How Does Russia Bypass Sanctions?

ReportEnergyAugust 16, 2022 - 3:44:53 AM

How are Russian businesses bypassing the strong sanctions of the EU and the G-7 countries?

Introduction: Russia Bypass Sanctions

After the invasion of Ukraine on February 24, 2022, Russia found itself under strong sanctions from the European Union and the G-7 countries. The main goal of the article is to show how Russia circumvents sanctions and who helps it to circumvent sanctions.

In the first chapter, we will show how Russian small businesses pay and receive money in the conditions of sanctions.

In the second chapter, we will show how a large Russian business carries out its activities under sanctions.

In the third chapter, we will show that Russia uses bypasses as a means to sell its commodities.

1. Small and Medium-sized Businesses in Russia are Looking for Ways to Make International Payments in order to Survive.

After the introduction of sanctions on the limitation of making international payments in Euros and Dollars, small businesses faced the problem of their survival. The main payment systems Visa, Mastercard, JCB and Pay Pal rejected the possibility of cooperation with Russia. And some large Russian banks were disconnected from the SWIFT international payment system.

Kazakhstan is Playing the Interface with the West

After the sanctions, small businesses started applying for personalized international bank cards in Kazakhstan and other neighboring countries. Kazakhstan Altyn Bank allowed Russian individuals and businesses to remotely open virtual Visa and Mastercard cards that allow making payments and receiving payments in Euros or Dollars on the territory of Kazakhstan. Having received money on a virtual account, Russian individuals have the opportunity to withdraw money through a plastic card that can be ordered remotely with delivery by courier. It should also be remembered that Altyn Bank's main shareholder is China CITIC Bank Corporation Limited.

China is an Alternative to the West

The second option for payments and receiving payments for Russian small business is the Chinese payment system UnionPay, which is accepted in 180 countries of the world. A Russian business or individual can open a bank account in 11 Russian banks in the UnionPay payment system. Although UnionPay suspended the issuance of its cards in the banks that fell under the sanctions. Some Russian banks are planning to issue a joint MIR-UnionPay card.

China and Kazakhstan are also a good option for importing goods to Russia due to Putin's new decree that allows the import of goods such as vehicles, technology, metals, pharmaceuticals and clothing without the consent of the trademark owner. For example, a Russian company can buy a Tesla car and then legally sell it in Russia.

India by Developing Joint Ventures

The third option for paying for goods for Russian small businesses is India. The Russian private sector held meetings with Indian businesses to identify companies willing to establish new joint ventures or subsidiaries with Russia and opened special ruble-rupee bank accounts in major cities for transactions. However, India's big business is afraid to do business with Russia because the Indian government does not want to be under Western sanctions. Although small and medium-sized businesses are not subject to the sanctions policy and can trade with Russia. Ruble-to-rupee bank transactions were previously used between the USSR and India to pay for trade in national currencies. These accounts are called Nostro accounts and allow making international payments by converting national currency into foreign currency. Thus, Russian small businesses have the opportunity to pay for auto parts, fresh produce, medical devices and construction materials.


The fourth alternative for making international payments is the Russian MIR international payments system, which began its operations in 2015 and is not under sanctions. However, this system has the ability to operate only in 8 countries: Turkey, Vietnam, Armenia, Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan and Belarus. Russian banks immediately started reissuing Visa and Mastercard credit cards in the MIR payment system. Russians don't even need to visit a bank to get new cards. The new cards “debit-card tourism” will continue to operate, perhaps in Uzbekistan, Switzerland, online banks such as Tinkoff Bank. Russians cannot make payments with this card in Russia, but they will be able to make payments for international services.

MIR’s payment system is also used through Turkey to receive the desired goods. This method works as follows: a 2-way company is created where 2 contracts are concluded, one with a Russian business and the other with a European business. The Russian business makes payments through the MIR system to Turkey, and the Turkish company transfers the payments to the European company. Russian business also has the opportunity to buy goods and make payments and receive payments through the MIR system in all countries where this payment system operates.

Other Means

Other alternatives for making international payments in Europe for small businesses in Russia are Golden Crown. However, this system has certain drawbacks, such as a limit of 5000$ on international transactions. Another option is secondary sanctions. For example, Russian Transkapitalbank (TKB) was banned from carrying out any operations in dollars or euros, but the bank allowed its customers to make payments through its own banking system TKB business, which is an alternative to SWIFT. And the last opportunity for international payments for Russian business is cryptocurrency. For example, crypto exchanges and the Hawala money transfer system still operate in Russia.

2. Big Businesses in Russia are Looking for Ways to Continue their Activities.

It is quite problematic for big business in Russia to carry out its activities, since big business is the object of sanctions by the EU, the USA, the G-7 countries and their partners. Big business in Russia uses ways to circumvent secondary sanctions to make international payments. For example, some banks have their own payment system, which is an analogue of the SWIFT payment system and allows for international transactions.

