Türkiye and secondary sanctions. About what we still have to experience in trading
We went in February news that some Chinese financial institutions, as well as a number of suppliers, began to either stop payments and deliveries or seriously slow them down.
This process in reality was not so large-scale, but some financial institutions that stopped payments have the status of quite serious operators, like Chouzhou Commercial Bank, and this signal made many in Russia think.
A week later, similar news came from the western direction - from Turkey. The problem here was generally expected (the tightening of work on transactions related to Russia has been going on since December), but the scale turned out to be greater than that of China. We are no longer talking about individual, albeit large, operators, but about the payment system as a whole. And for both individuals and legal entities.
The situation in this direction is very unpleasant and quite sensitive, since, despite all the difficulties, Turkey still remains one of the two main channels (together with China) for import needs, including “parallel” ones.
This is a daunting task. And specifically in the sector of equipment, electronics and high technology. It is still much easier for raw material producers to “confuse schemes”. Here, both a change in the approaches of logisticians and a change in approaches on the part of the state will be necessary. The sooner this is realized, the better.
Just taking the example “from Turkey to Pakistan” is not as simple as it might seem from the outside. For at least six months you will have to build relationships, study, find a common language, get used to the peculiarities of other financial and customs systems, and stumble over pitfalls. And at the same time, incur considerable expenses, lose money on inevitable mistakes - resources that will need to be found somewhere else and justify the need for spending for the investor.
At the same time, you will have client obligations, contracts, prepayments, and responsibility for current deliveries. In fact, “opening up” a new direction in logistics is equivalent to creating a new business.
Operators prefer to squeeze out the maximum that is possible from the direction in which they work. And so story with Turkey just gives us the opportunity to look at where this maximum is located. We are often told that “the West has reached the limit of sanctions,” but is this true?
It is impossible to consider the Turkish direction in exactly the same way as the Chinese one. They are still different, since Turkey, one of the regional countries close to the EU, has special modes of interaction with Europe in terms of foreign trade, which are in many ways similar to our relations within the EAEU.
This is the level of a full-fledged customs union with a number of ensuing mutual obligations. But it will be possible to identify both common features and threats for China and Turkey, as well as specific features and threats.
Moreover, since August last year, Ankara has been negotiating with the EU on deepening and expanding the customs union - in fact, on its reformatting.
“We will discuss this with our teams after the summer and see if it is possible to use these new signals from Turkey,”
- said then P. Gentiloni, head of the European Commission for Economic Affairs. What are these new signals? Some of them were discussed in the materials.
Turkey accepted the inevitable in the summer - it is part of the Eurozone value cluster with all the ensuing difficulties, but also bonuses in the form of a pool of investment funds that entered there in the fall, direct investments and even new aircraft. NATO, the “Azovites”, about whom so much was written in the summer, etc., are only part of a larger model.
These are no longer hypothetical forecasts, but a fact, and conversations in our media - such as those that, they say, Turkey, because of its problems, will almost join the Eurasian Union after a while - only do harm.
After all, once it comes in, then why should logisticians build new channels? They just need to be patient and wait until it comes in, and squeeze the maximum out of the existing ones. It’s better not to count on this, but to build new channels, even if it’s really expensive.
But using the example of Turkey, you can see what can be expected in countries that have a decent level of trade and customs interaction with the EU. After all, the EU has special agreements and regimes with Tunisia, Morocco, Algeria, etc. Simply because Ankara will have to be the first among the neutral countries to begin implementing most of the standards.
So, what have operators been faced with, partially and now increasingly, since December? Payments are not accepted or sent.
It is impossible to say that a bank as a financial organization does not have the right to such stops. In any case, they must verify the subject of the transaction, receive confirmation of its execution or conditions of execution, verify amounts and currencies, check the recipient and sender.
The transaction verification procedure, or as it is sometimes called “bank compliance,” is largely regulated by the financial institution itself. Moreover, there are systems for exchanging such information.
A Lebanese or Israeli bank may also refuse to carry out a transaction if they suddenly decide that you are financing, for example, Hezbollah or there is simply a suspicion of this. In some places you can get away with just a letter saying you don’t know who it is or what it is, but in others you don’t. This works by exchanging data under anti-money laundering and counter-terrorism protocols.
Moreover, these protocols can be either national or bilateral, or within a system like FATF (“Financial Action Task Force on Money Laundering”).
We have written a lot about the freedom from “global hegemons” that the Chinese CIPS system will provide compared to SWIFT. However, according to the Memorandum from 2016, both systems exchange information and use each other’s resources.
