Despite sanctions, microchips are still exported to Russia

According to the Wall Street Journal, the US invented the microchip and has threatened to punish anyone who sells it to Russia. However, recent leaks make it clear that they continue to be shipped to Russia. The center of these transactions is China and a number of other intermediary countries such as Turkey.

The adaptability of global trade networks to deal with sanctions and tariffs is not a new story. Another recent example is the global energy market, which has adapted relatively quickly to Western decisions to abandon Russian energy. But stopping the flow of semiconductors – used in both everyday household appliances and military equipment – into Russia is a particularly difficult problem.

One key reason: China, which has refused to join Western sanctions against Moscow, is the hub of the global chip trade. It is the world’s electronic goods floor and the largest global chip importer, as well as an important low-end chip manufacturer. China’s public export statistics also do not include details about overseas business partners.

For example, public data shows that certain semiconductors continue to be shipped to Russia – but does not say who sold them or whether they are indeed sanctioned items. That makes it extremely difficult to limit the flow of semiconductors from China to Russia – either directly or through third countries that are “repackaged” into new goods – extremely difficult. But completely blocking chip exports to China could shut down the world’s electronics industry.

What is clear is that, after a slump in early 2022 due to initial US sanctions, Russian semiconductor imports have recovered strongly and Chinese companies have played a key role. Leaked Russian customs records show that Russia’s imports of chips and chip components are close to the pre-conflict monthly average for the late 2022 period, more than half of which came from China. Publicly available Chinese customs data also shows that integrated circuit shipments to Russia are valued at $179 million in 2022, compared with just $74 million in 2021.

Chips and chip components from China also appear in a number of other interesting destinations. Chinese customs data shows that exports of some semiconductors to Turkey will also more than double by 2022.

Meanwhile, Turkey’s exports of similar semiconductors to Russia have increased from $79,000 in 2021 to $3.2 million in 2022. Turkey, which also refused to support sanctions sanctions imposed by the US and EU on Russia, has become a major exporter of electronic equipment in general to Russia. Turkey’s total exports of machinery and electronics to Russia more than doubled by 2022 to $559 million.

US Treasury officials visited Turkey and several other Middle Eastern countries including Oman and the United Arab Emirates in early February to seek control of Russian procurement networks. . Turkey’s Foreign Minister said on February 20 that it does not export electronic equipment used in the defense industry to Russia.

It is one thing for the West to cut sales and ship its most advanced chips to China and Russia, but it is another to find a way to stem the flow of trade in items like basic semiconductors. other topic. That is especially true when China and most developing countries openly question the Western sanctions regime.

As in the 2018 and 2019 Sino-US trade wars – as Chinese goods subject to tariffs find their way to third countries and overall Chinese exports remain well – the US finds that trade flows commerce tends to be self-adapting.