EU transshipments to Russia

As Ukraine burns, most EU countries turn a blind eye to Russia transshipments

Over the weekend, as Ukraine came under fierce aerial attack, I wrote a post about how EU countries use Central Asia, the Caucasus and Turkey as transshipments hubs for goods that ultimately go to Russia. That post prompted lots of questions, which fall into two broad buckets. First, how do these transshipments work? Do goods really go to Russia via an out-of-the-way place like Kyrgyzstan? Second, what can be done to stop these transshipments and why have they been going on for so long? I address both of these questions in today’s follow-up post.

The International Monetary Fund (IMF) has a great database called the Direction of Trade Statistics (DoTS). These data cover exports and imports between every country pair in the world on a monthly basis. They make it possible, for example, to look at German exports to Kyrgyzstan versus Kyrgyz imports from Germany. These two things should be the same. When they’re not, it tells us a lot about how the transshipment racket works.

The four charts above show this comparison for Germany (top left), Italy (top right), Poland (bottom left) and Lithuania (bottom right). They show that exports to Kyrgyzstan (black line) and Kyrgyz imports (blue line) generally coincided until the invasion of Ukraine, whereafter exports to Kyrgyzstan soared far above recorded imports. This suggests that Kyrgyzstan is just what gets written on the export invoice. Goods don’t actually go there. The likely go directly to Russia.

On the matter how best to stop these transshipments, it’s not that complicated. No additional regulations are needed and there’s no need for further export controls. It’s simpler than that. All it takes is a few phone calls from senior people in government to the firms involved. That will stop these transshipments overnight and is more or less what happened in Poland and Lithuania, who both successfully ended this trade.

This also means - unfortunately - that ongoing transshipments in the case of Germany and Italy (and many other EU countries) have the implicit blessing of government. As Ukraine burns, senior people in these governments consider this stuff acceptable. This is why the transshipment racket is ongoing in these countries.