This does not mean that banks and payment systems “leak everything,” but it does mean that there is an exchange of data, and how it will happen, with what frequency and depth, depends rather little on the client. These are agreements on the convenience of data exchange and the completeness of market information.
In terms of sanctions, there are also existing protocols and regulations based on the EU Security Policy (CFSP) and protocols from the notorious “Office of Foreign Assets Control of the US Department of the Treasury” (OFAC). They are supplemented by a direct list of sanctioned goods and their customs codes, sanctioned organizations and their international SWIFT codes, as well as sanctioned personalities.
Now let’s consider how a “decent” bank clerk should behave, who needs to rely on all these protocols and agreements in his work when verifying the next contract and payment.
Firstly, he is obliged to request, through all available channels, the degree of intersection of all counterparties with sanctioned companies and organizations, as well as the share of participation of sanctioned persons in each chain.
As a result, a risk model “A”, “B”, “C”, etc. is built. By and large, the length of the calculation and analysis of this chain depends on the financial organization itself. They can refuse to carry out an operation if the involvement of the transaction with sanctioned persons and companies (even in the third round) of more than 25% is revealed somewhere.
At the same time, 25% is the “standard”, and the clerk and his department can use their own assessment system, in which “just in case” there may be 0%, and the client cannot do anything here, they are not even obliged to explain this to him - “internal security protocol."
But this is not the end of the process. Even with 0% coincidence, there are also recommendations for indirect signs of risk.
For example, it turns out that the company with which the Turkish supplier cooperates has never purchased microprocessors before, but pays for the purchase from an office from Dubai, which previously paid for tangerine transactions. Or in the country where microprocessors are sent, there is no production that uses them and sells products based on them to foreign markets. Why do Kyrgyzstan or Mongolia need microprocessors now?
It would seem that they buy in Bangladesh, the Arabs pay, what’s the problem? In indirect risks. Reasons for refusal fin. the organization will not explain, this is a safety decision of the control unit. As with the same Hezbollah mentioned above.
In theory, a normal bank is not very interested in such a study of such details of foreign trade transactions. This creates a load on the system, leads to a decrease in the number of operations, staff workload and loss of income from cash and cash management services.
However, in this case, OFAC simply sends out a notice that the bank, of course, can use a less in-depth analysis method, but if OFAC itself goes through the entire chain and finds the bank’s “compliance” weak and unreliable, then the bank will receive quite significant fines . At the same time, the chain itself may be completely “white”; sanctioned companies and personalities may not even appear in it.
Hence, the simplest answer from the same Turkish banking system can only be one - regardless of the customs codes in the “packages of sanctions”, it is necessary to exclude the very possibility, even the theoretical connection of the transaction and payment with Russia.
This is easier than sorting out each invoice and certificate according to customs codes, especially since there are already more than a dozen sanctions packages. And since the suppliers and buyers are known to the bank, since they have been working for years, then alas.
All of the above does not take into account the entire range of capabilities and possible dirty tricks of the system. By and large, the lion's share of the holes that we observed in the issue of implementation of sanctions is the merit of the EU control authorities and OFAC, which, being bureaucratic structures themselves, simply cannot administer this entire flow.
The author does not completely exclude the possibility that sanctions are introduced in precisely such “packages” with a limited list of goods, companies and personalities, and that it is easier for the EU control system and OFAC to process transactions in a timely manner. But the base is being developed, especially since the digitalization of processes in the field of financial control is proceeding around the world at a very decent pace. Note that each package of sanctions also includes a set of measures to “automate” them.
In this regard, it is not very far-sighted to smile at the fact that, they say, “a million sanctions do not work.” Even among logisticians one can come across the opinion that “after some time this “sanctions” will end.
It won't end. There is an old saying that the one who picks up a sword may not be a warrior, but he can no longer count on mercy. Here the sword is taken in hand, but there still seems to be no full sensation of the depth of this step. However, it would be good to be wrong in this regard.
Apparently, we should somehow understand that the holes that exist in sanctions networks are mainly the result of three factors.
A) The position of a seller who does not want to lose revenue and profit. This explains the fact that until now many manufacturers have not fully implemented patent regulations under the WTO agreements. But how long this will last is unknown, and it still depends on the degree of “greed” of the seller and manufacturer, and not the importer-buyer.
B) Bureaucracy of controllers who cannot roll out so many demands at once so as not to paralyze the work of the financial sector. But the base of solutions and supply chains is being developed every month. And you shouldn’t count on this bureaucratic machine to say “we’re tired.”
