By Francesco Guarascio
BRUSSELS (Reuters) – Exports of essential medical devices Russia is dependent upon from the West have been partly restored, reducing the immediate risk of life-threatening shortages after a near-total collapse when the war in Ukraine began, a Western industry source told Reuters.
Russia imports a large share of its medical equipment, such as pacemakers and radiotherapy devices, from the European Union and the United States and its reliance is particularly acute for the most complex and critical machines.
Russia’s invasion of Ukraine on Feb. 24, which Moscow calls a “special military operation” to demilitarise its neighbour, temporarily froze these exports as companies navigated the barrage of sanctions against the Kremlin, said the Western industry source who declined to be named because of the sensitivity of the subject.
While medical devices and prescription drugs are exempt from sanctions, their delivery to Russia has been hit by transport, insurance and customs hurdles caused by the war and by the restrictive measures, according to two industry sources and a European Commission official.
That heavily disrupted the flow of supplies that before the conflict was worth about 1.5 billion euros ($1.6 billion) a year, according to data from the World Trade Organization (WTO).
Now, over 50 days into the conflict, the trade has resumed so that exports to Russia are about half of pre-war volumes, sufficient to dispel fears of immediate shortages, said the first industry source, but not enough to totally dismiss them.
The risk was higher for complex machines that need regular renewals of spare parts and consumable materials, such as dialysis systems or ventilators for COVID-19 patients, the source added.
“Logistics to Russia are quite challenging due to limited transportation possibilities. Nevertheless we are evaluating all options on a best-effort basis and so far have been able to keep some logistics channels open,” medical device giant Siemens Healthineers told Reuters.
The company, which has condemned the invasion of Ukraine, mostly exports imaging and radiotherapy equipment to Russia.
LOGISTICS, SANCTIONS, LEGAL THREATS
While logistical hurdles remain, companies and customs officials have now adapted to the initial complications brought on by the sanctions regime, the two industry sources said.
Transport risks, usually covered by Western insurers, are now shouldered by Russian insurance companies, according to one of the sources. Goods are often delivered to Russia’s neighbours, such as Turkey or Latvia, and Russian transport companies complete the journey.
Some companies say they have adapted quickly.
“We continue to work closely with the proper authorities to ensure compliance with sanctions, but we have not seen an impact at this time,” a spokesperson for GE Healthcare told Reuters.
New sanctions imposed earlier in April by EU countries, which ban Russian trucks and vessels from entering the EU, are expected to complicate matters for a few days, but are seen as a temporary snag.
A spokesperson for the EU Commission said that medical devices were exempted from the transport sanctions as well as import and export bans because they were considered essential goods.
When disruption to exports was at its most acute, Western companies relied on stocks already in Russia or local production or the limited supply of imports for spare parts and materials for complex machines, with a third industry source noting that medical centres using such equipment never stopped running.
Added to the logistical and sanctions issues, are the retaliatory measures Russia is taking to make life more difficult for the West.
Manufacturers of medical equipment have so far enjoyed special treatment by Russia, because of their critical function, which has allowed them to continue to be paid in foreign currencies and to be spared from asset seizures.
But that remains a threat, the sources said.
The uncertainty has led many companies to scale down their activities in Russia but none of the big firms have quit Russia so far. Several companies have shrunk the number of products they are offering in Russia and others have stopped using Russia as a hub for business in Central Asia, the Western industry source said.
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(Reporting by Francesco Guarascio @fraguarascio; additional reporting by Julie Steenhuysen, Erman Michael and Ludwig Burger;Editing by Elaine Hardcastle)