Maldives: Small island nation with big role shipping chips to Russia

MALE/TOKYO — Surrounded by azure waters and year-round sun, the Maldives is a popular destination for holidaymakers and honeymooners. But there is another side to this country of pristine islands and glamorous resorts. It is also a transit point for shipments that circumvent sanctions against Russia.

In the year after Russia invaded Ukraine, approximately 400,000 U.S.-made semiconductors worth a total of $53.6 million were shipped to Russia via the Maldives, according to Russian customs clearance data obtained from the Indian research firm Export Genius and analyzed by Nikkei.

The records analyzed covered shipments valued at over $50,000 (approximately 7 million yen) each. The Maldives was second only to China, including Hong Kong, in terms of such imports in the year after the invasion. Records for the year before the invasion covering transactions of the same minimum value show no such shipments of chips from the Maldives to Russia.

According to United Nations data, the Maldives’ total exports in 2021, excluding services, came to approximately $280 million. The value of U.S. semiconductor shipments from the Maldives to Russia is equivalent to 20% of this figure. Shipments of semiconductors increased sharply in May 2022 — the same month that Russian airline giant Aeroflot resumed flights between Male, the capital of the Maldives, and Moscow. The flights had been suspended due to the invasion of Ukraine that February.

This sudden increase came despite the fact that, according to Akira Minamikawa, a senior consulting director at Omdia, the Maldives semiconductor market is nonexistent.

According to the customs data, 14 exporters sent semiconductors from the Maldives to Russia. None of those companies appeared to be based in the Maldives.

One such company, the London-headquartered Mykines Corp., exported approximately $40 million worth of chips, or 80% of the total shipments revealed in the Nikkei analysis. The Financial Times reported in April 2023 that Mykines had shipped about $1.2 billion worth of electronic equipment to Russia. Nikkei sent Mykines a request for an interview via registered mail, but the company refused to receive the document.

The No. 2 company on the list was Hong Kong-based Pixel Devices. In an email to Nikkei, Pixel acknowledged that it exports to Russian companies but said it “strictly adheres to the export control laws applicable to Hong Kong entities” and “deemed not to violate any applicable regulations.” The company declined to comment on questions relating to potential sanctions violations against Russia or about the Maldives.

To shed some light on how such shipments are carried out, Nikkei contacted trading companies and officials in Male.

Key to such shipments are freight forwarders, or intermediaries that connect shippers and transporters and handle customs procedures on their behalf. One source in the shipping industry active in the Maldives told Nikkei that shipments of U.S. chips from the Maldives to Russia could be arranged by providing the name of a local forwarder in the “notify party” field of the waybill, the document containing the details of the shipment, such as its destination, the nature of the items and the route it will take.

Goods shipped internationally via an intermediary country are generally handled in one of two ways. One is as a “re-export,” meaning the goods are unloaded at the port or airport, cleared through customs, and then reloaded onto another ship or plane without modification for shipment to another country.

The other way is “transshipments.” The flow of goods is basically the same as in re-exports, but the items are transported to another country without going through customs clearance in the intermediary country.

According to data from the Maldivian customs service, around 169 rufiyaa, or about $10, worth of semiconductor items were re-exported to Russia in 2022. An official with the Maldives customs service told Nikkei that data on transshipments is “not included in export statistics and the data is not available.”

Transactions recorded in Russian customs clearance data seen by Nikkei, however, listed Maldives as the exporting country for shipments of semiconductors.

U.S. authorities have already taken notice of freight forwarders in the Maldives and their potential role in avoiding restrictions on shipments to Russia. In May, the U.S. Commerce Department accused a company called Intermodal Maldives of aiding the export of aircraft parts to Russia in contravention of U.S. restrictions. The company was registered in March 2022, just weeks after Russia’s invasion of Ukraine, and according to the U.S. is based in the Maldives.

The address of freight forwarder Intermodal Maldives, the company accused by U.S. authorities of circumventing trade restrictions on Russia, showed no sign of the company’s name. (Nikkei photo)

Intermodal acknowledged in a telephone call with Nikkei that its head office is in Male, at the address given in the U.S. documents, but when asked about making shipments to Russia that potentially violated U.S. export restrictions, the person on the phone hung up without answering any further questions.

Nikkei visited the Male office but found the name on the outside of the building and on an inside office door was that of a different freight forwarding company. Nobody answered the intercom or came to the door, and it was not possible to confirm whether the office was in fact in use.

Experts in international relations and trade say the Maldives, a small country on the front line of the climate crisis, has a history of courting foreign assistance without becoming overly reliant on any one country.

Former Maldives President Abdulla Yameen shifted the country toward China. The most visible sign of his pro-Beijing stance is the China-Maldives Friendship bridge, officially the Sinamale Bridge, inaugurated on his watch. The 1.39-kilometer bridge linking the island of Male with Hulhule, where the international airport is located, was built by the Chinese state-owned company China Communications Construction Company (CCCC), with the Chinese Government contributing $126 million, around half of the construction cost.

For China, the Maldives is a key shipping and transportation hub in Beijing’s Belt and Road initiative. Its location is also militarily important.

The China-Maldives Friendship Bridge is a visible symbol of the island nation’s reliance on support from other nations. (Nikkei photo)

Professor Srikanth Kondapalli of Jawaharlal Nehru University, India, who specializes in South Asian politics, says: “It also has strategic advantages for China as it is not far away from the Diego Garcia base. If China is trying to replace the U.S., cooperation with Maldives may come in handy in the long term.”

The base on the Diego Garcia atoll, part of the Chagos Archipelago, supports U.S. Navy operations in the Indian Ocean and Persian Gulf areas.

But the Maldives’ current president, Ibrahim Mohamed Solih, has focused on relations with neighboring India since taking office in 2018. In February 2021, he signed an agreement to receive Indian assistance in the development of a coast guard base, and the Tata Group, a major Indian conglomerate, is playing a central role in the construction of housing on the artificial island of Hulhumale, near Male Island.

And not to be outdone by China, India is also funding its own “friendship” bridge in the Maldives, connecting Male with other nearby islands.

Counterbalancing the influence of these two Asian powers is Washington. The Maldives and the U.S. signed a defense agreement in 2020, and the Maldivian Defence Force and the U.S. military have deepened their cooperation, including conducting joint exercises.

Amit Ranjan, a research fellow at the National University of Singapore, says, “Maldives lacks resources to develop infrastructure. Hence depends on other countries such as India and China.”

According to Ranjan, the island nation “cannot afford to enter into an alliance” and be pulled into international power games. Instead, the Maldives attempts to protect its interest by accepting support from various suitors but ultimately keeping them all at arm’s length. In this context, there may be little incentive for the Maldives to side with the West in clamping down on Russian-related transactions.