The Baltic border loophole in EU’s Russia sanctions

TEREHOVA, Latvia — If all went well for Mazhit Ismailov, he’d soon be able to drive his truck through one of the biggest loopholes in the European Union’s sanctions against Moscow.

The gangly 22-year-old had been stopped by Latvian border guards as he tried to enter Russia. The issue wasn’t so much the load he was carrying, as the vehicle itself. Trucks like his have been banned from crossing over fears they could be deployed to the battlefield in Ukraine.

Ismailov wasn’t too worried though. He would be able to cross if he could convince the guards he was carrying legitimate cargo destined for another country like Kazakhstan. And then there are other options, he said with a grin: “If they don’t let me through here, I will just try to enter through another border checkpoint.”

Estonia, Latvia and Lithuania are among the most hawkish EU countries on sanctions over the war in Ukraine, but they’ve struggled to manage the 1,600-kilometer (1,000-mile) border they share with Russia and its ally, Belarus. As a result, the Baltic border crossings have become a prime destination for those seeking to evade sanctions on goods that could have both civilian and military uses, as well as luxury items like cars, according to government officials, customs officers and experts.

Hour after hour, day after day, hundreds of trucks are checked and scanned by guards who say they aren’t equipped to handle the flux. The trucks could be carrying drugs or sanctioned goods destined for the Kremlin’s war effort, or European exports bound for markets in Minsk, or shopping centers in Almaty.

Without enough manpower, funding or administrative backup, it’s often impossible for those responsible to know what should be waved through and what shouldn’t.

“Politicians don’t want to spend money on customs to implement sanctions,” said Darius Binkys, one of three customs officials working in a small, makeshift office in the Lithuanian capital Vilnius. “We are all very tired. We all work overtime.”

Binkys and his colleagues field questions from guards at the border about which trucks should be sent back, as well as answering queries from companies on what can be sent to Russia and what cannot.

Resources are limited, said Rolandas Jurgaitis, sitting next to Binkys. They don’t have access to paid platforms that could provide them with information such as a company’s real owner, a list of shareholders that could shine a light on who might benefit from a transaction, or, indeed, who has been sanctioned.

“We get emails 24 hours a day, seven days a week,” Jurgaitis said.

Destination Russia

Checking trucks for drugs or smuggled goods is nothing new; what’s different now is the long list of goods that could be subject to sanctions, and the complex legislation governing them.

Goods arriving at the Baltic borders come from across Europe; only 6 percent of what crosses into Belarus or Russia from Lithuania originates from within the country, according to Lithuania’s foreign ministry.

Some 6,000 customs codes fall under sectoral sanctions for Russia and Belarus, according to Raimonds Zukuls, the director of Latvia’s national customs board.

Further complicating matters is that not everything crossing the Baltic borders is declared as headed for Russia.

Lithuania has two checkpoints with Belarus, which is in a customs union with Russia. However, many categories of goods are sanctioned for Russia but not Belarus, meaning that customs officials may not be able to stop truck drivers from bringing a load across the border if it’s declared to be headed to Minsk.

Then there’s the issue of cross-country traffic: goods declared to be headed across Russia to countries like Kazakhstan and Kyrgyzstan, both of which have seen a surge of imports for a range of goods, from mobile phones to wood pallets since sanctions were imposed on Russia.

Many sanctioned goods that are supposed to transit Russia are simply unloaded once they cross the border — and then disappear. Others reach their destination, only to be re-exported back into Russia.

A simple look on the map shows the problem, Lithuania’s deputy foreign affairs minister Jovita Neliupšienė said in an interview. “How do goods reach Central Asian countries — the South Caucasus and some other parts of the world, like China? It’s not possible without crossing Russia and Belarus,” she said.

To assess the scale of the problem, customs officials compared how many goods were declared at the border as headed to Kazakhstan to how much gets reported as having arrived.

“We regularly send requests to [the third countries] to prove if the consignee cleared a declaration there,” said Arturs Kovalenko, the head of the customs service unit in Latvia. He estimated that less than half the goods they inquired about were cleared for customs in the countries of destination.

