On a dusty roadside outside Dubai, Sohrab Fani is profiting from the West’s response to the war in Ukraine: his shop installs seat heaters in cars that are re-exported to Russia .
Twelve thousand heating pads languished in his warehouse for years, he said, until the Russian invasion and resulting Western sanctions drove American, European and Japanese cars off the market. in Russia. Now, the Russians import such cars through Dubai, in the United Arab Emirates – and since the cars sent to the Middle East are likely to be made for warm climates, accessories shops like Mr. Fani’s is doing a brisk business getting it ready for the winter season.
“When the Russians arrived, I was sold,” Mr. Fani said, so he ordered several thousand more seat-heating pads. “In Russia, they have sanctions. Here, there are none. Here, there is business.”
More than a year into President Vladimir V. Putin’s invasion, Western sanctions have hurt Russia’s economy but not crippled it. The web of global trade adjusted, which allowed the Russian leader to give an important promise: that the war would not interfere too much with the lifestyle of consumption for the Russian elite.
Russia still imports coveted goods to the West, facilitated by a global network of middlemen.
In Moscow, the latest iPhones are available for same-day delivery for less than European retail prices. Department stores still stock Gucci, Prada and Burberry. Car sales sites list new Land Rovers, Audis and BMWs.
Almost all leading electronics, auto and luxury brands in the West announced last year that they were leaving Russia. Not all of their goods technically violate sanctions, but Russian commerce has become increasingly difficult in the face of public anger, pressure from employees, and restrictions on semiconductor exports and financial transactions.
However, Russia’s demand for luxury goods remains strong, and businessmen in Dubai and elsewhere are meeting it.
“Rich people always stay rich,” said Ecaterina Condratiuc, the communications director of a luxury car showroom in Dubai that recently shipped a $300,000 Porsche Cayenne Turbo GT to a dealership. in Russia. The war, he added, “didn’t affect them.”
In Dubai, buyers roam the showrooms of a sprawling auto market, shopping for Western cars — the Dodge Ram is a recent favorite — to be bought for cash and shipped to Russia. Some are wealthy Russians who buy cars for themselves, or small businessmen looking to resell the cars for a quick buck.
In other cases, Russian car dealers, who have lost their official ties to Western brands, organize their own imports, sometimes hundreds of cars at a time.
Russian analytics company Autostat reported that such indirect imports accounted for 12 percent of the 626,300 new passenger cars sold in Russia in 2022.
Electronics are also taking routes in the Russian market. In Dubai’s old commercial district, Deira, electronics wholesalers are scrambling to recruit Russian-speaking staff.
“It’s an open secret thing,” said the owner of Bright Zone International General Trading LLC, a few stores from a wholesaler of hair extensions. “Today’s competition is very difficult for Russia.”
The owner, who asked to be identified only by his last name, Tura, said he shipped hundreds of smartphones and laptops to Russia last year before the holiday season. A potential buyer wanted a quote for 15,000 iPhones, Mr. Tura said, but apparently found a better deal elsewhere.
At another electronics store nearby, an Afghan salesman, Abdullah Ahmadzai, said he arrived in Dubai less than a year ago, and has since learned enough Russian to communicate with his Russian-speaking customers. Across the street, a man from Tajikistan, a former Soviet republic, said he and his partner quickly found work at a store that sells phones, laptops and drones.
“All the shops here are looking for people who speak Russian,” he said. “We’re lucky.”
After many Western companies left Russia, Mr. Putin’s government encouraged unauthorized imports of their goods from other countries. The Russian trade ministry has published a list of several companies whose products can be imported without the consent of their manufacturers, including Apple, Audi, Volvo and Yamaha.
“Anyone who wants to bring any luxury goods can do so,” Mr. Putin promised in May.
A report in Russia estimated that such “parallel imports” of laptops, tablets and smartphones amounted to $1.5 billion last year. At the same time, Chinese cars and electronics flooded the Russian market.
“You can drive anything you want, as long as you have money,” said Pyotr Bakanov, a Moscow-based auto journalist. “All those who are not lazy bring cars.”
The new trade routes mostly pass through countries with friendly relations with Moscow. Western analysts and officials point to Turkey, China and former Soviet republics such as Armenia and Kazakhstan as countries that redirect Western products to Russia. They say the Kremlin is exploiting imports not only to appease a population used to foreign phones and cars, but also to obtain microchips for weapons used against Ukraine.
Mr. Bakanov, like other Russian bloggers and car journalists, got into the business himself: he posted advertisements on the messaging app Telegram, offering to import cars “to order from any part of the world.” He said that foreign auto parts also come through parallel imports – some are now available in Russia for lower prices than before the war, when the parts were sold by authorized dealers who charge high premium.
The workarounds are so widespread that Russian car publications conduct regular reviews of cars made for foreign markets. The multimedia console of the Toyota Camry made for China only works in Chinese, a popular car website warned in February; the reviewer suggested holding a smartphone to translate the app to the display.
At the Dubai car market one night in March, Sergei Kashkarov sat in the passenger seat of a parked gray Toyota, negotiating his latest deal: shipping six Mitsubishi cars to a dealer. to the Siberian city of Novosibirsk by ferry and truck, through Iran and Kazakhstan. Mr. Kashkarov moved to Dubai from Siberia in 2021 and, after the invasion, established himself as a broker connecting Russian car dealers with suppliers in Dubai.
“I have a lot of work,” he said. “I’m not complaining at all.”
New trade patterns reflect international statistics; Car exports from the European Union to Russia, for example, fell to around 1 billion euros in 2022, from 5 billion euros in 2021.
But EU exports to Kazakhstan increased almost fourfold, to more than 700 million euros, and exports to the Emirates increased by about 40 percent, to 2.4 billion euros. Armenia reported that its car imports more than quintuple to $712 million last year.
Western car companies generally deny knowledge of their cars going to Russia in any significant numbers, or of an increase in Emirates sales.
“We’ve never seen anything like that,” said Jim Rowan, Volvo’s chief executive.
Paul Jacobson, the chief financial officer of General Motors, said, “I don’t know of anything going to Russia.”
Automakers have trouble tracking vehicle sales through intermediaries, industry officials say. And the US officials responsible for enforcing the restrictions are more focused on things that can be used for military purposes.
The United Arab Emirates has been identified as a “country of focus” by US officials because of its role as a hub for goods shipped to Russia in violation of sanctions. Electronics are of particular concern, officials say, because their chips can be reused for military use.
“The UAE has strict measures in place governing import and export permits for dual-use materials to prevent their exploitation for military purposes,” an Emirati official said. in a statement.
Browsing the car market in Dubai, a group of three men said they split their time between Russia and Armenia. They refused to say what they do for a living but they described that importing and selling cars is very profitable; one said he bought about 100 cars last year.
“Dubai is a three-in-one,” said a man who gave his name as Aik. “You go on vacation, you buy a car for yourself, and you buy to resell.”
Anton Troyanovski reported from Dubai and Jack Ewing from New York. Reporting was contributed by Vivian Nereim from Riyadh, Saudi Arabia, Ahmed Al-Omran from Jeddah, Saudi Arabia, and Oleg Matsnev from Berlin.