Rich Russians routinely shun trade restrictions on luxury brands, using a cottage industry of personal shoppers, sellers and cross-border smugglers to keep up with the best European fashion.
The social media platforms Instagram and Telegram have been filled with sellers offering their services to both major retailers and private buyers in Russia, promising a path around sanctions on expensive handbags and high-end fashion.
European luxury brands have been hit with restrictions on their sales to Russia following Vladimir Putin's massive invasion of Ukraine in 2022, with the EU restricting legal sales of goods worth less than €300.
However, although average prices for high-end fashion are well above the permissible limit, Russians continue to showcase the latest Western collections in Moscow, which are purchased through a thriving shadow supply chain. One buyer, Lliyenish, who has more than 10,000 followers on social media, promised to get “anything on your wish list” from the UAE and Europe. Lliyenish did not respond to a request for comment.
Customs records indicate that sanctions restrictions divert trade through distributors in third countries that do not apply any such restrictions. In September, for example, a shipment of more than 300 Italian-made Bottega Veneta bags, priced at an average price of $1,800, was shipped to Russia from Dubai by a seller based in China. Bottega did not respond to a request for comment.
Some Russian brands and importers have also adjusted their offers to ensure items fall below the sanctions threshold, according to analysts and customs data.
IBC Real Estate, a Moscow-based retail real estate consultancy, said about half of the major Western brands that were present in Russia at the beginning of 2020 were still available and bringing new clothing lines to the country.
Brokers saw a boom in business after the sanctions came into effect. From an apartment full of luxury handbags, one buyer in Italy said he was shipping 10 to 20 packages to Russia every week, earning up to €6,000 a week in commission.
“Italians don’t care,” said the buyer, who asked to be called Michael. “For them, it is important to sell the product, and what happens to it later is our business.”
Mikhail, who has been exploring the European market for clothing lines scheduled to be launched in Russia before 2022, claims that the destination of the goods he buys is an open secret. “Everyone in these shops already knows me, and they know my colleagues. Everyone knows where these clothes go.”
Latvian customs officials told the Financial Times that since the beginning of the year they had rejected 60 shipments of luxury goods to Russia, many of which had an artificially low price on the customs declaration. Brokers often try to disguise shipments as personal deliveries, for example, by removing tags from bags.
Western brands could be held liable for export control violations if their products appear on the Russian market, regardless of the route into the country.
Gavin Irwin, barrister at 2 Hare Court Chambers, said: “In order to mount a defence, you have to prove that you did not know, and had no reasonable cause to suspect, that the goods were ultimately destined for Russia.”
In some cases, price thresholds shaped the decision-making process.
A Financial Times analysis of Russian customs records shows that men's suits sent to the country by the Italian company Canali were priced at wholesalers at an average of about 600 euros in the year before the outbreak of war.
After the sanctions were imposed, the unit price of almost all shipments fell to just below the sanctions threshold of €300. This does not seem to reflect a general change in the company's pricing strategy: for example, Canali's announced suits on entry into India show no such change.
A Canali representative stated that they are “fully compliant with all applicable regulations.” When asked about their pricing strategy, they said that pricing decisions are “highly confidential and commercially sensitive.” But they added: “Prices have not fallen for Russian buyers.”
The company said that the lower prices reflect that buyers in Russia “select and buy the items available to them, which are those that can be exported….” . At a price lower than the regulatory limit.
Some of the suits made by Kanali are currently priced at Tsum, one of Moscow's department stores, at around 170,000 rupees (€1,600/$1,650).
Some other Western brands are launching “capsule collections” at prices that meet sales pricing requirements in Russia, said Ekaterina Nogay, head of real estate analytics at IBC.
“Although the export of luxury goods may not be as obvious as the export of Western components used in Russian weapons, it also plays an important role in supporting the regime,” said Vitaly Volovoy, a researcher at Squeezing Putin, an organization that tracks corporate responses to Russia’s policies. Putin.” A large-scale invasion, which first noticed the shift in wholesale prices in Canali.
“Any public instances of sanctions circumvention reduce the overall leverage of sanctions against Russia, and help Putin's regime build this narrative that he still has access to brand new Western products,” said Yulia Pavitska, director of the sanctions program at the Kyiv Institute of Economics. .
A Russian woman, who asked to remain anonymous, said the export controls had only had an impact on middle-class shoppers like herself, who don't often buy luxury goods and have now stopped altogether due to the high prices charged by sellers.
“Wealthy Russians, who could afford it easily before, continue to get everything through fashion buyers, and nothing has changed for them,” the 28-year-old web designer who lives in Moscow told the Financial Times.
“I was always trying to work more, earn a little more so I could afford these luxuries, and with the war I feel like I've moved down a social class.”
