Luxury & Geopolitics. Are the sanctions against Russia really effective?

Around two years ago, a fourth set of sanctions against Russia came into force, designed to weaken the country's economy and hopefully condition the outcome of the conflict with Ukraine.

Today, this solution seems far from bearing fruit.

The sanctions approved at the end of March 2022 included "a general prohibition on the sale, supply, transfer or export, directly or indirectly, to any natural or legal person in, or for use in Russia, of the targeted products". A list of more than 400 luxury goods, each worth more than €300, was specifically targeted.

However, Russia has managed to partially circumvent these sanctions and continue obtaining supplies of exclusive goods, mainly by using complicit intermediary countries.

Since spring 2022, at least 1,320 luxury cars (including Land Rovers, Mercedes, Porsches and Ferraris) worth a total of $229.6 million (around €215 million) have entered Russia, according to the independent Russian media outlet Verstka, citing an internal investigation based on customs data.

Another investigation, this time conducted by the New York Times in May 2023, revealed that Russians with high spending power have not really changed their lifestyle, as many luxury goods continue to flow into Russia through a global network of intermediaries based in Dubai.

In fact, the Russian Ministry of Trade recently published a list of ten famous companies whose products can be imported without the manufacturers' consent.

As for the Tech market, the New York Times reported that, in 2022, as a result of the sanctions measures taken, parallel imports of computers, tablets and iPhones totalled nearly 1.5 billion dollars.

What about fashion? The most prestigious labels closed their Russian shops in the weeks following the invasion of Ukraine. Hermès was the first major fashion house to announce the closure of its shops, followed by the French giant LVMH and all its brands (120 shops in all).

However, in 2023, these closures saw the emergence of a well-known phenomenon in China: the daigou. This involves a private buyer who purchases large quantities of luxury goods in Europe and then resells them on the Russian market at very competitive prices.

This new trend was revealed, among other things, by an investigation carried out in Italy by the weekly magazine Panorama, which looked into the phenomenon of private sales. These exclusive sales, organised by third parties in temporary points of sale, make it possible to acquire top fashion brands, in this case Italian, at very competitive prices. An abnormally high number of Russian daigous had been observed. 

Certain characteristics of the Italian fashion market are thought to favour the work of Russian daigous: in particular, the existence of nearly 400 multi-brand luxury clothing and accessories shops. These Italian retailers generate between 70% and 80% of their sales from abroad, thanks in part to intermediaries, with an annual sales volume of around €60-70 million.

The parallel luxury market in Russia, therefore, still has a long way to go.