Luxury Imports to Russia Take a Detour Around Sanctions — Through Dubai

On a dusty roadside outside Dubai, Sohrab Fani benefits from the Western response to the war in Ukraine. His shop installs seat heaters on cars that are re-exported to Russia.

He said 12,000 Cairos sat in warehouses for years until the Russian aggression and subsequent Western sanctions forced U.S., European and Japanese automakers to leave the Russian market. Russians now import these cars via Dubai in the United Arab Emirates, but cars shipped to the Middle East tend to be built for warmer climates, so accessories stores like Fani’s We are actively engaged in the business of preparing equipment for the winter season.

“When the Russians came, they sold out,” said Fani, who ordered thousands more of the seat heaters. “Russia has sanctions. Here, there are none of them. There is business here.”

More than a year after the invasion of President Vladimir V. Putin, Western sanctions damaged the Russian economy But didn’t cripple it. The nets of global trade have been adjusted, and Russian leaders have nearly delivered on an important promise that the war will not dramatically disrupt the consumer lifestyles of Russia’s elite.

Russia still imports coveted Western products through a global network of intermediaries.

In Moscow the latest iPhone Available Same day delivery for less than European retail prices.department stores still stock Gucci, Prada, Burberry.car sales site list New Land Rover, Audi, BMW.

Nearly all major Western electronics, auto and luxury brands announced last year that they would be leaving Russia. Not all products technically violate sanctions, but commerce with Russia is very difficult in the face of public outrage, pressure from employees, and restrictions on semiconductor exports and financial transactions. Became.

Yet demand for Russian luxury goods remains strong, and traders such as Dubai are responding.

“The rich will always stay rich,” said Ekaterina Kondratiuk, communications director at Dubai’s luxury car showroom. She recently shipped a $300,000 Porsche Cayenne Turbo GT to a Russian dealer. The war “didn’t affect them,” she added.

In Dubai, buyers roam the showrooms of the sprawling car market, haggling for cash to buy Dodge Ram’s latest favorite Western car and ship it to Russia. There are also wealthy Russians buying cars for themselves, and small entrepreneurs looking to resell them quickly.

There are also cases of Russian car dealers losing formal ties with Western brands and sorting out their own imports. hundreds of many cars at once.

Russian analytics company Autostat reported Of the 626,300 new passenger cars sold in Russia in 2022, such indirect imports accounted for 12%.

Electronics products are also following a roundabout route to the Russian market. In Deira, Dubai’s old shopping district, an electronics wholesaler is desperate to hire Russian-speaking staff.

“It’s an open secret,” said the owner of Bright Zone International General Trading LLC, a few doors down from the hair extensions wholesaler. “Competition is very tough for Russia now.”

The owner, who asked to reveal only his surname Tula, said he shipped hundreds of smartphones and laptops to Russia last year ahead of the holiday season. One prospective buyer asked for a quote for 15,000 iPhones, but apparently found a better deal elsewhere, Tula said.

At another electronics store nearby, Afghan salesman Abdullah Ahmazai said he learned enough Russian to negotiate with Russian-speaking customers less than a year after arriving in Dubai. . Across the street, a man from the former Soviet republic of Tajikistan said he and his colleagues quickly found work at a store selling phones, laptops and drones.

“Every shop here is looking for someone who can speak Russian,” he said. “We got lucky.”

After many Western companies withdrew from Russia, Putin’s government encouraged unauthorized imports of its products from other countries. Russia’s Ministry of Trade has released a list of dozens of companies whose products may be imported without the manufacturer’s consent, including Apple, Audi, Volvo and Yamaha.

Putin pledged in May last year that “anyone who wants to bring in any luxury can do it.”

1 Russian report Last year, the total “parallel import” of such laptops, tablets and smartphones was estimated at $1.5 billion. At the same time, Chinese cars and electronics flooded the Russian market.

“If you have money, you can bring whatever you want,” said Moscow-based automotive journalist Pyotr Bakanov. “Everyone who isn’t lazy has a car.”

The new trade routes mainly go through countries that have friendly relations with Moscow. Western analysts and officials point to Turkey, China and former Soviet states such as Armenia and Kazakhstan as countries directing Western products to Russia. They say the Kremlin is using these imports not only to appease its citizens accustomed to foreign phones and cars, but also to procure microchips for weapons used against Ukraine. claims to be.

Bakanov, like other Russian car bloggers and journalists, is in the business himself, posting ads on the messaging app Telegram and offering to import cars “that can be ordered from anywhere in the world.” . He said foreign-made auto parts are also coming in on parallel imports. Some parts are now available in Russia at lower prices than before the war. At the time, these parts were sold by authorized dealers at a hefty premium.

This workaround is so widespread that Russian automotive publications publish regular reviews of cars made for foreign markets.Toyota Camry’s multimedia console made for China only works in Chinese, popular car website warned During February; a reviewer suggested holding a smartphone translation app up to the display.

At the Dubai car market one night in March, Sergei Kashkarov sits in the passenger seat of a parked gray Toyota and ferries six Mitsubishi cars through Iran and Kazakhstan to a dealership in the Siberian city of Novosibirsk. was negotiating the latest deal of trucking with Kashkarov moved from Siberia to Dubai in 2021 and established himself as a broker between Russian car dealers and Dubai suppliers after the invasion.

“I have a lot of work to do,” he said. “I really have no complaints.”

New trade patterns are appearing in international statistics. For example, car exports from the European Union to Russia have fallen from €5 billion in 2021 to around €1 billion in 2022.

However, EU exports to Kazakhstan almost quadrupled to more than €700 million, while exports to the Emirates increased by almost 40% to €2.4 billion. Armenia reported that its car imports more than quintupled to $712 million last year.

Western car companies generally deny reports that their cars are being exported in large numbers to Russia, or that sales in the Emirates are soaring.

“I’ve never seen anything like it,” Volvo CEO Jim Rowan said.

General Motors Chief Financial Officer Paul Jacobson said, “We know nothing about what’s going on in Russia.”

Automakers will have a harder time tracking vehicle sales through middlemen, industry insiders said. And US officials charged with enforcing restrictions are more focused on items that can be used for military purposes.

The United Arab Emirates is known as “”.Country of focusU.S. officials have criticized its role as a hub for products shipped to Russia in violation of sanctions. Officials say electronics are of particular concern because they could be reused for military purposes.

“The UAE has strict measures in place to control import and export permits for dual-use materials to prevent their use for military purposes,” an Emirati official said in a statement.

A group of three men browsing the Dubai car market said they split their time between Russia and Armenia. They declined to say what they did for a living, but said importing and reselling cars was a lucrative side business. One person said he bought about 100 cars in the last year.

“Dubai is a trinity,” jokingly said a man who identified himself as Ike. “You go on vacation, you buy a car for yourself, you buy a car to resell.”

Anton Troianovsky A report from Dubai and Jack Ewing from New York. Report contributors: Vivian Nellaim From Riyadh, Saudi Arabia Ahmed Al Omran From Jeddah, Saudi Arabia Oleg Matznev from Berlin.