Used Car Exports to Russia Blocked, Redirected to Neighboring Countries? Signs of Sanctions Evasion

Sanctions Evasion Export Routes
From 1,668 Units in Jan-Apr to 211 Units in May
Exports to Kazakhstan and Kyrgyzstan Increase
Industry Ministry: "Possible Evasion Exports
Continuous Monitoring of Restricted Items"

Exports of high-priced used cars to Russia significantly declined last month. This is a consequence of South Korea, following the West, restricting exports of high-end vehicles since the end of April. However, while exports to Russia decreased, shipments to neighboring countries increased. There are concerns that these might be rerouted exports.

Analyzing trade statistics with Russia, the total number of used cars exported to Russia last month was 2,796 units. Considering the export volume from January to April this year (10,995 units, averaging 2,749 units per month), there is no significant difference. A closer look at detailed export statistics reveals a noticeable drop in high-displacement vehicles. Used gasoline cars with engines over 3,000cc and diesel cars over 2,500cc numbered 1,668 units exported from January to April this year, but shrank to 211 units last month.

Cars waiting at the temporary storage site of Vladivostok Port, Russia

These high-displacement vehicles exported to Russia up to April this year were also quite expensive. Based on export declarations including export amounts and quantities, the average price per gasoline vehicle exported from South Korea to Russia exceeds $65,380 (approximately 85 million KRW). Even considering this is a simple average and the high engine displacement, this is a price rarely seen for used cars.

Industry insiders have suspected that the high-priced used cars exported to Russia, having undergone registration procedures, are only used on paper but are practically new cars. Since European luxury brands have faced export restrictions making direct exports to Russia difficult, South Korea is being used as a 'rerouting export path.'

According to data from the Ministry of Land, Infrastructure and Transport, the number of vehicles deregistered within two months after new car registration to be exported as used cars surged from 254 cases in 2021 (212 domestic, 42 imported) to 2,440 cases last year (973 domestic, 1,467 imported), about a tenfold increase. This is circumstantial evidence that new cars were disguised as used cars and sent to Russia. For automakers, this allows exporting vehicles to Russia, a sanctioned country where selling high-priced cars is normally prohibited, and for importers in South Korea, it increases apparent sales volume.

However, following the US, Europe, and Japan, South Korea also implemented restrictions on exporting cars priced over $50,000 starting April 28. This aligns with the international community's trend to limit exports of products that could be used as weapons or luxury goods to countries responsible for the war. As exports of high-priced vehicles decreased, the average export price dropped below $30,000 in May.

Assembly line of Russian complete car brand Lada. In Russia, most foreign complete car brands have withdrawn or ceased operations due to international sanctions following the war.

Although the range of restricted export items has expanded, significantly reducing the flow of high-priced used cars to Russia, exports to neighboring countries continue. After the Russia-Ukraine war last year and the start of international sanctions against Russia, trade with countries close to Russia such as Kyrgyzstan and Kazakhstan increased across various items. Last month, exports of high-priced used cars from South Korea to Kazakhstan and Kyrgyzstan also surged.

An official from the Ministry of Trade, Industry and Energy stated, "If restricted export items pass through neighboring countries with Russia as the final destination, it constitutes a violation of sanctions," adding, "We are continuously monitoring restricted items with the possibility of rerouted exports in mind."