Gleb Stolyarov, Philip Lebedev, Alexander Marlow
LONDON (Reuters) – About $2.3 billion worth of dollar and euro banknotes have been exported to Russia since the United States and European Union banned paper currency exports to Russia in March 2022 following the invasion of Ukraine, according to customs data seen by Reuters.
The previously unreported figures show Russia has been able to avoid sanctions that block cash imports and suggest that the dollar and euro remain useful instruments for trade and travel despite Moscow’s efforts to reduce its exposure to foreign currencies.
Customs data obtained from a private company that records and compiles the information shows that the cash was transported to Russia from countries such as the UAE and Turkey, which have no restrictions on trade with Russia. For more than half the total amount, the country of origin was not listed in the records.
The U.S. government in December threatened to fine financial institutions that help Russia evade sanctions, and imposed sanctions on companies in third countries from 2023 to 2024.
Although significant settlement problems remain, it has overtaken the US dollar to become the most traded foreign currency in Moscow.
Dmitry Polevoy, head of investment at Russia’s Astra Asset Management, said many Russians still want to hold foreign currency in cash for travel abroad, small imports and domestic savings.
“The dollar remains a reliable currency for individuals,” he told Reuters.
Russia’s central bank and the U.S. sanctions agency, the Office of Foreign Assets Control (OFAC), did not respond to requests for comment.
Russia began labelling the dollar and euro as “toxic” in 2022 as wide-ranging sanctions cut off its access to the international financial system, hindering payments and trade. Around $300 billion in Russian banks’ foreign exchange reserves in Europe have been frozen.
A European Commission spokesman said he could not comment on individual cases of the application of sanctions, but said the EU would negotiate with third countries if it suspected sanctions were being circumvented.
The customs records cover the period from March 2022 to December 2023, and Reuters was unable to access more recent data.
The documents show a surge in cash imports just before the invasion: $18.9 billion in dollar and euro bills flowed into Russia between November 2021 and February 2022, compared with just $17 million in the four months prior.
Daniel Pickard, leader of the international trade and national security practice group at the US law firm Buchanan Ingersoll & Rooney, said the surge in shipping volumes before the invasion suggested some Russians wanted to protect themselves from possible sanctions.
“While the United States and its allies have learned the importance of collective action to maximize economic impact, Russia has learned how to avoid and mitigate those same impacts,” Picard said, adding that the data almost certainly underestimates actual currency flows.
Limited outflows
After the invasion of Ukraine, the Russian central bank quickly restricted individuals’ withdrawals of foreign currency cash to support the weakening of the 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 currency inflows were much larger. The largest company in terms of foreign currency declarations was AeroTrade, a little-known company that offers duty-free shopping services at airports and on airplanes. The company declared about $1.5 billion in notes 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 listed on customs forms as exchanges or proceeds from in-flight trade.
In most cases, Aerotrade was listed only as the declarant who prepared and submitted the customs documents. Reuters was not able to identify Aerotrade’s customers, nor could it determine the source or destination of the cash.
Aerotrade owner Artyom Martynyuk told Reuters he doubted the authenticity of the customs records. He declined to comment further. “Aerotrade is not involved in the supply of foreign currency to Russia,” the company said in a statement.
According to customs records, the 20 million euro shipment handled by Aerotrade was imported in February last year by Yves Rocher Vostok, a subsidiary of 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.
French parent Groupe Rocher said that neither it nor Yves Rocher Vostok had any connection with Aerotrade and had never requested the transfer of the matter.
“Yves Rocher Vostok, like all companies in the Rocher Group, complies with the law,” a spokesman for the group said. “The company has never and will not attempt to circumvent sanctions on the import of dollar and euro banknotes into Russia.”
Money, weapons, banks
More than a quarter of the $2.27 billion worth of notes was imported by banks, much of it to pay for precious metals, according to customs records and a person familiar with the transactions.
Russian banks received $580 million worth of cash from abroad between March 2022 and December 2023 and exported roughly the same amount of precious metals. In many cases, the gold and silver shipments went to companies that supplied the banknotes, records show.
For example, Russian financial institution Vitabank imported $64.8 million worth of banknotes from Turkish gold trading company Demas Kuyumtürk in 2022 and 2023. During the same period, Vitabank exported $59.5 million worth of gold and silver to Turkish companies.
A person familiar with Demas’ operations confirmed that the firm took part in a series of gold liquidation transactions between March 2022 and September 2023 involving Vitabank and two other Russian financial institutions.
Delivering the notes from the UAE to Russia was the only solution Demas found to fulfil long-term contracts it had signed with Russian gold suppliers before Western sanctions came into effect and to comply with Turkish and international regulations on cross-border payments, the person said.
Sanctions have effectively cut off Russia from the Western financial system, meaning traditional wire transfer payments are no longer possible, the people said.
Abandoning existing contracts would expose Demas to financial penalties and reputational risk, the person said. The Turkish gold trader has never done business with entities under Western sanctions and strictly adheres to domestic and international compliance procedures, the person added.
Demas closed both sides in the third quarter of last year after completing all pre-war contracts with Russian companies, the people said.
Vitabank, the UAE and the Turkish presidency’s media office did not respond to Reuters requests for comment.
Among other major cash importers were companies controlled by Rostec, the state-run defense-industry conglomerate, according to the documents.
Rostec, which has been under U.S. sanctions since 2014, did not respond to Reuters questions about the cash payments it received.
