Russia has set up production of the deadliest missiles that it regularly targets Ukrainian cities with. Exports of key electronics needed for the Russian war machine have returned to pre-war levels, according to the US State Department.
"Up to 50 components in the downed missiles that Russians used to hit our cities are mostly microelectronics made in other countries," Ukraine’s Defense Intelligence (HUR) told LIGA.net.
"If Russia has no money, they will have nothing to pay for the components for missiles," Yuriy Ihnat, a spokesman for the Ukrainian Air Force, told LIGA.net.
Despite Western sanctions, Russia is circumventing restrictions through third-party suppliers to obtain key microelectronics for replenishing its missile stockpile and sustaining strikes in Ukraine. However, experts question whether measures can be effectively implemented to halt these sanctions-busting supply chains. LIGA.net has obtained exclusive documents shedding light on Russia's procurement efforts and the challenges of stopping them.
HOW RUSSIA HAS ADAPTED TO SANCTIONS
In the early hours of June 13, the Russian military struck a five-story residential building in the city of Kryvyi Rih, killing 11 people. The building was hit by a Russian Kh-101 missile manufactured in April 2023, said Andriy Yermak, head of the President’s Office, adding that about 50 components in this missile – mostly microelectronics – were produced in the free world and delivered to Russia in various ways.
To be more precise, at least 53 types of electronic components (microcircuits, chips) are foreign-made, according to a new document of the Yermak-McFaul sanctions group, which was seen by LIGA.net.
In particular, the components of such companies as STMicroelectronics (Switzerland), Vicor (USA), XILINX (USA), Intel Corporation (USA), Texas Instruments (USA), ZILOG (USA), Maxim Integrated (USA) and Cypress Semiconductor (USA).
Russia uses at least 45 foreign components to produce 3M-14 Kalibr sea-launched cruise missiles. The 9M723 ballistic missiles and 9M728/9M729 cruise missiles of the Iskander system are equipped with at least 15 and 32 types of foreign electronic components, respectively. The Kh-47M2 Kinzhal aerial ballistic missiles use at least 48 foreign components.
A chip manufactured by the world-famous American company Intel was found in the Russian Tornado-S missile, in particular in the main part, the Defense Intelligence of Ukraine told LIGA.net.
Russia's ability to produce missiles despite sanctions is hardly news.
In December 2022, Conflict Armament Research (CAR) documented the remains of two Kh-101 missiles that hit Kyiv and concluded that these missiles were almost certainly manufactured at most two months before they were used (i.e., before November 2022).
In August 2022, the British Royal United Services Institute (RUSI), which also examined Russian missiles, established that Russian weapons are critically dependent on Western electronics. Of the 450 unique foreign-made components, more than a quarter bore the logo of Texas Instruments and Analog Devices, two American companies.
REFERENCE. After the outbreak of the full-scale war, Analog Devices ceased commercial activity in Russia, and any supply of their products is the result of unauthorized resale, the company said in response to a request from the Business & Human Rights Resource Center.
"We are strengthening our efforts to identify and counter this activity, including implementing enhanced monitoring and audit processes, and taking enforcement action where appropriate. We are also enhancing our monitoring of grey market activity overall," the company stated.
Texas Instruments said it stopped selling to Russia and Belarus at the end of February 2022 and "does not support or condone the use of our products in applications for which they weren’t designed."
In the first seven months of the all-out war, Russia imported $2.6 billion worth of electronic components, at least $777 million of which were made by Western firms, according to a joint investigation by RUSI (Royal United Services Institute) and Reuters based on Russian customs data.
In 2022, Russia received about $3 billion worth of allegedly "consumer" chips, the Main Intelligence Directorate told LIGA.net.
Russia has finally adapted to the sanctions and plans to produce 1,061 missiles this year, more than double the 512 missiles it was able to produce in 2022. This is stated in a presentation prepared by Ukraine for the G7 countries, The Guardian reports.
Exports of key electronics needed for Russia's war machine and missile production have returned to pre-war levels as Russia has gotten better at circumventing sanctions, Jim O'Brien, sanctions coordinator at the US State Department, told Politico on June 7.
SPECIAL SERVICES AND FLY-BY-NIGHT COMPANIES
Electronic components for missiles get to Russia mostly through third countries, Yermak-McFaul's group tells LIGA.net.
In January-February 2023, 80% of components totaling $211 million came to Russia from China (including 46% from Hong Kong). Thailand is in second place with a share of 5.5%. Turkey, the Maldives, the UAE and Kazakhstan are also in the top, according to The Guardian. All these countries have not imposed sanctions against key players in the Russian military-industrial complex.
To circumvent sanctions, Russia uses companies that are not formally involved in the defense industry. They simply buy electronics in the West as if "for themselves" and then resell them to Russia.
From a formal point of view, the companies do not violate either the domestic laws of these states or sanctions restrictions, but in fact, this is the same circumvention mechanism: high-tech products from Western manufacturers that can be used to make missiles enter Russia through companies that act as buffers, the intelligence stressed.
