“The 90s are back.” The flow of broken foreign cars to Russia through Armenia has increased more than 200 times

The collapse of the Russian automotive sector, the departure of foreign manufacturers in connection with the war and Western sanctions have led to a return to practices from 30 years ago, when a civilized car market in Russia has not yet developed.

One of the main routes for importing used foreign cars to Russia has become the Armenian route. The Financial Times correspondent visited several car exchanges in Armenia, where cars from Western countries are delivered – most of them damaged. There they are repaired and sold to Russian sellers and distillers.

“In Russia, all car dealerships have closed: BMW, Audi, everything,” a young Russian trader at the Gyumri customs terminal told the FT, refusing to give his name. – If earlier a wealthy person went to a car dealership to buy a car, now it is impossible. That’s why they turn to us or someone else to bring them.”

“None of them will stay in Armenia,” the FT source said, pointing to the rows of cars. “Everything is re-exported to Russia, something to Kazakhstan.”

The sanctions banned the export to Russia of cars from Europe worth more than 50,000. euros, and from the USA – all passenger cars, both new and used. The EU recently extended restrictions to cars with an engine capacity of 2 liters or more. But automakers in developed countries have basically stopped all deliveries and production.

But enterprising suppliers have begun buying wrecks cheaply at US auctions, where insurers sell end-of-life cars, buyers and brokers told the FT. This allows you to keep prices below the 50,000 mark that Armenian customs officials sometimes insist on. A Russian trader in Gyumri explains:

The cars are repaired in Georgia and Armenia and then resold to Russia. They are delivered by sea to the Georgian port of Poti, and then to Armenia, where they undergo customs clearance (the country, together with Russia, belongs to the Eurasian Economic Union). Then again through Georgia, but by land, they rush to Russia.

“This route, USA-Georgia-Armenia-Georgia-Russia, is not the only one,” says Pavel, a former realtor who opted for a car and came to Gyumri from St. Petersburg. “These plans are growing like mushrooms after rain.”

The Russian market collapsed after the start of the war due to the cessation of exports and production of cars of foreign brands. Now it is growing, but sales are only 60% of pre-war. In the first half of the year, more than 3.2 million cars were sold in Russia: 401,000 new and about 2.8 million used. New sales are 46% lower than in January-June 2021, used sales are 1.4% more. The new car sector is dominated by the Chinese: their share is steadily growing, reaching 49% in July. Avtostat predicts its increase to 60%.

Cars are definitely not the only goods re-exported by Armenia. Significant flows of parallel imports enabled the return to Russia of many prohibited dual-use goods and high-tech products, in particular through the countries of Central Asia and the Caucasus. The European Bank for Economic Co-operation and Development even called these plans a “Eurasian merry-go-round”.

Total EU and US exports of goods to Armenia, Georgia, Kazakhstan, Kyrgyzstan and Uzbekistan increased by USD 9.7 billion in 2022 (+66% to 2021) to USD 24.3 billion, and exports from these countries to Russia – by USD 4.8 billion (+50%) to USD 15 billion, The Wall Street Journal calculated on the basis of UN trade data. For example, U.S. and EU chip shipments to Armenia exceeded $8.5 million last year, 16 times more than in 2021 ($530,000). And their exports from Armenia to Russia increased 6,500 times, from less than $2,000 to $13 million.

Another Armenian car market focused on Russian sellers is in Erebuni, a district of Yerevan. It’s been there for decades. The business “was very popular in the 1990s because the official market had yet to take shape” and foreign brands had not come to Russia, another Russian buyer, Alexander, told the FT: