Ukraine investigation- Russian military industry still sees Taiwanese products flowing in from China

A Ukrainian investigation has revealed that, despite the outbreak of war in February 2022, goods from Taiwanese companies continue to flow into Russia’s military industry. This report includes a detailed diagram showing the relationships between manufacturers, intermediaries, importers, and Russian military end-users, highlighting how products are directed toward these clients. The intermediaries mentioned include Chinese businesses, and the end-users consist of companies that are under international sanctions.

According to this investigation, which was reviewed by the Central News Agency and is already circulating within Ukrainian official circles, after launching a full-scale invasion, Russia’s economy rapidly militarized. However, domestic suppliers were unable to meet the urgent demands of the military industry, and the tightening of export controls and expanding sanctions by Western nations compelled Russia to seek alternative sources for the necessary products and technologies.

Taiwan has emerged as a viable option, providing competitively priced and high-quality goods. The enforcement of export controls and sanctions appears relatively lenient, making Taiwan a primary target for Russian military importers and global suppliers.

A market survey conducted by the Institute for Economic Forecasting of the Russian Academy of Sciences in August this year revealed that 53% of Russian industrial businesses are still unable to find local alternative suppliers for the necessary goods due to international sanctions and export controls.

Notably, this situation has improved compared to April 2022, when 62% of Russian businesses reported similar challenges. Over the past two years, Russian companies have made some progress in “import substitution.”

The investigation cites international trade data, customs information, and publicly available sources, indicating that despite a decline in bilateral trade between Taiwan and Russia since the war began, Russia continues to acquire Taiwanese products through third countries like China, Hong Kong, and Turkey.

The report states that the total value of Taiwanese goods imported by Russia through third countries soared from under $850 million in 2022 to approximately $1.75 billion, marking a twofold annual increase; by 2023, this figure further climbed to around $1.85 billion.

Analyzing specific areas of demand within Russia’s military industry, the report estimates the total import values of Taiwanese products imported directly and indirectly by Russia over different periods. For example, the total imports of machine tools and computer numerical control (CNC) machining centers reached about $332 million from 2019 to 2021; this figure increased to $427 million from 2022 to May 2024.

In categories like integrated circuits and printed circuit boards, the total import value from 2020 to 2021 exceeded $341 million, rising to nearly $609 million in 2022 and 2023. Additionally, semiconductor manufacturing equipment saw imports rise from $2 million in 2020 and 2021 to $4.78 million in 2022 and 2023.

Prominent Russian military enterprises receiving Taiwanese goods include the Kalashnikov Group, several factories under the Rostec state corporation, the United Aircraft Corporation, which produces MiG and Su fighter jets, and the Tactical Missiles Corporation. These companies procure products from Taiwanese firms through importers familiar with the Russian military-industrial ecosystem.

Large suppliers like Baltic Industrial Company and Promoil profit immensely by supplying Taiwanese brand machinery.

The investigation also highlights that even Russian firms facing European and American sanctions can employ complex methods and supply networks to successfully sidestep these restrictions and export controls.

Common practices include establishing new companies both domestically and abroad, disguising military goods as civilian products, sourcing needed items from non-sanctioned countries like China and Hong Kong, and rebranding Taiwanese products as “Made in Russia.”

This investigation was carried out by the Centre for Defence Reforms (CDR), a Ukrainian think tank. An English version of the report is set to be submitted to Ukraine’s key partners within NATO. It includes a list of relevant businesses from China, Taiwan, and Turkey, as well as diagrams illustrating the relationships and flows of goods.

Oleksandr V. Danylyuk, who leads CDR and has previously served as the chief of staff for Ukraine’s armed forces, emphasized the significant role of China (including Hong Kong), Turkey, and the United Arab Emirates in helping Russia evade sanctions.

Danylyuk indicated that these nations not only provide their own products but also supply items to Russia sourced from other countries. However, some Taiwanese manufacturers continue to work with Russian companies, believing that their products are meant for civilian uses. In reality, during wartime economic conditions, Russia’s so-called “civilian” industries do not require as much machinery or microelectronics.

In a public database maintained by Ukraine’s Ministry of Defense Intelligence, choosing “Taiwan” in the dropdown menu reveals a wealth of information regarding components used in Russian weapon systems and equipment tools for weapon production.

Danylyuk stresses that Taiwan is not the only country involved in international sanctions while allowing products to flow into Russia. However, out of concern for safety threats from China, Western nations often adopt a relatively lenient stance toward Taiwanese companies.

He highlighted that, when goods suitable for military needs enter Russia through China or Hong Kong—including establishments set up by Taiwanese firms or partners located there—Taiwan must consider the potential increase in security risks.

Regarding why Russian businesses need to repackage Taiwanese products as “Made in Russia,” Danylyuk cited two main reasons: Russian regulations impose restrictions on domestic military enterprises using foreign products, and modifying the labeling helps mask the transnational supply chains for controlled goods.

Repackaging can protect the supply and manufacturing sources, minimizing their chances of being placed on sanctions lists and avoiding disruptions in supply chain stability. Danylyuk noted that similar rebranding practices are also observed in some Taiwanese manufacturing facilities.

He pointed out that not all Taiwanese businesses intentionally violate export controls or sanctions, but given the complexity of Russia’s military supply network and methods of evading sanctions, as well as the ongoing emergence of new international sanction topics, Taiwan needs stronger cross-national collaboration and robust investigative analysis to ensure effective policy implementation.

It’s noteworthy that “parallel imports” (i.e., goods entering a country through informal channels) have long been prevalent in Russia. Danylyuk indicated that some products might even enter Russia without the manufacturers’ consent. Current export control measures are evidently insufficient to address this trend.

Lesya Zaburanna, chair of Ukraine’s National Budget Expenditures Committee, mentioned during her visit to the UK earlier this month that goods are also flowing from European countries into Russia’s military industry.

However, Zaburanna warned that weapons produced by Russia today could be used against Ukraine and, tomorrow, could target Poland and the Baltic states. She emphasized that other NATO member nations would then have obligations to implement “collective defense” and could pay a heavy price as a result.

Zaburanna called on free democratic nations to strengthen sanctions against Russia, stressing that if Russia and its allies succeed in evading deserved punishment, it signifies a failure for freedom and democracy, which will ultimately impact Taiwan as well.

Danylyuk added, “A Russian victory would expand China’s operational space against Taiwan.” It is not hard to imagine the types of security threats Taiwan might face with both Russia and China, two permanent members of the UN Security Council, emboldened.

During a speech in parliament on October 16, Ukrainian President Volodymyr Zelenskyy warned that unless Ukraine significantly enhances its defenses now, Russia could dramatically strengthen its position by next year, even reaching a point where it no longer needs to rely on diplomatic means to resolve issues.