STEVEN FELDSTEIN, FIONA BRAUER
Following Russia’s invasion of Ukraine, the United States imposed an unprecedented package of sanctions intended to make Russia pay a high economic cost for its aggression and to constrain the Russian military. U.S. President Joe Biden declared that Russia would “bear the consequences” for the invasion and emphasized that sanctions were designed to reverse Russia’s military modernization, degrade its critical industries, and impair its ability “to compete in a high-tech 21st-century economy.”
These sanctions—coordinated with allies including the EU, Japan, and the UK—spanned several industries and economic sectors, including energy and raw materials exports, and the Russian financial system. The measures also included a stringent set of technology export controls aimed at denying Russia access to components that could be used for its war machine. They targeted a wide range of technologies, from ball bearings to electrical transformers, but were particularly focused on a set of high-priority dual-use items such as integrated circuits and radio frequency transceiver modules that “have extensive commercial applications but have also been found in Russian missiles and drones on the battlefield in Ukraine.”
Yet, Russia has proved exceptionally resilient to the West’s measures. This is true of the Russian economy as a whole but is particularly germane when it comes to Russia’s unexpected success in acquiring advanced technology components. In theory, Western technology export controls should have had more impact. Take semiconductor chips—critical to a range of items including drones, radios, precision missiles, and armored vehicles. Russia’s domestic chips industry is outdated and undersized. Plagued by disinvestment, Russian factories operate at 65-nanometer chip technology—about fifteen years behind the United States. As the U.S. Department of Commerce says in its description of the export controls, the highest priority items were selected in part because of “Russia’s lack of domestic production.” Given Russia’s reliance on imports of critical technology, policymakers were not unrealistic to expect that technology sanctions would significantly degrade Russia’s military capability. But after experiencing a steep drop in the imports of transistors and microprocessors in 2022, Russia’s supplies have rebounded to prewar levels.
How is it that Russia has been so effective in acquiring critical technology used for military weapons, often from Western manufacturers, despite export controls? Three factors are primarily responsible for sustaining Russia’s military technology procurement efforts. First, Russia is powering its weapons systems by procuring run-of-the-mill computer chips and components, often sourced from U.S. manufacturers, found in consumer products that are rarely subject to export restrictions. Second, Russia has shown an adaptive ability to exploit globalized supply chains and leverage a network of third-country traders to access dual-use components for its tanks, missiles, and drones. Third, shifting geopolitical incentives have motivated many countries—such as China, India, Türkiye, and the UAE—to ignore Western sanctions and sustain trading ties with Russia.
THE SIGNIFICANCE OF COMMON TECHNOLOGIES
One aspect that has surprised experts is the extent to which Russia has ramped up its defense industrial production. Although Russia imports a variety of military items, from Iranian drones to North Korean artillery shells, its domestic manufacturing base has quickly pivoted to a war footing. An estimated 7.5 percent of Russia’s GDP is now dedicated to defense spending, and the industry employs 3.5 million Russians, or 2.5 percent of the country’s population. The increased defense spending has led to surprising distortions: as The Guardian reports, “Machinists and welders in Russian factories producing war equipment are now making more money than many white-collar managers and lawyers.”
The key to powering Russia’s military industrial machine is obtaining critical components such as electronic integrated circuits. Although the West has denied Russia access to advanced models, its factories have made do with lower-grade substitutes. In many cases, the same chips found in common appliances like microwaves are also sufficient to power Russian cruise missiles and battle tanks. As U.S. Commerce Secretary Gina Raimondo has testified, “We have reports from Ukrainians that when they find Russian military equipment on the ground, it’s filled with semiconductors that they took out of dishwashers and refrigerators.” Relying on lower-grade chips can result in functionality trade-offs. For example, military-grade versions of chips are designed to be resilient to high temperatures (and therefore hard to obtain due to sanctions). Instead, Russia is using ordinary chips but supplementing them with heat sinks and thick insulation seals so that the electronic components inside will stay cool.
The ubiquity and breadth of these components make them more than merely dual-use technologies—items with distinct military and civilian applications. Rather, they should be considered to be “omni-use” technologies, present in every area of the modern economy. These technologies tend to be developed and controlled by private industry (rather than overseen by sanctioning governments), in contrast to dual-use controlled goods. Their widespread availability and the evolving nature of their end uses are not well suited to the inflexibility of export controls.
