Russia’s sanctions-dodging is getting ever more sophisticated
The Russian government has long been known for its ability to dodge sanctions, finding workarounds to seemingly insurmountable obstacles. Yet, as the international community grows increasingly savvy and alert to Russia’s contraband tactics, we are discovering that Russia’s methods are becoming more sophisticated—ensuring the country’s continued access to prohibited goods, services, and finance.
1. Outwitting Sanctions: Russia’s Clever Tactical Move
Russia’s Sanctions-Outwitting Move
Despite many nations imposing economic sanctions against Russia, the state has been exceedingly resourceful in finding ways to work around these restrictions. They have employed a three-pronged tactic, laser-focused on economic development:
- Develop strategic partnerships: the establishment of working relationships with countries that don’t apply restrictions to Russia’s activities has enabled them to continue trading with relative impunity. Payments made by Russia to these partners are largely untraceable, making it easier to evade sanctions.
- Build financial intelligence: the creation of bank accounts and offshore companies has enabled Russia to receive funds without leaving a trace and to transfer money to countries that are otherwise off-limits. This gives them access to foreign investments and markets.
- Make strategic investments: using state-owned companies, Russian banks have been able to expand their operations and access to foreign capital without being affected by sanctions. One example of this is the $50 billion joint venture between Rosneft and China National Petroleum Corporation.
Russia has quickly realised the power of having a diversified portfolio and is making the most out of any opportunity to further its global ambitions and to outwit sanctions. They are certainly proving to be a master of getting around restrictions and investing in the future of their state.
2. Examining the Sanctions-Dodging Strategies of Russia
In the recent years, Russia has become quite adept at avoiding the economic sanctions imposed by several countries around the world. Although they have not been able to fully overcome the economic strains of such limitations, they have managed to find alternate strategies to mitigate their impact. Here we take a closer look at some of the ways in which Russia has managed to dodge sanctions.
- Using fictitious companies: By establishing companies overseas with bogus information on the ownership, nations like Russia have been able to shift money around and use foreign trade agreements without fear of detection. This strategy, in addition to maintaining government discretion, also bypasses the official banking industry, thereby redirecting the flow of funds.
- Establishing joint ventures: By upping their foreign investments and setting up strategic joint ventures in countries where sanctions don’t apply, Russia is able to make use of the resources in those countries without much hindrance. By investing in the deals, Russian companies are able to conduct business as usual in spite of the sanctions.
- Investing in the non-sanctioned markets: By investing in the markets which do not fall under the sanctions notification, Russia has been able to free itself of direct financial losses. This way, investment in the foreign markets not only helps to protect the economy of such nations but also provides an opportunity to benefit on the returns of the international investments.
3. Squeezing Through the Financial Cracks: The Evasion Challenge
The financial system, with its web of paperwork, is a concrete jungles for those trying to escape its clutches. Whether choosing fraud or dodgy tactics, desperately wriggling through the cracks is no cakewalk. It is a tiring, tedious and ever-shifting task.
The strongest even have to become temporary bogeypersons to stay afloat. 1. Rigging accounts: stuffing them with financial maneuvers such as ‘smurfing’ and money laundering. 2. Falsifying documents: fabricating financial statements to conceal income. 3. Creating shell companies: using them to park money away from the prying eyes of the IRS. 4. Incorporating overseas: staying under the radar by operating abroad.
At the end of the day, if they’re successful money is moved across borders, identities are hidden and true sources are obscured. Not even the FBI can always unearth the truth.
4. Russia’s Organic Response to Sanctions: Working Around Roadblocks
The Russian economy faced unprecedented sanctions in the wake of the Crimean annexation on 2014. Despite this, Russian officials have aggressively sought out ways to counter the effects of the sanctions. Here are four organic responses they have used to overcome the roadblocks they faced.
- Increased Trade with China
Russia has sought to bolster its economy with increased trade to China. This has enabled Russia to gain strong access to Chinese markets, access to advanced technologies and a reliable economic partner.
- Strengthening International Ties
Russia has worked to strengthen its ties with other countries to form alliances in terms of trade and markets. This has enabled Russia to still attract investment and find new business opportunities.
- Developing Domestic Markets and Industries
Russia has sought to take advantage of its own human resources and natural resources by investing in the development of local markets and industries. This has allowed Russia to bring foreign investments and further strengthen its economy.
- Utilizing Cash Reserves
The sanctions had a significant impact on the availability of cash reserves. To combat this, Russia had to utilize different methods such as issuing government bonds and taking advantage of repatriated funds to compensate for the scarcity of cash.
All these responses have been largely successful in mitigating the economic challenges caused by the sanctions and ensuring that the Russian economy remains strong. As international economics become increasingly interdependent, Russia’s ability to work around roadblocks will be essential to its future success. As the Russian government continues to refine its capabilities to dodge U.S. sanctions, it remains to be seen whether any of the efforts will be successful in the long-term. With political tensions between Russia and the United States still running high, the future of these sanctions-dodging measures remains uncertain. In any case, it’s clear that the Russian government is determined to pursue every available route that might help them subvert the punitive measures laid down by Washington officials.