Russia’s invasion of Ukraine has been marked by limited battlefield success, with no indication of a divisive victory for either party or a peace settlement. Russia has had to cope with an almost systematic increase in sanctions in scope and scale in order to conduct its invasion of Ukraine. These sanctions aim to hobble Russia’s capacity to procure and produce the necessary products to resupply its military. However, while sanctions have significantly affected Russia’s economy and war effort, Russia has shown adaptability in circumventing these restrictions through various initiatives and engaging with strategic partners, most importantly, the People’s Republic of China and its business entities. This report discusses the crucial role of China and how its business entities operate and supply Russia’s military and defence industry with non-lethal equipment, battlefield goods, and critical components. It analyzes critical components, high-priority goods for Russia’s defence industry, and construction and logistical equipment. This report assesses that China is acting as a proxy jurisdiction for Moscow to evade Western sanctions, as Russian entities are finding willing partners in China to purchase goods and equipment. The report emphasises that without Chinese cooperation to help Russia’s military and its heavily sanctioned defence industry, Russia would severely struggle to conduct its war in Ukraine.
Background
Due to the application of Western sanctions, China has effectively replaced Western nations as a source of battlefield goods and critical components, and as a market for Russian energy products and commodities. According to Chinese Customs data, overall trade between China and Russia reached $240 billion in 2023, marking a 26.3% growth from 2022. Chinese Customs data shows Chinese exports to Russia increased by 46.9% between 2022-2023, and 64.2% from 2021-2023. This surge has positioned China as Russia’s largest trade partner, surpassing the European Union. A significant portion of these exports includes items and technologies crucial to Russia’s defence industry, and military and logistical capacity in Ukraine. The surge in Sino-Russian defence and strategic relationship has resulted in Russia achieving the most significant military and defence industry expansion since the Soviet Union era. Western response has been disjointed in targeting Chinese business entities from selling sanctioned goods to Russia. On June 19th, 2024, Secretary General of NATO, Jens Stoltenberg acknowledged China was aiding Russia with critical components in their war against Ukraine and that China should face consequences.
Before Russia invaded Ukraine in February 2022, President Putin and President Xi Jinping declared a ‘no limits friendship’. This friendship has increased in collaboration and complexity, with a meeting in October 2023, hailing ‘deep friendship’, and recently in May 2024. In the May meeting, the two presidents gave a joint statement, heralding a ‘new era’ of partnership between the two. Within this statement, they portrayed the U.S. as an “aggressive Cold War hegemony sowing chaos across the world” and emphasized the deepening of their comprehensive partnership and strategic cooperation. Whether this relationship has fostered China supplying lethal aid to Russia is disputed, with the UK Defence Minister claiming China is ‘preparing or providing’ lethal aid to Russia.
Data
According to numerous extensive think-tank reports (i.e., KSE, CSIS, Stanford, Rand) and Western governments and organizations (i.e., the United States, the EU, NATO, and G7), Chinese-based companies are now responsible for aiding Russia’s war on Ukraine. This includes substantial portions of battlefield goods and critical component imports manufactured in China with Western-based parent corporations. A study by the KSE Institute utilizing Harmonized System (HS) codes, administered by the World Customs Organization, analyses forty-five common high-priority items (i.e., battlefield goods) and 485 HS codes for critical components. This study is based on transaction-level data of Russian imports, aiming to comprehensively analyze and outline Russia’s military and defence industry supply chain. Between January and October 2023, Russian imports of battlefield goods totalled $8.77 billion, while critical components amounted to $22.23 billion. Within the 2023 KSE Institute compiled dataset, China has exercised a pivotal role in Russia’s efforts to import battlefield goods and critical components for its military and defence industry. This is observed from the immediate aftermath of Western sanctions being imposed to August-December 2022 when imports of battlefield goods and critical components increased by 84% and 42% respectively.
