FT: Luxury brands flow into Russia through shadow markets despite EU sanctions

The Financial Times reports that wealthy Russians have found ways to bypass sanctions to purchase luxury goods, using personal shoppers, resellers, and cross-border smugglers.

Since Russia launched the all-out war against Ukraine in 2022, European luxury brands have faced restrictions on sales to Russia, with the EU capping legal transactions at items priced under €300. Despite these limits, rich Russians continue obtaining the latest Western collections through a thriving shadow market.

Social media platforms are now filled with resellers working with both major retailers and private clients in Russia, offering discreet methods to sidestep sanctions on high-end handbags and couture. Customs records reveal that trade has been rerouted through middlemen in third countries without such restrictions. For instance, in September, over 300 Bottega Veneta handbags, averaging $1,800 each, were shipped to Russia from Dubai via a Chinese reseller.

Some brands and Russian importers have adapted their strategies to comply with sanctions thresholds. According to IBC Real Estate, nearly half of the Western designer brands operating in Russia in early 2020 remain available, with new collections regularly entering the market.

The sanctions have spurred a boom in intermediary businesses. An Italian-based buyer, Mikhail, disclosed sending 10–20 packages weekly to Russia, earning up to €6,000 in commissions.

“The Italians don’t care. For them, it is important to sell the product, and what happens to it later is our business. Everyone knows me in these shops already, and they know my colleagues. Everyone knows very well where these clothes are going,” he said.

Latvian customs officials have intercepted 60 shipments of luxury goods destined for Russia this year, many with artificially low declared values. Resellers often disguise these shipments as personal purchases by removing tags from items.

Western brands could be held accountable for violating export controls if their products are found in Russia. Some have launched “capsule collections” priced to align with Russian sanctions limits, said Ekaterina Nogay, head of analytics at IBC Real Estate.

“While perhaps not as obvious as the export of Western components used in Russian weapons, the export of luxury goods also plays an important role in buttressing Putin’s regime,” noted Vitali Volovoi, a researcher at Squeezing Putin, an organization tracking corporate responses to the invasion.

Yuliia Pavytska, sanctions program manager at the Kyiv School of Economics Institute, stressed that “any public cases of sanctions circumvention decrease the general leverage of sanctions against Russia” and help Moscow build this narrative that they can still access Western products.

A 28-year-old web designer in Moscow noted that export controls have primarily impacted middle-class shoppers, who now avoid luxury items due to high resale prices.

“Rich Russians, who could easily afford it before, continue to get everything through fashion buyers, nothing has changed for them,” she said.

Earlier, EU diplomats told welt.de that the bloc planned to adopt its 16th package of sanctions against Russia on 24 February 2025.

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