According to a recent analysis by chip specialist Chris Miller, 88% of the chips Russia purchased in the first half of 2023—measured in dollars—came from Chinese deliveries.
In March 2023, one year after Russia invaded Ukraine, Chinese President Xi Jinping and Russian President Vladimir Putin had talks at the Kremlin in Moscow. Despite China’s declarations about its neutrality towards the Russia-Ukraine war, Moscow benefits from trade with Chinese firms, including dual-use components, dodging Western sanctions.
According to recent research, despite sanctions placed after its invasion of Ukraine, Russia has continued to have widespread access to computer chips from the West through imports from China and other nearby nations.
Chip expert Chris Miller’s analysis for the American Enterprise Institute asserted that despite sanctions restricting Russia’s ability to produce more chips and obstructing direct imports from the West, the country has discovered alternative suppliers.
It stated that “in the first half of 2023, shipments from China accounted for 88% of the chips Russia acquired, measured by dollar value,” indicating that “China is by far the most significant supplier of chips for Russia.”
The study stated, “The Chinese government has turned a blind eye to this trade, despite the fact that such transactions are typically illegal under US law.”
It stated that Chinese President Xi Jinping and Russian President Vladimir Putin pledged to “maintain the stability” of industrial trade during their early February 2024 meeting. This was in reference to China’s provision of essential parts for Russia’s defense manufacturing infrastructure.
Additionally, Russia has benefited from a “dramatic increase” in chips coming from “neighboring countries that lack chip industries,” such as Turkey and nations in Central Asia and the South Caucasus, from whom it had previously imported very few semiconductors.
According to Nikkei Asia journalists, the launch of “direct Aeroflot flights between the Maldives and Moscow” resulted in $53 million worth of chip exports, even though the Maldives, an island chain in the Indian Ocean, has no chip manufacturing.
However, the research stated that these imports had become significantly more expensive, with costs rising by almost 80% as a result of sanctions imposed by the US, the EU, and chip manufacturing companies in Taiwan, Japan, and other countries.
Subsequent sanctions rounds forced Moscow to pay “nearly twice as much for semiconductors as it did before the war,” leading to significant supply-chain disruptions and price rises.
Miller asserted that Ukrainians had stolen a variety of Russian military hardware, including drones, missiles, and communication and intelligence systems, highlighting Moscow’s significant reliance on foreign technology.
However, since the world manufactures over a trillion chips annually and they are small enough to pack hundreds in a single bag, it was hard to completely block off Russia’s ability to acquire chips.
Russia has had to create new supply channels for semiconductors on multiple occasions. As sanctions disrupted present smuggling routes, it set up new ones to bypass Western sanctions.
But it stated: “The biggest failure in enforcing the controls is not that Russia continues to have some success in smuggling—tthat’s not a surprise—bbut that China continues shamelessly to sell Russia so much via normal trade routes.
Chinese manufacturing companies are investing in new semiconductor factories in an effort to expand the country’s production capacity. China’s imports of chip-making machines jumped last year as firms ramped up investment in an attempt to circumvent U.S. efforts to curb the country’s semiconductor industry, Bloomberg reported.
Imports of equipment used to make computer chips rose 14% in 2023 to nearly $40 billion, the second highest amount on record since 2015, according to Bloomberg calculations based on official customs data.
Thus far, the Biden administration and its European allies have not made significant pressure on China to adhere to Western rules. However, many European and American leaders voice this concern. The US is looking into hitting sanctions on Chinese companies it thinks are aiding Russia in supporting its war against Ukraine.
Recently, US Secretary of State Anthony Blinken criticized China for supporting Russia’s defense industry, saying that Beijing is now the main supplier of critical components for the war of aggression that Russia is waging against Ukraine.
“When it comes to Russia’s defense industrial base, the primary contributor at this moment to that is China. We see China sharing machine tools, semiconductors, and other dual-use items that have helped Russia rebuild the defense industrial base”, Anthony Blinken was quoted by Reuters as saying.
Read also: How Russian manufacturer of Orlan drones imports equipment evading sanctions
“In order to increase the disruptive effect, the US should impose more frequent sanctions against Chinese and Russian companies involved in the illegal chip trade, as long as China continues to sell Western chips to Russia”, the report stated.
The current regulations are likely already creating obstacles in Russia’s defense manufacturing, despite the country’s inability to completely shut off chips. Increasing enforcement will make this effect stronger.
Additionally, they imported some outdated chip-making equipment from Taiwan, Israel, and South Korea. He claimed that although the latter was not taking part in the sanctions against Russia, it had shipped at least thirty shipments of technology for producing chips.
Even when trade was limited to Chinese and Russian companies, he claimed that the imposition of new sanctions had a negative impact on chip shipments. He also stated that the local industry is “still highly reliant on parts from the West,” so “if the US listed more companies more frequently, it would cause more disruption to Russia’s defense supply chains.”
The research recommended holding distributors and secondary markets accountable for supporting shipments that raise red flags and forcing them to comply with fines.
Read also: A recent media investigation into the use of 2,000 foreign-made parts in Russian Su fighter jets.
