Israeli-Russian trade still prospering despite Ukraine War

How has the war in Ukraine affected Israeli-Russian trade and how have the Jewish state’s communities of Russian speakers from Russia and Ukraine responded to it?

People walk near the headquarters of Yandex company in Moscow, May 23, 2011. (photo credit: REUTERS/SERGEI KARPUKHIN/FILE PHOTO)
People walk near the headquarters of Yandex company in Moscow, May 23, 2011.
(photo credit: REUTERS/SERGEI KARPUKHIN/FILE PHOTO)

A Russian ballet performs in Tel Aviv, Russian products that bear the Russian flag can be found easily in Israeli supermarkets, Israel exports its vegetables to Russia, while Yango, part of the Russian giant Yandex Group, supplies Israelis with taxis and grocery deliveries.

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Today Israel is the only Western country that does not exercise any sanctions against Russian entities or capital. However, financial limitations do exist. How has the war in Ukraine affected the trade between the two countries and how have the Jewish state’s communities of Russian speakers from Russia and Ukraine responded to it?

A taxi, a deli delivery, and a prewar image of Bucha

Commercials for Yango Deli – a new delivery service that enables a customer to get a quick supply of milk, bread, or any other product in a record time of just 15 minutes – were lately seen in many cities across Israel.

Yango, an abbreviation of Yandex Go, is an international brand of Yandex – the so-called Russian Google, a giant conglomerate that started as a search engine and now offers anything from taxis and scooters to shipping, deliveries, news, and data.

A panoramic view of the Kremlin, St. Basil's Cathedral and Zaryadye Park in Moscow, Russia, May 12, 2022. (credit: REUTERS/EVGENIA NOVOZHENINA)A panoramic view of the Kremlin, St. Basil's Cathedral and Zaryadye Park in Moscow, Russia, May 12, 2022. (credit: REUTERS/EVGENIA NOVOZHENINA)

“It’s important that Israel understands what kind of company it lets into the country.”

Denis Dlugach

Yandex employs 450 people in Israel and according to recent publications in Russian and Israeli media, it is planning to relocate its headquarters to Israel and split the company into a Russian and an international division.

The European Union lately added Yandex’s Deputy CEO Tigran Khudaverdyan to its sanctions lists (he soon resigned from the company), while pro-Ukrainian activists and observers had noticed that the Yandex search engine only offers prewar images of Bucha, where massacres were allegedly carried out by the Russian military. Some Yandex officials resigned soon after this became public.

Denis Dlugach, an Israeli of Ukrainian origin and an activist with the nongovernmental organization Israeli Friends of Ukraine, told The Media Line the main issue with Yandex was that it manipulated the data, and consequently public opinion.

“People who want to find out the facts will not be able to do it through Yandex. It’s important that Israel understands what kind of company it lets into the country. They can put anything in their algorithms – no one will ever know – and it eases the task of manipulating public opinion. Also, they keep paying tax in Russia, and we know how this money is used by the Russian state,” he said.

Roman Bronfman, a businessman and a former member of Knesset who was born in Ukraine, warns of yet another problematic aspect.

“Personally, I stopped doing business with Russia back in 2014, yet I understand the market dependence when we talk about companies that are not involved in the military industry or weapon sales,” he told The Media Line. “But Yandex and its offshoots are busy with gathering information and data. It can compromise Israeli security and its activity here in Israel must stop at once.”

“The State of Israel does not restrict the activities of international companies that operate in accordance with the law.”

Economy Ministry spokesperson

Bronfman called on Economy Minister Orna Barbivai to use her powers to halt Yandex’s activities in Israel.

In reply to an inquiry by The Media Line, the ministry spokesperson said, “The issue is not the responsibility of the Economy Ministry. The State of Israel does not restrict the activities of international companies that operate in accordance with the law.”

The Israeli government has so far avoided imposing sanctions on Russia or expressing criticism of Vladimir Putin’s regime, trying to keep up the balancing act between Moscow and Kyiv. The Russian oligarchs haven’t been sanctioned and their assets haven’t been seized, while many of the Russian billionaires of Jewish origin have immigrated to Israel.

While Europe, the US, Canada, and other Western countries are struggling with dependence on Russian oil and gas and expanding the existing sanctions, Russian-made products – from ice cream to cooking oil – can be found in most supermarkets across Israel, Russian artists (recently the Russian National Ballet Theatre) arrive to perform and Russian state TV channels such as Channel 1 continue to broadcast as usual.

A few concerts by Russian artists who support Putin were canceled due to pressure from pro-Ukraine activists, and this development triggered a furious debate between Israelis who support and object to this kind of activity.

“People should choose by themselves. That’s how it’s done in civilized states,” Marina Polinoski, a resident of Beersheba, wrote on Facebook. “Who gets to decide who will perform in Israel and who will not? The artists do not have to answer these questions, just to perform and make the audience happy.”

Hundreds of other Facebook users enthusiastically supported the cancellation of scheduled concerts of Grigory Leps, Elena Vaenga, and other Russian performers known for their support of Putin’s regime.

No credit insurance and a lot of uncertainty about the future

The value of trade between Israel and Russia reached some $3.5 billion in 2021, of which about $3.16 billion was in goods and about $350 million consisted of services, according to data from the Foreign Trade Administration in the Economy Ministry. The figures were up 52% from 2020.

According to the ministry, no official data can yet be published on exports and imports with Russia in 2022.

It was announced in March that Israel would not issue credit insurance to Israeli companies that maintained their business with Russia, but some continued to export and operate in Russia without this insurance.

Sources in the vegetable-producing sector told The Media Line there was much uncertainty regarding the continuation of cooperation with the Russian Federation, especially regarding the ability of Russian companies to transfer international payments.

At the same time, large Israeli high-tech firms such as Wix.com, Fiverr, Playtika, and Tipalti have suspended or pulled their commercial operations in Russia over Russian aggression in Ukraine.

More than 100 others – including Check Point, Tadiran, Gottex, Netafim, and Ahava – remain active in Russia. Also, as of today, the Israeli diamond industry continues to import rough stones from Russian state-owned Alrosa.

“Israel has been extremely careful about international financial affairs since Israeli banks operate around the world. The financial and insurance structures are very careful and mostly avoid doing business in Russia. Those who continue the trade, do it on their own responsibility,” Bronfman said.

Recently, David Davidovich, a business partner of Russian-Israeli billionaire Roman Abramovich, sued Israel’s Bank Hapoalim after it blocked his account and credit card. Hapoalim replied that it acted in accordance with the British sanctions that were imposed on Davidovich in April. Some experts in Israel believe that Davidovich was acting as a frontman for Abramovich and so was the bank account.

Almost 100 days into the war, Israeli trade with Russia has probably slowed down due to international financial restrictions, difficulties in shipping, and so on. However, due to the lack of any Israeli sanctions or legislative base, many Israeli and Russian businesses continue as usual.

In the absence of basic data from the Economy Ministry for 2022, it’s hard to talk about the numbers, but it’s still easy to talk about the political aspects of commercial relations between the two countries: Israel is still reluctant to act against oligarchs, “Russian Google” and cooperation with state-run companies.

“This behavior is definitely a very serious exception to what has already become the rule in the West,” Bronfman says.