The Role of Foreign Components in Russian Military Drones and Sanctions Evasion Tactics

1. Summary

• This report investigates the use of foreign components in Russian military drones amidst the ongoing conflict in Ukraine. Highlighting Russia's strategies to produce and maintain UAVs despite international sanctions, it uncovers the means by which sanctions are evaded and the role of alternative suppliers. The report emphasizes the urgent need for improved global cooperation and regulatory alignment to hinder Russia’s access to critical military components.

2. The Importance of UAVs in Russian Military Strategy

• 2-1. Role of UAVs in Modern Warfare

• Russia's invasion of Ukraine has underscored the critical role of Unmanned Aerial Vehicles (UAVs) in modern warfare. UAVs serve multiple functions, including reconnaissance, offensive maneuvers, and kamikaze missions. Drones are classified into strategic, operational, and tactical categories, each contributing to different aspects of warfare. The production of these drones involves a significant share of components produced by countries within the sanctions coalition. The critical use of UAVs is evident in their deployment for attacking civilians, targeting energy infrastructure, overwhelming air defenses, eroding Ukrainian morale through civilian casualties, and revealing Ukrainian air defense system placements.

• 2-2. Russia's Use of UAVs in the Invasion of Ukraine

• In the invasion of Ukraine, Russia deployed various UAVs, including the Iranian-made Shahed-136/131 UAVs and Russian-made Lancet loitering munitions, to attack Ukrainian civilians and infrastructure. Additionally, the Russian-made Orlan-10 UAV played a pivotal role in reconnaissance and surveillance, being integrated into the Unified Tactical Control System for coordinating troop actions and disrupting communications via electronic warfare. Despite Western sanctions, the Russian defense industry produced over 22,000 UAVs in 2023. This production included substantial quantities of military assets such as over 1,500 tanks and 1,400 rocket and artillery vehicles. However, Russia's dependence on foreign components, particularly microelectronics from U.S.-owned companies, remains high for its UAV production.

3. Foreign Components in Russian Military Drones

• 3-1. Critical foreign components used in Russian UAVs

• 174 foreign components were retrieved from Shahed-136/131, Lancet, and Orlan-10 drones used by Russia in Ukraine. Despite efforts for import substitution, the Russian military heavily relies on foreign-made components, particularly microelectronics. Notably, 69% of these components originate from U.S.-owned companies. Essential electronic components challenging to replace include processors, microprocessors, voltage regulators, microchips, and transistors. GLONASS-enabled modules for navigation and electric engines are also critical for UAV production.

• 3-2. Trade patterns of critical components

• An analysis of trade patterns using Harmonized System (HS) codes associated with components found in Russian UAVs revealed an increase in trade volumes after an initial downturn at the beginning of the full-scale invasion in the third quarter of 2022. Transactions amounted to $7.2 billion from January to May 2023, which is 19% higher than the corresponding period in 2022 ($6.1 billion). The total for 2022 was $15.8 billion. China is a crucial supplier, contributing 67% of these components, with 17% routed through Hong Kong. Turkey and the United Arab Emirates also play notable roles, contributing 5% and 2% respectively. Despite these shifts, the European Union maintains a 14% trade share with Russia, and the Eurasian Customs Union remains a significant trade route. US and EU companies operating production facilities in China further influence component transfers. Top producers from January to May 2023 included Intel, Analog Devices, Samsung, Texas Instruments, and Xilinx (AMD), with components from these manufacturers found in Russian UAVs and other military equipment.

4. Sanctions and Their Impact

• 4-1. Western sanctions on Russian defense industry

• Western sanctions have imposed significant constraints on the Russian defense industry. Targeting crucial imports needed for advanced weapon systems—such as main battle tanks, aircraft, and missiles—these sanctions have affected Russia's capacity to manufacture state-of-the-art military equipment. Despite the sanctions, Russia has demonstrated resilience. According to reports, Russia has established sanction-evading supply chains, prominently shifting its focus to countries like China, Iran, and North Korea for alternative supplies. For instance, since 2022, China has provided Russia with millions of dollars worth of semiconductors, drones, and dual-use goods. This strategic shift underscores Russia's efforts to mitigate the impact of Western sanctions and sustain its military production capabilities.

• 4-2. Effects of sanctions on Russian military production

• While Western sanctions have restricted Russia's access to crucial components, the Russian defense industry has successfully produced a substantial quantity of critical weapon systems despite these constraints. In 2023, the Russian Armed Forces received over 22,000 drones, 1,500 tanks, 2,200 armored combat vehicles, and other essential military assets. Production of some weapons systems reportedly tripled between January and August 2023 compared to the same period in 2022, according to official Russian sources. The Kremlin has also utilized its contingency fund to support the operational capacity of factories, indicating a financial strain but a determined commitment to maintaining military production. Moreover, there has been a notable decrease in Russian arms sales as the defense sector has prioritized resource allocation for military efforts in Ukraine, contributing to financial stress on the Kremlin budget.

