By Gleb Stolyarov, Philip Lebedev and Alexander Marrow
LONDON (Reuters) – About $2.3 billion in dollar and euro banknotes have been shipped to Russia since the United States and European Union banned exports of their banknotes there in March 2022 after the invasion of Ukraine, according to customs data seen by Reuters.
The previously unreported figures show that Russia has managed to circumvent sanctions that block cash imports, and suggest that the dollar and euro remain useful tools for trade and travel even as Moscow seeks to reduce its exposure to hard currencies.
Customs data, obtained from a commercial supplier that records and collects information, shows that the cash was brought into Russia from countries such as the United Arab Emirates and Turkey, which have no restrictions on trade with Russia. The country of origin for more than half of the total was not listed in the records.
In December, the US government threatened to impose sanctions on financial institutions that help Russia evade sanctions, and imposed sanctions on companies from third countries throughout 2023 and 2024.
It has overtaken the US dollar to become the most widely traded foreign currency in Moscow, despite major payment problems remaining.
Many Russians still want foreign currency in cash for trips abroad, as well as small imports and domestic savings, said Dmitry Polevoy, head of investment at Astra Asset Management in Russia.
“For individuals, the dollar is still a reliable currency,” he told Reuters.
The Russian Central Bank, the US sanctions agency and the Office of Foreign Assets Control (OFAC) did not respond to requests for comment.
Russia began labeling the dollar and euro as “toxic” currencies in 2022, as sweeping sanctions cut off its access to the global financial system, hampering payments and trade. Some $300 billion of the Bank of Russia’s foreign exchange reserves were frozen in Europe.
A European Commission spokesman said he could not comment on individual cases of sanctions being applied. The spokesman added that the EU communicates with third countries when it suspects sanctions evasion.
The customs records cover the period from March 2022 to December 2023, and Reuters was unable to access more recent data.
The documents showed a sharp rise in cash imports ahead of the invasion. From November 2021 to February 2022, $18.9 billion in dollar and euro banknotes entered Russia, compared with just $17 million in the previous four months.
The surge in shipments ahead of the invasion suggests some Russians want to insulate themselves against potential sanctions, said Daniel Pickard, chair of the international trade and national security practice group at U.S. law firm Buchanan Ingersoll & Rooney.
“While the United States and its allies have learned the importance of collective action in maximizing economic consequences, Russia has learned how to avoid and mitigate those same consequences,” Picard said, adding that the data likely understated actual currency flows.
Limited flows
Russia’s central bank has been quick to limit individuals’ withdrawals of foreign currency in the wake of the invasion of Ukraine, in an attempt to support the weak ruble.
According to the data, only $98 million in dollar and euro banknotes left Russia from February 2022 to the end of 2023.
By contrast, foreign exchange inflows were much higher. The largest foreign exchange declarer was a little-known company, Aero Trade, which offers duty-free shopping at airports and on board aircraft. The company declared about $1.5 billion in securities during the period.
AeroTrade registered 73 shipments worth $20 million or euros each, all of which were cleared at Moscow’s Domodedovo airport, an international hub near the company’s headquarters. The shipments were described in customs declarations as exchange or proceeds from onboard trade.
In most cases, AeroTrade was listed only as the entity preparing and submitting customs documents. Reuters was unable to identify AeroTrade’s clients or determine the source or destination of the funds.
Aero-Trade owner Artem Martynyuk told Reuters he doubted the authenticity of the customs records. He declined to comment further. “Aero-Trade is not involved in the supply of hard currency to Russia,” the company said in a statement.
According to customs records, one shipment worth 20 million euros handled by AeroTrade was imported in February last year by Yves Rocher Vostok, a subsidiary of the French cosmetics group Yves Rocher, which still operates dozens of stores in Russia. The country of origin and the name of the supplier were not listed in the data.
Rocher Group, the parent company in France, said that neither the group nor Yves Rocher Vostok had any connection whatsoever with Aero-Trade or the transfer request in question.
“Yves Rocher Vostok, like all Rocher Group companies, abides by the law. It has never tried and will never try to bypass sanctions on the import of dollars and European banknotes into Russia,” a group spokesman said.
Gold, weapons and banks
According to customs records and a person familiar with the transactions, banks imported more than a quarter of the $2.27 billion in banknotes, most of it as payments for precious metals.
Several Russian banks received $580 million in cash from abroad between March 2022 and December 2023, and exported roughly equivalent amounts of precious metals. Records show that in many cases the shipments of gold or silver went to companies that supplied the country with banknotes.
For example, Russia’s Vitabank imported $64.8 million in banknotes from Turkish gold trading company Dimas Kuyumkuluk in 2022 and 2023. During the same period, Vitabank exported $59.5 million in gold and silver to the Turkish company.
A person familiar with Dimas’ operations confirmed that the company was involved in a series of cash-for-gold transactions involving Vitabank and two other Russian lenders between March 2022 and September 2023.
Delivering banknotes from the UAE to Russia was the only solution Dimas found to fulfill long-term contracts signed before Western sanctions took effect with Russian gold suppliers, while still complying with Turkish and international regulations on cross-border payments, the person said.
With the sanctions, Russia has effectively been cut off from the Western financial system, so it is no longer possible to settle invoices via traditional bank transfer, the person added.
Backing out of existing agreements would expose Dimas to financial penalties and reputational risks, the person said. The Turkish gold trader has never dealt with entities under Western sanctions and strictly follows all national and international compliance procedures, the person added.
In the third quarter of last year, once all pre-war contracts with Russian companies were completed, Dimas ended the back-and-forth deals, the person said.
Vita Bank, the UAE and the Turkish presidency’s communications directorate did not respond to Reuters requests for comment.
Other major cash importers were entities controlled by Rostec, a state-owned military-industrial corporation, the documents showed.
Rostec, which has been under U.S. sanctions since 2014, did not respond to Reuters’ questions about the cash payments it received.
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