between November 2021 and February 2022, $18.9 billion in dollar and euro banknotes entered Russia, up from just $17 million in the previous four months.

The shipments have allowed Russia to maintain its foreign currency reserves, which are still favoured by Russians for travel and domestic savings.

Attribution: Reuters