Russia’s military industry has had to recall Soviet technology for missiles after a system of circumventing sanctions to buy microchips began to fail, Western officials have told the BBC.
“Russian imports of semiconductors, which started to rise late last year, fell by two-thirds again between January and February 2023, forcing reliance on low-quality substitutes such as chips with a 40% defect rate”, one of the publication’s interlocutors said.
Most of Russia’s weapons, including ballistic and cruise missiles, contain electronic components. However, they are produced not in Russia, which lacks its own component base, but in the United States, the United Kingdom, Germany, the Netherlands, Japan, Israel and China.
Microchips and processors make up about half of the components of Russian weapons, and about two-thirds of them are produced by American companies, including Analogue Devices, Texas Instruments and Intel, the Kyiv School of Economics, together with the Yermak-McFaul International Working Group on Russian Sanctions, found out.
Since the components are subject to export controls, Russia does not receive them directly, but through a network of third-country intermediaries. Thus, according to Nikkei, 75% of U.S. microchips are supplied to Russia via Hong Kong or China. At the same time, some of the key components were purchased formally for non-military use, for example, for the Russian space program.
“There are many companies willing to take substantial risks to fulfill Russia’s procurement requirements,” the report by the Kyiv School of Economics and the Yermak-McFaul Group said. Such companies are located all over the world –in the Czech Republic, Serbia, Armenia, Kazakhstan, Turkey, India and China.
Western countries impose sanctions against some of these companies. For example, the UK has imposed restrictions on the Turkish companies Turkik Union and Azu International “for their role in exporting microelectronics to Russia, which is necessary for military activities in Ukraine”.
In May, the US, EU and UK published a list of 38 “common high-priority items” and called on companies around the world to “exercise due diligence to ensure that the final destination of these items is not Russia”. The list included a wide range of electronic integrated circuits, semiconductors, lasers and navigation devices.
Following this, Turkey, in particular, suspended the transit to Russia of certain goods subject to Western sanctions.
However, once a component is in the hands of an intermediary, it becomes harder to trace. In this regard, Ben Hilgenstock, senior economist at the Kyiv School of Economics, proposes not to play cat and mouse with Russia’s suppliers, but to draw up a blacklist of suspicious intermediaries.
“Because many manufacturers also do not know with whom they should do business and with whom they should not. This is a serious problem”, Hilgenstock concluded.