On February 22, an article was published on the Global Voices platform, an international community of authors, regarding the export of machine tools and industrial equipment from East Asia to Russia. The article highlights that in 2022, China's share in Russian imports increased to 43%, and despite economic and financial sanctions imposed on Russia, Asia continues to be the primary source of imports to support Russia's military actions in Ukraine.
In the article, Olena Yurchenko, Senior Analyst at the Economic Security Council of Ukraine (ESCU), addresses the following questions:
- Why is Russia shifting from Western machine tools to equipment from East Asia?
- What are the ways to identify end-users that machine tool manufacturers may serve?
- What actions should Asian CNC machine manufacturers take to neither support Russian aggression nor jeopardize the viability of their business?
Yurchenko notes that South Korea and Taiwan are newcomers to the CNC industry and lag behind industry leaders in manufacturing capabilities but are progressing rapidly. Their affordability and satisfactory quality, especially in the face of comprehensive sanctions imposed on Russia by the US and the EU, make them attractive partners for import-dependent countries like Russia.
"A significant aspect of the resilience of the Russian military-industrial complex is the established supply chains for sanctioned goods. They were created in 2014 after the annexation of Crimea and the beginning of military operations in eastern Ukraine, and they are now expanding. In 2022, Russians opened over 1300 companies in Turkey – 670% more than in 2021. In Kazakhstan, the number of companies with Russian capital increased by 70% in a year. In Georgia and Armenia, there was also a sharp influx of Russian businesses in 2022 – 21 thousand and 6.5 thousand, respectively. Judging by the financial activity between China, the UAE, other Central Asian countries, and Russia, the total number of dummy companies may exceed 30 thousand," comments Yurchenko.
Regarding manufacturers' actions to preserve their business and comply with sanctions, Olena notes: "Internal compliance can save companies from problems, earn them additional points in the eyes of competent authorities, and enhance their reputation. Moreover, there are many markets where Asian CNC machine tools can be used – for example, Ukraine, which requires the development of the military industry and is inconceivable without these machine tools."