China Helps Foreign Cars Reach Russia, Bypassing Sanctions

Many foreign cars are being sent to Russia by going through China. This is a way to get cars into Russia even though there are rules against it because of the war in Ukraine. This shows how trade can find new ways to work.
By Newsroom | International Trade, Russia |

Thousands of foreign-brand vehicles are reaching Russia by transiting through China, effectively bypassing international sanctions imposed due to the conflict in Ukraine. This situation highlights a growing trend of parallel trade, where official sales channels are circumvented.

Escalation of Parallel Trade in Automotive Sector

Following Russia's actions in Ukraine, many nations, including the European Union, United States, South Korea, and Japan, have put in place sanctions affecting the automotive industry. These measures aim to limit the flow of goods and technology to Russia. Despite these restrictions, data indicates a significant increase in the number of foreign-brand cars entering the Russian market. This surge is attributed to indirect trade routes, primarily utilizing China as a transit point.

Observed Increase in Foreign Car Sales via China

Data from sources like Autostat reveals a notable rise in foreign vehicle registrations in Russia.

  • In the past year, approximately 30,000 Toyota vehicles were registered in Russia.

  • A substantial portion of these vehicles, nearly 24,000, are reported to have been manufactured in China.

  • This trend is not limited to a single brand, with sales of German and Japanese-made cars produced in China also showing an upward trajectory.

Mechanisms of Evasion

The re-routing of vehicles through China involves specific practices to obscure their origin and circumvent regulations.

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Exclusive-Foreign cars flow to Russia through China, skirting Ukraine war sanctions - 1

  • Misclassification of Goods: To bypass the requirement for automaker approval for sales in Russia, traders are reportedly classifying new cars as used. This practice is mentioned by Ms. Zhang Ai Jun, a former exporter at a car trading firm in Sichuan.

  • Chinese Intermediaries: A growing system of parallel trade has emerged, enabling Russian dealers to acquire Western, Japanese, and South Korean vehicles through Chinese intermediaries.

  • Logistical Infrastructure: China, being a major automotive producer and a significant trade partner for Russia, provides the necessary logistical and commercial framework to facilitate this indirect trade.

"Most foreign cars are imported through China regardless of where they are built," stated Mr. Vladimir, a Russian car dealer, indicating the widespread nature of this practice.

Official Stance and Non-Responses

Automakers and official bodies have offered limited direct comment on the situation.

  • Mercedes-Benz has stated that it prohibits sales to Russia. The company declined to comment specifically on the trade of Japanese vehicles between China and Russia.

  • Both China's Commerce Ministry and Russia's Industry and Trade Ministry have not responded to requests for comment regarding these observed trade flows.

Analysis of Trade Dynamics

The current situation points to a strategic adaptation by the automotive market to navigate restrictive trade policies.

  • Sanction Circumvention: The primary driver appears to be the circumvention of sanctions, allowing continued access to foreign vehicles in Russia.

  • China's Role: China's position as a manufacturing hub and its trade relationship with Russia make it a pivotal point for this indirect commerce.

  • Impact on Official Sales: Official sales of Western and Japanese brands in Russia have seen a sharp decline, a direct consequence of the sanctions and the rise of parallel import channels.

China and Russia have consistently opposed unilateral sanctions, arguing they lack international legal legitimacy, according to Modern Diplomacy.

Concluding Observations

The flow of foreign cars to Russia via China represents a complex geopolitical and economic maneuver. While direct sanctions are in place, indirect channels are proving effective in maintaining the supply of vehicles.

  • The utilization of China as a transit hub by traders of European, Japanese, and South Korean brands is a significant development.

  • The practice of re-classifying new vehicles as used is a key tactic employed in this parallel trade.

  • The lack of official comment from key ministries and companies suggests a sensitive and potentially contentious issue.

The evidence strongly suggests that China is a principal route for foreign vehicles entering Russia, effectively bypassing existing sanctions. The methods employed, such as misclassification and the use of intermediaries, underscore the adaptability of trade networks in response to international pressures.

Sources

Frequently Asked Questions

Q: How are cars getting to Russia?
Many cars made by foreign companies are sent to Russia by going through China. This is a way around the rules.
Q: Why are there rules against sending cars to Russia?
Some countries have rules against sending goods to Russia because of the war in Ukraine. These rules are called sanctions.
Q: Is this legal?
The cars are being sent in ways that try to avoid the rules. Sometimes new cars are called used cars to get them through.
Q: What do car companies say?
Some companies say they do not allow sales to Russia. They have not said much about cars going there through China.
Q: What does China say?
China has not commented on this trade.