How Russia Circumvents EU sanctions on machinery imports: the case of Deutz Fahr

1
How Russia Circumvents EU sanctions on machinery
imports the case of Deutz Fahr
2
This week the EU countries expect to agree on the
11th sanctions package against Russia for its
invasion of Ukraine. The new measures will be
primarily focused on closing loopholes to
circumvent the previous restrictions. It is no
secret that despite all existing bans, car
dealerships in Moscow continue to sell the newest
BMW and Mercedes models, restaurants serve Dom
Perignon champagne, and clothing stores like TSUM
provide the latest collections from top European
brands. Loopholes also work in the opposite
direction Russia's oil exports, a key revenue
stream generating over 380 billion for the
national budget in 2022, have rebounded to
pre-war levels, with a substantial portion still
finding its way to the EU market via intermediary
countries such as India and China. Russia's
agricultural sector has also flourished as a
significant revenue generator, raking in over 40
billion in 2022. This figure is on par with the
proceeds from the country's metals exports and
double the earnings from fertilizer exports.
Obviously, even here, the EU sanctions were
actually far from what they were meant for. Until
February 2022, Russia imported more than a third
of its fleet of agricultural equipment,
purchasing approximately 3,000 tractors and up to
1,000 harvesters each year, amounting to around
1.5 billion. Despite having its own
machine-building facilities like Rostselmash and
Kirovets, Russia struggled to fulfill the
significant demand for agricultural machinery
necessary for cultivating over 80 million
hectares of cropland (which surpasses the land
area of France). The largest machinery suppliers
to Russia were prominent global companies such as
Deere, Claas and Deutz Fahr.
3
Following Russias attack on Ukraine, all three
companies expressed strong disapproval of the
military action and ceased the provision of
machinery, spare parts, as well as the operation
of their assembly plants within Russia.
Subsequently, the supply of agricultural
machinery faced limitations at the EU level due
to the classification of certain parts and
components as dual-use goods, with potential
applications in weapon production. This had a
tangible impact on agriculture in Russia with
the halt in supplies and unavailability of
necessary parts, some farmers resorted to
"cannibalism" which involved dismantling
functional machinery to obtain the required
components. Perhaps the shortage of equipment was
one of the reasons why Russia announced that it
plans to harvest 20 less grain in 2023 than the
year before. In December 2022, the German
newspaper Die Zeit published an
investigation revealing allegations that Claas
had developed a strategy to evade sanctions and
continue exporting its products, which were
restricted under European bans, to Russia.