What can and can’t be traded with Russia: The MultiLateral Data View with Dr Rebecca Harding #006 29th March 2022

What can and can’t be traded with Russia
Rebecca Harding, CEO Coriolis Technologies
March 29th 2022
 
Let’s have a look at a couple of things that have been published just recently by the US and by the European Union. One of the documents published in the last few days shows straight away there are loads and loads and loads of different sanctions. These apply to goods that cannot be traded anymore. A key sanction is on luxury goods that can’t be traded from the US to Russia, as well as a huge amount of other material from the European Union. 
 
What does all of this mean in terms of what you can and can’t trade? Why are we instigating all of these different types of products and how on earth does a business work its way through to understand exactly what it can and it can’t do? What I want to do today is go through some of the goods that are being banned and some of the goods that are sanctioned looking particularly at dual-use goods, and then show you a product that we have developed to try and make life a little bit easier.
 
So let’s start first of all with luxury goods. You’ll have heard a lot about the banning of luxury goods that has happened since the 15th of March. The UK the European Union and the United States have all imposed bans on exports of luxury goods to Russia. Why have they done this? Well, there’s a very simple reason. The idea is to restrict the types of goods that are luxuries going to the Russian elite and going to the domestic population within Russia. The aim of this is to create a degree of isolation between domestic sentiment and the Russian administration. There’s actually a huge amount that goes on now which is apparent in our data. Looking at things like perfumes, fruit and nuts, types of meat and spirits like whiskeys, bourbons and rums, you will see that Russia imports around 6.15 billion dollars worth per year. You can also see that the EU in particular is very important in this market. Germany and France are the biggest, but the EU has a large amount of trade with Russia in this sector You will see that there’s been a little bit of an impact from Covid, but since that, these products have started to go up again. These areas are perfumes, cosmetics, fruit and vegetables, clocks and watches as well, which have also been banned. Taking out the effects of Covid and the Covid pandemic have been very important areas. The other area that has also been banned is dual-use goods and what I’ve looked at here is a very broad set of sectors that might constitute dual-use goods.
 
Let’s explain what a dual-use good is first of all. Take for example Jewellery. Jewellery is a good that can be used either for military or civilian purposes as the materials used in jewellery making are often semiconductors. So if I export jewellery I might be exporting a semiconductor. In exporting that semiconductor I might indirectly be putting that semiconductor into a weapon system in a country where it shouldn’t be. On the surface of trade, it’s unclear whether my semiconductor export is to be used for civilians purposes in a mobile phone or for military purposes. And there are an awful lot of other goods that constitute those dual-use goods and Russia imports a lot of them. Machinery and components, cars, electrical products like semiconductors, computers, data processing materials and so on. Even things like cameras and medicines can be medical equipment and precision equipment can be used for military and civilian purposes etc.
If you take a look at a particular type of dual-use goods like aerospace and propulsion you can see that there are some very interesting patterns and trends. In fact, the EU is the largest importer of these types of dual-use goods. You can see in the run-up to 2014, which was the original conflict and looking at the original annexation of Crimea, you will see that there was a steady increase in this activity. There are also one or two little spikes that are also associated with different types of events in the Donbas region. Russia imports $2.56 billion a year from the European Union in this area. In the United Kingdom, you can see similar types of patterns in taps and bowls and appliances. Some of those are actually used in machinery and arms equipment manufacture.
 
But let’s have a look at another one which has also been banned and which is also a serious concern, and that’s telecommunications. Looking at this in total you can see that for the world as a whole, the USA is a very big importer. China is a very big importer of telecommunications equipment too, but looking at the Russian federation you can see that in telecommunications equipment, in spite of the drop back of Covid,  Russia has actually been importing a lot in relation to telecommunications equipment.
Looking at imports of dual-use goods in telecommunications, ie. the goods that go into data centres and into data processing storage, offer insight into the cyber intensity and the capacity of any nation. Russia imports a lot of this stuff – nearly $6.7 billion a year. Over a period of time, this has been increasing. So Russia has been importing more technology-related items which are associated with building its own cyber presence. There are one or two interesting spikes of activity within this context. Looking at Germany, immediately you can see that there’s something interesting coming through. The European Union is looking like it’s been reducing its overall imports of telecommunications until quite recently, then there’s suddenly a projected spike going up. Machinery was spiking very much between 2015 and 2016. This was coming from Germany. What this is telling us is that the types of equipment that are consistent with cyberattacks are increasingly being imported, and remember, during 2016 and 2017 we saw a very large increase in the numbers of those attacks. By taking out the EU 28 but keeping Germany and looking at Lithuania and Estonia’s activity, you can see again that in 2017, just as the NotPetya attacks were happening, there was a major spike in imports into Russia from Estonia in data communications and processing equipment.
 
Looking at how this might be trending from a wider perspective you can see very clearly from these import partners that China has taken over from Europe during 2015-16, and become the dominant provider of this type of dual-use good. Our modelling shows a very clear spike up to the end of 2021 suggesting that this is a very important area for Russia to be importing, but it’s also potentially associated with cyber activity.
 
This is very worrying and it’s not that all of these countries are deliberately trying to support activity that might be aggressive. So what they’re doing is supplying goods and services such as dual-use or luxury goods, in order to be able to limit the type of aggression that can be conducted through it.
 
But if you’re a business your problem is that getting through all of this and understanding what is allowed and what is not allowed is extremely difficult. So at Coriolis Technologies, we have created a sanctions tracking tool in partnership with the Institute of Exporters and International Trade. This tool lists all the dual-use goods that are associated in particular with the Russia Ukraine crisis, as well as with everything more generally. You can isolate whether you want something that’s banned right now, or whether it’s a dual-use good in particular. We’ve also looked at all the sanctioned goods in terms of all the luxury items as well. There is also a list of sanctioned individuals from the United Nations, the US,  the UK, and the EU. This information allows you to understand whether or not you’re going to be in breach of some of the regulations that are coming in. 

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