How big are EU transshipments to Russia?

Transshipments have fully offset the fall in direct exports from Germany to Russia

It’s heartbreaking to think that a country like Germany continues to export to Russia via third countries as Ukraine burns. But that’s the unfortunate reality and Germany isn’t alone in this respect. Almost all EU countries are in on this, with the exception of Sweden and Finland, who made sure Russia transshipments never took off, while Poland and the Baltics quickly shut down this racket after it boomed in the months after the invasion.

I frequently get pushback that Russia transshipments are small, so why worry about them. That’s not true at all. In today’s post, I give the example of German car exports, where the fall in direct exports to Russia is more than fully offset by a rise in transshipments via Central Asia, the Caucasus and Turkey.

The chart shows that Germany’s exports of cars and parts to Russia collapsed after Russia’s invasion of Ukraine. However, the drop in exports is more than fully offset by a sharp rise in exports to third countries, especially once you include Turkey (orange line). The fact that exports to these third countries rise right after the invasion rules out that this is about domestic demand in these places. Instead, this is about German cars going to Russian buyers.

Not surprisingly, autos and car parts are at the heart of transshipments from Germany to Russia. So it’s fair to say that the picture that emerges here - that Russia still gets all the German cars it wants - holds more broadly for German (and EU) products. It’s safe to say that the German government is fully aware of what’s going on. It chooses to turn a blind eye because German companies are lobbying to keep these exports going. Perhaps other countries have an excuse for this kind of behavior, but Germany - with its terrible past - really doesn’t.