Luxury Goods Still Get to Russia
DUBAI, United Arab Emirates — On the outskirts of Dubai, Sohrab Fani is profiting from the West’s response to the war in Ukraine: His shop installs seat heaters into cars being re-exported to Russia.
Twelve thousand heating pads languished in his warehouse for years, he said, until Russia’s invasion and the resulting Western sanctions drove American, European and Japanese automakers out of the Russian market. Now, Russians import those cars via Dubai — and because cars shipped to the Middle East tend to be made for warm climates, accessories shops like Mr. Fani’s are busy outfitting them for winter weather.
“When the Russians came, I sold out,” Mr. Fani said. “In Russia, they have sanctions. Here, there is not. Here, there is business.”
More than a year into President Vladimir V. Putin’s invasion, Western sanctions have damaged Russia’s economy but not crippled it. Russia is still importing coveted Western goods, enabled by a global network of middlemen.
Just about all of the West’s leading electronics, automobile and luxury brands announced last year that they were pulling out of Russia. Not all of their goods technically violate sanctions, but commerce with Russia became very difficult.
Still, Russian demand for luxury items remains strong, and traders in Dubai and elsewhere are meeting it.
“The wealthy people always stay wealthy,” said Ecaterina Condratiuc, the director of communications at a Dubai luxury car showroom who shipped a $300,000 Porsche Cayenne Turbo GT to a Russian dealership. The war, she added, “did not affect them.”
In Dubai, buyers at a sprawling auto market haggle over Western cars to purchase and ship to Russia. Some are wealthy Russians buying vehicles for themselves, or smalltime entrepreneurs looking to resell cars for quick money.
In other cases, Russian car dealerships, having lost their official affiliations with Western brands, are organizing their own imports, sometimes hundreds of cars at a time.
The Russian analytics company Autostat reported that such indirect imports accounted for 12 percent of the 626,300 new passenger cars sold in Russia in 2022.
Electronics also take circuitous routes to the Russian market. The owner of Bright Zone International General Trading L.L.C. in Dubai, who requested that he be identified only by his last name, Tura, said he shipped hundreds of smartphones and laptops into Russia last year ahead of the holiday season. One potential buyer wanted a quote for 15,000 iPhones, Mr. Tura said, but apparently found a better deal elsewhere.
After many Western companies pulled out of Russia, Mr. Putin’s government encouraged unauthorized imports of their goods from other countries. The Russian trade ministry published a list of companies whose products could be imported without their makers’ consent, including Apple, Audi, Volvo and Yamaha.
The new trade routes pass through countries that have friendly relations with Moscow. Western analysts and officials have pointed to Turkey, China and former Soviet republics like Armenia and Kazakhstan as countries redirecting Western goods to Russia.
Western companies deny knowing that their cars are going to Russia in any significant quantities, or that sales are spiking in the Emirates.
Carmakers would have trouble tracking sales of vehicles through intermediaries, industry officials say. And U.S. officials responsible for enforcing restrictions have focused more on goods that can be used for military purposes.
In the Dubai car market one day, Sergei Kashkarov negotiated a deal: sending six Mitsubishi cars to a dealership in the Siberian city of Novosibirsk by ferry and truck, via Iran and Kazakhstan. Mr. Kashkarov had moved to Dubai from Siberia in 2021 and, after the invasion, established himself as a broker connecting Russian car dealers with Dubai suppliers.
“I’ve got plenty of work,” he said. “I’m really not complaining.”