Aug 12 2024: Since the U.S. and EU imposed bans on exporting dollar and euro banknotes to Russia in March 2022 following the invasion of Ukraine, approximately $2.3 billion in these currencies have still been shipped to Russia, according to customs data reviewed by Reuters.
These previously unreported figures reveal how Russia has managed to bypass sanctions on cash imports, indicating that dollars and euros remain important for trade and travel, even as Moscow seeks to reduce its reliance on hard currencies.
The customs data, sourced from a commercial provider that tracks such information, shows that the cash was transported to Russia from countries like the UAE and Turkey, which have not restricted trade with Russia. Notably, the country of origin for over half of the shipments was not specified.
In December, the U.S. government warned financial institutions about penalties for helping Russia evade sanctions and has imposed penalties on companies from third countries throughout 2023 and 2024.
While China’s yuan has surpassed the dollar to become the most traded foreign currency in Moscow, challenges remain with significant payment issues.
Dmitry Polevoy, head of investment at Astra Asset Management in Russia, noted that many Russians still prefer foreign currency in cash for travel, minor imports, and domestic savings. “For individuals, the dollar remains a reliable currency,” he told Reuters.
The Russian central bank and the U.S. Office of Foreign Assets Control (OFAC) did not respond to requests for comment.
Following the invasion of Ukraine, Russia labeled the dollar and euro as “toxic” due to sweeping sanctions that cut its access to the global financial system, freezing around $300 billion of the Bank of Russia’s foreign reserves in Europe.
A European Commission spokesperson said they could not comment on specific cases of sanctions but noted that the EU engages with third countries if it suspects sanctions are being circumvented.
The customs records, covering March 2022 to December 2023, showed a notable increase in cash imports just before the invasion, with $18.9 billion in dollar and euro banknotes entering Russia between November 2021 and February 2022, compared to just $17 million in the prior four months.
Daniel Pickard, leader of the International Trade & National Security Practice Group at U.S. law firm Buchanan Ingersoll & Rooney, suggested that the pre-invasion spike indicated some Russians were preparing for potential sanctions. “While the U.S. and its allies have learned the importance of collective action, Russia has been learning how to circumvent these measures,” he said, adding that the data likely underrepresents the actual currency flow.
Limited Outflows
Following the invasion, Russia’s central bank restricted foreign currency cash withdrawals to support the ruble. The data shows only $98 million in dollar and euro banknotes left Russia between February 2022 and the end of 2023, while inflows were significantly higher.
The largest foreign currency declarant was Aero-Trade, a little-known company providing duty-free services at airports and on flights. Aero-Trade declared around $1.5 billion in banknotes during this period, with 73 shipments of $20 million each cleared at Moscow’s Domodedovo airport. Aero-Trade was listed only as the declarant, and the source or destination of the cash could not be identified.
Aero-Trade’s owner, Artem Martynyuk, expressed doubts about the authenticity of the customs records and declined further comment. The company stated that it does not engage in supplying hard currency to Russia.
One shipment of 20 million euros handled by Aero-Trade was imported in February last year by Yves Rocher Vostok, a subsidiary of the French cosmetics group Yves Rocher. The group’s spokesperson denied any involvement with Aero-Trade or attempts to bypass sanctions.
Gold, Arms, and Banking
More than a quarter of the $2.27 billion in banknotes was imported by banks, primarily for payments related to precious metals. Between March 2022 and December 2023, Russian banks received $580 million in cash from abroad and exported similar amounts in gold and silver.
For instance, Russian lender Vitabank imported $64.8 million in banknotes from Turkish gold trader Demas Kuyumculuk and exported $59.5 million in gold and silver to the same company. Demas confirmed participation in cash-for-gold transactions but ceased these trades in the third quarter of last year after fulfilling pre-war contracts.
Vitabank, the UAE, and the Turkish presidency’s communications directorate did not respond to requests for comment. The documents also indicated that entities controlled by Rostec, a state-owned military-industrial conglomerate under U.S. sanctions since 2014, were major cash importers.