While Western business entities still perform, at least inadvertently, a vital role in Russia’s defence industry, China was instrumental in all stages of the Russian defence industry’s external supply chain between January and October 2023. For instance, where businesses are headquartered, China accounts for 41% of battlefield goods and 41.2% of critical components. Interestingly, the total non-coalition sanctions accounted for 48%, and of these, China represented 46.7%, making China the most dominant power outside the coalition-sanction countries and the most dominant single entity. China’s role increases substantially during manufacturing, representing 63.1% of battlefield goods and 58.7% of critical components produced for Russia. This is due to the substantial share of Russian-sanctioned goods and components manufactured in China. Moreover, while Western-based entities are diversifying their operations in China, this indicates Western business entities still have production facilities in China that operate as branch plants to markets beyond Western control. At the subsequent stage of the supply chain, the jurisdictional locale of final sales to Russian firms, Chinese businesses accounted for 38% of battlefield goods and 38.9% of critical components. However, Hong Kong, a Special Administrative Region of China, garnered second, accounting for 30.9% and 18.1% respectively. This data shows that Chinese and Hong Kongese companies’ data combined led the sales of the goods and components in question to Russia, accounting for 68.9% of battlefield goods and 57% of critical components. Finally, China also plays a pivotal role in goods and components shipped directly to Russia, with China representing 53.2% of battlefield goods and 53.8% of critical components, respectively. Again, China is followed by Hong Kong at 22.7% and 12.9, with a combined 75.9% and 66.7%.
The KSE dataset complements a report by CSIS which shows that, after the meeting between President Putin and Xi in March 2023, there was a significant shift in trade patterns and large increases in the volume and value of battlefield goods and critical components to Russia from China and Hong Kong. Moreover, a study by Carnegie Endowment shows that Russian direct trade partners have drastically declined since 2021, with only Türkiye, Malaysia and Armenia providing above 1% of Russia’s total high-priority imports besides China. This suggests that Chinese business entities directly engage Russian importers and export explicitly Western-sanctioned high-priority goods and critical components to Russia. Russian importers and Chinese exporters are utilizing third-party financial intermediaries to increasingly facilitate payment for Western-sanctioned battlefield goods and critical components. This indicates that China is sensitive to the risk of secondary sanctions on Chinese financial institutions and the current exodus of Western foreign direct investment (FDI) from ‘decoupling’ and the strain on its financial institutions. Western officials, including the U.S. Treasury Department, acknowledge the opaqueness surrounding the complicity of Chinese government officials in directly aiding the process and delivery of battlefield goods and critical components. U.S. Treasury Secretary Janet Yellen in November 2023 stated private companies, not Chinese officials, were responsible for sanctions evasion. However, this is dubious, as Chinese business export reporting is comparatively highly scrutinized, making it likely that Chinese officials are at least aware.
The subsequent sections of this report discuss specific Chinese exports of dual-use components and materials related to Russia’s defence industry and equipment that is being utilized by Russia’s military, including construction equipment.
CNC Machines
Computer Numerical Control (CNC) machines are in almost every industrial sector, and critically in the case of Russia, in the defence industry. Due to Russia’s lack of civilian domestic industrial capacity, its defence industry dominates 70-80% of the consumption of CNC machines. CNC machines are critical to precision accuracy and productivity, as they are automated industrial tools with exceptional capacity to boost pin-point accuracy and output. Therefore, the tools can be utilized to produce weapon hulls, aircraft parts, missiles, drone/UAV components, ammunition production, electronic manufacturing, metalworking and automotive parts. Since the Soviet Union’s collapse, Russia has failed to modernize and maintain its industrial capacity, especially within advanced manufacturing applications and technical technology. In response, Russia created an import substitution program for CNC machines, which has largely failed, as also acknowledged by Russia in early 2020. Traditional suppliers of CNC machines to Russia include Germany, Italy, Japan, Taiwan, South Korea, Switzerland and the United States.
According to the Jamestown Foundation, China’s share of Russian imports of metalworking machine tools grew from 13% in 2017 to 28% in 2021, with a drastic increase to 60% in 2022, notably after Western sanctions were applied, and to 90% in 2023. Additionally, China’s share of Russian imports of machine parts increased from 32% in 2022 to 80-90% in 2023. While the estimates from the Chinese General Administration of Customs can be used to gauge China’s share of the Russian machine tool market, full data imports would likely show that China’s share in 2024 has grown further. Western sanctions on Russia’s capacity to purchase CNC machines internationally are being circumvented through third-party intermediaries and direct suppliers in China. This rapid increase in imports from China over traditional suppliers has made Russia heavily dependent on China as a manufacturing source of machine tools and parts. Moreover, while China has dramatically increased its share of CNC machines, a large portion of these goods are produced in Chinese branch plant facilities on behalf of Western business entities. This dynamic increases the precariousness of Russian industrial supply chains over the long term, as Western nations will seek to tighten sanctions on Western-based parent corporations with manufacturing facilities in China and sales subsidiaries in Hong Kong.
