How Economic Integration Mitigates Sanctions on Machinery and Equipment Imports

Shipments through third countries are one way to mitigate the adverse effects of sanctions on imports of machinery and equipment (HS 84–92). The hypothesis that such shipments emerged after 2022 is tested empirically in this paper by using a sample of CIS countries for which monthly trade statistics are available from 2018 through 2025. The sample includes three EAEU members Armenia, Kazakhstan, and Kyrgyzstan as well as Azerbaijan, Georgia, Moldova, and Uzbekistan. Regression estimates reveal a stable relationship between imports of machinery and equipment from third countries and their subsequent exports to Russia after February 2022 for EAEU countries. The accuracy of the regression-based approach is limited by the quality of official statistics, which are likely to underreport some shipments. In addition, the paper applies a gravity-based approach that does not require the use of data on exports to Russia. A counterfactual amount of net imports of machinery and equipment is inferred from GDP dynamics and then compared with actual net imports excluding shipments to Russia. The excess of actual net imports over the estimated level is interpreted as transshipments, whose flow via EAEU countries is estimated at USD 7.1 billion per year. Both approaches converge on two consistent conclusions. First, transshipments of machinery and equipment to Russia are evident only via EAEU countries; this indicates that transaction costs and simplified customs procedures are more important than the logistical advantages of other countries. Second, these shipments consist mostly of goods initially imported from neutral countries, a fact which suggests that transient trade is a way to reduce costs rather than circumvent sanctions. The paper’s analysis also shows probable systematic underreporting of Kyrgyzstan’s reexports, whereas the trade statistics of Armenia and Kazakhstan seem more reliable.

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