It’s microchips that look poised to finally take Vladimir Putin. Six months after its invasion of Ukraine, Russia is suffering from a severe technology deficit caused by sanctions. Having launched (or lost in battle) far more missile power than they originally anticipated, Moscow’s troops are now increasingly relying on ancient stockpiles of primitive Soviet-era munitions as Western Ukrainian armed forces battle to turn the tide in a southern counterattack with precision strikes on ammunition dumps and key infrastructure such as bridges. Kyiv is well aware that the outcome of the war is likely to depend on whether Russia finds a way to regain access to high-tech chips, and it wants to ensure that it does not. To highlight the danger, Ukraine sends international warnings that the Kremlin has drawn up shopping lists of semiconductors, transformers, connectors, housings, transistors, insulators and other components, most made by companies in the US, Germany, the Netherlands. the United Kingdom, Taiwan and Japan, among others, which it needs to fuel its war effort. The message is clear: Don’t let the Russians get their hands on this gadget. POLITICO has seen one of the Russian lists, which is divided into three priority categories, from most critical to least critical. It even includes the price per item that Moscow expects to pay, down to the last penny. While POLITICO was unable to independently verify the origin of the list, two experts on military supply chains confirmed that it was consistent with other investigative findings about Russia’s military equipment and needs. At first glance, Russia should not be able to acquire the most sensitive technology on the lists. With only very basic domestic technology, the Kremlin has relied on major players in the US, EU and Japan for semiconductor suppliers in recent years, and they should be unfazed by the sanctions. The difficulty would arise if an intermediary country like China were to buy technologies and then sell them to Moscow. In extreme cases, Russians appear to be taking chips out of household appliances such as refrigerators. Ukrainian Prime Minister Denis Smykhal stressed that the war had reached a turning point where technological advantage is proving decisive. “According to our information, the Russians have already spent almost half … of their arsenal,” he told POLITICO. He added that Ukraine estimated that Russia was down to just “four dozen” hypersonic missiles. “These are the ones that have precision and accuracy because of the microchips they have. But because of the sanctions imposed on Russia, deliveries of this high-tech microchip equipment … have stopped and they have no way to replenish those stocks.”
Chips on the menu
Of the 25 items most desperately sought by Russia, almost all are microchips made by US companies Marvell, Intel, Holt, ISSI, Microchip, Micron, Broadcom and Texas Instruments. Rounding out the list are chips from Japan’s Renesas, which bought US-based IDT, Germany’s Infineon, which bought US-based Cypress, microcircuits from US-based Vicor and connectors from US-based AirBorn. Some of the items can be easily found at online electronics retailers, while others have been out of stock for months as a result of the global microchip shortage. The cheapest item on the top priority list, the 88E1322-AO-BAM2I000 gigabit ethernet transceiver manufactured by Marvell, can apparently be bought from Moscow for 430.83 rubles apiece, or about €7. The most expensive item, a 10M04DCF256I7G programmable field gate array made by Intel, can be had for a whopping 66815.77 rubles or €1,107 each, according to the listing (before the chip shortage, it would have cost under €20 ). As for the mid-priority list, companies such as Germany’s Harting and Netherlands’ Nexperia (which was acquired by Chinese technology company Wingtech in 2019) feature heavily. The Russians are looking for a range of Harting enclosures and connectors, the listing showed, including 09 03 000 6201 and 09 03 000 6104, as well as Nexperia/NXP’s 74LVC1G14GV, 125 buffer converters, 244AP and 74LVC1G14GV converters. James Byrne, director of open source intelligence and analysis at the leading defense and security think tank RUSI, said it is possible that Russia has been buying a stockpile of Western microchips and other key equipment for years, but may now run out. Russia’s military procurement program is “extensive, well-funded, and they have a huge military and industrial base that produces hardware,” Byrne said. “But now they’ve spent so much of it in Ukraine, they need a lot of new supplies. And the sanctions will make it harder for them… So they’re going to have to prioritize critical things, and that’s why we’re seeing these documents. Obviously we think that they’re trying to secure supplies.”
