The European Union has recently announced yet another sanctions against Russia—its seventeenth so far. These measures build upon the extensive economic sanctions and wide-ranging export bans already imposed by the United States and the EU in the wake of Russia’s invasion of Ukraine in February 2022. Central to these initiatives is the strategic aim of denying Russia access to advanced technologies critical for producing and maintaining military hardware. Yet the stark reality remains that Western technology continues to be detected in the Russian drones and missiles deployed in Ukraine, starkly highlighting the limitations of these sanctions in achieving their intended effect.

To unravel this troubling dynamic, economists from the universities of Würzburg, Munich, and Princeton—Lisa Scheckenhofer, Feodora A. Teti, and Joschka Wanner—have carried out a thorough investigation into how military goods, despite being subject to sanctions, still manage to reach Russia. Their findings are published in the latest edition of AEA Papers & Proceedings, shedding light on a complex and persistent challenge: the circumvention of sanctions via third countries sympathetic to Moscow.

Joschka Wanner, Assistant Professor of Quantitative International and Environmental Economics at Julius-Maximilians-Universität Würzburg, explains that the study offers concrete evidence that military equipment sanctioned by the West has been reaching the Russian market indirectly, routed through countries considered friendly to Russia. In terms of complex data, the probability of these Russia-friendly nations exporting a sanctioned military product category to Russia jumped by an astonishing 20 percentage points relative to neutral countries after the conflict erupted. This dramatic increase highlights the porous nature of international sanctions when confronted with the realities of global trade and shifting alliances.

The team’s research relied on a rigorous analysis of publicly available trade data from UN Comtrade, one of the largest global trade databases managed by the United Nations, covering 2021 to 2023. They examined trade flows from 122 countries, categorising them into allies of the sanctioning coalitions, Russia-friendly states, and neutral parties. This detailed data provided a window into how trade patterns have adapted in response to the sanctions, revealing the pivotal role of third countries in circumventing the restrictions.

Of course, tracing these patterns was far from straightforward. Lisa Scheckenhofer notes that sanctions evasion is inherently clandestine, making detection an uphill task. Nonetheless, the data indicated that logistics firms in Russia-friendly countries significantly ramped up their transportation of Western goods to Russia following the outbreak of hostilities. This was accompanied by a discernible increase in exports from Western allies to these intermediary countries, setting the stage for onward export to Russia. Following these intertwined trade flows, the researchers could identify clear evidence of how sanctions were being bypassed.

Another layer of complexity emerged in distinguishing between deliberate sanction-busting and the more benign shifting of trade flows driven by increased costs. Feodora A. Teti explains that to untangle these factors, the team compared the exports of Russia-friendly and neutral countries, which maintained consistent trade costs with Russia. The discovery of a disproportionate increase in exports from Russia-friendly countries to Russia, alongside higher imports from Western allies to these intermediary nations, strongly suggested that these flows were not simply a reflection of higher costs but pointed to active circumvention of sanctions.

The study’s conclusions offer a sobering reminder of the limits of sanctions in a globalised economy where third countries can act as convenient intermediaries. Even more disconcerting is the revelation that some Western nations, despite their sanctions commitments, were four percentage points more likely to export these sensitive goods to Russia-friendly countries than neutral states. Although the study did find some evidence of declining violations by 2023, this modest improvement does not diminish the pressing need for more robust and proactive measures to close these loopholes. The authors argue that policies such as secondary sanctions, which would penalise third countries enabling such trade, ensure that sanctions fulfil their intended role in constraining Russia’s military capabilities.

More information: Joschka Wanner et al, Dodging Trade Sanctions? Evidence from Military Goods, AEA Papers and Proceedings. DOI: 10.1257/pandp.20251084

Journal information: AEA Papers and Proceedings Provided by University of Würzburg