In 2024, a striking chart circulated widely on social media: it showed a sharp and unexpected spike in German exports to the remote Kyrgyz Republic following the introduction of multiple EU sanctions against Russia. Around the same time, we also shared a series of similar charts on LinkedIn, including the one below.

Building on a recent client project, we revisited the data to explore how trade flows can help identify sanction evasion risks. From the perspective of a German financial institution, a key question arises: which countries should be closely monitored for potential evasion activities linked to the Russia sanctions?

Let’s see what trade flow data reveals and how patterns have evolved over the past two years. The updated chart below shows again exports from Germany to the Kyrgyz Republic. As the data highlights, the surge observed in 2022 was not an isolated event but a prelude to a continued increase — reaching around USD 800 million per year, roughly 15 times higher than pre-sanction levels.

The Kyrgyz Republic was not alone in this trend. The entire region experienced a notable rise in trade flows from Germany. The chart below compares the relative changes in German exports to Russia and neighbouring countries. While exports to Russia dropped by nearly 70% between 2020 and 2024, trade with several surrounding countries increased sharply.

Kyrgyzstan stands out as the clear outlier. This pattern raises a red flag: the surge in goods flowing from Germany to Kyrgyzstan — and the corresponding financial transactions — may indicate potential sanction evasion. The trade statistics tell a compelling story: Kyrgyz exports to Russia mirror the increase in German exports to Kyrgyzstan, suggesting that much of the German-origin goods are merely transiting through Kyrgyzstan before reaching Russia.

Who Is the Elephant in the Room?

While the relative growth of exports from Germany to Kyrgyzstan and onward to Russia appears dramatic, the absolute value of USD 800 million remains small in the context of Russia’s overall trade volume of roughly USD 400 billion — essentially a rounding error.

Yes, transactions involving Kyrgyzstan warrant closer scrutiny due to the elevated evasion risk, but the true heavyweights lie elsewhere. Unsurprisingly, China — and to a lesser extent India — have emerged as the dominant players. Russia has substantially increased its imports from China, while its commodity exports now flow in growing volumes to both China and India, as illustrated in the following charts.

Shifting Trading Partners

Over the past five years, Russia’s trade structure has undergone a profound transformation — on both the export and import sides. The tables below list the top ten destination and source countries for Russian trade.

China’s role has become overwhelming: it now accounts for around 65% of Russia’s trade among its top ten partners. In 2020, several European countries were among Russia’s main export destinations — largely due to oil and gas imports — but they have since fallen out of the top ten altogether. From that perspective, sanctions have clearly had a substantial impact.

Operationalizing for AML Country Risk Monitoring

With comprehensive trade data at hand, we can develop a structured approach to enhance AML country risk assessments. One effective method starts with identifying countries currently subject to broad or far-reaching sanctions by OFAC, the EU, UN, or the UK. These typically include Iran, North Korea, Syria, Myanmar, Russia, and — from a US perspective — Cuba.

Countries that maintain significant trade links with these sanctioned jurisdictions are more likely to present elevated sanction-evasion risks. For added granularity, we classify them into three tiers — top 3, top 6, and top 10 trading partners — with risk levels decreasing across these categories.

The resulting list highlights countries with the greatest potential exposure to sanction-evasion risk through trade. Alongside the expected names such as China and India, Germany also appears due to its strong export profile, as do countries like Spain, reflecting its trade ties with Cuba.

AI Deep Research Helper

We also leveraged the AI tools available on the CountryRisk.io Insights platform as research partners to complement our data analysis. The detailed research report can be found at the end of this post, summarizing key analytical findings. Notably, some countries — including India and Germany — are missing from the AI-generated results, highlighting the value of combining human and AI perspectives for a more complete picture.

Summary

By combining traditional trade-flow analysis with the CountryRisk.io AI Deep Research Tool, we uncovered meaningful shifts in trading patterns with sanctioned countries. This blended approach helps refine our understanding of money-laundering and sanction-evasion risks — forming a valuable component of comprehensive AML country risk analysis.

 Research question that we used:

Which countries are used as third countries by Russia to evade economic and financial sanctions?

Overview

Since the imposition of wide-ranging economic and financial sanctions on Russia following its invasion of Ukraine, there has been significant international concern regarding Russia’s ability to circumvent these restrictions. One of the primary methods identified is the use of third countries—states that are not directly involved in the sanctions regime or have limited enforcement capacity—to facilitate trade, financial transactions, and the movement of goods and capital. This report provides a comprehensive analysis of which countries are most commonly used by Russia as intermediaries to evade sanctions, the mechanisms involved, and the factors that make these countries attractive for such activities.

