Since the US and the European Union imposed a ban on banknote exports to Russia in March 2022 following Russia's invasion of Ukraine, about $2.3 billion in dollars and euros have made their way into the country, according to customs data seen by Reuters.
The previously undisclosed figures show that Russia has managed to avoid sanctions banning cash imports, and indicate that dollars and euros remain important tools for trade and travel, even as Moscow seeks to reduce its reliance on foreign currencies.
Based on customs data obtained from commercial data providers, it was revealed that there was a flow of cash from countries such as the UAE and Turkey to Russia. These countries are known to have not imposed trade sanctions on Russia. Interestingly, the origin of more than half of the total amount of cash is not recorded.
In December, the US government threatened to impose sanctions on financial institutions that help Russia evade sanctions. Throughout 2023 and 2024, the US imposed sanctions on a number of third-country companies.
China's yuan has now surpassed the US dollar as the most widely traded foreign currency in Moscow, although it still faces significant payments challenges.
Dmitry Polevoy, chief investment officer at Astra Asset Management in Russia, said that many Russians still prefer to hold foreign currency in cash for international travel, small-scale import needs and domestic savings.
“For individuals, the dollar is still a reliable currency,” he told Reuters.
Russia's central bank and the U.S. sanctions authority, the Office of Foreign Assets Control (OFAC), did not respond to requests for comment.
In 2022, Russia called the dollar and euro currencies “poison” after the US and the European Union imposed a series of sanctions and cut off Moscow’s access to the global financial system, hampering transactions and trade. About $300 billion of the Bank of Russia’s foreign exchange reserves in Europe were frozen.
A European Commission spokesperson said they could not comment on specific cases of sanctions, but said the EU works with third countries if they suspect attempts to evade sanctions.
The customs records cover the period from March 2022 to December 2023, and Reuters did not have access to more recent data.
The documents show a surge in cash imports before the invasion. Between November 2021 and February 2022, $18.9 billion worth of dollar and euro notes entered Russia, compared with just $17 million in the previous four months.
Daniel Pickard, Leader of the International Trade and National Security Practice Group at US law firm Buchanan Ingersoll & Rooney, said the surge in shipments before the invasion suggested some Russians were trying to protect themselves from possible sanctions.
Limited Cash Flow
Following the invasion of Ukraine, Russia's central bank immediately restricted foreign currency cash withdrawals by individuals as a move to support the plunging ruble.
According to the data, only $98 million in dollar and euro banknotes left Russia between February 2022 and the end of 2023.
In contrast, foreign exchange inflows were much larger. The largest single provider of information on foreign exchange is a little-known company, Aero-Trade. It provides duty-free shopping services at airports and on planes. The company reported transactions of about $1.5 billion in the period.
Aero-Trade recorded 73 shipments, each worth 20 million dollars or euros, all completed at Moscow's Domodedovo Airport, an international hub near the company's headquarters. The shipments were listed in customs declarations as exchange or income from onboard trade.
In most cases, Aero-Trade is only registered as a declarant, that is, an entity that prepares and submits customs documentation. Reuters could not identify Aero-Trade clients and could not determine the source or destination of the cash.
Aero-Trade owner Artem Martynyuk stated to Reuters that it doubted the authenticity of the customs records and declined to comment further. The company also said in a statement that “Aero-Trade is not involved in the supply of hard currency to Russia.”
According to customs records, a shipment worth 20 million euros handled by Aero-Trade 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 data does not list the country of origin or the name of the supplier.
Groupe Rocher, the parent company in France, said that neither the group nor Yves Rocher Vostok had ever had any relationship with Aero-Trade or requested the transfer in question.
Gold, Guns, and Banking
More than a quarter of the total $2.27 billion in banknotes were imported by banks, mostly to pay for precious metals, according to customs records and a source familiar with the transactions.
Russian banks received $580 million in cash from abroad between March 2022 and December 2023 and exported about the same amount of precious metals. In many cases, the gold or silver shipments were given to companies that supply banknotes, the records show.
For example, Russian lender Vitabank imported $64.8 million worth of banknotes from Turkish gold trading company Demas Kuyumculuk in 2022 and 2023. During the same period, Vitabank exported $59.5 million worth of gold and silver to the Turkish company.
A person familiar with Demas' 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.
The person stated that sending the banknotes from the UAE to Russia was the only solution Demas found to complete long-term contracts signed before Western sanctions were imposed with Russian gold suppliers, while still complying with Turkish and international regulations regarding cross-border payments.
With sanctions effectively cutting Russia off from the Western financial system, settling bills using traditional wire transfers is no longer possible, the source said.
Violating the agreement would expose Demas to financial penalties and reputational damage, the person said. The Turkish gold trader has never transacted with any Western-sanctioned entity and has always complied with all national and international compliance rules, he added.
In the third quarter of last year, after completing all pre-war contracts with Russian companies, Demas stopped two-way trade, the source said.
Vitabank, the UAE and Turkey's presidential communications directorate did not respond to Reuters requests for comment.
The documents show that among other major cash importers are entities controlled by Rostec, the state-owned military-industrial conglomerate. (ah/rs)
