Sanctioned Western tech is still entering Russia and powering its military machine, new analysis shows

Russia is still obtaining large volumes of Western technology critical to its war in Ukraine, even as sanctions show some sign of taking hold, new analysis shows.

China, Hong Kong, Turkey and the United Arab Emirates have been increasingly important in funneling critical components to Russia, according to new research, as supply chains have adapted in response to export controls aimed at choking off Moscow’s military machine.

In response to Russia’s full-scale invasion of Ukraine on Feb. 24, 2022, a Western coalition of allies including Japan and South Korea imposed a series of sanctions restricting the sale of certain goods to Russia, including advanced technologies for use in the military.

Yet Western-origin technologies still accounted for almost half of all Russian imports of critical components and “high-priority” battlefield goods in the first three quarters of 2023, according to research from Ukrainian think tank KSE Institute and the Yermak-McFaul International Working Group, which promotes sanctions against Russia.

Such products are typically designed by companies headquartered in Western coalition countries, but manufactured and distributed abroad — often making their supply chains harder to police. Earlier CNBC investigations indicated that these third-country intermediaries are generally based in countries without direct sanctions on Russia — primarily China, as well as Turkey and the UAE.

Moscow imported more than $22 billion worth of critical components between January and October 2023, Russian trade data shows. Over the same period, it also imported almost $9 billion worth of “high-priority” battlefield components, which Western authorities have specifically sanctioned.

Such goods include microchips, communications equipment, computer components, bearings and transmission shafts, and navigation and sensor devices — which can be used in a range of military equipment including drones, radios, missiles and armored vehicles.

The trade flows mark an uptick from the first six months of the Russia-Ukraine war, when Russian imports dropped off dramatically.

When compared to pre-war levels, however, the figures point to a downward trend, with Russian imports of critical components and battlefield goods down 29% and 10%, respectively.

The report’s authors said the data suggests that some export controls are working, and that Russia has been unable to find reliable substitutes for many Western components. They noted that more needs to be done to bolster enforcement and clamp down on remaining loopholes.

“We are finally starting to see this slow but somewhat positive trend,” Olena Bilousova, senior research lead at KSE Institute and one of the report’s authors, told CNBC. “Sanctions are not a measure you can enforce and expect to see the effects tomorrow.”

The findings mirror comments made Tuesday by Ukrainian President Volodymyr Zelenskyy, who said that there were “clear signs of a slowdown” in Russia’s defense industry. Zelenskyy did not provide evidence for his assertion, and Russia has separately said that its production of military equipment has stepped up.

The report’s findings highlight the continued challenges faced by the industry in monitoring its complex supply chains. In a January 2023 blogpost, the Semiconductor Industry Association, which represents around 99% of the U.S. semiconductor industry and around two-thirds of non-U.S. chip firms, highlighted the issue, but said the industry was “deeply committed” to working with the U.S. and allied governments to address the “illicit diversion” of its technology.

Chinese shipments to Russia of CNC tools have increased tenfold since the start of Moscow’s full-scale invasion of Ukraine, according to an FT analysis of Russian trade data released last week.