by Ben doran and Jonathan Rincon LÓpez
Executive summary
In response to the Russian invasion of Ukraine, many countries—representing over 50% of global GDP—have imposed wide-ranging sanctions to punish Russia for the invasion of Ukraine and to impede their ability to wage war. Of particular importance to obstructing Russia’s war effort are sanctions on dual-use goods – products that can be used in both civilian and military applications (e.g., GPS systems). Although Russia is a major arms manufacturer, Russian industry relies on foreign components for high-end products and can thus see their ability to continue manufacturing military equipment hindered by sanctions.
Although the sanctions are wide-ranging, 55% of Russian mechanical and electrical imports are from countries not participating in the sanctions. Our analysis of trade data from China and Taiwan suggests that in anticipation of international sanctions, Russia began stockpiling strategic dual-use technologies prior to the invasion. Exports of a wide range of goods including microprocessors, lasers, and radar parts from China have been increasing in the lead-up to the war. There is little evidence of a slowdown in exports to Russia since the invasion began, indicating that countries like China will continue to be a source of dual-use imports. Taiwanese data also demonstrates a significant rise in exports to Russia in late-2021 and early-2022 further demonstrating Russian stockpiling. Russia’s imports for the period from December to March increased 57% year-over-year in 2021/22, coinciding with the movement of troops to the Ukrainian border. However, since March, there has been a steep 98% decline in exports to Russia. In other words, Taiwan is complying with international sanctions. Russian military spending further indicates stockpiling as Russia increased military spending by 2.1% in 2021. Furthermore, the “National Defence” budget line increased 14% above what had initially been budgeted. This line accounts for both operations and procurement. While this in part reflects troop movements, it is also illustrative of increased procurement—and therefore stockpiling— in anticipation of sanctions.
Two conclusions for the impact of sanctions on the ongoing war follow. First, the current sanctions are insufficient to stop Russia’s war machine as third-party countries, like China, continue to supply Russia with the technology they need. That said, the quality of goods sourced from China may be lower than that of other countries, like Taiwan, that are complying with sanctions. This means the quality of supplies Russia will be able to manufacture will be reduced. Secondly, Russia will likely be able to maintain their war effort longer than initially anticipated as they were successfully able to stockpile technologies crucial to their military effort. Since it is highly unlikely that sanctions will also induce Chinese cooperation, and even more unlikely that any of Ukraine’s allies will go into war for them, the best chance for Ukraine’s sovereignty is to be armed with high-end military equipment against Russia’s enduring lower end military. To this end, the west needs to not only continue their aggressive sanctions towards debilitating Russian capabilities, but also needs to simultaneously provide Ukraine with the best in technology and equipment.
