Zero Genie

Russia is still able to import significant amounts of technology for use by its defense industry despite unprecedented global sanctions following Vladimir Putin‘s invasion of Ukraine, according to a study.

Silverado Policy Accelerator, a Washington, DC think tank, has examined trade data showing that, despite being punished for the war, Russia continues to have access to crucial dual-use technologies such as semiconductors, thanks in part to China and Hong Kong.

It also showed that imports to Russia have rebounded, as have supply chains for consumer goods, such as smartphones, appliances and cars, as the country adapts to sanctions that had been aimed at isolating it from the global financial system.

While sanctions had caused a sharp dip in trade to Russia initially, “a lot of people stopped paying attention to what happened after that, which was this rebound in certain areas, especially in areas like chips,” Sarah Stewart, Silverado chief executive officer and co-author of the report, told Newsweek.

Soon after Putin’s invasion, the U.S. joined forces with 37 allies and partners to impose sanctions and export controls, limiting Russia’s access to foreign goods and technology and hampering its war effort.

These had an immediate impact. In April, Russia’s overall imports in April were 43 percent below the pre-war median level. However, between August and October, combined imports were only 1 percent lower than in the same period in 2019, the report said.

“Just because there was initial drop off doesn’t mean that it stayed that way. There’s new partners in the mix, so we’ve got to keep our keep our eyes on the ball,” added Stewart.

Her team’s report also found that Russia was finding it trickier to rebuild the auto industry supply chain, prices had increased for other consumer goods and some imported products were of inferior quality.

Bans or restrictions were put on products for military end use and exports of foreign-origin items like semiconductors made with U.S. advanced technologies.

Integrated circuits or semiconductors are dual-use technologies that can be used for applications ranging from smartphones to missile systems.

Sanctioning them was an early focus for the U.S. and its allies. While Russian imports of integrated circuits “significantly declined” Moscow has managed to re-establish a network of suppliers in non-sanctioning countries, the report said.

It also described how Russia “is continuing to import integrated circuits, albeit at lower volumes, particularly from China and Hong Kong.”

Exports of integrated circuits from China and Hong Kong to Russia in November 2022 were 55 percent of median prewar exports to Russia from all countries. An additional smaller volume of integrated circuits is being transported through third countries, the report added.

“This is just what’s being reported officially in the trade data, so the Chinese government knows that this is being recorded,” said Stewart.

“It really does beg the question, what is China supplying exactly and is that consistent with its position that it’s been laying low when it comes to technologies like chips.”

China’s president, Xi Jinping, is an ally of Putin and has remained neutral on his invasion of Ukraine.

A month after Putin launched his invasion, U.S. Commerce Secretary Gina Raimondo warned Chinese companies against sending semiconductors to Russia made with U.S technology, telling Reuters: “We can essentially shut them down by denying them use of that software.”

The Silverado report did not directly accuse Beijing of evading sanctions but said that oversight and enforcement of chip exports to Russia via China and Hong Kong needs to be prioritized.

It also calls for a U.S. interagency task force to ensure the enforcement of measures against Russia and recommended that the U.S. Bureau of Industry and Security (BIS), the main export control enforcement arm of U.S. government, should be given more resources.

“This could be human resources or other types of technology that would help with supply chain tracking,” said Stewart. Newsweek has contacted the BIS and the Chinese foreign ministry for comment.