Semiconductors
Semiconductor chips are vital components used in civilian and defence products, including drones, radios, precision missiles, armoured vehicles and missiles. However, Russia’s domestic semiconductor industry is outdated and relatively small, operating with technology over fifteen years behind the U.S. and Western nations. Despite these limitations, Russia has been relatively successful in acquiring critical technology for its weapons systems. This is achieved by sourcing basic computer chips and components, often from Western manufacturers, as these products are not typically subject to export restrictions. Russia has been adeptly exploiting global supply chains and utilizes a network of third-party traders to access dual-use components for its military equipment. According to the KSE Institute, China has been playing a pivotal role in Russia’s semiconductor supply chain, significantly aiding Russia in mitigating the impact of Western sanctions. For instance, in the fourth quarter of 2022, over 75% of US sales to Russia were channelled through intermediaries in China, a substantial increase from the previous year. Exports of U.S.-made semiconductors to Russia via Hong Kong and China increased tenfold compared to levels before the invasion. Additionally, a report by the American Enterprise Institute shows that in the first half of 2023, China accounted for 88% of semiconductors exported to Russia. And according to the Center for Advanced Defence Studies, China accounted for 53% of spare parts for chip-making equipment.
Microelectronics and Electronic Components
U.S. Officials disclosed that China supplied Russia with 90% of its microelectronics in the past year. These are crucial components used in the manufacture of missiles, tanks, and aircraft. Data obtained by CSIS indicates that many of the primary imports of electronic goods into Russia have emerged since the declaration of partial military mobilization in September 2022, suggesting that many of these imports may be shell companies rather than longstanding firms. Amongst the largest Chinese entities include IMAXCHIP Technology Co Ltd, based in China, and ACE Electronic Co. Ltd (Hong Kong). According to reports from news outlet Semafor, the Ukrainian military has discovered a significant number of Chinese-produced electronics in Russian weapons captured on the battlefield. Examples include Chinese parts discovered in Russian cruise missiles, while the Associated Press and Reuters have revealed that Chinese microelectronics have also been discovered in Russian battle tanks and Orlan aerial drones.
Russia is resorting to importing and acquiring critical components, such as electronic integrated circuits, from lower-grade substitutes in China, including common appliances such as microwaves. Despite being of lower quality, these components are deemed sufficient to power Russian cruise missiles and battle tanks. China is also utilizing third-country intermediaries to facilitate its trade with Russia. As reported by the New York Times, shortly after the February 2022 invasion, Russian government trade officials contacted the port of Tanger Med in Morocco. By November 2022, Russian trade officials had established a pipeline of electronics through the port, labelling it an “electronics transhipment hub,” with notable amounts of these electronics originating from China and loaded onto Russia-bound cargo ships.
Ball Bearings
China has drastically increased exports of ball bearings to Russia. These ball bearings are used within the manufacturing of Russia’s armoured and combat vehicles, and crucially, within Russia’s manufacturing and retrofitting of its T-series battle tanks and armoured vehicles. Exports have surged by 345% from November 2021 to November 2023. Kyrgyzstan has also become an intermediary for Chinese ball bearings into Russia, with exports from China to Kyrgyzstan increasing 2,500% during the same period. Notably, this is a strategic utilization of Kyrgyzstan’s position as an intermediary due to its membership in the Eurasian Economic Union, of which Russia is also a member. The EEU’s approach to trade data reporting, due to being a customs union, means that details are obscured and institutional capacities result in underreporting to other members, such as Russia. As a result, the true extent and nature of these trade transactions between China and Russia are shielded from detection and analysis, underscoring the complexity and sophistication of the trade networks involved. This also indicates China’s willingness to circumvent Western detection and shield Chinese business entities from sanctions.
Nitrocellulose
Despite sanctions aimed at restricting the trade of nitrocellulose, Russia continues to access the international market. Crucially, nitrocellulose is an essential compound for artillery ammunition manufacturing. Russian imports of the substance have surged by 70% in 2022, reaching 3,000 tons by mid-2023, which is double the import level compared to 2021. While nitrocellulose is also used in printing inks and paints, analysts believe the substantial increase in imports is primarily driven by its use in Russia’s defence industry. The widespread need for this substance has left many Western ammunition manufacturers struggling to secure an adequate supply, resulting in price hikes and production bottlenecks. Nitrocellulose is subject to intense scrutiny under international trade regulations, with its production limited to only a few countries. Originally reported by the Wall Street Journal Russia has limited domestic production of nitrocellulose, necessitating extensive imports. China has become a significant supplier of this compound to Russia since February 2022, with Chinese business, Hengshui Heshuo Cellulose Co., Ltd in turn being added to the sanctions list. Moreover, evidence shows Turkey is acting as an intermediary for Chinese companies to sell the compound to Russia, further complicating supply chains. The U.S. Commerce Department in December 2023 added nitrocellulose to its high-priority controlled products and the U.S. Treasury Department has indicated its willingness to sanction financial institutions that facilitate its trade. Nonetheless, the surge in nitrocellulose imports underscores the challenges posed by sanctions and the intricate network of trade relationships that navigate to bypass them.
