Russia’s Black Market Booms: US and EU Export Bans Circumvented Through Gray Trade

Despite facing stringent export bans from the United States and European Union, Russia has managed to import significant quantities of electrical machinery, optical, measuring, and medical equipment through gray trade channels. According to recent data, the value of these exports has surged by 209% year-on-year, with Kazakhstan emerging as a key player in this illegal trade.

The Gray Trade Route

Russian importers have been using legal entities outside of Russia to order goods from international companies that are unwilling or unable to export directly to Russia. The products are then re-exported to Russia through Turkey or other countries that are members of the Eurasian Customs Union, including Armenia and Kazakhstan.

Once goods enter the territory of a member-state and clear customs, they can freely circulate within the union without additional customs procedures. This has allowed Russian importers to bypass export bans and sanctions, while international manufacturers remain unaware of their products’ ultimate destination.

Companies at Risk

The gray trade route poses significant risks for companies that may unwittingly have their products diverted to Russia in violation of international sanctions. Companies must be vigilant in monitoring their sales data, contracts, and invoices for anomalous activity and take steps to investigate any suspicious transactions.

Steps to Assess and Prevent Gray Trade

To mitigate the risk of gray trade, companies can take several steps:

• Assess Risk

  • Review sales data
  • Monitor media reports
  • Engage whistle-blowing channels to identify potential risks

• Investigate

  • Conduct internal investigations
  • Gather intelligence on third-party sales activity
  • Determine whether product diversion is occurring

• Prevent

  • Implement measures such as:
    • Reviewing investigative reporting
    • Monitoring sales data in high-risk countries
    • Training frontline employees on gray trade typologies

By taking proactive steps to identify and prevent gray trade, companies can minimize the risk of their products being diverted to Russia in violation of international sanctions.