Research by Statistics Netherlands (CBS) and the University of Groningen finds possible circumvention of sanctions against Russia by small, young businesses

Dutch goods exports to Russia fell sharply after the European Union scaled up sanctions in 2022. At the same time, Dutch exports of sanctioned goods increased to seven countries with an increased risk of sanction circumvention. A striking number of small, young companies that did not export these sanctioned products before 2022 started exporting to these countries. This is what Statistics Netherlands (CBS) and the University of Groningen (UG) found in new research, commissioned by the Dutch Ministry of Foreign Affairs.

Compared to the period 2018-2021, the export value of sanctioned goods to Russia decreased by 86% in 2023. In addition, exports of non-sanctioned goods to Russia dropped by 25%. Some of the goods could still end up in Russia through third countries which did continue to export to Russia. Although this form of sanction circumvention is not directly observable in CBS statistics, it is possible to examine to which countries exports of sanctioned products have increased disproportionately. In the research by the CBS and the UG, these countries are identified as having an increased risk of sanctions circumvention, possibly enabling sanctioned goods from the Netherlands to reach Russia via intermediate parties in third countries.

Sharp increase in exports to seven countries

The research identifies the following export destinations as being potential conduits for sanction circumvention: Armenia, Kazakhstan, Kyrgyzstan, Mongolia, Serbia, Turkey, and Turkmenistan. There has been a remarkable increase in Dutch exports to these countries of goods whose export to Russia has been sanctioned. From these destinations, exports to Russia subsequently increased. For example, the export value of sanctioned goods to the EEU+ region (the EEU countries of Armenia, Kazakhstan and Kyrgyzstan, along with Mongolia and Turkmenistan) increased by more than 74% in 2022, and more than 90% in 2023, compared to the average for the period 2018-2021. In both years, the exports of these goods to the rest of the world grew by about 25%.

Increase in exports to Russia from the seven countries

In addition, these seven aforementioned countries increased their exports of sanctioned products to Russia. This could indicate that sanctioned goods from the Netherlands still reach Russia through these countries. For example, Turkish exports of machinery to Russia grew the most. In 2022 and 2023, bulldozers, shovels, excavators and the like were the most exported machinery (by value) from Turkey to Russia.

Small young businesses enter

Mainly large multinationals exported products to Russia before the Russian invasion of Ukraine. Once sanctions were imposed, these companies absorbed the loss of Russia as an export destination by increasing exports to countries where they had previously been active. Some of these companies also started to explore new export destinations, including the countries with an increased risk of circumvention. These companies are the so-called switchers.

The researchers also discovered a group of entrants: companies that export sanctioned products to countries with an increased risk of sanctions circumvention, whereas before the tightening of sanctions in 2022 they did not export these products at all. These are relatively young independent small and medium-sized enterprises with a small export portfolio, often acting as brokers for exporting sanctioned goods, which they do not produce themselves, to countries with an increased risk of sanctions circumvention.

Authors

The authors of the research report are Marcel van den Berg, Loe Franssen, Tristan Kohl (Associate professor at the Faculty of Economics and Business, University of Groningen), Roger Voncken, and Stef Weijers.

Sources:

Internationalisation Monitor, 2024-III - Sancties tegen Rusland: gevolgen voor de Nederlandse export en mogelijke omzeilingsroutes

Internationalisation Monitor 2024-III - Exporteren in de schaduw van sancties

More information:

Questions? Please contact the CBS’ press officers: 070 - 337 44 44 or email: Persdienst cbs.nl or Tristan Kohl (t.kohl rug.nl).