Key Factors Enabling Third Country Use

Several factors contribute to a country’s attractiveness as a conduit for sanctions evasion:

• Geopolitical relationships and alliances: Countries with neutral or friendly relations with Russia are less likely to enforce Western sanctions strictly.
• Financial secrecy and regulatory environment: Jurisdictions with weak anti-money laundering controls, high financial secrecy, or lax regulatory oversight are more susceptible to being used for illicit financial flows.
• Trade and logistics infrastructure: Well-developed logistics networks and trade hubs facilitate the re-export of goods and the masking of end-users.
• Presence of Russian diaspora and business networks: Established Russian communities and business ties can ease the creation of shell companies and complex trade arrangements.
• Legal and judicial system robustness: Weak legal enforcement or corruption can allow illicit activities to go undetected or unpunished.
• Use of shell companies and complex corporate structures: Some countries are known for allowing the rapid creation of opaque corporate vehicles.
• Level of international cooperation on sanctions enforcement: Countries that do not fully cooperate with Western authorities or international organizations are more likely to be exploited for sanctions evasion.

Major Third Countries Used by Russia

1. Turkey

Turkey has emerged as a significant intermediary for Russian trade and finance. Its strategic location, robust logistics infrastructure, and relatively neutral stance in the Russia-Ukraine conflict have made it a key hub for re-exporting goods, including dual-use items and technology. Turkish banks and companies have also been implicated in facilitating financial transactions that bypass Western restrictions. The presence of a sizable Russian business community further supports these activities.

2. United Arab Emirates (UAE)

The UAE, particularly Dubai, is a major global financial center with a reputation for financial secrecy and a large expatriate Russian population. The country’s regulatory environment allows for the rapid creation of shell companies and complex corporate structures, making it an attractive destination for Russian capital and trade flows seeking to avoid scrutiny. The UAE’s limited cooperation with Western sanctions enforcement has been noted as a critical vulnerability.

3. Kazakhstan

Kazakhstan shares a long border with Russia and is a member of the Eurasian Economic Union, which facilitates the movement of goods and capital. The country’s trade and logistics infrastructure, combined with close economic ties to Russia, have made it a key route for the re-export of sanctioned goods. There have been documented increases in imports of Western goods to Kazakhstan, followed by a surge in exports to Russia, indicating its role as a transshipment point.

4. Armenia

Armenia has seen a dramatic rise in imports of Western technology and goods since the imposition of sanctions on Russia, with a corresponding increase in exports to Russia. The country’s small size, close economic ties to Russia, and relatively weak enforcement of sanctions make it a convenient conduit for goods and financial flows.

5. Kyrgyzstan

Kyrgyzstan, like Kazakhstan and Armenia, is a member of the Eurasian Economic Union and has experienced a significant uptick in trade with Russia since 2022. The country’s limited regulatory capacity and close integration with Russian markets facilitate the movement of goods and capital that may be subject to sanctions elsewhere.

6. China

China is Russia’s largest trading partner and has not joined Western sanctions. While Chinese authorities have stated their intention to avoid violating international sanctions, there is evidence of increased trade in sanctioned goods, including technology and dual-use items. Chinese banks and companies have also been implicated in facilitating financial transactions for Russian entities.

7. Serbia

Serbia maintains close historical and political ties with Russia and has not fully aligned with EU sanctions. The country’s financial system and trade networks have been used to facilitate Russian business activities, including the establishment of shell companies and the movement of capital.

8. Other Notable Countries

• Georgia: Increased trade flows and the presence of Russian business networks have raised concerns about Georgia’s role as a transit country.
• Azerbaijan: Its strategic location and trade links with both Russia and the West make it a potential conduit.
• Hong Kong: As a global financial center with a degree of autonomy from mainland China, Hong Kong has been used for financial transactions and the creation of shell companies.

Mechanisms of Sanctions Evasion

• Re-export of goods: Goods are imported into third countries and then re-exported to Russia, often with altered documentation to obscure their origin.
• Financial transactions: Use of local banks and financial institutions to process payments and transfers that would be blocked in Western jurisdictions.
• Shell companies and complex ownership structures: Creation of opaque corporate vehicles to hide Russian ownership or control.
• Transshipment and logistics hubs: Use of free trade zones and major ports to facilitate the movement of goods without direct links to Russia.
• Use of local intermediaries: Engagement of local businesses and individuals to act as fronts for Russian interests.

Critical Insights and Limitations

• The use of third countries is dynamic and adapts to changes in enforcement and regulatory environments. As some countries tighten controls, new jurisdictions may emerge as alternative routes.
• The effectiveness of sanctions is undermined by the lack of uniform international enforcement and the willingness of some countries to prioritize economic interests over compliance.
• Data limitations exist due to the opaque nature of many transactions and the use of complex corporate structures, making it difficult to quantify the full scale of sanctions evasion.

Conclusion

Russia’s use of third countries to evade economic and financial sanctions is a multifaceted and evolving challenge. Countries such as Turkey, the UAE, Kazakhstan, Armenia, Kyrgyzstan, China, and Serbia have emerged as key intermediaries due to a combination of geopolitical, economic, and regulatory factors. The mechanisms employed range from the re-export of goods to the use of sophisticated financial and corporate structures. Addressing this issue requires enhanced international cooperation, improved regulatory oversight, and targeted engagement with countries at risk of being exploited for sanctions evasion.