The Russian Federal Customs Service (FCS) has released data showing that the volume of parallel imports of goods to Russia since the launch of the mechanism in mid-May until mid-December 2022 amounted to more than US$20 billion.
Smartphones, auto parts, consumables, household appliances and hundreds of other items of sanctioned goods imported from Kazakhstan as part of re-exports have appeared on the Russian market. Tens of thousands of small and medium-sized entrepreneurs are engaged in this in Kazakhstan, which provides employment and income for the population, and reduces the protest potential for the government.
The parallel import mechanism involves the use of the international principle of copyright exhaustion and allows a country (in this case Russia) to import goods without the consent of the copyright holder, as soon as sales have started in any country in the world.
In Russia, it began to operate in early May last year and applies to groups of goods and brands included in the list approved by the Russian Ministry of Industry and Trade. This also includes goods that are not produced in Russia and the supply of which was refused by a foreign manufacturer.
The London-based research house Euromonitor meanwhile has reported that since March 2022, EU exports to Russia have decreased by 47%. However, almost exactly matching this, EU exports to Armenia, Kazakhstan, Georgia, Uzbekistan and Kyrgyzstan increased by 48% and reached €20.3 billion.
These goods, among other products, went to Russia through parallel imports. Euromonitor determined that €2.8 billion of re-exported goods are delivered to Russia through third countries every month, a trade value of a compounded €34 billion per annum, and unlikely to be given up easily by the recipients.
“The analysis shows that the sanctions do not work as expected,” said a Euromonitor analyst who did not want to be named. Practically all EU countries have a problem with the control of European goods, which through third countries are exported to Russia, he said.
This rapid replacement of supply chains from direct from Europe to indirectly from Europe is also a result of pre-planning and fast actions of the Russian government, which has provided these countries with a profitable trade niche, while maintaining the domestic consumer activity of the ordinary Russians.
The Russian economy was predicted by the G7 to decline by 20% in 2022, but actually shrank by 2.2%. Growth of 2.2% is planned for 2023, according to the IMF forecast, suggesting that G7 indicators and analysts either failed to properly understand the depth of Russian involvement in the global economy, overestimated third party support for sanctions in the wider commercial community, and had been too Euro-centric when estimating the impact.
For the first time in many years, Kazakhstan’s transportation of export cargoes to Russia increased by 4%. Cargo is often routed from Kazakhstan through Russia to Switzerland, Turkey, UAE, Poland, and Cyprus and include:
Russia does not interfere with this trade.
Kazakh exporters also began to actively use the eastern direction of the International North-South Transport Corridor passing through Bolashak in Atyrau, north-west Kazakhstan. This corridor was implemented by the agreements of Russia with Iran and India. As a result, Kazakhstani exports of chemical cargoes, oil products, ferrous metals, food products to Iran and further to India increased by 8.5 times in 2022.
Again, the G7 seems to have failed to recognise that Russia’s trade partners would simply establish new, EU-avoiding supply chains, and that advisors – if any – were not familiar with commercial trade practices.
On the other hand, since many goods and their supply routes to Russia became subjected to sanctions, Kazakhstan began to replace them with exports to the EU, bypassing Russia. That impacted the volume of export cargo along the Trans-Caspian International Transport Route (China-Europe, bypassing Russia) which increased by 6.6 times compared to 2021. Exports of ferrous and non-ferrous metals and chemical goods especially increased. Import traffic growth along this route grew by 83% – suggesting it is also used for parallel imports from the EU to Russia.
Growth in freight turnover and electricity consumption (the system operator of Kazakhstan recorded a 7% increase) are indicators of the good health of the economy. The Kazakh economy grew by 3.1% in 2022 under changing supply chain conditions. The Kazakh President, Kassym-Jomart Tokayev has said that Kazakhstan’s GDP growth should reach 4% and possibly higher in 2023, and for the first time, should exceed an overall value (PPP) of US$250 billion.
This means that Kazakhstan has actively rebuilt itself and has had too due to the immediate impact of the EUs sanctions upon Russia which could have created serious secondary effects upon the Kazakh economy.
Instead, it has created an effective ‘middle-man’ role as a transit operator between the EU and Russia – and like similar countries has created an entirely new, multi-billion dollar industry in doing so. That will cement the national political stability and create a new class of wealthy Kazakh traders. It is also likely to lead to expanded logistics facilities throughout the region – all entirely at the EU’s logistics and transport industries expense.
Source: https://www.pravda.ru/economics/1800988-kazakhstan_russia/