Sanction

 

In Russia, informal governance is highly centralized and operates through elite-controlled networks, especially in industries like oil, gas, and arms exports. The state-owned energy company Gazprom, for example, is not just an economic entity but also a political tool used by the Kremlin to secure geopolitical advantages. While Gazprom operates under formal regulations, many of its key trade agreements—such as pipeline deals and pricing structures—are decided through informal negotiations with foreign partners. This allows Russia to exert political influence over energy-dependent countries, such as those in Europe and Central Asia. The selective enforcement of trade regulations is another key feature of informal governance in Russia. Customs officials often engage in corrupt practices, allowing well-connected firms to avoid tariffs or secure exclusive export contracts, while competitors face bureaucratic hurdles (Kosals & Maksimova, 2015). This manipulation creates an uneven playing field in the Russian export market, where those with political connections gain unfair advantages.

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One of the most significant impacts of informal governance on Russia’s imports has been its adaptation to Western sanctions. Following the 2014 annexation of Crimea and later the 2022 invasion of Ukraine, Russia faced trade restrictions on technology, defense equipment, and industrial goods. To bypass these restrictions, Russian firms have turned to gray-market trading, rerouting imports through third-party countries like Turkey, China, and the UAE. Some companies have misclassified restricted goods to continue importing sanctioned products under different labels. While this system has kept Russia’s economy functional, it also makes trade increasingly dependent on informal networks rather than legal markets, reducing transparency and long-term competitiveness.

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In contrast, Ukraine’s informal governance structure is more decentralized, influenced by regional business networks and oligarchic competition. Since its independence, Ukraine’s economy has relied heavily on exports of agricultural products, steel, and chemicals. Informal governance has shaped this trade sector by enabling corrupt business practices, tax evasion, and smuggling. A key example is Ukraine’s grain export industry, where intermediaries control port access, customs clearance, and export permits through informal negotiations. During the Yanukovych administration (2010–2014), agricultural exports were often controlled by business elites with political connections, who used informal agreements to secure exclusive export contracts while limiting market access for competitors (Ayres, 2017).

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Smuggling and illicit trade are additional ways informal governance affects Ukraine’s imports and exports. The Ukrainian-Russian and Ukrainian-Belarusian borders have long been hotspots for informal trade, facilitating the movement of untaxed goods like fuel, cigarettes, and industrial materials. Informal governance in border regions allows customs officials to turn a blind eye to illegal transactions in exchange for bribes, weakening Ukraine’s ability to regulate its own trade policies (Schmidt, 2007). Additionally, during the early years of the Donbas conflict, reports emerged that coal from Russian-occupied territories was being unofficially exported to European markets through Russian intermediaries. These transactions were not formally recorded, but they were facilitated by informal agreements between business elites on both sides of the conflict (Kosals & Maksimova, 2015).

Since the 2022 Russian invasion of Ukraine, informal governance has further shaped wartime trade. The importation of military and humanitarian aid has faced challenges due to corruption and bureaucratic inefficiencies. Some reports indicated that aid supplies were delayed or diverted due to informal agreements between local officials and private distributors (Pieterse, 2022). This shows how informal governance, while sometimes necessary for crisis response, can also disrupt essential trade flows when accountability is weak.

Comparing Russia and Ukraine, both countries use informal governance to navigate trade restrictions and economic pressures, but they do so in different ways. In Russia, informal governance is state-controlled, allowing the Kremlin to use trade as a geopolitical weapon, particularly in energy exports. In Ukraine, informal governance is more fragmented, influenced by regional oligarchs and local business elites who use informal networks for personal gain rather than national strategy. Another key difference is how sanctions and informal trade intersect in each country. Russia actively exploits informal networks to bypass sanctions, while Ukraine struggles with border corruption and war-related trade disruptions.

Overall, informal governance has had a major impact on the import/export sectors of both Russia and Ukraine. In Russia, it allows the government to maintain tight control over key industries, avoid sanctions, and use trade as a foreign policy tool. However, this system also fosters corruption and inefficiency, discouraging foreign investment. In Ukraine, informal governance is less centralized, creating challenges in regulating trade while also allowing oligarchs to manipulate market access. Although informal governance provides short-term flexibility, its long-term effects weaken transparency, increase economic inequality, and make both countries more reliant on unofficial trade networks. Future reforms will require stronger legal frameworks, enforcement mechanisms, and international cooperation to reduce corruption and promote fairer trade practices.

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• Ayres, S. (2017). Assessing the impact of informal governance on political innovation. Public Management Review, 19(1), 90–107. https://doi.org/10.1080/14719037.2016.1200665

• Kosals, L., & Maksimova, A. (2015). Informality, crime and corruption in Russia: A review of recent literature. Theoretical Criminology, 19(2), 278–288. https://doi.org/10.1177/1362480615581099

• Magyar, B., & Madlovics, B. (2022). The anatomy of post-communist regimes. Central European University Press.

• Pieterse, J. N. (2022). Learning from Covid: Three key variables. ProtoSociology, 38, 211–228.

• Schmidt, D. (2007). Anti-corruption: What do we know? Research on preventing corruption in the post-communist world. Political Studies Review, 5(2), 202–232.