Sanction failures piling up
Western sanctions were supposed to “ruin” Russia not only economically, but also technologically – according to the well-known announcement by German Foreign Minister Annalena Baerbock.
Published: February 11, 2023, 6:50 am
The ban on supplying electronics was intended to paralyze the Russian armaments industry. But Western war planners appear to have gotten even the most basic facts wrong. As is now apparent, an “isolated” Russia has managed to circumvent US-imposed sanctions in the technology sector. What’s more, Russia is importing even more microchips and semiconductors than before the war.
Among other things, the US and the EU banned the supply of microchips and semiconductors to Russia, depriving them of “70 percent” of their imports. The most important companies in the sector, such as Intel, AMD, the Taiwanese chip giant TSMC and Nexperia from the Netherlands, stopped doing business in Russia almost overnight.
At the end of March, US President Biden confidently announced that Russia would no longer be “able to rebuild those devastating weapon systems” and was on its way back “to the 19th century” as a result of the Russian operation in Ukraine, while US Commerce Secretary Gina Raimondo stated: “We have reports from Ukrainians that when they find Russian military equipment on the ground, it’s filled with semiconductors that they took out of dishwashers and refrigerators”.
Raimondo spoke at a Senate hearing in May last year, noting that she had recently met with Ukraine’s prime minister. “Our approach was to deny Russia technology — technology that would cripple their ability to continue a military operation. And that is exactly what we are doing.”
And in September, the President of the EU Commission, Ursula von der Leyen, defiantly announced that Russia’s industry was in ruins. “The Russian military is taking chips from dishwashers and refrigerators to repair their military equipment because they are running out of semiconductors. Russian industry is in tatters,” she claimed in a speech in the European Parliament.
Total Western failure to predict outcomes
But the Russian armed forces never had to do that during the war, as is now evident. Referring to an official report, the weekly German newspaper Zeit reported that Western sanctions in no way reduced Russian imports of electronic components – on the contrary: Russia imported even more processors and semiconductors in 2022 than before the war. Overall, imports in this segment have increased from 1.8 billion euros to 2.45 billion euros.
Beyond that, Russian imports fell by just 16 percent on a yearly basis. This was also confirmed by US economist and sanctions advocate Matthew Klein. According to his calculations, Russian imports in November were only 15 percent below the monthly average for 2021. At the beginning of 2022, shortly after the Russian operation started, Western “experts” had expected a slump of at least 30 to 40 percent.
The fact that Russia was able to circumvent the sanctions is due to countries like China, Turkey or the United Arab Emirates, which quickly filled the gaps left by Western corporations. They also act as a location for Russian intermediaries who obtain Western technology from letterbox companies.
At the same time, Russians have been manufacturing their own goods to fill the gaps that have arisen as a result of sanctions and the withdrawal of western corporations.
IMF expects Russia’s economy to grow
Until recently the West doubted that Russia’s economy would survive under sanctions, but the International Monetary Fund (IMF) is now sounding more optimistic than even the Russian government. Known for its gloomy forecasts, The IMF has predicted that Russia’s GDP will expand this year.
By far the most important trading partner for Russia is China. Overall, imports from China rose by 13 percent in 2022. Many Western companies such as Apple or Ikea had supplied the Russian market before they withdrew. This decision to leave could be compensated for.
China’s companies now deliver the majority of new cars and smartphones, computers, but also heavy equipment such as construction machinery and trucks. In fact, exports of trucks from China more than tripled in 2022 while imports of construction equipment have doubled.
Most importantly from a Russian point of view, however, are the imports of microchips. Together with Hong Kong, China shipped $900 million worth of semiconductors to its neighbour in 2022, more than double than the figure for 2021.
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