The Madness of EU Transshipments to Russia
More than four years after the invasion, transshipments to Russia continue unabated
Thank you for subscribing to my posts. If you’re not yet a paying subscriber, please consider becoming one. That’ll allow you to DM me with questions and comments. I plan to move my posts behind a paywall in coming months. Subscribing now locks you in at a low rate. Thank you so much for your support and feedback!
When Russia invaded Ukraine over four years ago, the West quickly imposed export controls to prevent sensitive goods from going to Moscow. Right around then, exports from the EU to all kinds of unlikely places started exploding, including to Kyrgyzstan, a tiny, land-locked country in Central Asia. This export explosion obviously had little to do with surging demand in Bishkek for EU goods. Whatever the Kyrgyz economy might have been doing, nothing could possibly justify the astronomical rise in goods that were supposedly going there. Instead, this was about transshipment of goods to Russia, i.e. circumvention of Western export controls.
There’s no scandal in having this happen right after the invasion. There’s always going to be people trying to make a buck by bending the rules. But, over four years after Russia’s invasion, these transshipments continue unabated from Germany and Italy, two of the largest manufacturing hubs in the EU. That’s a huge scandal and it cuts to the core of what’s wrong with the EU. Similar to the shadow fleet, where the EU has unveiled countless sanctions packages that have accomplished little - in fact, you can be forgiven for thinking they’re largely performative - these transshipments are a symptom of the same, underlying disease, which is that EU governance gives companies outsized power and the means to prevent forceful action against outside aggressors like Russia. The lobbying power in Brussels of Greece’s shipping oligarchs is the prime example, but German and Italian exporters are in close second place.
Today’s post reviews the latest data on these transshipments. The signal they send to Moscow and Beijing is devastating, because they say that the EU is captive to short-term commercial interests that tie its hands as a geopolitical adversary. This is music to the ears of Putin and Xi. It’s enough already. The EU needs to get its act together.
The black lines in the charts above show what Germany (top left), Italy (top right), Lithuania (bottom left) and Poland (bottom right) report for exports to Kyrgyzstan. The blue lines are what Kyrgyzstan records as imports from each of these countries. The gap between the two means stuff is falling off the back of the truck on its way to Kyrgyzstan. That’s hardly surprising. You can’t actually drive from Western Europe to Kyrgyzstan without spending a lot of time driving through Russia. So the hard reality is that Kyrgyzstan is just something that gets written on the invoice. Most of this stuff goes straight to Russia, i.e. there was never any intention of going to Kyrgyzstan.
The reason I show Lithuania and Poland is because both were clearly able to shut down the transshipment trade to a very large extent. This highlights that it’s entirely possible to end this trade. All it takes is a few phone calls and these exports will stop. The continuation of this trade for Germany and Italy is therefore a political decision. At this point, it’s obviously well known in Berlin and Rome that this stuff is going on, but a decision has been made to look the other way. Short-term commercial interests are allowed to override medium-term strategic thinking. Putin and Xi obviously love every minute of this.
Kyrgyzstan is obviously just one example. These transshipments go from Germany and Italy to every single country in Central Asia, the Caucasus and - most important - Turkey. Once you add it all up - as I’ve shown in this post - there actually hasn’t been a drop in German exports of cars to Russia, for example.
The last thing I’ll say is that some countries clamped down on transshipments from the start. The US did this, as did the UK. The Nordics have been exemplary and - as I flag above - Poland and the Baltics shut this stuff down after it first reared its head. There is no conceivable reason that - four years after the invasion - this stuff should still be going on for Germany, Italy and a bunch of other EU countries.
Rather than calling EU transshipments to Russia “madness,” I would call them something closer to hypocrisy and weakness.
Dr. Brooks points out this hypocrisy very clearly. The EU loudly sanctions Russia, while large volumes of European goods continue to reach Russia through Central Asia and the Caucasus. Exports supposedly destined for Kazakhstan, Kyrgyzstan, Armenia, Georgia, and other countries are often final destinations only on paper. In reality, many of these goods appear to end up in Russia.
The EU is one of the main sources of this transshipment network, especially Germany and Italy. European officials know these trade flows are highly abnormal, yet enforcement has remained selective and weak for a long time.
To me, the hypocrisy is even more obvious because Europe continues to criticize China’s normal trade with Russia and sanctions Chinese companies, while European firms themselves keep exporting to Russia indirectly. At the same time, the EU still imports large volumes of Russian natural gas. This is not a serious sanctions regime. It is a system of moral posturing, selective enforcement, and strategic self-deception.
For the past 6 -9 month the transshipments into Russia from Europe might be seen as a marginal issue. The principal issue is , more than ever before, that the European governments have not found common ground for a diplomatic initiative to lead efforts to end the war, and actually end it. Europe has more to offer, both to Russia and to Ukraine, than a mindless meeting for show in Alaska, or a personal and national humiliation of Selenskij-Ukraine at a government office.