China has become the principal conduit for large-scale evasion of Western sanctions, enabling tens of thousands of new European and Asian vehicles to reach the Russian market through elaborate resale schemes. The operation exploits regulatory loopholes and involves Chinese traders and manufacturers reregistering brand-new cars as used before their transfer to Russian intermediaries.
The evasion mechanism
The scale of this operation, which sees foreign cars flowing into Russia through China, involves tens of thousands of vehicles annually. To circumvent export restrictions imposed by the EU, US, Japan and South Korea, vehicles with zero mileage are officially recorded within China as having been sold and are then classified as second-hand. This status allows them to be legally transferred through a chain of intermediaries before reaching Russian dealers. Brands affected include Mercedes-Benz, Toyota, BMW, Volkswagen, Audi, Porsche and Skoda, many of which are produced in Chinese factories.
Manufacturers’ enforcement challenges
Major European carmakers have implemented measures to prevent their vehicles from reaching Russia via third countries, including VIN tracking and dealer blacklists. However, these efforts have proven insufficient to stop the grey imports. Chinese regulatory bodies, including the Ministry of Commerce, have taken no discernible action to curb these practices. The continued flow suggests that corporate compliance programmes are being systematically undermined by determined networks operating with apparent impunity within China.
Financial incentives driving the trade
The sanctions regime created a supply vacuum and inflated demand within Russia for Western automotive brands, generating substantial profit opportunities. Chinese manufacturers and traders have capitalised on this situation, reportedly achieving inflated sales figures and premium margins. This economic benefit creates a disincentive for Chinese entities to support sanctions enforcement, as termination of the trade would eliminate a lucrative revenue stream. The schemes also allow Russian automotive businesses, many with connections to political elites, to incorporate substantial risk premiums into final consumer prices.
Systemic vulnerabilities and diplomatic pressure
The weak link in the sanctions enforcement chain is clearly located within China’s domestic automotive supply and registration system. Effective countermeasures would require coordinated diplomatic pressure from the EU, US, Japan and South Korea on Chinese authorities to mandate stricter controls. This could include compulsory verification of unusual vehicle registrations, enhanced VIN monitoring for China-produced exports, and shared databases of non-compliant dealers. Without high-level political agreements and more agile sanctions policy that anticipates evasion methods, the impact of restrictions will remain limited.
Broader implications for sanctions regimes
The persistent grey imports demonstrate significant failures in corporate responsibility and compliance enforcement. When sanctions prohibitions can be bypassed on this scale without consequences for intermediaries, it risks demotivating compliant companies from maintaining costly enforcement measures. A paradoxical situation emerges where those adhering to restrictions incur financial losses, while participants in evasion schemes gain market advantage. This dynamic threatens the long-term credibility of multilateral sanctions as a foreign policy tool, particularly when key transit countries do not cooperate with enforcement efforts.
