Russian shoppers are still buying new goods from Zara and other brands that pulled out of the country. Here’s how
Even after hundreds of Western companies left Russia in protest against the country’s invasion of Ukraine, Apple iPhones, Zara skirts, and Mercedes-Benz cars are still flowing into the country.
Through a scheme the government calls “parallel imports,” Russia is bypassing Western sanctions and importing branded goods from companies that once promised to exit Russia—and apparently doing so legally.
The scheme, introduced shortly after Russia’s invasion of Ukraine and fully up and running by July, enables Russian companies to buy a long list of goods made by foreign companies—ranging from cars, tech products, and clothes to musical instruments, cosmetics, and boats—from a third country and, without permission from the trademark owners, sell them in Russia.
After being purchased legally from other countries—often ones in the Eurasian Economic Union (EEU), which Russia leads: Armenia, Belarus, Kazakhstan, and Kyrgyzstan—the goods are then sold in Russian stores operating under altered names to circumvent Western sanctions placed on the country.
The scheme cushions the impact of the exit of Western brands, which were originally intended to punish Russia for Putin’s attack on Ukraine. The inability to buy beloved brands like Zara and Apple would impact Russian citizens more directly than macroeconomic sanctions placed on Kremlin officials or the country’s central bank.
The Kremlin wants to keep a “sense of normality in [Russians’] daily lives,” Grigory Yudin, a sociologist, told the Guardian.
“Parallel import, therefore, plays its part in making sure life isn’t disrupted by the war. Putin doesn’t want Russians to change their habits because of the war but continue living as they lived.”
How to buy Zara in Russia
Russia first legalized parallel imports at the end of March and then produced a list of goods that could be imported in May.
“Parallel import does not mean permission to import and circulate counterfeit goods in Russia—the products must be legally put into circulation from the country of import,” the trade ministry said in a statement when it published the list of goods.
“One of the principles of compiling the list was defending the interests of domestic consumers for products of those foreign companies that left the Russian market under the sanctions regime imposed by ‘unfriendly’ countries,” it said.
In June, Russia removed all legal liability for parallel imports on goods and intellectual property coming from the West, and by July the import mechanism was fully working, enabling Russians to circumvent supply restrictions, Trade Minister Denis Manturov said in early July.
“This mechanism is working,” Russian news agencies quoted Manturov boasting. “We submitted the adjusted list to the justice ministry not so long ago.”
Online Russian retailers like Ozon and Wildberries have both begun selling goods through a parallel imports mechanism on their platforms. “Goods imported with the help of parallel imports are available on Ozon,” the company told Reuters in June, adding, “we have already started selling popular electronics brands on Ozon, including smartphones and their components.”
Parallel imports shouldn’t be seen as equal to gray imports, Dmitry Polevoy, head of investment at Locko Invest asset management and former chief economist at the state-run Russian Direct Investment Fund, told Reuters, as their customs services are paid and their shipments are completely legal.
“The volume of imports will likely be lower than before the latest sanctions, as issues with logistics need resolving,” Polevoy said, adding producers could impose restrictions to comply with sanctions, and extra costs would likely push the price of goods higher.
“The question is to what extent producers will be closing their eyes to the fact that their products will go to Russia,” he noted.
This story was originally featured on Fortune.com