B) Some resistance at the level of IMF structures. The latter looks somewhat unusual for Russian discourse, but it is the IMF that is so far slowing down both the withdrawal of international reserves and such a thorough check of payment chains, again avoiding imbalance of the system. But this is a temporary factor, just like the other two.
All this means that even though the effect of the wave of sanctions at the moment is not very strong, we have not yet felt the real pressure of the entire system; it is a matter of time, and not the very distant one. Now the American OFAC bureaucracy is focused specifically on CNC machines, next quarter it will deal with another segment, etc.
If we are talking about full-fledged import substitution, then the deployment of production will take 6-7 years. For this period, the country should be provided with imported machine tools and components - this is not such a short period of time, quite comfortable for the Western bureaucracy to gradually patch up holes in its system, adapt its production and supply channels, among other things.
With us, no matter how you turn on the information, you’ll be lifted up, unwinding. As in slightly modified poems by V. Berestov: “What do sparrows sing about on the last day of winter: “We survived, we survived, we are alive, we are alive”" The West is falling apart, the chains of the globalists are cracking, but even if they are cracking, how does this remove the restrictions and soften the conditions written above?
It seems like every day we are told that Western elites are a pack of hyenas. And this is absolutely true. However, when declaring yourself to be a lion, you should remember that a pack of hyenas can circle around him for a long time.
Exhaust, move away, show weakness, howl in anguish that, for example, there are no shells, let the lion calm down a little and feel victory. Let them catch prey and eat.
Wait until the well-fed lion falls asleep, finish it off, and then eat both the lion and the remains of its prey. And no matter how big, strong and noble the lion is, only exceptional attention and foresight will save him from this flock. The West needs to retreat and regroup, and it does not hesitate to do this, even losing its reputation, but the sanctions regime is tightening and tightening. Databases are developed, information is analyzed, conclusions are drawn.
There have been so many discussions on the topic of payments in gold or about “golden currencies”, by the way, on our resource, but among others, there is also the content of the so-called. The “seventh package” of sanctions is a ban on the purchase, import or transfer of gold and jewelry from Russia.
That is, a European supplier from China is unlikely to be able to accept payment in Russian gold for goods made by a buyer, for example, from China. This means that not every Chinese can accept payment for Chinese goods in metal with our hallmark.
From such bricks, the West, step by step, is building a very unpleasant wall around us, and those two years, during which sanctions in the West have seemingly achieved less than we would like, are only part of a large long process. Pointing the finger at them as “insignificant” may not be superfluous in terms of information wars, but we still need to understand that we must have a completely different foreign trade infrastructure than we have today.
You open our media, and there is joy at how we have strengthened ourselves. Well, okay, but here’s the question: is our regulatory system ready to vouch for the fact that our domestic banking system with its “compliance” does not provide such information to the outside world? Are there any guarantees that should be reinforced concrete? But what about the actually open data on the Unified State Register of Legal Entities? Some information is closed separately, but a significant number of enterprises are engaged in foreign trade or cooperate with them.
Digitalization is a wonderful thing, but there are nuances. It is necessary to close internal information from the outside world, otherwise you yourself will strip down to your underpants in front of the global world. A logistician will spend a year building chains of companies, and some quasi-oppositionist from Lithuania will sit down and look at open databases - is the world open or what? Or maybe it’s not worth keeping the windows wide open for now, just leaving the vents?
Turkey is important in this regard precisely because it will have to carry out all the described procedures first, since a new stage of customs integration with the EU is underway. It is also important because Ankara and I have one of the most profound integration business models. It is important to understand this so that once again it doesn’t turn out like in I. Repin’s imperishable canvas “They Didn’t Expect.”
Instead of wondering how strong our armor is in the face of a wave of sanctions, we need to work here preventively and withdraw technological imports from this jurisdiction, while at the same time developing new logistics channels. It will not be possible to squeeze more out of Turkey than is available, but what we will certainly get is also problems with payments for the tour. sector, since the EU will simply block Turkey’s shortfall in revenue with subsidies, which is being negotiated.
As with the payment instruments discussed in the material Chinese banks and anti-Russian sanctions. Some aspects of the problem, the creation of alternative chains is not just a complication of the registration scheme, but is associated with the construction of an entire intermediate sphere of mini-productions in different countries, which will be used for multi-stage re-export. Moreover, build them in such a way that there is not a single external sign at several levels of ties with Russia.
This is a daunting task. Moreover, it is in the sector of equipment, electronics and high technologies that it is much easier for raw material producers to “confuse schemes”. Here, both a change in the approaches of logisticians and a change in approaches on the part of the state will be necessary. The sooner this is realized, the better.
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