Sanctions significantly complicate daily life for Russia and its allies, forcing the "axis of evil" to seek new ways to circumvent them and alternative sources for critical resources. In our new feature, Sanctions Digest, we cover new restrictions and their impact on the global economy. This edition highlights news from November 28 to December 5.
The Third U.S. Strike on Chinese Semiconductors
The U.S. has restricted exports to 140 companies, including the supply of 24 types of equipment and three software tools, Reuters reports. These measures will significantly hinder the production of advanced semiconductors that could be used for military purposes. Export controls have also been introduced for high-bandwidth memory (HBM), a critical component for AI chips.
This is the third package of restrictions in three years targeting Chinese semiconductors, which Beijing utilizes for military modernization.
China Imposes Export Restrictions on Tungsten
Since December 1, China has restricted the export of tungsten, a critical element for weapon and semiconductor production, under new rules controlling dual-use goods. Exporting tungsten-based products now requires specific licenses.
China dominates up to 80% of the global tungsten market. However, due to strained US-China relations, demand for tungsten from other countries is rising. The US Department of Defense plans to prohibit its contractors from purchasing Chinese tungsten by 2027. As of June, China supplied 45% of US tungsten imports.
Russia’s Metalworking Industry: A Critical Shortage of Machinery and Skilled Workers
Approximately 63–65% of Russia’s machine tools are worn out, with some enterprises operating equipment that is over 25 years old. The share of machines less than five years old stands at just 4.7%.
The cost of new Russian-made equipment is another critical issue. While a Chinese factory can produce a machine tool for about 20 million rubles, its Russian equivalent costs four times as much — 80 million rubles.
The industry also faces an acute shortage of skilled personnel, including welders, assemblers, and fitters, as highlighted during the plenary session of Russia’s metalworking forum "TEMP."
Liechtenstein Company Fails to Overturn US Sanctions in Court
On February 23, 2024, the US Office of Foreign Assets Control (OFAC) added Axel Diegelmann, his son Fritz, and their Liechtenstein-based business to its Specially Designated Nationals (SDN) list. OFAC accused Rheingold Edelmetall AG of helping Russian metallurgical companies disguise the origin of precious metals and laundering money through cash transactions, bypassing sanctions.
On April 16, Rheingold Edelmetall AG appealed to OFAC to be removed from the sanctions list and filed a federal lawsuit in the US to lift what it called "unfounded sanctions." However, on November 25, the court ruled that OFAC acted within its authority and provided sufficient evidence, rejecting the appeal. This case serves as a warning that dealing with Russia might be easy, but escaping the grip of sanctions is nearly impossible.
Russia Focuses on Domestic Resources
- Lithium Extraction in Dagestan: A new technology to extract lithium carbonate from geothermal brines was introduced at Dagestan State University, aimed at producing a strategic material.
- Expanding Resource Exploration: By 2030, Russia plans to increase geological surveys of the Far East and Siberia to cover 65% of their territories, unlocking new areas for oil, gas, and mineral extraction.
- Increased Diamond Reserves: Over the first 10 months of 2024, Russia added 3.2 million carats to its diamond reserves, along with significant increases in gold, silver, copper, and other minerals.
- Carbon Fiber Production Expansion: Rosatom aims to quintuple its carbon fiber output by 2030, achieving material strength of 7 GPa.
- Uranium Mining Auction: A deposit in Buryatia containing 6.4 tons of uranium is up for auction, potentially boosting Russia’s uranium industry.
- Modernization in Mining: Upgrades at the Lovozersky Mining and Processing Plant, including a new flotation machine, will reduce ore losses and increase high-quality production.
- Rare Earth Metals Production: Over 7 billion rubles are being invested in a new facility at the Solikamsk Magnesium Plant, ensuring Russia’s technological independence.
Check back next week for the latest updates in Sanctions Digest.