5. Sanction Evasion Tactics

• 5-1. Establishment of sanction-evading supply chains

• Despite the crippling impact of Western sanctions on Russia's military-industrial complex, the Russian defense industry has adapted swiftly to maintain its production capabilities. In 2023, the Russian Armed Forces received over 22,000 drones and more than 1,500 tanks, demonstrating the efficacy of newly established supply chains that bypass sanctions. These efforts are illustrated by the continuous influx of critical military assets amidst restrictions. The creation of sanction-evading supply chains involved sourcing components through non-traditional avenues and partners, allowing Russia to sustain and, in some cases, ramp up its production of sophisticated weaponry.

• 5-2. Shift towards alternative suppliers like China, Iran, and North Korea

• The Russian defense sector has increasingly relied on alternative suppliers such as China, Iran, and North Korea to mitigate the impacts of Western sanctions. Since 2022, China has emerged as a crucial partner, providing Russia with semiconductors, drones, and other dual-use goods totaling millions of dollars. This strategic pivot has enabled the flow of necessary components to continue, allowing Russia to sustain its military operations despite constraints. The ongoing procurement from these countries has helped offset the reduction in arms sales and revenue within the Russian defense sector, thereby alleviating some financial pressures.

6. Policy Recommendations

• 6-1. Aligning Sanctions Across Coalition Countries

• Aligning sanctions lists across coalition countries to encompass a broader scope of companies involved in the military complex is essential. Even some major producers of military equipment remain unsanctioned. Alignment includes adopting a centralized approach to dual-use goods lists with standardized criteria and classification based on Harmonized System codes. Improving information exchange and cooperation among coalition nations is also crucial. This measure includes sharing transaction data and collaborating on investigations to prevent violations and circumvention.

• 6-2. Expanding Export Controls

• Expanding sanctioned product categories by utilizing broader goods classifications based on 6-digit Harmonized System (HS) codes can prevent misclassification and simplify export controls enforcement. Strengthening control over dual-use goods available on open marketplaces and ceasing production of GLONASS-enabled microelectronics by Western firms are also crucial steps to consider.

• 6-3. Improving Company Compliance

• Enhancing collaboration between critical component producers and authorities is key to improving sanctions compliance and implementing effective measures. Sharing information and experience can strengthen efforts on both sides. Clear compliance guidance for smaller enterprises is necessary, as they may lack resources. Establishing a comprehensive database of potential business partners, including sanctions coverage and past violations, can facilitate better compliance.

• 6-4. Increasing Responsibility of Companies

• Companies must take responsibility for preventing their products from reaching Russian military applications. Governments should investigate well-known companies to demonstrate their commitment to enforcing sanctions. Explicit procedures and documentation requirements can establish company responsibility for compliance. It is equally important to apply the same regulatory oversight to products manufactured outside the sanctions coalition countries.

• 6-5. Utilizing Existing Institutions and Frameworks to Counter Sanctions Evasion

• Leveraging the Anti-Money Laundering (AML) framework could fortify export control measures, as sanctions evasion often has similar patterns to money laundering. Coalition authorities can adopt this framework to trace opaque ownership structures and dynamic actor changes involved in circumventing sanctions. Applying AML practices to export controls is valuable for identifying structures in third countries that are crucial for military input production and exports to Russia. This strategy can be particularly effective if production occurs outside the sanctions coalition. Additionally, utilizing financial sector sanctions, such as targeting Russian banks and monitoring transaction patterns that facilitate these technology transfers, can enhance enforcement efforts.

7. Conclusion

• The report reveals the extent to which Russia relies on foreign components for its military drones and outlines the challenges faced by the international community in enforcing sanctions. Effective policy measures and multinational cooperation are vital to restrict Russia's access to these critical components. While the Russian defense industry has adapted by establishing alternative supply chains, more robust sanctions and compliance mechanisms are essential. This report underscores the importance of a cohesive global strategy to close loopholes and prevent sanctions evasion, aiming towards achieving sustained impact in restricting Russia’s military capabilities.

8. Glossary

• 8-1. UAVs (Unmanned Aerial Vehicles) [Technology]

• UAVs are a critical asset in modern warfare, used extensively by Russia in its invasion of Ukraine for surveillance and combat purposes. They are particularly dependent on advanced foreign components that are currently subject to international sanctions aimed at crippling Russia's military capabilities.

• 8-2. Western Sanctions [Policy]

• Sanctions imposed by Western countries on Russia’s defense industry to curtail its ability to procure critical military components. Despite these sanctions, Russia has managed to maintain a flow of necessary components through evasion tactics and alternative supply chains.

• 8-3. Sanction Evasion Tactics [Practice]

• Methods implemented by Russia to circumvent international sanctions, including establishing alternative supply chains and turning to suppliers in countries like China, Iran, and North Korea. These tactics enable continued production and supply of military drones and other weapon systems.

9. Source Documents

• Foreign Components in Russian Military Droneshttps://kse.ua/about-the-school/news/foreign-components-in-russian-military-drones/
• 22,000 Drones In 2023! Russian Military Got Uninterrupted Supply Of UAVs To Fight Ukraine Despite Sanctionshttps://www.eurasiantimes.com/22000-drones-in-2023-russian-military-got-uninterrupted/