Moscow imports a third of battlefield tech from western companies

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Russia obtained at least one-third of its foreign-sourced critical battlefield components from companies based in the US and its allies last year — in large part because of outsourced production facilities in states that apply weaker export controls.

These goods — worth a total of $7.3bn — were mainly manufactured in countries that are not part of the US-led export-control coalition, according to an analysis by the Kyiv School of Economics. The largest share of these goods — worth around $1.9bn — were produced in China.

The 485 types of component in the analysis include semiconductors, computer parts, electronics, automotive components and bearings. The list relies on analysis of components found by Ukrainian officials in Russian equipment on the battlefield.

The analysis accounts for $22bn of Russian imports over the first nine months of 2023 and highlights how outsourced production can make it easier for Russia to buy controlled goods from countries whose customs officers will not apply checks at the border.

The data also shows the critical role of China in Russia’s supply networks, including goods made by non-coalition companies. A majority of the goods on the list were made in the country, which has been joining an ever-deepening partnership with Moscow.

Olena Bilousova, a senior researcher at KSE, said: “It’s been a normal business strategy for years for western technology companies to have manufacturing facilities across Asia. But these factories need to be made to comply with the same strength of export controls as they would at home.”

The US is the only country to insist that goods made in a third country may potentially be covered by domestic controls. The “foreign-direct product regulations” (FDPR) are extraterritorial and can cover goods made in third countries if content, software or technology originating in the US has been involved in their production.

FDPR provisions apply even if the producer is not American. The US dominance of semiconductor technology means the FDPR has particular impact on this sector.

However, Emily Kilcrease, a sanctions expert at the Centre for a New American Security, said that applying the FDPR is difficult. It “is necessarily one of the tougher mechanisms to use just because the activity is, by definition, not happening at home. China is one of our more difficult enforcement environments”.

Data reviewed by the Financial Times shows the goods were sold to Russia via distributors and intermediaries. Kevin Wolf, a partner at Akin law firm in Washington and a former assistant commerce secretary, said that if the US companies had no knowledge of the eventual export to Russia and did not cause it, they would not contravene American law.

But the US adding “distributors and other middlemen” to its sanctions list would be “a very effective way of addressing diversion of semiconductors and other items”, he said. “This would prohibit shipments to the listed entities by any company — even if the whole transaction happens outside the US.”

A US Treasury official also drew attention to a new executive order issued in December that targets banks involved in such trade, which they hoped would disrupt these networks. Washington has given notice that it could target institutions “determined to have conducted or facilitated any significant transaction, or provided any service, involving Russia’s military industrial base”.

The KSE data suggests that Russia has been importing rising volumes of products made by some western producers — such as Analog Devices, a US-based chipmaker. Russian imports of its goods rose from $123mn in 2021 to $269mn in the first nine months of 2023. Only $20mn of the Analog chips entering Russia in 2023 were listed in filings as made in the US, $93mn were made in China and $53mn in Malaysia.

Analog chips are listed by the Ukrainian government’s sanctions body as having been recovered from a variety of Russian arms. Its components have been found inside the rockets of the 9M544 Tornado-S, a multiple-launch rocket launcher, as well the Russian-built versions of the Iranian Mohajer-6 and Shahed drones.

Analog told the FT that it had ceased all sales into Russia and Belarus, “instructed all of our distributors to halt shipments of our products into these regions” and that “any post-sanctions shipment into these regions is a direct violation of our policy and the result of an unauthorised resale or diversion of ADI products”.