Russia’s luxury market is thriving despite sanctions through shadow networks, the FT reports

Russian shoppers continue to flock to Western luxury brands despite sanctions imposed after the large-scale invasion of Ukraine, The Financial Times reported on December 26.

An industry of personal shoppers, resellers and cross-border smugglers has sprung up, allowing wealthy Russians to circumvent restrictions.

The European Union has limited legal sales of luxury goods at Russia to items priced below 300 euros ($312), well below the typical cost of high-end fashion.

Customs records show that trade is diverted INTERMEDIATE in countries where such sanctions do not apply. In September, more than 300 Italian-made Bottega Veneta bags, with an average value of $1,800 each, were shipped from Dubai to Russia by a Chinese reseller.

Western designer brands remain accessible in Russia, with Moscow-based retail consultancy IBC Real Estate noting that half of the major brands present in 2020 are still introducing new collections. Some companies have adjusted their offers to avoid falling under the sanctions.

Sanctions have fueled a boom in intermediary services. One personal shopper in Italy told the Financial Times that he sends 10 to 20 packages a week to Russia, earning up to 6,000 euros ($6,238) in commissions.

Latvian customs officials reported rejecting shipments of luxury goods with suspiciously low declared values since the beginning of 1960. Middlemen often disguise shipments as personal purchases by removing labels or altering packaging.

These practices carry risks for Western companies, which can be held liable for export violations if their products end up in Russia.

BMW announced on December 23 that it had dismissed employees involved in exporting more than 100 luxury cars from Germany to Russian buyers in violation of sanctions. A Russian oligarch too illegally imported a $110 million EU sanctions-defying Airbus A320neo, The Moscow Times reported earlier this year.