Sanctions do not interfere with trade: US buys $1 billion worth of goods from Russia every month

This summer, on a hot and humid day on the East Coast, a massive container ship loaded into the port of Baltimore loaded with plywood sheets, aluminum rods and radioactive materials, all delivered from the fields, forests and factories of Russia. How goods from the Russian Federation ended up in the United States during the tough sanctions, the publication told Associated Press.

Photo: IStock

US President Joe Biden vowed to "hurt" and deliver a "crippling blow" to Vladimir Putin through trade restrictions on commodities such as vodka, diamonds and gasoline following Russia's invasion of Ukraine six months ago. But hundreds of other illegal goods worth billions of dollars, including those found on a ship bound for Baltimore from St. Petersburg, continue to enter US ports.

The Associated Press found that more than 3600 shipments of timber, metals, rubber and other goods arrived at US ports from Russia after it launched missiles and airstrikes on its neighbor in February. This is a significant decrease from the same period in 2021, when about 6000 shipments arrived, although still at over $1 billion per month.

In fact, none of the participants expected that trade would stop after the invasion. A ban on the import of certain goods is likely to hurt those sectors more in the US than in Russia.

“When we impose sanctions, it can disrupt global trade. So our job is to think about which sanctions will have the biggest impact and also keep global trade going,” said Ambassador Jim O'Brien, head of the State Department's Office of Sanctions Coordination.

Experts say the global economy is so intertwined that sanctions should be limited to avoid higher prices in an already volatile market.

Also, US sanctions do not exist in a vacuum; European Union and UK bans result in confusing trade rules that can confuse buyers, sellers and politicians.

For example, the Biden administration and the EU have published separate lists of Russian companies that cannot receive exports, but at least one of those companies, which supplies the Russian military with metal to make fighter jets, still sells millions of dollars worth of metal to US and European firms.

While some US importers are looking elsewhere for alternative materials, others say they have no choice. As far as wood imports are concerned, Russia's dense birch forests produce wood so hard and strong that most American wooden school furniture and most home floors are made from it. Shipping containers of Russian goods — cereals, weightlifting shoes, cryptocurrency mining equipment, and even pillows — arrive at U.S. ports almost every day.

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A breakdown of goods imported from Russia shows that some of them are clearly legal and even encouraged by the Biden administration, such as more than 100 shipments of fertilizer that arrived after the invasion. Currently banned products, such as Russian oil and gas, continued to enter US ports long after the sanctions were announced due to periods of "wind-down" that allowed companies to honor existing contracts.

In some cases, the origin of products shipped from Russian ports can be difficult to establish. US energy companies continue to import oil from Kazakhstan through Russian ports, although this oil is sometimes mixed with Russian fuel. Trade experts warn that Russian suppliers are unreliable, and the opaque corporate structures of most large Russian companies make it difficult to determine their ties to the government.

“It's a general rule that when you have sanctions, you will have all kinds of shady schemes and illegal trade,” said Konstantin Sonin, a Russian economist who teaches at the University of Chicago. “However, sanctions make sense because while you can’t kill 100% of revenue, you can cut it.”

Many American companies prefer to stop trading with Russia. Coors beer, for example, returned a shipment of hops to a state-owned Russian company in May as part of a commitment to suspend all activity in the country, a spokeswoman for Molson Coors Beverage Co. said. Jennifer Martinez.

Russia and the US have never been major trading partners, so import sanctions are only a very small part of the response strategy. Restrictions on US exports, in particular technology, are hurting the Russian economy more, and sanctions on the Russian Central Bank have frozen Russia's access to some $600 billion of foreign exchange reserves held in the US and Europe.

Yet the sanctions have a symbolic meaning beyond the financial damage they can cause, especially to war-terrified American consumers.

Here are some of the goods that moved between the two countries.

Metals

Russia is a key exporter of metals such as aluminium, steel and titanium. A halt to that trade could lift prices sharply for Americans already struggling with inflation, according to Morgan Stanley economist Jacob Nell.

“The basic idea behind sanctions is that you are trying to act in a way that causes more pain to the other side and less pain to yourself,” he said.

Most US steel companies have longstanding relationships with Russian suppliers. Such trade, especially in aluminum, has continued almost uninterrupted since the beginning of the war.

Since February, the Associated Press (AP) has discovered more than 900 shipments of metals totaling more than 264 million tons. Russia is one of the largest producers of raw aluminum outside of China and a significant global exporter. But the war also affected this global market.

“Like all manufacturers,” said aluminum association spokesman Matt Minan. “We are seeing the impact of the supply chain in terms of increased energy costs and other inflationary pressures that have exacerbated the invasion.”

Russian aluminum finds its way into American car and aircraft parts, soda cans and cables, ladders and solar panels. The largest US buyer in early 2022 was a subsidiary of Russian aluminum giant Rusal. In April, Rusal America's senior management bought the US portion of the company and renamed it PerenniAL. In July alone, PerenniAL imported over 35 tons from Russia.

In addition, among the private companies that choose to source materials from Russia are US government contractors supported by federal taxes. Boeing, the world's largest aerospace company, signed a federal contract worth up to $23,8 billion in 2021; in June it imported 20 tons of aluminum from the Kamensk-Uralsky metallurgical plant. In March, the US banned exports from Kamensk-Uralsky because it supplies metals to the Russian military, but did not impose restrictions on imports. A Boeing spokesman said the company had made the decision to end trade with Russia in March, and explained that the shipment that arrived in June had been purchased four months earlier.