Drones and Electronic Warfare systems
Russia’s war on Ukraine has witnessed a dramatic increase in the use of uncrewed aerial vehicles (UAV), i.e., drones and electronic warfare (EW) systems. UAVs have experienced significant losses due to effective countermeasures. This includes EW systems such as the counter-unmanned aerial system (CUAS) rifle, which according to CSIS, Russian volunteers buy and assemble from commercial and high-tech components and software from sources in China. This countermeasure necessitates continuous drone manufacturing to replenish the losses. According to Russian media, TASS, the Russian Ministry of Defence has claimed to have produced 22,000 attack drones in 2023, with plans to produce 32,000 a year by 2030. Apart from sophisticated attack drones, the Russian military relies on commercial UAVs, such as the Chinese-made DJI and Autel, for intelligence, surveillance and reconnaissance (ISR) and precision-drop munition missions. According to CSIS the most common and increasingly valuable drone in the Russian arsenal is the FPV-type drone, assembled almost entirely from Chinese-made commercial components. These drones, which cost less than $500 to assemble, can carry various munitions at nearly 100mph, making them highly effective against a wide range of targets. Unlike the more sophisticated military drones, FPV-type drones are primarily assembled by a vast volunteer network within Russia. This network includes individuals, organizations, start-ups and enterprises that raise funds from regular Russian citizens, wealthy individuals, and national and regional government grants, licensing and tax incentives. Research by CSIS has identified a network of foreign firms, including Entep and Altrabeta, which have supplied sanctioned Russian actors with drone components through 2022 and 2023. These firms, primarily based in China and Hong Kong have shipped goods such as batteries, propellers, and motors – specifically designated for quadcopters and multicopters – to Russia directly and through intermediaries (i.e., Turkey). Similar shipments have also been made to Russian companies not yet on sanctions lists, indicating a robust and resilient drone component and manufacturing supply chain.
Construction and logistical equipment
Russia has significantly increased its imports of Chinese-made construction and logistical equipment, including digging and dirt-moving equipment, and heavy-duty transportation trucks. These purchases have been crucial to Russian efforts in Ukraine as Russian troops entrench themselves and utilize the trucks to transport munitions and other supplies across the front. According to the Atlantic Council, Chinese-made digging and dirt-moving equipment have been instrumental in allowing Russian forces to fortify their positions. A massive increase in vehicle imports from China, including super heavy trucks, has enabled Russia to continue producing military vehicles and sustain its military logistics, ensuring the continuous movement of equipment and supplies to the battlefield.
Chinese exports of excavators to Russia more than quadrupled after September 2022, aiding the creation of Russia’s defensive Surovikin Line, which followed Ukraine’s successful counteroffensive in August and September 2022. Large-scale imports of Chinese-made trucks are crucial for sustaining Russia’s war effort. With Russian occupation forces largely unable to utilize rail or seaborne transit for resupply in Ukraine, Russia has become increasingly reliant on heavy trucks for their supply lines. Moreover, Chinese shipments of trench-digging equipment to Russia were highly elevated starting from late September 2022, remaining high throughout the winter. Typically, Russia’s civilian construction season runs from March through October; the unseasonal imports further indicate procurement for the Russian military.
Chinese-made heavy trucks increased by 728% in 2022 compared to 2021, totalling 45,000 units in 2023. Chinese exports of tractors increased from 0 in 2021, to 48,000 units through September 2023. These equipment and vehicle exports from China are providing critical support to the Russian war effort. KAMAZ, the Russian heavy-duty truck manufacturer has been sanctioned by the U.S. Treasury Department, creating a market gap for Chinese trucks. This also allows KAMAZ and other auto manufacturers the ability to shift production to Russia’s military needs, such as the production of armoured vehicles and other military equipment. China is also transshipping through EEU members, Kyrgyzstan and Kazakhstan to Russia. For instance, Kyrgyzstan’s imports of vehicle-related products increased from $300 million to $3.1 billion (2021-2023), meaning, 22% of Kyrgyzstan’s $14 billion GDP is imported Chinese vehicles. Kazakhstan’s imports of vehicles have also doubled in 2023 compared to 2021. China is also helping Russia maintain existing truck and military vehicle fleets with spare parts, with exports nearly tripling to Russia and its neighbours since 2021, increasing from $383 million to $1.1 billion. Kyrgyzstan notably accounts for $415 million of the transshipped vehicle parts that are exported to Russia from China in 2023, which is 642% higher than in 2021.
