Turkey blocks Russian transit of sanctioned goods

Turkey blocks Russian transit of sanctioned goods
By bne IntelliNews March 10, 2023

Russian shipping companies are facing a blanket ban by Turkey’s Customs Service on transit declarations for goods on the EU sanctions list to Russia, Vedomosti and Kommersant daily reported citing market participants. 

As covered by bne IntelliNews, the US officials are working behind the scenes in a diplomatic push to keep Russia’s major trading partners enforcing sanctions, trade controls and minimising the “sanction leakage”. In the meantime, reports suggested that the EU will also be shifting focus from adopting new sanctions to tougher enforcement of the existing ones.

Turkish counterparts of Russian market sources claim that the transit blockade was imposed at the level of the Turkish Central Customs Administration in Ankara, following "serious pressure from the EU" to halt transit through Turkey to Russia. The issue was recently raised by the EU sanctions emissary. 

Given that Turkey has a customs union with the European Union and they use the NCTS clearance system, it is possible that the transit failure is related to the update of this information system, some analysts surveyed by RBC business portal suggested.

Other sources told Kommersant that the suspension of transit of sanctioned cargo relates to the visit of US Secretary of State Anthony Blinken to Turkey in February. Washington had earlier warned Ankara that it could impose secondary sanctions against Turkish companies for violating the restrictive measures regime against Russia.

Russia's embassy and trade mission confirmed to RBC that they are "investigating the reasons for stopping the transit of sub-sanctioned goods into the country via Turkey".

"At present the embassy and the trade mission are working to clarify the circumstances and the background of the difficulties that a number of Russian companies are having with the execution of trade operations. We are in contact with the Turkish authorities. We hope the situation will be resolved in the near future," the embassy said as cited by the RBC.

Analysts surveyed by Kommersant and Vedomosti believe that Turkey will maintain the ban and not provide any official explanations, as providing any comment would admit that certain goods were transited through Turkey to circumvent sanctions. 

Industry participants also believe that Turkey will attempt to maintain the status of one of the main transportation hubs for Russia, but will try to benefit more from the transit. This would mean subjecting the goods to full customs clearance in Turkey and then re-exporting them to Russia as goods of Turkish origin, which would allow collection of the VAT and other duties and fees on transactions. 

Such a scenario would add at least 18% to the cargo cost and could bring Turkey up to $1bn of additional revenues, The Bell estimated.

Analysts surveyed by RBC believe that should Turkey be forced to ban all exports of sanctioned goods to Russia, this would mean that it will have to find detours through the UAE, Iran and China. For trucks, one of the few alternative routes would remain the ferry to Georgia via the Black Sea. However, any rerouting will have an effect on the delivery length and cost.

Previously Russian state nuclear power agency and contractor Rosatom, which has so far avoided sanctions and substantially increased its exports in 2022, has also run into sanctions-related problems building the Akkuyu nuclear power plant (NPP) in Turkey. Turkish airports could also reportedly cave to pressure and ban Russian carriers.