In addition, Russia is strengthening the disguise of purchases by using illegal networks under the supervision of special services, the Yermak-McFaul group writes. Usually, the name of the goods is hidden in the customs data or a very generalized description is provided, or the products are imported without documenting the fact of crossing the border at all.
For procurement purposes, shell companies are used, which are created and changed on a massive scale. Moreover, the number of intermediary companies between the manufacturer and the Russians is increasing and in some cases can even reach dozens.
For example, in April 2022, Agu Information Technology was established in Hong Kong. It is still not under sanctions, and its legal address is a residential building, Nikkei Asia reports. In the second half of 2022, the company managed to sell $18.74 million worth of Intel chips to the Russian firm Mistral.
Another such case is the supply of Intel and AMD products to the Russian company Atlas by DEXP International, a Hong Kong-based company. In 2023, DEXP International made more than 1,300 deliveries to Russia worth $242 million. According to Nikkei, Russian businessman Dmitry Alekseev may be involved in the creation of DEXP International.
In addition to the classic supply of products, Russia is actively using the capabilities of Chinese companies specializing in so-called reverse engineering. One of these companies is ELINC China Co. which produces analogs of American and Japanese components, according to the Yermak-McFaul group.
Among the available ELINC China Co. product catalogs, a chip was found that is a complete analog of the product of the American company Analog Devices, which is used in the Iskander-M and Kinzhal missiles.
Chinese companies simultaneously supply non-sanctioned Russian companies with a variety of items, including household goods. This complicates the possibility of proving that the seller was aware that the supplies were made for the military-industrial complex, the President's Office states.
Companies from China also help with the supply of electronics used in Russia's military industry. On the one hand, these are intermediary firms for so-called re-exports, and on the other hand, they are microelectronics manufacturers. Ukrainian intelligence has evidence that elements of Chinese microelectronics are used in the guidance systems of Russian cruise missiles, HUR told LIGA.net.
In January 2023, the Russian company Stek received 2,598 microchips from the Kazakh company Da Group 22. In the same month, Da Group 22 received the same batch of microchips from the German company Elix-St. The co-owners of the German company are Yevgeny and Elena Chernet. And the Kazakhstani company Da Group 22 was registered in March 2022 and belongs to Aleksandr Chernet, presumably their son, iStories media found.
Sanctions Coordinator O'Brien calls Russia's schemes a "significant problem" that he discusses with Turkey, Georgia, the UAE, and Armenia in addition to Kazakhstan. In 2022, Armenia imported 515% more chips and processors from the United States than in 2021. Armenia exported 97% of these products to Russia, according to The New York Times.
IS IT POSSIBLE TO DEPRIVE RUSSIA OF MISSILE COMPONENTS?
The components that Russia receives through "third" countries are mostly for civilian use, and therefore can be freely used (for example, in small household appliances), the Yermak-McFaul group states.
The complete cessation of supply of such components is possible only if the export of the relevant goods to the world market is completely stopped, which is impossible, according to the document of the Yermak-McFaul group.
"To completely exclude the intermediary countries... it is necessary to impose direct economic sanctions against these countries, which could eventually lead to the sanctioning of half of the world's GDP and the collapse of the sanctions system," the sanctions group states.
Diplomats of the partner countries have received a list of companies whose products are used by Russia to manufacture missiles, Defense Intelligence says.
Therefore, Western partners should tighten export controls on specific components, Vlasiuk said.
"Some products are the most massive and quite technological: they can be controlled," he explains. He names the following options as possible: export only with a permit; introduction of an end-user certificate in the case of component exports; and possible receipt of additional guarantees from the importer that these goods will not get to Russia.
At the planning stage, the manufacturer must indicate the product on which the component will be installed, and after its production, the serial number of the product and the installed component, Mykhailo Liuksikov, editor of the Ukrainian Military Portal, tells LIGA.net.
"Although it is not known how this will work and whether it will not disrupt the technological process for manufacturers who are not front companies," he adds. But he is also convinced that Western governments themselves should choose an effective control mechanism to avoid harming non-sanctioned producers and making it impossible to supply to shell companies.
What Kyiv’s Western partners can do is synchronize sanctions against key Russian missile manufacturers. For example, the United Kingdom has imposed sanctions against only 10 of the 18 companies that Ukraine considers to be involved in the production of Russia's deadliest missiles.
It is impossible to completely stop Russia from obtaining components for missiles – all LIGA.net's sources concur on this. "Sanctions do not work when it comes to the supply of civilian components. They can complicate supply routes, but not stop them," Katkov said.
The Air Force of the Armed Forces of Ukraine believes that the problem should be assessed at a more global level. "Our partners have to control global sanctions, primarily related to oil and gas," Air Force spokesman Yuriy Ihnat tells LIGA.net, "Because if Russia has no money, they will have nothing to pay for missile components. The army needs to be fed."