London —
Russia is seeking to copy Iran’s tactics in evading Western sanctions imposed on Moscow since its February 2022 invasion of Ukraine, according to a report from Britain’s Royal United Services Institute (RUSI), .
Ukraine’s allies, including the United States, the European Union, Britain, Canada, Japan, Australia and New Zealand, have imposed successively tougher sanctions on Russia, initially since its forceful annexation of Crimea in 2014.
The measures have been significantly tightened since the full-scale invasion of Ukraine, targeting the Russian Central Bank, its finance and military-industrial sectors, alongside the country’s significant oil and gas exports. Individuals close to Russian President Vladimir Putin and the military have also faced asset freezes and travel bans.
The RUSI report, titled “Developing Bad Habits: What Russia Might Learn from Iran’s Sanctions Evasion,” says that “evidence is emerging of adaptations in Russia’s
financial and trade strategy.”
“Examples include the switching of ownership of companies and properties to family members or affiliates, the use of trading companies to source foreign exchange to avoid the sanctions imposed on the Central Bank of Russia, and import substitution. … Alongside these steps, Russia is now gravitating further towards other states that have faced similarly sweeping restrictive measures or that facilitate sanctions evasion, to learn best practices, secure necessary services and establish trade relationships,” the report says.
In a televised speech on June 4, Ukrainian President Volodymyr Zelenskyy warned that Russia is using a network of suppliers to evade international sanctions designed to prevent it from making missiles and other weapons.
“Unfortunately, the terrorist state manages to obtain the technologies of the world through a network of suppliers, manages to bypass international sanctions,” Zelenskyy said. “And we must close all such routes — together with our partners — so that there are no products of the free world in Russian missiles, in Russian weapons.”
He added, “Necessary steps will be taken.”
Russia has procured drones from Iran and has used them to attack cities across Ukraine.
“In response — and demonstrating the seriousness with which Ukraine’s allies are treating this growing relationship — Western allies are increasingly targeting Iranian entities with sanctions,” the RUSI report says.
Russia is rapidly learning to adapt to the sanctions, said Tom Keatinge, a co-author of the report.
“In particular, sourcing the kind of electronic components they need to support their military, that's the first thing," he told VOA. “The second thing is obviously, they've had to look for new markets for their hydrocarbons, their oil exports. That’s a key revenue generator for the country.”
Russia said its economy shrank by 2.1% in 2022 — less than many expected —although some analysts question the reliability of the government figures.
Meanwhile, imports of Russian crude oil by China and India hit an all-time high in May. Analysts said buyers took advantage of discounted prices. In December, Western nations imposed a price cap of $60 per barrel on Russian crude oil. The U.S. Treasury said that has resulted in a more than 40% drop in oil revenue in the first quarter of 2023.
The sanctions only apply to Western governments and companies trading with Russia.
“And therefore, if you're a bank in India, you can perfectly well have a financial connection with a Russian bank,” Keatinge said.
Nevertheless, most global trade is still conducted in U.S. dollars. So, how has Russia circumvented attempts to strangle its economy?
Keatinge said the Kremlin is increasingly looking to Iran as a model on how to evade sanctions. Tehran has been subject to various Western sanctions since 1979 over its nuclear and missile programs and its support for terrorist groups, which Iran denies.
“Iran — as a hydrocarbon economy trying to export oil — has learned a lot of tricks over the recent years that we do see Russia start to employ. So, for example, shadow fleets of tankers — so this kind of switching oil between tankers in the middle of the night, with location devices switched off. But also using front companies in places like Turkey or the UAE to try and hide the origin of trade,” Keatinge told VOA.