Kellogg’s, Coca-Cola and Brewdog beer on Russian shelves despite sanctions
Kellogg’s cornflakes, Bonne Maman jam, Kent Crisps, Brewdog beer… these are the items on the supermarket shelves in front of me.
I’m in a branch of Azbuka Vkusa (or ‘Alphabet or Taste’) in Moscow, where the aisles look remarkably like those in a Tesco, Sainsbury’s or Waitrose.
Russia is the most sanctioned economy in the world, but here we are, more than three years into its supposed isolation, and the shelves are still stocked with Western goods.
So how come?
Many of the products on sale here are what are called ‘parallel imports’. That means they’ve entered Russia via third countries, without the trademark owner’s permission.
Russia legalised the practice soon after its invasion of Ukraine to sidestep sanctions and to shield consumers from the impact of a mass exodus of foreign brands.
So despite companies pulling out of Russia, their products can often still be found here.
Take Coca-Cola for example. It stopped selling to Russia and ceased operations here in 2022, but there’s no problem buying its drinks.
Next to each other on the supermarket shelf, I found one can from France, one from Poland, one from Iraq and even a bottle from the UK. “Please recycle me,” the cap hopefully implores.
Like other businesses that say they have not authorised imports of their brands into Russia, there’s little Coca-Cola can do about it. The company declined a request to comment.
This specifically isn’t sanctions-busting, since food and drink are generally exempt from the restrictions imposed by Britain and the EU. It is, however, an example of how trade bans (self-imposed, in this case) can be circumvented. And the very same practice is being used on some sanctioned goods, like luxury cars.
At Frank Auto, a glitzy car showroom in northwest Moscow, there’s a Porsche Cayenne Coupe, a Mercedes EQE and a BMW X5. All are under two years old, i.e. younger than the sanctions regime that was designed to keep them out.
“Germany officially does not know that we import cars for clients from Russia,” Irina Frank, the dealership owner, tells me unashamedly.
“It’s done through multiple moves. An order is placed, for example, from Turkey, then from Turkey it goes to Armenia, and from Armenia we deliver the car to Russia.”
She explains that the cars are imported to order, because of the cost involved and the uncertainty.
Luxury cars can still be obtained in Russia
“Now, every transaction is checked, and there were cases when you even lost all the money, and cannot take the car out,” she says.
But it’s clearly still possible. In February, Irina sold a Ferrari Purosangue to a customer who paid 130 million roubles (1.43 million euros) – 30% more than what it would have cost without sanctions, she says.
And she even claims to have sold Range Rovers from Britain.
“Russia, you know, is a special country. Our people really love everything that is the most expensive, the coolest, in the maximum configuration,” she adds.
Sky News has reported extensively on how British and European cars are still entering Russia despite sanctions. But this is the first time we’ve spoken to some of those who have imported them.
In a car park in front of Moscow’s Belarussky train station, we meet Ararat Mardoyan, who owns a car brokerage firm called Autodegustator. He says he imported dozens of British and European cars into Russia during the first two years of the war, including his own vehicle.
Please use Chrome browser for a more accessible video player
Inside the importers of Western Cars into Russia
His black Volkswagen took six months to arrive from Germany, after being shipped via Belgium, Georgia, Armenia and Iran.
“You’re not doing anything wrong,” he insists, when I ask if he’s helping Russia avoid sanctions.
He refers to the Eurasian Economic Union as justification – a customs union which Russia shares with Armenia, Belarus, Kazakhstan and Kyrgyzstan.
“It’s like [the] European Union,” he argues.
“If the good hits Kazakhstan, for example, it’s already not only a Kazakh product, it’s already a product of customs union.”
I suggest that such moves are not in the spirit of sanctions, and that some would question the morality of it.
“I don’t think it’s something from the sphere of immorality. It’s business,” he says. “People have to work and survive.”
Ararat stopped importing European cars at the start of last year because of increased risks and decreasing profits, citing how he had to scrap an entire fleet of Range Rovers after their diagnostic systems were blocked as soon as they were switched on.
But he doesn’t believe the practice will ever cease, no matter how pricey and problematic it becomes.
“People who want to drive Ferrari,” he says, “they always have the money, and where there is the demand, there will always be supply.”
“This is like a globalised world. I don’t believe there’s any chance of isolating Russia. It’s not possible.”
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
Read more:
Trump plans to hit Canada with 35% tariff – warning of blanket hike for other countries
Woman and three teenagers arrested over M&S, Co-op and Harrods cyber attacks
The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
Please use Chrome browser for a more accessible video player
Is Britain going bankrupt?
Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.
Hangover from artificial growth
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
Read more:
Trump to hit Canada with 35% tariff
Woman and three teens arrested over cyber attacks
In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
Please use Chrome browser for a more accessible video player
Is Britain going bankrupt?
Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike