Impose Secondary Sanctions on the Business Partners of Russia and China

Chinese leader Xi Jinping and Russian President Vladimir Putin toast during their dinner at the Palace of the Facets, a building in the Kremlin, in Moscow, on March 21, 2023. Pavel Byrkin, Sputnik, Kremlin Pool Photo via AP

Commentary

Western sanctions on Russia have loopholes through which a self-driving truck with haywire AI could drive.

Businesses in Central Asia, for example, openly advertise online about how they serve as transshipment points to evade U.S. and EU sanctions “100 percent.”

The statistics back them up. As soon as the sanctions took effect, imports of goods from the United States and European Union shot up in Kazakhstan, Georgia, Uzbekistan, Armenia, and Kyrgyzstan. Those countries’ exports to Russia also jumped, according to The Wall Street Journal on May 14.

Russia assisted the trade last year by legalizing “parallel imports” done without the original producers’ permission.

“In total, U.S. and E.U. goods exports to Armenia, Georgia, Kyrgyzstan, Uzbekistan and Kazakhstan rose to $24.3 billion last year from $14.6 billion in 2021,” according to the Journal. “These countries collectively increased their exports to Russia by nearly 50 percent last year to around $15 billion.”

These are self-reported numbers, so they are likely understated. But data in the Journal still paint a picture of disregard by businesses in Central Asia for the aggression perpetrated by Russia.

Of particular concern to U.S. officials are exports to Russia of aircraft parts, antennas, GPS systems, oilfield equipment, sonar systems, spectrophotometers, test equipment, and vacuum pumps.

Consumer goods are also a concern, given the dual-use components found within.

From Kazakhstan, the Central Asian country with the largest increase in imports from the West ($4.7 billion) and exports to Russia ($1.8 billion), washing machine sales to Russia increased from zero in 2021 to nearly 100,000 units in 2022. These machines have semiconductors that can be removed and used in weapons. The same goes for cameras. European officials are concerned that Moscow is extracting chips from both goods for military applications.

Evidence of transshipment from other Central and Eurasian countries is also instructive. According to Armenian media, “Russian-Armenian trade skyrocketed last year, with Armenian exports to Russia nearly tripling to $2.4 billion. Goods manufactured in third countries and re-exported from Armenia to Russia are believed to have accounted for most of that gain.”

The increase in Georgian exports to Russia was a negligible $40 million compared to much larger increases from the other countries. But there is evidence readily available of Georgia’s biggest import from the United States—autos and trucks—being transshipped from the United States through Georgia to evade sanctions on Russia.

“Major foreign automakers pulled out of Russia after the West imposed sanctions, prompting Russian drivers and dealers to turn to neighboring countries like Georgia and Armenia,” according to Eurasianet. The article quoted one Russian car dealer at an auto market in Georgia, saying, “Take a gander at this Porsche Cayenne. ... This is a sanctioned car and you can’t get it in Russia anymore.”

The Lighthouse Winmore, a Hong Kong-flagged vessel suspected of transferring oil to North Korea in defiance of international sanctions, is seen in the sea off Yeosu, South Korea, on Dec. 29, 2017. Yonhap via Reuters

In Asia, Hong Kong has long acted as a transshipment hub for goods that are export-controlled to China. Thus, American and European sanctions have had little effect on our chief adversaries’ abilities to acquire whatever technology they wish, as long as they can find another country, or in the case of Hong Kong, an “autonomous” region, that can act as a transshipment hub. Sanctions that target a particular company in China and Russia are even more useless as sanction targets need only change their legal name or transship through a neighboring business.

In other words, “targeted” sanctions against China and Russia are nearly useless. The entire country—and any other country that serves as a transshipment hub—needs to be hit with blanket sanctions, or they have little utility in stopping aggression.

The widespread problem of transshipment should make clear that effective economic sanctions require parallel trade restrictions by all of our trading partners. Kazakhstan is one example where progress is being made. The country announced that starting in April, it would more closely track imports and exports to comply with U.S. and EU sanctions on Russia. That could raise the prices of electronics by approximately 10–12 percent, according to Russian media. That’s better than nothing.

But Russian importers are looking far beyond Central Asia to evade Western sanctions, including to China, Kyrgyzstan, and the United Arab Emirates. The U.S. government has identified Turkey, Belarus, Brazil, India, Israel, Mexico, Nicaragua, Serbia, Singapore, South Africa, Taiwan, and Tajikistan as transshipment points for illegal exports to Russia.

Beijing is likely watching and figuring that if it invades Taiwan, it can still transship from these and other countries where unscrupulous businesses are allowed to run rampant by ethically lax governance.

Countries that allow their businesses to facilitate illegal exports to Russia are now part of the problem that leads to global instability and war, including not only in Ukraine today, but likely in Taiwan tomorrow. If they capitalize on the suffering of Ukrainians and (in expectation) Taiwanese and attempts by the West to sanction Russia and China, they themselves should be subject to secondary sanctions. This is no more a violation of their sovereignty than they are imposing on Ukraine and Taiwan by facilitating transnational aggression.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.