An analysis of European Commission data seen by POLITICO found that the EU had registered exports of €1.87 billion in critical products like fuel, machinery and vehicle parts to Kazakhstan in 2022. During the same period, Kazakhstan declared only around €1.1 billion in such products coming in: a gap of more than €750 million.

Sometimes, the rule breaking is blatant, said a Lithuanian customs official who was granted anonymity as he was not permitted to speak to the press. He described one truck, which declared it would make the 3,500-kilometer trip to Kazakhstan — a one-way journey that would take 47 hours of non-stop driving — only to reappear at the Latvian border just two days later.

“That’s physically impossible,” the official said.

Other schemes are even cruder. Customs officers at both the Latvian and Lithuanian borders said they regularly find a second set of papers hidden in the trucks that indicates the goods are destined for Russia.

“It’s not like we are checking every cabin of course, but sometimes if we have some doubts,” said Zukuls, the director of Latvia’s national customs board. “Then customs officers check. I have seen so many cases.”

The Baltics also struggle with corruption in their own ranks. In Latvia, the problem was so pervasive that a disciplinary proceeding was launched into the practices of customs in 2021 — including into Zukuls. 

He was cleared of wrongdoing, but a dozen employees left the customs department after the proceedings were opened. To reduce the likelihood of bribes, Latvia now checks trucks remotely, streaming X-ray scans from the border into an office on the outskirts of the capital of Riga. 

In neighboring Lithuania, however, all checks are still done at the border — unless customs officials contact Vilnius — leaving the system vulnerable to abuse. 

To address the issue of differences between countries, Latvia, Lithuania and Estonia signed a joint declaration vowing to “take steps towards alignment of customs controls” on January 26.

The three-page declaration includes requirements for additional paperwork that the truckers need to fill out — and that customs authorities will have to check, putting an additional burden on them.

Slap on the wrist

For those who can get goods across the border, the incentives are clear.

Sanctions have forced up prices in Russia. A laptop worth a few hundred euros in Europe might fetch €2,000 in Russia, said Audrius Valeika, deputy director of Lithuania’s financial crimes investigations unit.

“It’s quite big business,” he said. “Russians still got the money, and they need these daily goods in their lives, and they pay.”

Even smugglers who get caught often escape with a slap on the wrist, as judicial systems aren’t equipped to deal with the caseload.

Most would-be sanction violators are simply stopped at the border, said Natalja Veselova, head of the customs investigation division in the tax and customs police board of Latvia. “A lot of cases don’t become criminal cases,” she said. “They’re just turned away.” Her office estimated that about 10 trucks a day receive this treatment.

Of 250 criminal cases related to Russia sanctions as of mid-December, Veselova said only nine have reached the prosecutors’ office — and six of the accused have been convicted.

“It’s not that we’re doing only this full-time: We have financial and customs crimes, and the number of investigators is the same as before [the war],” she said. “It’s a bottleneck effect: Too many EU-related cases started, and there aren’t enough resources to investigate it.”

The first such case took a year to deliver a conviction. The fine? Just €6,200, said Veselova.

Last summer, Lithuania tried to address the problem with stricter laws requiring additional paperwork from those who want to cross into Belarus. But other neighboring countries — including Latvia, Estonia, Finland and Poland — lack such rules.

In their January declaration, Estonia and Latvia also promised to ask truckers for a manufacturers’ declaration that confirms the identity of the end user and that “the transaction does not give rise to concerns about the possible circumvention of international sanctions.”

Lithuania, in turn, will likely announce that two more border posts with Belarus will be closed in March, said Jurgaitis, the customs official.

But whether that leads to fewer attempts to circumvent sanctions remains to be seen — when Latvia closed one of its border checkpoints in fall last year, customs authorities didn’t expect this to significantly shift the number of trucks trying to cross into Russia or Belarus.

“Most probably, these trucks will move to other border crossing points,” Latvia’s Zukuls said. “You know, like in physics: you have these different glass things and then you pour the water and they are differently shaped but water stays at the one level.”

“It’s the same as custom control points. If we close one customs point, they will go to Estonia,” or elsewhere, he said.

Leonie Kijewski is a former trade reporter at POLITICO. Reporting for this article was supported by a grant from Transparency International’s Journalists for Transparency program.