Russia overpays double for Western chips to bypass sanctions – Bloomberg
Russia is still acquiring electronic components from Western companies to install in missiles used in the war against Ukraine, despite global sanctions.
According to an investigation by Bloomberg, most supplies are routed through Chinese and Hong Kong companies, allowing Russia to circumvent restrictions. However, these transactions are significantly more expensive for Moscow, as intermediaries raise prices due to the limited supplier options available to Russia.
Data from Ukrainian intelligence and the Kyiv School of Economics shows that Russian missiles and drones predominantly use chips from American and European manufacturers. The most frequently found components are from American companies Analog Devices (21% of 3,871 items discovered in ammunition remnants) and Texas Instruments (14%). Customs data indicates that Russia purchased $326 million worth of Analog chips in 2022, despite the restrictions.
The cost of these components was much lower before the war. However, due to export control measures, Russia now pays double for these products compared to pre-2022 prices. Consultant Olena Bilousova from the Kyiv School of Economics notes that intermediaries are well aware of the lack of alternative sources for Russia and take full advantage of the situation.
About two-thirds of the purchased Analog chips are integrated circuits, which are on the U.S. Department of Commerce's priority components list due to their use in military systems. In addition, Russia buys dual-use items, such as RS-232 standard interface controllers found in the Iskander missile.
As of August 2024, about 86,000 such parts could be purchased from official distributors, while unauthorized sellers had over 4 million available, according to Matthew Haber, chief executive officer of New York-based company Cofactr Inc. This highlights how sanctioned goods can reach Russia through third countries, despite restrictions from the manufacturers themselves.
Some of the Analog chips that ended up in Russia were produced in mainland China. In 2022, around 60% of these components were supplied by Sunny Technology. However, Bloomberg reports that the company has no actual office at its listed Hong Kong address, and no information about it exists in corporate records.
Although Chinese and Hong Kong companies are the main suppliers of Western electronics to Russia, the country uses very few China-made chips, except for the simplest components. Key suppliers of sanctioned products to Russia include companies like Intel, Huawei, Analog Devices, AMD, and Texas Instruments, as well as Chinese companies Lenovo, Hikvision, and Inspur. However, no Chinese-made chips have been found in the debris of Russian ammunition used in Ukraine, according to the report.
- Russia imported $1 billion worth of American and European chips in 2023.
