How the rich of Russia now get their luxuries
On a dusty roadside on the outskirts of Dubai, Sohrab Fani is taking advantage of the West’s response to the war in Ukraine: his shop is installing heated seats in cars that are being exported back to Russia.
Twelve thousand heating pads languished in his warehouse for years, he said, until the Russian invasion and ensuing Western sanctions drove American, European and Japanese automakers out of the Russian market. Now the Russians import those cars through Dubai, into the United Arab Emirates – and because cars shipped to the Middle East are usually made for hot climates, accessory shops like Mr. Fani’s do a good job of kitting them out for winter weather .
“When the Russians came I was sold out,” said Mr. Fani, so he ordered a few more thousand seat heating pads. “In Russia they have sanctions. That’s not here. Business is done here.”
More than a year after President Vladimir V. Putin’s invasion, Western sanctions have done just that damaged the Russian economy but did not paralyze it. The web of world trade has adapted, allowing the Russian leader to largely deliver on an important promise: that the war will not drastically disrupt the lifestyle of consumption for Russia’s elites.
Russia continues to import coveted Western goods, made possible through a global network of middlemen.
In Moscow are the latest iPhones available for same day delivery for less than the retail price in Europe. Department stores still stock Gucci, Prada and Burberry. Car sales sites list new Land Rovers, Audis and BMWs.
Almost all leading electronics, car and luxury brands in the West announced last year that they are withdrawing from Russia. Not all of their goods are technically in violation of sanctions, but trading with Russia became very difficult due to the public outcry, pressure from workers and restrictions on semiconductor exports and financial transactions.
Still, Russian demand for luxury items remains strong, with merchants in Dubai and elsewhere catering to it.
“The rich people always stay rich,” said Ecaterina Condratiuc, the communications director of a luxury car showroom in Dubai who recently shipped a $300,000 Porsche Cayenne Turbo GT to a Russian dealer. The war, she added, “didn’t affect them.”
In Dubai, buyers roam the showrooms of a sprawling car market, haggling over western cars — the Dodge Ram is a recent favorite — to buy for cash and ship to Russia. Some are wealthy Russians who buy cars for themselves, or small entrepreneurs who want to resell cars for quick cash.
In other cases, Russian car dealers, having lost official ties with Western brands, organize their own imports, sometimes from hundreds of cars at the same time.
The Russian analytics company Autostat reported that such indirect imports accounted for 12 percent of the 626,300 new passenger cars sold in Russia in 2022.
Electronics also take circuitous routes to the Russian market. In Dubai’s old commercial neighborhood of Deira, electronics wholesalers have made an effort to recruit Russian-speaking staff.
“It’s an open secret,” said the owner of Bright Zone International General Trading LLC, located a few storefronts away from a hair extension wholesaler. “Competition is very tough for Russia at the moment.”
The owner, who requested to identify only his last name, Tura, said he shipped hundreds of smartphones and laptops to Russia last year ahead of the holiday season. A potential buyer wanted a quote for 15,000 iPhones, Mr. Tura said, but apparently found a better deal elsewhere.
At another nearby electronics store, an Afghan salesman, Abdullah Ahmadzai, said he had arrived in Dubai less than a year earlier and had since learned enough Russian to negotiate with his Russian-speaking customers. Across the street, a man from Tajikistan, a former Soviet republic, said he and his colleague quickly found work at a shop that sold phones, laptops and drones.
“All the shops here are looking for people who speak Russian,” he said. “We got lucky.”
After many Western companies pulled out of Russia, Putin’s government encouraged the unauthorized importation of their goods from other countries. The Russian Ministry of Commerce published a list of dozens of companies whose products could be imported without the makers’ permission, including Apple, Audi, Volvo and Yamaha.
“Whoever wants to bring in luxury goods will be able to do so,” Putin promised last May.
A Russian report estimated that such “parallel imports” of laptops, tablets and smartphones totaled $1.5 billion last year. At the same time, Chinese cars and electronics have entered the Russian market.
“You can take whatever you want as long as you have money,” says Pyotr Bakanov, a Moscow-based motoring journalist. “Anyone who isn’t lazy brings cars.”
The new trade routes largely pass through countries that maintain friendly relations with Moscow. Western analysts and officials have pointed out Turkey, China and former Soviet republics such as Armenia and Kazakhstan are countries that divert Western goods to Russia. They say the Kremlin is taking advantage of those imports not just to appease a population accustomed to foreign phones and cars, but also to find microchips for weapons used against Ukraine.
Mr. Bakanov, like other Russian car bloggers and journalists, got into the business himself: he posts ads on the Telegram messaging app and offers to import cars “on order from any part of the world.” He said foreign auto parts are also coming in through parallel imports – some are now available in Russia at lower prices than before the war, when those parts were sold by authorized dealers charging high premiums.
The workarounds are so widespread that Russian auto publications regularly provide reviews of cars made for foreign markets. The multimedia console in the China-made Toyota Camry only works in Chinese, a popular car website warned in February; the reviewer suggested holding a smartphone translation app to the screen.
At the car market in Dubai one evening in March, Sergei Kashkarov sat in the passenger seat of a parked gray Toyota and negotiated his latest deal: to send six Mitsubishi cars by ferry and truck to a dealership in the Siberian city of Novosibirsk, via Iran and Kazakhstan . Mr. Kashkarov had moved to Dubai from Siberia in 2021 and established himself after the invasion as a broker connecting Russian car dealers with suppliers in Dubai.
“I’ve got plenty of work,” he said. “I’m really not complaining.”
The new trade patterns are reflected in international statistics; For example, car exports from the European Union to Russia fell to about 1 billion euros in 2022, from 5 billion euros in 2021.
But EU exports to Kazakhstan have almost quadrupled, to more than €700 million, and exports to the Emirates have increased by some 40 percent to €2.4 billion. Armenia reports that car imports increased more than fivefold last year to $712 million.
Western car companies generally deny knowing that their cars are going to Russia in significant quantities, or that there is a spike in sales in the Emirates.
“We haven’t seen any of that,” said Jim Rowan, Volvo’s CEO.
General Motors chief financial officer Paul Jacobson said, “I’m not aware of anything going to Russia.”
Automakers would struggle to track vehicle sales through intermediaries, industry officials say. And U.S. officials responsible for enforcing restrictions have focused more on goods that could be used for military purposes.
The United Arab Emirates has been identified as a “country of focusby US officials for its role as a hub for products shipped to Russia in violation of sanctions. Electronics in particular are a concern, officials say, because their chips could be reused for military use.
“The UAE has taken strict measures on import and export licenses for dual-use materials to prevent exploitation for military purposes,” an Emirati official said in a statement.
At the Dubai car market, a group of three men said they split their time between Russia and Armenia. They declined to say what they did for a living, but they described importing and reselling cars as a lucrative side business; someone said he bought about 100 cars in the last year.
“Dubai is a three-in-one,” joked a man who gave his name as Aik. “You go on vacation, you buy yourself a car, and you buy one to resell.”
Anton Trojanovsky reported from Dubai and Jack Ewing From New York. Reporting contributed by Vivian Nereim from Riyadh, Saudi Arabia, Ahmad Al Omran from Jeddah, Saudi Arabia and Oleg Matsnev from Berlin.