Body armour and Helmets
Chinese exports of aramid fibre to Russia surged 350% between 2021 and 2022, while in January and February of 2023, imports of this material had already reached half of 2022’s full-year total. Aramid fibre is a class of heat-resistant synthetic fibres used in bulletproof vests and vitally needed by Russian military personnel. Similarly, according to Chinese customs data, Chinese exports of ceramics, a component used in body armour, also increased by 69% to Russia, totalling more than $225 million in 2023. POLITICO revealed that Rika, a Russian-based company bought smaller shipments of body armour from a Shanghai H Win in March 2023, consignments of helmets from Deekon Shanghai and thermal optical equipment from Chinese companies. According to customs and business filings, Legittelekom, which describes itself as a Moscow-based freight forwarding company, has also bought from Deekon Shanghai. These purchases include 100,000 items of military-grade headgear and 100,000 suits of outwear.
Another example includes Pozitron, which imported $60 million ‘in airsoft helmets’, ‘miscellaneous ceramics’ and other items from Chinese company, Beijing KRNatural in November and December 2022. While these product descriptions in the declarations and customs seem harmless, defence experts indicate that it is now common practice to mislabel dual-use goods as civilian products when they are intended for the battlefield to avoid sanctions and Western detection. The financial success of Pozitron, which was only founded in March 2021, highlights the profitability of these imports. The company’s revenues soared from $400,000 in 2021 to $300 million in 2022, according to its financial statement. This dramatic increase reflects the substantial demand for military and dual-use goods in Russia, facilitated by Chinese suppliers and intermediaries.
Discussion and Conclusion
As the Sino-Russia partnership continues to take shape in the face of Western collaboration and condemnation, Chinese supply to Russia fuels the war in Ukraine. China’s continued support for Russia amid its invasion of Ukraine poses significant risks and challenges that far outweigh any short-term benefits. By aiding Russia, China jeopardizes its international reputation as a responsible global power, becoming a complicit actor in the conflict, violating international law and the core principles of sovereignty. Moreover, Chinese entities supporting Russia and the Chinese government’s lackadaisical response to Western complaints will eventually lead to secondary sanctions, deepening economic strains and retaliation from Western nations. This would severely impact China’s economy and international stability, disrupting an already precarious global supply chain, as well as deterring foreign investment and limiting China’s potential. Western nations must confront this partnership through coordination and indicate resolve. Moreover, it must be reiterated with sincerity that there are consequences to aiding Russia’s illegal war in Ukraine.
While Western aims at curbing Russia’s ability to resupply its military have had an effect, Russia has demonstrated considerable resilience and adaptability. This resilience has been enhanced by its strategic partnership with China. China has effectively become Russia’s primary supplier of battlefield goods and critical components, filling the void left by Western nations. The relationship is ultimately asymmetrical and is leading to Russian overdependence on support from China. The surge in Sino-Russian trade in dual-use components, defence-related products, and equipment underscores this relationship and gives China immense leverage over Russia’s leadership and its economy. As this report has shown, Chinese exports to Russia of CNC machines, semiconductors, microelectronics, ball bearings, nitrocellulose, drones, EW systems, construction and logistical equipment have all seen substantial increases. These goods have all been vital for Russia’s defence industry and military operations. The intricate network of third-party state and business intermediaries has also facilitated the trade of sanctioned goods and components from China to Russia, demonstrating the sophistication of international supply chains. In conclusion, the supply of high-priority goods and components poses a dynamic challenge for Western policymakers. Nonetheless, policymakers must address the multifaceted nature of these trade relationships to enforce sanctions and deny Russia victory in Ukraine.
Photo: “Russian President Vladimir Putin held talks in Beijing with General Secretary of the Communist Party and President of China Xi Jinping” (2022), via Wikipedia Commons. License under C.C. 4.0.
Disclaimer: Any views or opinions expressed in articles are solely those of the author and do not necessarily represent the views of the NATO Association of Canada.
