Economic Sanctions and Intermediated Trade

Circumvention undermines economic sanction effectiveness, yet evidence on the precise mechanisms remains limited. This paper documents two strategies deployed to work around trade sanctions imposed on Russia in 2022: intermediated trade through Caucasus and Central Asia and a simple, yet little-documented, method whereby goods shipped through the sanctioned economy to the neighboring economies fail to reach their intended destination. The latter amounted to around half of total “abnormal” exports from the European Union/United Kingdom to Armenia, Kazakhstan, and Kyrgyzstan. While these strategies offset less than 10 percent of the sanctions' impact, substitution ratios exceed 50 percent for numerous sanctioned products.