Russia’s Orlan-10 drone, used to locate Ukrainian troops and vehicles for rapid strikes, illustrates the military utility of commonplace technologies. It also highlights how much Russia relies on dual-use components sourced from U.S. manufacturers. The Orlan-10’s generator is powered by a Texas Instruments chip—one commonly found in HVAC systems. Components from the Swiss companies STMicroelectronics and U-blox are found in the flight controller and GPS module. The flight controller also contains multiple microcircuits produced by Dutch-owned (formerly U.S.-owned) company Freescale Semiconductor, whose components are commonly used in weather stations, washing machines, and respiratory equipment. One of the few Russian-made components, a navigation receiver in the GPS module, is built onto a U.S. chip made by Analog Devices.
Analyses reveal that the bulk of Russia’s sourced components—whether microprocessors or GPS units—originate from U.S. companies such as Intel, AMD, and Texas Instruments. Customs records indicate that from February 2022 through the end of that year, Russian companies entered into more than 3,000 semiconductor import transactions worth at least $100,000 each—70 percent of which were products from U.S. chipmakers. As one Russian weapons manufacturer put it, he has “no problems” getting chips because “it is impossible to isolate Russia from the entire global electronic component base. It’s a fantasy to think otherwise.”
GLOBALIZED SUPPLY CHAINS
Russia has also successfully leveraged global trading networks to access needed components. Because Russia faces major constraints when it comes to directly importing critical technologies, it obtains 98 percent of its components via third countries. To bolster this strategy, Moscow has “tapped webs of intermediaries” who hide their transactions through shell companies and rely on neutral third-country ports to receive and ship goods. According to the New York Times, Russian trade officials share tips in weekly emails about international ports willing to transfer goods as well as those that will conduct transactions in rubles or allow repairs to Russian-flagged vessels.
In Morocco, the Times notes, the Russian government trade office contacted the general director of the port of Tanger Med soon after Russia’s invasion. By November 2022, Russian trade officials had turned the port into an “electronics transshipment hub.” Products from manufacturing centers, including China and Taiwan, were unloaded at the state-run port and placed on Russia-bound ships. According to leaked emails, the volume of supplies running through Tanger Med “could amount to about $10 million per year.”
Beyond microelectronics and semiconductors, similar patterns of illicit procurement allow Russia to access other key technologies for security uses. For instance, CNC machine tools—robotic equipment used for precision manufacturing that can include making parts for nuclear warheads—continue to flow into Russia, despite being subject to export controls.
CNC machines are not as ubiquitous or as numerous as the chips found in appliances. But their widespread use in nondefense manufacturing and their adaptability allow them to be repurposed and sourced on the secondhand market. The Washington-based nonprofit C4ADS has uncovered evidence of Russian defense contractors sourcing previously used CNC machine tools from secondhand resellers. As C4ADS analyst Allen Maggard explained in a February interview, Russian defense contractors have “offshored” the procurement of CNC tools using third-country intermediaries in jurisdictions not committed to enforcing sanctions. C4ADS identified several instances where third-country intermediaries arranged for South Korean or Chinese resellers—some of whom list CNC tools for purchase on open websites, such as South Korean business-to-business commerce platform Daara—to ship previously used tools directly or indirectly to Russian defense contractors.
Crucially, Moscow does not have to reinvent the wheel to access needed technologies. Economic relationships between international defense contracting firms and Russian defense end users predate earlier export controls imposed in 2014 (in response to Russia’s occupation of Crimea). Russia can leverage existing relationships with manufacturers and suppliers and merely has to introduce a new layer into the transactions—shipping the technology via third countries—in order to evade export controls. As Maggard noted in the February conversation, Russia’s prior integration into the global markets, and its demand for foreign technology, has created durable relationships between importers and foreign manufacturers. “Export controls can’t and don’t erase those relationships overnight,” Maggard said. Instead, the controls add a level of complexity to those relationships, creating new links with third-country intermediaries while preserving the business interests of Russian importers and, in some instances, of overseas manufacturers eager to maintain their presence in the Russian machine tool market.
Russia’s success in evading sanctions is also due in part to deficiencies with the export control regimes themselves. While all U.S. microelectronics exports are subject to controls, once the components leave America’s shores, they face far fewer constraints. Existing multilateral frameworks tend to focus on military applications and lack enforcement mechanisms to control dual-use technology. Frameworks that focus on dual-use technologies, such as the Wassenaar Arrangement, can be problematic. Wassenaar operates on a consensus basis, and Russia remains part of the group, so members who desire to sanction Moscow must rely on other mechanisms for restricting dual-use goods.