Holes in the block
Since its latest invasion of Ukraine in February, Western countries have tightened sanctions on Russia, increasingly targeting its microchip supply chains to reduce its military capabilities. The new sanctions come on top of years of tighter controls on sales of chips – which often fall under “dual-use goods” because they are used in military and civilian applications alike – under international agreements such as the Wassenaar Arrangement as well as recent EU legislation. Experts warn that these export control regimes too often fail to stop the transfer of technology to undesirable actors and entities. “Once the chips leave the factory it’s very difficult to know for sure where they end up,” said Diederik Cops, senior researcher on arms exports and trade at the Flemish Peace Institute, a research organization linked to the Flemish parliament. The officers said that Russian entities that supply the military have a variety of ways to obtain critical goods, ranging from buying them on unregulated online markets to using third-party shops and postal companies to smuggle high-tech kit into the country. “Countries like North Korea and Iran have gained years of know-how to circumvent sanctions. Russia will certainly have been preparing to deal with this in recent months… The Russians can also draw on historical know-how to create such conduits: “It was routine during the Cold War. And it has long borders with neighboring countries and a large network of allied states to work with,” Cops said. The US, Europe and other Western allies have created licensing regimes to prevent companies from exporting potential military technology to customers who could be seen as a security risk. But “it’s a huge challenge to monitor the illegal distribution channels, even the legal channels, to see who the end user is,” Cops said. Sanctions imposed after the February invasion were intended to close loopholes and further tighten the screws on the Russian military. According to Damien Spleeters, deputy director of operations at Conflict Armament Research (CAR), an organization specializing in tracking and tracing weapons of war that is currently identifying components found on the battlefields of Ukraine, it is too early to tell which to what extent the sanctions are working: “Everything we’ve seen so far was produced before the invasion. It’s stocks that pre-date the sanctions,” he said. But the Russians are definitely “burning out” according to Ukrainian Prime Minister Shmyhal. “They are using their Soviet equipment and missiles that were made in the 1960s or 70s,” he said. Russia is so desperate for more sophisticated semiconductors for its weapons program, it has resorted to removing microchips from dishwashers and refrigerators to use in its military equipment, US Commerce Secretary Gina Raimondo said in May, attributing the information to Ukrainian officials. However, some US national security veterans disagree with the optimistic assessment from US President Joe Biden’s team. They say Western governments have little ability to stop other regimes—particularly China—from microchips to Russia. Controls on chips “are almost as tight as a screen door,” said Matthew Turpin, the US National Security Council’s China director from 2018 to 2019. “China and Russia share a 4,300-kilometer border. There is absolutely no way to trace whether these chips are going from China to Russia.” The US Commerce Department has repeatedly said it has seen no evidence that China is transferring technologies to Russia, which could prompt Beijing to impose tough sanctions. But the Chinese government has also said it will not place new restrictions on its trade relationship with Russia, and Turpin and others say there is almost no way Western governments can be sure of their behavior. The Bureau of Industry and Commerce, which oversees technology sanctions, has “less than 10 ‘inspectors’ in China who are supposed to determine whether the chips have been diverted to Chinese military use,” Turpin said, adding that “we are not effective in inspections because the Chinese government requires advance warning.
Desperate times, desperate measures
In recent years, as its relationship with the West has grown increasingly frosty, Russia has implemented an import substitution program, seeking to build its own high-tech industry. These efforts are becoming increasingly urgent now. Russia’s industry and trade ministry has drawn up proposals that seek to incentivize local companies to produce the high-tech components needed by the military-industrial complex, business newspaper Vedomosti reported last month. The measures, dated August 22, include a tax cut for the relevant companies, a reduction in insurance premiums, the granting of preferential loans…
