Russia circumventing chip ban by ordering out

Sanctions imposed over Ukraine war having little effect

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There seems to be some truth in the joke that the biggest supplier to Russia’s war effort in Ukraine is AliExpress. Since European and US companies implemented a ban on sales to Russia, roughly $1 billion worth of components from big brands have made their way into military equipment from orders placed in markets that have not signed up to the ban.

According to classified customs data that news service Bloomberg was able to access, Russia imports chips from Intel, Advanced Micro Devices, Infineon Technologies, STMicroelectronics and NXP Semiconductors, among others. These are all companies that must comply with sanctions laws. So, by their own admission, each has stopped trading with Russia.

The components enter Russia via a roundabout route. Unsuspecting companies export the chips to countries such as China, Turkey and the United Arab Emirates. Russia can then freely imports the chips from those countries.

Both Europe and the US are therefore working on a list of dual-use goods that can be used for both military and civilian purposes. These goods would then be subject to stricter rules so that high-tech equipment could not simply be exported.

For Europe, these rules should be in the third sanctions package against Russia, which is still being negotiated.

The Kyiv School of Economics reported that Russia imported $8.77 billion in war goods between January and October last year, a drop of only 10% compared to the pre-sanction period.

“Foreign components are still found in the weapons that strike Kyiv and other cities daily,” the institute said.

Several chipmakers responded adamantly that they had nothing to do with supporting Russia. But that is obviously not where the problem lies: world trade is difficult to control if not all countries draw a hard line.

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