By Gleb Stolyarov, Filipp Lebedev and Alexander Marrow
LONDON (Reuters) – About $2.3 billion worth of dollar and euro notes have been shipped to Russia since the United States and the EU banned exports of their banknotes there in March 2022 after the invasion of Ukraine, according to Reuters customs data.
The previously unreported figures show that Russia has managed to avoid sanctions blocking cash imports, and suggest that dollars and euros remain useful tools for trade and travel even as Moscow looks to reduce its exposure to hard currency .
Customs data, obtained from a commercial supplier that records and collects the information, shows that cash has been transported to Russia from countries such as the UAE and Turkey, which have not imposed restrictions on trade with Russia. The country of origin of more than half of the total was not stated in the administration.
The US government in December threatened sanctions against financial institutions that help Russia evade sanctions and has imposed sanctions on third-country companies in 2023 and 2024.
has overtaken the dollar to become the most traded foreign currency in Moscow, although significant payment problems remain.
Dmitry Polevoy, head of investments at Astra Asset Management in Russia, said many Russians still wanted foreign currency in cash for travel abroad, as well as small imports and domestic savings.
“For individuals, the dollar is still a reliable currency,” he told Reuters.
The Russian central bank and the US sanctions authority, the Office of Foreign Assets Control (OFAC), did not respond to requests for comment.
Russia began labeling the dollar and euro as “toxic” in 2022 as sweeping sanctions hampered access to the global financial system, hampering payments and trade. About $300 billion of the Bank of Russia’s foreign reserves in Europe have been frozen.
A spokesperson for the European Commission said it could not comment on individual cases of application of sanctions. The spokesperson said that the European Union will enter into discussions with third countries if it suspects that sanctions are being circumvented.
The customs data covers the period March 2022 to December 2023 and Reuters did not have access to more recent data.
The documents showed that there had been a sharp increase in cash imports just before the invasion. Between November 2021 and February 2022, $18.9 billion of dollar and euro banknotes entered Russia, compared to just $17 million in the previous four months.
Daniel Pickard, International Trade & National Security Practice Group Leader at US law firm Buchanan Ingersoll & Rooney, said the spike in shipments before the invasion indicated some Russians wanted to protect themselves from possible sanctions.
“While the U.S. and its allies have learned the importance of collective action in maximizing economic impacts, Russia has learned how to avoid and mitigate those same impacts,” Pickard said. He added that the data almost certainly underestimates actual currency flows.
OUTFLOW LIMITED
Russia’s central bank quickly restricted foreign currency cash withdrawals after the invasion of Ukraine in an effort to prop up the weakening ruble.
According to the data, only $98 million worth of dollar and euro banknotes left Russia between February 2022 and the end of 2023.
In contrast, foreign currency inflows were much larger. The largest foreign currency exchanger was a little-known company, Aero-Trade, which offers duty-free groceries at airports and on flights. It declared about $1.5 billion in bills during that period.
Aero-Trade recorded 73 shipments worth 20 million dollars or euros each, all of which were cleared at Moscow’s Domodedovo airport, an international hub near the company’s headquarters. The shipments were described in customs declarations as exchange or proceeds from trade on board.
In most cases, Aero-Trade was listed only as the declarant, the entity that prepares and submits customs documentation. Reuters was unable to identify Aero-Trade’s customers and was unable to determine the source or destination of the funds.
Aero-Trade owner Artem Martynyuk told Reuters he doubted the authenticity of the customs data. He declined to comment further. The company said in a statement that “Aero-Trade is not engaged in the supply of hard currency to Russia.”
According to customs data, one Aero-Trade-handled shipment worth 20 million euros was imported in February last year by Yves Rocher Vostok, a subsidiary of French cosmetics group Yves Rocher, which still operates dozens of stores in Russia. No country of origin or supplier name was mentioned in the data.
Groupe Rocher, the parent company in France, said neither the group nor Yves Rocher Vostok had ever had any connection with Aero-Trade, or had requested the transfer in question.
“Yves Rocher Vostok, like all Groupe Rocher entities, complies with the law,” a spokesperson for the group said. “It has never tried and will never try to circumvent sanctions on the import of dollar and euro banknotes into Russia.”
GOLD, WEAPONS, BANKS
More than a quarter of the $2.27 billion in notes were imported by banks, largely as payment for precious metals, according to customs data and a person familiar with the transactions.
Several Russian banks received cash worth $580 million from abroad between March 2022 and December 2023 and exported approximately equivalent amounts of precious metals. In many cases, the gold or silver shipments went to the companies that supplied the banknotes, the records showed.
For example, the Russian lender Vitabank imported $64.8 million worth of banknotes from the Turkish gold trade Demas Kuyumculuk in 2022 and 2023. During the same period, Vitabank exported $59.5 million worth of gold and silver to the Turkish company.
A person familiar with Demas’ activities confirmed that the company participated in a series of cash-for-gold transactions involving Vitabank and two other Russian lenders between March 2022 and September 2023.
The person said that having banknotes delivered from the UAE to Russia was the only solution Demas found to finalize long-term contracts signed before Western sanctions with Russian gold suppliers took effect, while still complying with Turkish and international regulations regarding cross-border payments.
With sanctions effectively cutting Russia off from the Western financial system, it was no longer possible to pay bills through traditional transfers, the person said.
Reneging on existing agreements would have exposed Demas to financial sanctions and reputational risks, the person said. The Turkish gold trader has never done business with entities under Western sanctions and strictly follows all national and international compliance procedures, the person added.
In the third quarter of last year, when all pre-war contracts with Russian companies were completed, Demas ended the two-way transactions, the person said.
Vitabank, the UAE and the Turkish presidency’s communications directorate did not respond to Reuters’ requests for comment.
The other major cash importers included entities controlled by Rostec, the state military-industrial conglomerate, the documents showed.
Rostec, which has been under US sanctions since 2014, did not respond to questions from Reuters about the cash payments it received.
