9 Aug. 2023 06:30 – Updated 9 Aug. 2023 06:31
A several kilometer long column loaded with used cars snakes its way down a dusty road towards the customs station in Gyumri, Armenia’s second largest city. The business is a clear circumvention of the sanctions against Russia, but is in a legal gray area.
The Russian invasion of Ukraine in February 2022 and the subsequent sanctions in several rounds from the West have opened up a large-scale trade in used cars.
31-year-old Jaroslav Kolchenko has seen an opportunity to act as a used car dealer. Now he is sitting in the sun outside the truck drinking a coffee, while the almost stationary queue seems endless.
The US and the EU have banned the export of cars to Russia, but vehicles can still be cleared through Armenia, and for Kolchenko there are prospects for good profits.
Online auction
– Today it is the case that even rich Russians only have access to used American cars that are brought into the country via Armenia. Used, damaged and cheap cars are bought at online auctions in the US, says Kolchenko. He explains about the circuitous road these cars have to travel to reach the customs station in Gyumri.
The cars are transported by ship to the Georgian port city of Poti, where they are repaired and restored according to all the rules of the art. They are then transported on trucks to Armenia for customs clearance and then transported on to Russia by land through Georgia.
This parallel export is generally seen as a legal gray area and undermines at least the spirit of the sanctions, if not necessarily the letter.
This new and highly lucrative route is part of the explanation for the growing unease in Ukraine and Western countries that Russia’s economic partners in the former Soviet states of the Caucasus and Central Asia are helping the authorities in Moscow to circumvent the sanctions.
Friend of Russia
Armenia’s role came into the spotlight last year when President Vahagn Khachaturyan said Russia would stand up to the sanctions and promised closer economic ties with its comrades in Moscow. The small and poor Caucasian country has a free trade agreement with Russia, and customs clearance of the car in Armenia is far cheaper than inside Russia.
This has meant that Armenia has become a hub for the re-export of American cars from the USA as a replacement for many European car manufacturers closing their sales premises.
Kolchenko’s business partner Andrej, who will only give his first name, says that they have been doing this ever since the war broke out. Right from the start, they sold dozens of cars a month, and the profit was solid in Armenian eyes.
Andrej says that a used car he bought at auction in the USA for 13,000 dollars will be sold in St. Petersburg for 23,000 dollars, including 5,000 dollars in customs. Even with shipping and expenses deducted, the two amateur sellers will make a nice profit.
Huge increase
Such figures explain why Armenia’s trade with Russia has plummeted since the invasion of Ukraine. Official figures show that exports last year were 2.4 times higher than the year before. In figures, exports corresponded to 2.4 billion dollars. The onward export of cars increased last year by 170 percent, and over 450,000 cars, most of them from the USA, were sent to Russian cities in the first quarter of 2023 alone.
In March, a joint report by the US Department of Justice, Treasury and Commerce identified Armenia as one of the main countries for onward exports to Russia.
In June, the EU adopted new measures to streamline its 11th sanctions package against Russia and reduce the possibilities for circumvention. The adjustments in this decision were aimed at loopholes that opened up the re-export of sensitive technology such as computer chips via third countries.
Prime Minister Nikol Pasjinian of Armenia recently admitted to AFP that it is a difficult balancing act to comply with Western sanctions without incurring the wrath of the country’s most important economic partner.
Responsible member
– We have close contact with the EU’s special envoy and the US representative. We are working with both to ensure that we behave as a responsible member of the international community,” Pasjinian said.
– On the official level, we have not received any objections or complaints from European and American partners, clarifies the Armenian Prime Minister.
But used car dealer Kolchenko is of a slightly different opinion. He says that what is happening in Gyumri shows that the sanctions can be circumvented.
– The Americans are of course not very happy about this, and they will probably stick sticks in the wheels. But they will fail. You cannot isolate a country as large as Russia. As they say: The water will always find a new way if a river is blocked, he says.
2023-08-09 04:30:09
#Armenia #locks #American #cars #Russia