The difficulties in creating and enforcing comprehensive export controls for these components has resulted in the United States and other countries continually expanding their controls. Despite the widening net, new holes also appear. The Department of Commerce’s Bureau of Industry and Security (BIS), responsible for implementing and enforcing U.S. export controls, has added new companies to its entity list of violators but acknowledges that it is failing to keep pace with the creation of shell companies. Given the sophistication of global procurement networks alongside BIS’s lack of funding and outdated procedures (analysts primarily rely on Google searches and Excel spreadsheets to track violators), it is little wonder that Moscow has found ample room to exploit leaky supply chains. Yet, even improved BIS enforcement would not solve the problem. As the next section lays out, one of the most pivotal drivers enabling Russia’s transshipment of controlled technology is not individual companies but third countries, such as China, Iran, Türkiye, and the UAE.
SHIFTING GEOPOLITICS
Far from being isolated, Moscow relies on a shifting web of countries that are reluctant to cut ties with Russia. This dynamic is doubtlessly driven by economic incentives for companies and states that profit from Russia’s dependence on imports. Both governments friendly to the United States (such as South Korea and Taiwan), as well as more neutral governments (Brazil and the UAE) have found it financially advantageous to continue selling products to Russian outlets despite Western export controls. But Moscow’s circumvention of technological controls is also enhanced by growing geopolitical fragmentation and a willingness by governments to hedge their bets against the West.
As Matias Spektor writes in Foreign Affairs, secondary powers have “simultaneously” developed robust diplomatic and economic ties with China, Russia, and the United States, which provides an “insurance policy” in case conflict breaks out among major powers. While these economic and political relationships predate the Ukraine war, they have taken on added importance for Russia as the United States and its allies attempt to isolate Moscow.
Such hedging has benefited Russia, allowing it to circumvent Western controls with relative ease. An obvious partner is China. Sanctions have further spurred Russia into the arms of China. Beijing’s central role in semiconductor supply chains has helped Russia to offset the impact of Western sanctions. One analysis found that in the fourth quarter of 2022 alone, “more than three-fourths of sales to Russia were conducted via an intermediary in China,” compared to only 22 percent the previous year. When it comes to U.S.-made chips, exports to Russia via Hong Kong and China have increased tenfold from preinvasion levels.
But this is not just a story about Russia’s and China’s burgeoning relationship. Middle-power states are providing vital lifelines for Russia. The UAE is a good illustration. The trading hub has become an essential transshipment node for Russia. A “cottage industry” of traders has settled in Dubai, with the job of sourcing integrated circuits, microchip processors and controllers, radio navigational aids, and other electronics for export to Russia. One former broker says, “The circus moves where liquidity is. You can do business here, that’s what’s benefiting Dubai.” In 2022, the UAE exported fifteen times more chips to Russia than in the previous year. More recently, news outlets reported that Russian forces are procuring Starlink terminals from the UAE and other Arab countries for approximately 200,000 rubles, or $2,200, per unit. It should come as little surprise that Russian President Vladimir Putin paid a special visit to the Emirates in December 2023 and said that relations between the countries were at “an unprecedented level.”
Even countries friendly to the United States are at times providing critical technology to Russia. A 2024 investigative piece from the Washington Post disclosed how Russian firm I Machine Technology imported more than $20 million worth of sophisticated CNC machine tools from Taiwan. These tools were sent in sixty-three separate shipments from an array of Taiwanese trading firms; some were directly sent to Moscow, while other shipments followed a more circuitous route, coming through China and Türkiye.
Although global ambivalence to isolating Russia is considerable, the West has demonstrated that it can successfully exert leverage in middle-power states against Russia or China when it chooses to. In the case of UAE, U.S. officials recently pushed the country’s leading AI company, G42, to cut ties with Chinese hardware suppliers in favor of U.S. counterparts. Behind closed doors, U.S. officials laid out concerns about sensitive technology falling into the Chinese government’s hands, prompting G42 chief executive Peng Xiao to lament, “For better or worse, as a commercial company, we are in a position where we have to make a choice. We cannot work with both sides. We can’t.” So although the UAE—and many other middle-power states—are pursuing hedging strategies to navigate increasingly unpredictable international politics, these strategies also have limits.
CONCLUSION
Russia has demonstrated considerable adaptation in evading Western export controls relating to critical technologies, retooling dual-use components, and leveraging third countries to import sanctioned items. The failure of Western export controls has spurred calls for reforms to better stem the flow of components, including proposals to reinforce export controls with more serious sanctions, impose stricter requirements on companies and manufacturers, and exert more geopolitical pressure on third-country trading hubs. These steps may make it harder for Russia to obtain critical technologies, yet the factors driving Russia’s adaptation—the ubiquity of digital technology, globalized supply chains, and geopolitical fragmentation—are not mere loopholes to be closed. They are enduring, structural features of today’s world. Russia’s adaptation to export controls may be unexpected, but it is less reflective of any weakness of the sanctions themselves than of the new realities of the global technology marketplace and the implications of geopolitical fragmentation.
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