Having studied how the sanctions imposed on Russia are observed, we see the West has failed to stop Russian aggression, support democracy and independence in Ukraine, and contain the Kremlin’s military ambition. This defeat owes not to Russia’s capacity but inability by the West to comply with sanctions and prevent transfer of technologies and goods to Russia.
Ongoing supply of military hardware and dual-use items reduces the effectiveness of unprecedented military assistance given to Ukraine. The key challenge to bring the war in Ukraine no an end, therefore, is not to increase or cut off arms supplies to Kyiv but to ensure the sanctions imposed on Moscow are fully obresved.
In March 2022, the RLI posted a research on how Western technologies and components are used in Russian weapons. With Russia obviously falling behind in technology, unable to fill this gap with what the Kremlin calls import substitution (equivalents to Western goods they produce on their own), Russian arms industry is developing, as Western exporters evade sanctions.
This increases the risk for NATO if Moscow wages provocation, in the Baltics, for example. That means lack of effective tool to ensure sanctions now tends to weaken the West, with a chance for economic knockout similar to the Soviet Union scenario lost. On one side, Russian propaganda promotes the narrative that cessation of military support for Ukraine can encourage compromise and end the war. On the other side, however, European and American companies violate sanctions and boost spending, thus giving Russia much needed scarce resources to wage war.
Russia imported sanctioned chips by Western companies worth more than $502 million for the first half of 2023. These items are used to produce missiles and other weapons. Defense machinery worth more than $171 million was imported during the same period.
We have to admit that despite the fact the sanctions are unprecedented, they are not effective as exporters fail to comply with them.
This becomes possible due to third country evasion schemes. X 101 cruise missiles, for example, use Intel and AMD processors (imported in Q1-Q2 2023 – $169 million and $35 million), Xilinx and Texas Instruments, Analog Devices Inc. chips. That means a scenario when Russia is short of missiles is less possible.
Low sanctions discipline by Western companies makes people give up on the efficiency of the sanctions imposed, though it is the trigger for the war to go on.
Components by American Analog Devices Inc. worth more than $98 million, Xilinx—more than $75 million, Microchip Technology—more than $42 million, Texas Instruments—at least $38 million, German Infineon—more than $28 million, Atmel – more than $2.7 million, Cypress Semiconductor – more than $3.8 million were imported to Russia in the first half of 2023.
Practically all sanctioned electronics are shipped to Russia via China and Hong Kong (Time art international limited, Union Tech Inc. Limited, Dexp International Limited). The delivery involves direct suppliers for defense industry, supervised in particular by Russian military intelligence (VMK, Testkomplekt, Tordan Industry Limited, Kvazar). Delivery schemes include a long logistics arm – Hong Kong, Thailand, Estonia (Elmec Trade OU), China.
Orlan drones use Xilinx chips. Russia imported these chips worth $1.6 million, for the first half of 2023, via Chinese and Turkish companies (Margi̇ana Inşaat Diş Ticaret Li̇mi̇ted Şi̇rketi̇).
Ranzhir-M1 air defense system uses German Infineon chips. These chips worth 2 million dollars have been imported into Russia through TH Symmetron EC since the beginning of year.
The Unimatic company has imported machinery by Italian O.M.V. and German Arinstein worth at least $5 million to Russia so far this year. The producer acted as a sender in some cases. The machinery was intended for the Arclm International Trading Co., Limited, the leading maker of tank guns.
Pointer LLC imported 52.4 thousand optical sights made in China, U.S. and Japan worth $9 million to Russia in 2023.
Some sanctions were targeting Russian civil aviation. With Russian Aeroflot forced to allow flights with deactivated brakes, Russia keeps importing components via third countries.
Moscow has managed to import spare parts for aicraft worth $110 million manufactured by American Honeywell, Woodward, Boeing, French Safran Nacelles, Turbomeca, CFM International since the beginning of this year. Aviation components are supplied both via China an UAE (Desert sun supply, for example).
We believe Moscow has been building a scheme to bypass sanctions since 2014. Intelligence affiliates registered companies abroad, with the task to purchase goods for the market of the country where the company is registered. Once delivered, the goods were re-exported to Russia by changing destination. Russian intelligence present in former Soviet countries makes it easy to register companies, to put pressure on the customs to carry out such operations. That is why the Kremlin actively uses Georgia, Kazakhstan, Kyrgyzstan, Uzbekistan, Armenia, Tajikistan to deliver sanctioned goods.
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