Trade partners help Russia counter Western sanctions
China's increased imports of goods from Russia, mainly in the energy sector, have more than offset the decline in trade between Moscow and its Western trading partners, including the US, UK and some EU countries.
Russia's most important trading partner
Trade between China and Russia boomed in 2022, becoming a lifeline for Moscow's struggling economy and showing the limits of Western sanctions, according to a new report.
Russia has increased imports of key technologies for the conflict in Ukraine, including semiconductors and microchips from China, according to a report by the Washington-based NGO Free Russia Foundation (FRF).
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| Cargo containers at the port of Vladivostok, Russia, October 18, 2021. Photo: Reuters |
China's increased imports of goods from Russia, mainly in the energy sector, have more than offset the decline in trade between Moscow and its Western trading partners, including the US, UK and some European Union (EU) countries.
“As the US, EU and UK all scale back trade with Russia, China has emerged as Russia’s most important trading partner,” the report said.
Based on 40 million customs records obtained by FRF, the report offers a detailed look at Russian trade, which has been lacking in detail since the West imposed sanctions on Moscow.
In April 2022, Russia’s customs agency suspended the release of monthly import and export data, along with other statistics. At the time, Russia said it wanted to avoid “inaccurate estimates, speculation and distortions of import deliveries.” The January 2022 data is the most recent data Russia has made public.
Russian and Chinese trade agencies did not respond to requests for comment on the matter.
Military technology provider
China has emerged as a supplier of some key technologies that could have military uses despite Western sanctions, with data showing China sold $3.3 million worth of unmanned aerial vehicles (UAVs) to Russia in 2022.
The report stressed that UAVs continued to be delivered to Russia in November and December 2022 from the United Arab Emirates (UAE), Hong Kong, mainland China and Singapore.
In 2022, Russia's imports of semiconductors and microchips increased by about 34%, with China emerging as the main supplier. That helped Russia increase total chip imports to $2.45 billion in 2022 from $1.82 billion in 2021, despite Western sanctions targeting the sector.
Russia and China have spent years strengthening economic ties, including a $55 billion gas pipeline and Moscow’s increased use of the yuan. The relationship has deepened even as officials in Moscow remain concerned that Russia could become tied into China’s economic orbit.
FRF collected the data in collaboration with Madrid-based IE University from a third-party data provider that specializes in value chain analysis for companies. The report's working group included Russian economists and former Russian officials, including Sergey Aleksashenko, former deputy chairman of the Russian Central Bank, and Vladimir Milov, former deputy minister of energy.
To verify the validity and reliability of the data, the report's authors compared it with official Russian trade statistics published through January 2022 and 2022 data from Russia's trading partners. The report said one of the limitations of the dataset is that the records are partially redacted for military transactions.
Russia is more dependent on Chinese goods
Trade between Russia and China increased by about $27 billion from March to September 2022 compared to the same period in 2021, reaching $99 billion, according to the report.
Much of the increase was due to higher crude oil sales, which Russia began shifting to China and other markets such as India and Türkiye as Western countries restricted purchases of Russian energy products.
Russia is also increasingly reliant on Chinese goods. Between March and September 2022, about 36% of Russia’s imports came from China, up from 21% in the same period in 2021.
After Russia launched its military campaign in Ukraine, the United States, South Korea, Japan and China completely banned the sale of high-tech products, including semiconductors, to Russia. As some of Russia's traditional suppliers of high-tech goods, such as Germany, the Netherlands and South Korea, have scaled back their trade, the volume of Russian imports from China has more than doubled.
During the period from March to September 2022, the value of China's semiconductor exports to Russia increased from 200 million USD in 2021 to more than 500 million USD in 2022. The number of transactions also increased significantly.
Russia also imports semiconductors from Türkiye, Kazakhstan and Kyrgyzstan. Although these countries do not have significant domestic semiconductor industries, Russia can easily buy chips from distributors there, analysts say.
“China has the ability to produce a lot of lower-tech chips domestically, so it’s not surprising that Russia would buy those chips,” said Chris Miller, an associate professor at Tufts University who was not involved in the report.
Still, “military systems use a variety of chips, and so they could face shortages of specific chips even though they can still buy large quantities of other chips,” Mr. Miller said./.