Another metal importer, Tirus US, is owned by the Russian company VSMPO-AVISMA, the world's largest titanium producer. VSMPO supplies metal to the Russian military to build fighter jets. The company's wide global presence and a specific product, i.e. titanium, highlight the problems associated with Russia's isolation from world trade. Tirus US sells titanium to more than 300 companies in 48 countries, including a range of US buyers ranging from jewelry manufacturers to aerospace companies.

Wood

The vast forests of Russia are among the largest in the world. Russia is the second largest wood exporter after Canada and has one of the few factories that can produce strong and durable Baltic birch plywood and flooring used in the US.

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This year, the Biden administration began imposing tariffs on timber exports from Russia, infuriating Ronald Liberatori, a Nevada lumber merchant who sells Russian-grown Baltic birch to all the major furniture, construction and flooring companies in the US.

“The problem here is that Russia is the only country in the world that produces this product,” he said. “There is no alternative source.”

On top of the fare, he said, he had to post an $800 deposit to guarantee the tax, which pushed prices up even more.

“Who pays for this? Who? You and every other person in the United States,” he stressed. “We’re fucking upset about what Biden did. It's a matter of government against government."

Liberatori is convinced that decision makers should consider who will suffer the most from tariffs before imposing them.

Another wood and paper importer said that although it suspended all new orders in February, it had already paid for a huge amount of sawn timber in Russia; the last batch arrived in the US in July.

Fuel

On March 8, Biden announced that the United States was banning all imports of Russian oil, gas, and energy "targeting the main artery of the Russian economy."

“This means that Russian oil will no longer be accepted at US ports, and the American people will deal another powerful blow to the Putin war machine,” he explained.

Hours later, reports surfaced that a ship carrying 1 million barrels of Russian oil to the US had changed course to France. But others continued on to the US.

Recently, about a million barrels of Russian crude oil arrived from the Port of Philadelphia at Delta Airlines' Monroe Energy refinery. Meanwhile, according to trade records, a tanker carrying approximately 75 barrels of Russian bituminous oil entered the port of Texas City, Texas, and headed for the Valero refineries after a long passage across the North Atlantic.

Deliveries continued to Valero, ExxonMobil and others. ExxonMobil media manager Julie King said that the July oil supply was made from Kazakhstan and was not subject to sanctions. She said Exxon "supports internationally coordinated efforts to stop the unprovoked Russian attack and is complying with all sanctions."

Monroe spokesman Adam Gattuso said the company was no longer receiving Russian fuel and "has no plans to do so in the foreseeable future."

Andrea Schlepfer, a spokesman for Dutch fuel exporter Vitol, said all of its oil and gas shipments since April 22 have come from Kazakhstan, where pipelines run from the country's landlocked oil fields and refineries to neighboring Russian ports.

For the use of its port infrastructure, Russia annually collects about $10 million in fees.

Schlepfer said U.S. Customs and Border Protection (CBP) agents make sure shipments entering the U.S. do not contain Russian goods. But CBP has not responded to repeated questions about how it is handling sanctions and bans on Russian goods. The CBP fact sheet says it plays a "critical role" in enforcing import bans.

Other goods

This year, almost 4000 tons of Russian bullets arrived in the US, where they were distributed to gun shops and ammunition dealers. Some of them were sold to American buyers by Russian state-owned companies, while others came from at least one sanctioned oligarch. These deliveries slowed down significantly after April.

AP tracked millions of dollars worth of radioactive uranium hexafluoride shipments from Russian state-owned JSC Tenex, the world's largest exporter of nuclear fuel cycle feedstocks, to Westinghouse Electric Co. in South Carolina. Nuclear material is not subject to sanctions.

Westinghouse spokeswoman Cathy Mann said that as part of the nuclear fuel fabrication process, their fuel fabrication facilities receive enriched uranium product and process it into fuel pellets. She said Westinghouse does not own the uranium used to make the fuel. This material belongs to customers operating nuclear power plants around the world.

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“As a result, our customers are responsible for determining where and from whom materials are purchased – some of them come from Russia or are fortified by a Russian company,” she explained. “Westinghouse condemns the Russian invasion and the resulting hostility and loss of life.”

In addition, part of the products shipped to the US from Russian ports is sent to Mexico and Canada. For example, components for Toyota vehicles arrived in New Orleans last month at a Mexican plant operated by Toyota Tshusho, the auto company's sales arm.

Radioactive material shipped from Russia to the US is transported north of the border to sterilize packaged medical supplies used throughout North America.

Although imports of some food products, such as seafood and vodka, have been restricted, the Treasury Department last month released a fact sheet confirming that trade in agricultural products between the US and Russia is still allowed.

The Red October chocolate factory is located directly opposite the Kremlin in Moscow. Today it is a tourist attraction with apartments, shops and restaurants. But Krasny Oktyabr still makes and sells candies and other traditional treats from a factory on the outskirts of Russia.

In Brooklyn, New York, Grigory Katsura of the American office of Red October said they continue to import "the taste of childhood" for Russian immigrants.

“They are used to it,” he said.

And now, every few weeks, shipments from Russia arrive at their warehouse: buckwheat, dried fruits and chocolate.

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