Russia.- Something strange happened to smartphones in Armenia last summer.
Shipments from other parts of the world to the Soviet Republic rapidly rose to more than 10 times the value of phone imports in the past few months. At the same time, Armenia reported an explosion in smartphone exports to a beleaguered ally: Russia.
The trend, which was repeated last year for washing machines, computer chips and other products in a handful of Asian countries, provides evidence of some of the new life lines that are keeping Russia’s economy afloat.
Recent data shows a surge in trade from some of Russia’s neighbors and allies, suggesting that countries like Turkey, China, Belarus, Kazakhstan and Kyrgyzstan are supplying Russia with many products that Western countries have tried to cut off in punishment for the Moscow invasion of Ukraine.
Those sanctions, which include restrictions on Russia’s biggest banks and limits on the sale of technology that could be used by its military, block access to a variety of products.
The reports, regularly leaked outside of Russia, of consumers frustrated by high prices or poor-quality products ranged from milk and household items to computer software and medicines, said Maria Snegovaya, senior fellow for Russia and Eurasia at the Center for Russian Studies. Strategic and International, in a group of experts in January.
Still, Russian trade appears to be back to where it was before the February 2022 invasion of Ukraine. Analysts estimate that imports could have recovered to prewar levels, or will soon, depending on their models.
In part, that could be because many nations have found Russia difficult to leave. Recent research showed that less than 9% of companies based in the European Union and the Group of Seven have divested from one of their Russian subsidiaries.
In addition, maritime tracking firms have seen an increase in activity from shipping fleets that may be helping Russia export its energy, apparently bypassing Western restrictions on such sales.
While Western countries have not banned the shipment of consumer goods like cell phones and washing machines to Russia, other penalties were expected to hit their economies, including a cap on the price Russia can charge for its oil, as well as restricted access to semiconductors. and other critical technology.
Some companies, including H&M, IBM, Volkswagen and Maersk, have ceased operations in Russia after the invasion, citing moral and logistical reasons. But the Russian economy has proven surprisingly resilient, raising questions about the effectiveness of Western sanctions.
Countries have had a hard time reducing their dependence on Russian energy and other basic commodities, and Russia’s central bank has managed to keep the value of the ruble and financial markets stable.
On Monday, the International Monetary Fund (IMF) said the Russian economy is expected to grow at 0.3% this year, an improvement from its previous estimate of a 2.3% contraction.
It added that the volume of crude oil exports is expected to remain relatively strong under the current price cap, with trade being redirected to countries that have not imposed sanctions.
Most container ships have stopped transporting goods such as cell phones, washing machines and auto parts to the port of St. Petersburg. Instead, the products are brought in by trucks or trains, from Belarus, China and Kazakhstan.
Fresco, a Russian shipping operator, added new ships and ports of call to a route with Turkey that transports foreign industrial goods and accessories and electronics between Novorossiysk and Istanbul.
Sergey Aleksashenko, the former Deputy Finance Minister of the Russian Federation, told an event in January that 2023 would be a “difficult year” for the country’s economy, but there would be “no catastrophe, no collapse.”
Some sectors of Russia’s economy are struggling, he said, referring to car factories that have closed for not being able to secure parts of Germany, France, Japan and South Korea. But military spending and high energy prices helped last year.
“We cannot say that the Russian economy is in tatters, that it is destroyed, that Putin lacks funds to continue his war,” Aleksashenko said.
The nation stopped publishing trade data after the invasion of Ukraine. But analysts and economists can draw conclusions about their patterns, adding up the business that other countries report with Russia.
A bigger question that remains open is how much the West’s price cap on Russian oil will affect this year.
The limit allows Russia to sell the oil to the world using insurance and Western financing, as long as the price does not exceed $60 a barrel. That cap, which is essentially an exception to G-7 sanctions, is designed to keep oil flowing in global markets while limiting Russian government profits from it.
Some analysts have suggested that Russia is finding ways around the effort, using ships that are not dependent on insurers or Western financing.
Ami Daniel, CEO of Windward, a maritime data company, said he has seen thousands of cases where people from countries like the United Arab Emirates, India, China, Pakistan, Indonesia and Malaysia bought ships to try to assemble what seems to be a non-Western trade network for Russia.
“Basically, Russia has been scheming to be able to traffic outside the law,” he said.
Daniel added that his firm has also seen an uptick in shipping practices that appear to be Russian efforts to break Western sanctions.
These include oil shipments on ships far out at sea, in international waters that are outside the jurisdiction of any country’s Navy; and attempts by ships to hide their activities by turning off satellite trackers that record their location or by transmitting false coordinates.
So far, the price cap appears to be achieving its goal of lowering the price Russia can charge while keeping global supplies flowing.
Whether that “ghost fleet” of ships is large enough to allow the nation to buy and sell off-limits remains to be seen, Ben Cahill, a senior fellow at the Center for Strategic and International Studies, said during a panel discussion in January.
“If that fleet is large enough for Russia to operate outside the reach of the G-7, the cap probably won’t take advantage of what policymakers wanted,” Cahill added.
“I think we’ll know in a couple of months.”
