Reuters: Despite the sanctions, billions of dollars and euros in cash are flowing into Russia

Since the United States (US) and the European Union (EU) banned the export of their banknotes to Russia in March 2022, almost $2.3 billion in cash has flowed into the Russian Federation.

This is reported by Reuters.

Customs data obtained from a commercial supplier show that the cash entered Russia from countries such as the UAE and Turkey, which did not impose restrictions on trade with the Russian Federation even after its full-scale invasion of Ukraine. At the same time, the country from which more than half of the currency comes to Russia was not specified in the documents.

Customs records cover the period from March 2022 to December 2023. The documents showed a sharp increase in cash imports immediately before the full-scale invasion of Ukraine by the Russian Federation. From November 2021 to February 2022, $18.9 billion in cash in dollars and euros arrived in Russia, compared to only $17 million in the previous four months.

The head of the international trade and national security practice group at the US law firm Buchanan “Ingersoll & Rooney Daniel” Pickard said that the active inflow of currency before the invasion suggests that the Russians wanted to protect themselves from possible sanctions in this way.

"While the US and its allies were learning the importance of collective action to maximize negative economic consequences, Russia was learning to avoid and mitigate those same consequences," Pickard said. He added that the data most likely greatly underestimates the actual currency flows.

After the beginning of the invasion of the Russian Federation into Ukraine, the Central Bank of Russia quickly limited the populationʼs withdrawal of cash in foreign currency, trying in this way to soften the fall of the ruble.

According to Reuters, from February 2022 to the end of 2023, only $98 million in cash in dollars and euros left Russia. On the other hand, the inflow of foreign currency was much higher.

The largest single declarant of foreign currency was the little-known company Aero-Trade, which offers duty-free shopping services at airports and on board airplanes. During this period, she declared securities worth almost $1.5 billion.

Aero-Trade registered 73 deliveries of 20 million dollars or euros each. All of them were cleared at Moscowʼs “Domodedovo” airport. In the customs declarations, the goods were described as exchange or income from trade on board.

In most cases, "Aero-Trade" was listed only as a declarant, that is, an entity that prepares and submits customs documentation.

The owner of the “Aero-Trade” company Artem Martyniuk said in a Reuters comment that he doubts the authenticity of the customs documents. He refused further comments. The company stated that "Aero-Trade is not engaged in the supply of currency to Russia."

According to customs documents, one shipment worth €20 million processed by “Aero-Trade” was imported in February 2023 by “Yves Rocher Vostok”, a subsidiary of French cosmetics group “Yves Rocher”, which still operates dozens of stores in Russia. The customs data did not indicate where the funds came from.

The parent company in France “Groupe Rocher” said that neither it nor “Yves Rocher Vostok” had ever had any connection with “Aero-Trade” and were not aware of the transfer.

"Yves Rocher Vostok, like all Groupe Rocher companies, complies with the law. It has never tried and will never try to circumvent sanctions on the import of dollar and euro banknotes into Russia," said a representative of the group.

More than a quarter of this $2.27 billion in banknotes was received by Russian banks. A significant part of these funds came as payment for precious metals.

Several Russian banks received $580 million in cash from abroad between March 2022 and December 2023. At the same time, Russia exported an approximately equivalent amount of precious metals. In many cases, shipments of gold or silver went to companies that supplied banknotes to the Russian Federation.

For example, in 2022 and 2023, Russian lender “Vitabank” received $64.8 million worth of notes from Turkish gold trading firm Demas Kuyumculuk. During the same period, “Vitabank” exported $59.5 million worth of gold and silver to the Turkish company.

A Reuters source familiar with “Demas” operations confirmed that the company was involved in a series of cash-for-gold transactions involving “Vitabank” and two other Russian banks between March 2022 and September 2023.

The source said that the delivery of cash from the UAE to Russia was the only solution that “Demas” found to complete the long-term agreements signed even before the entry into force of Western sanctions against the Russian Federation. And since the sanctions effectively cut off Russia from the Western financial system, settlement by traditional bank transfer was no longer possible.

Abandoning existing deals would expose “Demas” to huge losses and reputational risks, the source said. When all pre-war contracts with Russian companies were closed, “Demas” stopped bilateral trade.

Other large importers of cash in Russia included enterprises controlled by the Russian state-owned military-industrial conglomerate “Rostekh”.