On Tuesday, the UK government announced what it described as the “largest ever UK action” targeting Russia’s access to foreign military supplies.
The sanctions included businesses and individuals in Turkey, Dubai, Slovakia and Switzerland.
The Foreign Secretary, James Cleverly, said the measures would “further diminish Russia’s arsenal and close the net on supply chains propping up Putin’s now struggling defence industry.”
But after successive waves of sanctions by the UK, US and EU, Russia still has the parts it needs to keep its war machine going.
The reasons for this are complex but boil down to Moscow’s continued ability to lay its hands on small but vital pieces of Western technology, especially microchips.
Much of the Kremlin’s weaponry, including ballistic and cruise missiles, makes heavy use of electronic components manufactured in the US, UK, Germany, Netherlands, Japan, Israel and China.
In June, Kyiv’s KSE Institute, in association with the Yermak-McFaul International Working Group on Russian Sanctions, analysed 1,057 separate foreign components found in 58 pieces of captured Russian weaponry.
It found that microchips and processors accounted for about half of the components and that around two thirds of them were made by American companies.
The top five manufacturers were all American, including Analogue Devices, Texas Instruments and Intel.
The research echoed findings in other reports stretching back to Russia’s full-scale invasion of Ukraine in February 2022.
With many of these vital components subject to export controls, Russia is not buying them directly from Western suppliers.
Instead it has turned to an elaborate network of third country intermediaries.
In April this year, Nikkei found that 75% of US microchips were being supplied to Russia through Hong Kong or China.
Nikkei’s investigators found that small or midsize suppliers, set up after Russia’s full-scale invasion, were heavily involved, sometimes operating out of anonymous, unnamed offices in Hong Kong.
Other studies have found that key components have been bought ostensibly for non-military use, for example in Russia’s space program.
According to the KSE & Yermak McFaul report: “There are numerous companies…willing to take substantial risks to fulfil Russian procurement demands.”
Such companies, the report says, are located across the globe, including the Czech Republic, Serbia, Armenia, Kazakhstan, Turkey, India and China.
The latest UK sanctions announcement shows that Ukraine’s Western allies are increasingly exercised about the role of third party intermediaries.
Two of the Turkish companies newly sanctioned, Turkik Union and Azu International, were cited “for their role in exporting microelectronics to Russia that are essential for Russia’s military activity in Ukraine.”
A Slovakian national Ashot Mkrtychev, was listed for his alleged involvement in an attempted arms deal between Russia and North Korea.
In May, the UK, EU and US jointly published a list of 38 “common high priority items” and warned companies to “undertake due diligence to ensure that the end destination of these products is not Russia.”
The list included a wide range of electronic integrated circuits, semiconductors, lasers and navigational instruments.
Western officials say they are making progress and point to a Turkish presidential decree, earlier this year, which halted the transit to Russia of certain goods sanctioned by the EU, UK and US.
They also point out that while Russia still manages to import significant quantities of semiconductors, they’re not always of the highest quality.
“Russian imports of semiconductors, which had been starting to rise towards the end of last year, fell by two thirds again from January to February 2023,” one official said, “forcing them to rely on low quality substitutes, such as microchips with a 40% defect rate.”
The same official said that Russia was having to make do without certain capabilities, including thermal imaging, and with repurposing Soviet-era technology.
“This obviously sits in stark contrast with Ukraine’s ability to procure cutting edge technology from us,” he added.
For Ukraine, Western sanctions can never work quickly or thoroughly enough.
Researchers at the KSE Institute questioned whether the latest round of UK sanctions was as broad ranging as the government claims.
Ben Hilgenstock, a senior economist at KSE, said chasing third party intermediaries was “a game of cat and mouse,” involving a myriad of little known companies.
“I’m not sure how successfully we’re going to play the game if we’re sanctioning five companies,” he told the BBC. “It won’t solve the problem because it’s just too easy to create some new entity elsewhere.”
Once a component is in the hands of an intermediary, it becomes harder to trace. It may show up later in Russian trade data, but by then it’s too late.
Mr Hilgenstock suggested a blacklist of suspect intermediaries would be useful.
“Because a lot of the producers also don’t know who they should be doing business with and who they shouldn’t. It’s a serious challenge.”
Source : BBC
