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Kyiv’s frustration boils as flow of Western chips for Russian missiles continues uninterrupted (kyivindependent.com)

submitted 1 year ago by [email protected] to c/[email protected]

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Destroyed apartments, burnt-out cars, lives upturned or extinguished altogether: Russia’s June 13 missile attack on the city of Kryvyi Rih was, in many ways, nothing out of the ordinary for wartime Ukraine. The evening after the attack, which killed 13 civilians, President Volodymyr Zelensky came out in his daily

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[–] frequency 3 points 1 year ago (3 children)

I recall hearing from some guy in the opposition of Kazakhstan(Russia's neighbour) that the import of household technologies, such as washing machines and similar appliances, has increased 3000% since the start of the war.

[–] [email protected] 4 points 1 year ago (2 children)

Honestly, I doubt that Russia even needs to do that -- buying a whole appliance just to get some chips, or even just recovering parts from things being scrapped already in Russia, is probably an expensive way to get them, creates an unnecessary degree of obfuscation.

I remember reading -- I can't recall if it was the RUSI report mentioned above or a later one -- talking about some of the chips that had wound up in Russia, and both of the specific cases that they talked about were kinda sketchy Chinese companies operating out of Hong Kong.

googles

This isn't it, but broader overview:

https://carnegieendowment.org/2023/05/17/hong-kong-s-technology-lifeline-to-russia-pub-89775

While China’s support for Russia is widely reported, Hong Kong’s substantial contributions to Russia’s war efforts are less known. Recent reports have identified Hong Kong as a prominent node in Russia’s illicit procurement network, acting as a transshipment hub for diverting Western-made microelectronic components to companies affiliated with the Russian military.3 Since Russia’s invasion of Ukraine, Hong Kong has doubled its integrated circuits exports to around $400 million worth of semiconductors in 2022, second only to China and far exceeding any third country in the volume of semiconductor trade with Russia.4 Many of these transactions violate U.S. export control regulations against Russia, and multiple individuals and entities operating from Hong Kong have been sanctioned for their involvement in the Russian military’s procurement network.5

Numerous reports indicate that despite sweeping Western sanctions, Russia’s defense industrial base has successfully established alternative routes to import dual-use components needed for manufacturing military equipment.6 Lacking scalable domestic substitutes, Russia relies on foreign-made microelectronic components to produce a range of military gear, including weapons like drones and cruise missiles.7 Examining Russian weapons captured in Ukraine, the Royal United Services Institute (RUSI) discovered in August 2022 that the majority of microchip components in Russian systems originated from the United States, East Asia, and Western Europe.8 Tracing the supply chain of microelectronics, RUSI concluded that “third-country transshipment hubs and clandestine networks operated by Russia’s special services are now working to build new routes to secure access to Western microelectronics.”9

A leader in low-end microchip manufacturing and the world’s top chip importer, China is now the foremost supplier of semiconductors to Russia. In 2022, as Western countries restricted technology supply, Russia’s semiconductor imports from China skyrocketed, jumping from $200 million in 2021 to well over $500 million in 2022, according to Russian customs data analyzed by the Free Russia Foundation.10 Importantly, the Sino-Russian technology trade involves not only Chinese-made components but also products manufactured by top U.S. chipmakers such as Intel, Advanced Micro Devices, and Texas Instruments. Nikkei Asia recently reported that exports of U.S. chips from Hong Kong and China to Russia increased tenfold between 2021 and 2022, reaching about $570 million worth.11 By one figure, China and Hong Kong together accounted for nearly 90 percent of global chip exports to Russia in the period between March and December 2022.12

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[–] [email protected] 3 points 1 year ago* (last edited 1 year ago) (1 children)

[continued from parent]

It becomes even more challenging to distinguish between transshipment to sanctioned entities and transshipment to legitimate importers if the importing country has a large existing market for dual-use goods. According to trade data compiled by the Observatory of Economic Complexity, Hong Kong has consistently been the world’s top importer of electrical machinery and electronics since 2004.26 In the global trade of integrated circuits, for instance, Hong Kong imported 24.3 percent (or $162 billion) of the world’s trade in 2020, exceeding even China’s $114 billion imports.27

But this line of argument fails to account for the big picture. While the problem of illicit trade has historically bedeviled Hong Kong, the government’s open defiance against Western sanctions since the Ukraine war signals its commitment to a deliberately lax approach to export controls. The sizeable flow of technology from Hong Kong to Russia is the result of an active political choice. The reactions from other major transshipment hubs, such as Singapore and the United Arab Emirates (UAE), illustrate that it is possible to stem the flow of technology to Russia if there is political will to do so. U.S. authorities have long recognized the prominence of Hong Kong, Singapore, and the UAE in illicit trade networks. The three major transshipment ports reacted to Western sanctions regimes against Russia differently according to their geopolitical interests.

Chips go to some Chinese distributor. Russia sends some guy to China, they work with someone there to set up a company that procures chips. They sell them off to Russia. Once that company has access to those chips, we can -- and have -- sanctioned individuals associated with the company, and we can put pressure on a distributor to not distribute to that company, but setting up more shell companies isn't that hard.

And I don't believe that there's any realistic way for the distributor to know in advance whether random company in China is actually buying their chips to make some new product until after they show up in Ukraine and one can trace the flow back. But by then, you've already had a bunch of product move to Russia.

I'm also less confident than the author is above about the viability of China -- even if it wanted to -- being able to crack down effectively based on the reduction in transhipments in places like the UAE. Russia's got good reason to take the path of least resistance to obtain weapon components. If the UAE is even slightly more of a pain to get chips from, and China isn't, well, might as well go to China. Having the UAE reduce transhipments to Russia is going to be easier if China is providing a ready alternative. Even in a world where China was really trying hard to stop the flow, my guess is that if China were the last option, reductions in transhipments would be a lot harder.

My guess is that once the chips are loose in China, it's not that hard to get them into Russia, even not incorporated into another product, but if someone really wanted to, there are probably still easier dodges to use than stripping down real products, like designing a product whose sole point is to use a lot of Chip X, move them across the border, and then yank said chips out. I mean, that's a never-ending game of whack-a-mole. And you can't realistically say "China can't have any voltage regulators" -- or, okay, you can, but you're talking about a world that is economically a lot different than it is today, and even in that world, China's not going to have problems designing and building something like voltage regulators.

For stuff where a weapons manufacturer really stands out from the noise, where the quantity or type of chips required really differs, then, sure, one could place more-rigorous bars on obtaining components.

There were some articles in the news a bit back about some Greek defense contractor that was paid off to procure parts for Russia. I'm sure that even in the defense world, there's some holes, but at least when you're talking about specialized components used by the defense industry, then the problem is a lot more tractable.

[–] frequency 1 points 1 year ago

Going to agree with you on all points, great analysis!