Car industry insists 2,000% increase in sales to Azerbaijan has nothing to do with Russia
Britain’s car industry has insisted that an unprecedented 2,000% increase in vehicle exports to Azerbaijan has nothing to with Russia and is explained by the fact that the former Soviet state is a “flourishing market in its own right”.
Sky analysis has found that the British car sector sent another £40m worth of cars to Azerbaijan in the first month of this year, raising fresh questions about whether those cars were being sent there to circumvent sanctions on Russia.
New data from HM Revenue & Customs shows that while direct car exports to Russia remain at zero, where they have been since the imposition of sanctions in 2022, in January £43m worth of cars were sent to Azerbaijan, the former Soviet state neighbouring Russia.
That meant Azerbaijan, which hitherto had rarely made the top 75 export destinations for British cars, is now the 12th biggest foreign market, by value, for British-made cars: above Switzerland, Canada and Spain.
UK carmakers have pledged not to send cars to Russia, with sanctions formally banning the export of “dual use” items which could be repurposed as weapons in the Ukraine war. There are separate sanctions specifically banning the trade of cars worth over £42,000.
However, Sky News analysis found last week that over precisely the same period as British car exports to Azerbaijan rose sharply, there was a near-simultaneous rise in car exports from Azerbaijan to Russia.
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British-made luxury cars still being bought by rich Russians
The average value of cars sent from the UK to Azerbaijan in January was just over £115,000.
Trade data shows that similar increases in British exports have been seen in other former Soviet Russian neighbours, including Kazakhstan, Armenia and Georgia.
A spokesman from Britain’s motoring lobby group, the Society of Motor Manufacturers and Traders (SMMT), said it had detected no evidence the vehicles being sent to Azerbaijan were destined for Russia – and that they were evidence that it was a “flourishing market in its own right”.
“UK vehicle exports to Azerbaijan – as to many countries globally – have increased due to a number of factors, not least a flourishing economy, new model launches and pent-up demand,” it said.
Azerbaijan’s flatlining economy
However, the notion that the exports were evidence of a flourishing economy stands in stark contrast to the economic data, which show that Azerbaijan’s GDP per capita has been flat for a decade and a half at around $15,000 in purchasing power parity terms.
Since two years preceding the pandemic, the value of car exports to Azerbaijan has risen by more than 2,000%. No other sizeable car market in the world has come close, save for Kazakhstan, the other Russian neighbour, whose imports of British-made cars are up 800%.
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Carmakers told to act after Sky report
The SMMT said: “Wherever the UK automotive industry exports, it is committed to compliance with all trade and economic sanctions, and continues to work closely with government and the new Office For Sanctions to ensure the effective implementation of the regulations.
“There is no evidence available of that commitment being compromised, and it is right to monitor for any potential vulnerabilities in a fast-moving and evolving environment.
“The automotive industry remains in dialogue with government and other international partners enforcing co-ordinated trade restrictions, to ensure adherence to both the letter and the spirit of the sanctions, across all vulnerable sectors.”
While the sheer number of cars going to Azerbaijan is small, the value of those cars is consistently high, averaging well over £100,000 and suggesting they are mostly luxury cars.
There have been similar flows detected from other European nations, including Germany and Poland, to other former Soviet states neighbouring Russia.
Following the original Sky News story last week, Foreign Office Minister Anne-Marie Trevelyan said car companies should examine their orders to ensure they are complying with sanctions rules.
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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