International Bank Sanctions Lead to Bartering in Russia
In the face of international bank sanctions, Russian businesses are turning to an ancient solution: bartering. The practice, which dates back to the Neolithic era, has become a lifeline for Russian firms struggling to circumvent Western sanctions imposed over the country’s invasion of Ukraine.
One of Russia’s largest agricultural companies, Astarta Agrotrading, has signed two major agreements with a Pakistani company, exchanging chickpeas for rice and mandarins. The deal marks the first major test of this type of transaction, with issues such as customs taxes and product weighing still to be resolved.
The agreements are part of the Kremlin’s “Navigator for Barter in Foreign Trade” guide, which was launched to help companies navigate the complexities of bartering. The guide includes contract formats and protocols for determining the value of goods and services exchanged.
According to Veronika Nikishina, general director of the Russian Export Center, bartering will improve the competitiveness of Russian companies on the international stage. The Russian government has also emphasized the benefits of bartering, stating that it bolsters mutual trust and allows businesses to reduce the cost of acquiring necessary goods and services.
However, bartering raises concerns, including the potential for evading customs taxes and the need for foreign currency inflows to import machinery and raw materials. The guide warns businesses to agree on product packing and customs rates in advance to avoid surprises.
Bartering is particularly focused on the food sector, where Russia has managed to rely on its own production more successfully since imposing restrictions on European agricultural products in 2014.
In addition to bartering, the Kremlin has also legalized “parallel imports,” or the purchase of foreign products without the consent of their manufacturers. This initiative, approved in 2022, is seen as a way for Russia to evade international sanctions.