An important option for a large technology business in the conditions of the ban on the purchase of network systems from the United States is the Chinese market, where it is possible to purchase Chinese technologies in parts. Payments can be made through the Chinese payment system UnionPay. For aviation companies, the system of creating “bilateral” new companies is used. For example, in Turkey, airlines are created that are joint and payments are made in the MIR payment system or in the national currency on special bank accounts.

The Russian shipping business has the opportunity to buy parts through intermediary companies. However, Western companies know where their equipment is. There are certainly some options for how to act in such situations. Mostly there are re-exports through new intermediary companies in the UAE where it is easy to move the business or to Turkey.

The third option for large businesses is the restructuring or liquidation of corporate structures. Technically, this step removes the company from sanctions. For example, Switzerland offers help to Russian companies in order to hide the ultimate beneficiaries to avoid legal entities from sanctions. Russian oligarchs use the following way to avoid sanctions in order to avoid freezing their own assets: the company is in the process of liquidation. However, the liquidator has the right to allocate funds for asset maintenance. In fact, the ultimate goal is to avoid a decrease in the value of one's own asset. A vivid example of this sanction avoidance scheme is the Russian chemical company Yevrokhim, which was lifted after billionaire Andrei Melnichenko transferred beneficial ownership to his wife.

And the fourth option for making payments for large businesses is to open accounts in the national currency. For example, Russia's oil and gas giant Gazprom requires payment for its gas in rubles to a special Gazprombank account. Also, payments for energy resources are made in yuan or rupees.

3. Use of Loopholes in Sanctions and Payment in National Currency for Commodity Trade.

Russia is one of the main suppliers of energy resources in the EU. However, Russian oil and coal are under EU sanctions. The EU also discussed sanctions against Russian gas, but Hungary blocked any possibility of sanctions against Russian gas and got exemptions for itself in the oil embargo. Moreover, Hungary is the only one of the EU to break the diplomatic boycott of Russia and agreed on the purchase of 700 million cubic meters of Russian gas. In response to the sanctions, Russia transferred payments for its energy resources in rubles. Initially, the G-7 countries and the EU strongly rejected this idea, but over time, the European Commission issued recommendations on how to make payments in rubles without violating sanctions. The Italian energy group and the German company RVE immediately opened ruble accounts at Gazprombank for gas payments.

Against the background of sanctions against Russia, China sharply increased its purchases of Russian gas after receiving a discount. Gas is delivered to China through the Power of Siberia gas pipeline under a long-term contract between Gazprom and CNPC. The largest oil and gas company Sibur intends to increase the supply of polymers to China by 40%.

India is the second major oil buyer that did not condemn Russia's attack on Ukraine after China. India actively started buying oil from Russia in March 2022. India received a discount of $35 per barrel. Since the beginning of March, India has received 5 ships of oil or about 6 million barrels of oil that have been delivered to India. India is also an important staging post for Russian oil fraud by blending oil at Indian ports. Russia offers India payment for its oil in rubles through the Financial Message Interchange System, which is the Russian analogue of the SWIFT payment system. Russia and India are discussing the expansion of payment mechanisms in national currencies. India and Russia are also working together to create an alternative to SWIFT.

For sales, Russia uses all possible ways to avoid sanctions, such as mixing its products with other oil and coal and using tankers without a destination to complicate the tracking of routes. More and more traders hide the origin of Russian oil in the following way: by mixing Russian oil in the minority with the oil of another country in the majority. This step allows you to identify oil as Turkish or Latvian, for example. Because technically this oil is no longer Russian. This method was used by the oil company Shell, but after criticism, the company abandoned this practice. A similar system is used with coal in Mongolia.

There is another interesting method. Oil and fuel can be delivered by tankers without a destination. The system works by delivering fuel by tankers in the seas without a destination or by transferring fuel from one tanker to another without a clear destination, which greatly complicates the tracking of such routes.


Despite Russia's actions, there are countries that do not want to sacrifice their business interests and join Russia's isolation. Most of Russia's partners in one way or another position themselves as an alternative to the Western world and strive for their own global dominance using available ways to benefit themselves. Having found itself under sanctions for making international payments in Euros and Dollars, Russian business faced the question of its survival. Russian business with the help of banks of neighboring countries and its own payment system MIR still has the ability to make payments and receive money.

Russia is one of the largest suppliers of resources in the world, so it is not easy to isolate Russia. Russia uses its partnership with China, India, Kazakhstan and Turkey to get the goods it needs and strengthen its position in the world. Russia continues to sell its own commodities using loopholes in restrictions. For Russia, bypassing sanctions is an opportunity to get the goods it needs and prevent the collapse of its own economy.

Date= 8th August 2022, Gold price – 1797.90$, Silver price – 20.96$, Platinum price – 967$, Oil price – 96.33$

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