17.02.23 Sanctions Review

Who is Helping Russia Fight? As the war approaches its one-year mark, sanctions remain largely symbolic according to Russian customs data

Experts from the international ‘Free Russia Foundation’ were able to gain access to data from Russia’s Federal Customs Service, and have concluded that, since the Russian invasion of Ukraine, imports of high-tech dual-use items into Russia have actually increased despite being the primary target of sanctions. Electronic chips and drones (including their spare parts) are being supplied to Russia not only from China, Turkey and India, but also from Germany, the Netherlands, Estonia and Finland. According to the experts, there are two main issues that need to be addressed in the sanctions policy: a lack of clear and measurable goals (as well as mechanisms that would be able to prioritise these goals in order of critical importance), and an absence of a centralised management and control system.

Despite their unprecedented scale, international sanctions against Russia have thus far not been very effective, according to the report by the Free Russia Foundation (FRF). Russian exports grew in 2022, while imports have not witnessed a dramatic decline, despite both qualitative and quantitative degradation of their quality(as Re: Russia previously explained here). This is evident in data from the Russian Federal Customs Service for January–September 2022 (although the customs service stopped publishing its figures following the invasion the authors of the report were able to access this data). Supplementary data is also available via statistics from Russia’s primary foreign trade partners.

The dramatic reduction in exports and imports from individual countries (for example, the US and the UK) has not had a substantial impact on Russian trade, as these countries were never among Russia’s key trading partners. 

China has now become Russia's largest trading partner, accounting for 20% of Russian exports and 35% of imports in 2022. Germany continued to be the country’s second largest exporter, and although its exports have fallen by more than 50%, there remains a substantial gap between Germany and Turkey (which replaced the Netherlands to take third place in 2022). 

Gross export-import figures can be explained by record revenues from the increased sale price of energy resources (the current account surplus in 2022 amounted to $227 billion, compared to $122 billion in 2021). The most shocking detail, however, is that the volume of imports of high-tech dual-use items actually rose in 2022 (the mechanisms behind this increase have been described by Re;Russia here). Having studied data on two different commodity codes for microelectronics, FRF experts found that the volume of imports had risen by almost 150%, reaching $2.45 billion.

A quarter of this came fromChina, which doubled exports into Russia to $500 million over the past year. In addition to China, Turkey also helped Russia to avoid sanctions; in 2021, it supplied Russia with a little over $300 thousand dollars worth of semiconductors and microcircuits, yet that figure rose to $86 million in 2022. To add to this, Turkey almost doubled its export of heavy engineering products, and almost tripled its export of household appliances and electronics to Russia. The FRF authors also note that Germany, the Netherlands and Finland also continued to supply Russia with electronic chips. They devote particular attention to Estonia, which, despite taking a tough stance (along with the other Baltic countries) on the issue of support for Ukraine, also became a significant supplier of electronic chips to Russia last year. In absolute terms, the volume of the chips supplied was not particularly large, but in terms of the number of transactions that have come to light in the customs service database, Estonia ranks third after China and Hong Kong, and ahead of even Turkey.

Drones and their spare parts have also been successfully imported into the country, and not only from Iran, with which Russia denies cooperation. China supplied Russia with $3.3 billion worth of drones over the last year, and Hong Kong with $1.6 billion more. Although it may come as no surprise, India and Turkey were also found to be among the top suppliers of drones. However, researchers were shocked to discover that, in addition to this, Russia was also supplied with drones by Germany and the Netherlands. TThey noted that, within the customs data, these items are classified as for civilian use, but with minor technological alterations could also be used for military purposes.

Despite demonstrating their political solidarity with Ukraine, it seems as though businesses are willing to continue earning profits from trade with Russia wherever possible. The main issue with the international sanctions policy, according to the authors of the report, is a lack of clear, measurable goals which can be sorted in order of importance when necessary. The experts call on politicians to implement such goals as soon as possible; the EU should create a special monitoring body to ensure that all countries are fully compliant with sanctions. Currently, each country is left to its own devices in terms of which protocols it chooses to implement and follow. NATO could also help to resolve this issue; the authors of the report are concerned that Turkey (a member of the military alliance) has only formally been complying with sanctions. Some countries (Estonia, for example) could potentially allocate extra funds in order to hire more customs officers and train them accordingly. Trade restrictions against Russian commodity exports, combined with a centralised system of sanctions policy management and the consistent application of secondary sanctions (according to the authors of the report, this primarily concerns China, Turkey, Cyprus, the United Arab Emirates, Belarus, Kazakhstan and Uzbekistan) should lead to better results, and more effective sanctions, than have been observed thus far.