The aggressive war that the Russian Federation has been waging on the territory of Ukraine for more than two years is not only about weapons that are directly used on the battlefield, but also about the technologies that keep the stockpile of such weapons growing.
Currently, the production capacity of Russia’s military-industrial complex is operating at a record high of 84%. With 63-65% of all Russian capital equipment being worn out, new machine tools, in particular those with computer numerical control, are becoming one of the most critical technologies that the Russian war machine seeks to obtain at any cost.
During the first year of the full-scale invasion, the issue of Russian access to foreign CNC machines remained out of the sanctions coalition's focus, which allowed the aggressor state to increase its imports significantly. At the same time, due to the lack of domestic production, Russia's dependence on external supplies of industrial equipment and relevant components was and still is at 70-90%. Moreover, the vast majority of machine tools delivered to Russia end up in the hands of its military producers and are used to maintain existing facilities or build new production shops.
Since the end of 2023, members of the sanctions coalition have made great efforts to block Russia's access to Western CNC equipment. Under the pressure of the imposed sanctions, constant losses of military equipment at the frontline, and a shortage of production capacity, the Russian Federation is finding new ways to circumvent the restrictions and maintain or even increase imports of machine tools.
In 2023 and 2024, China became the leading supplier of industrial equipment to the Russian Federation, accounting for 80-90% of the machine tools imported by the aggressor state. Such Sino-Russian trade cooperation is based on three workarounds, which still depend on Western input:
Supply of machine tools manufactured in the countries of the sanctions coalition to Russia through China as a re-export hub
Regarding the number of companies involved in exporting machine tools manufactured in the sanctions coalition to Russia, China ranks second after Turkey. In 2023 and the first quarter of 2024, 340 Chinese entities exported Western machine tools to Russia worth USD 568.6 million. 70% of Russian companies that received these products have ties to the military-industrial complex. Despite this fact, 90% of the largest Chinese suppliers are still not under sanctions. At the same time, some were founded during the invasion or are run by Russian citizens, meaning they have clear red flags.
Exports to Russia of machines manufactured at the factories of Western companies in China
22 of the 30 largest Western manufacturers of CNC machines have factories in China. The equipment produced at these factories is much easier to get to Russia, as it only crosses the Sino-Russian border. In 2023 and early 2024 alone, Russian companies received USD 50 million worth of Western-quality machine tools made in the PRC. Among the manufacturers with production facilities in China, some companies serve the critical industries of their own countries, namely energy, aerospace, and defense. At the same time, only 1 of the 12 most significant suppliers of such products to Russia is currently sanctioned.
Russian imports of Chinese machine tools, the production of which depends on Western components, technologies and expertise
Under the pressure of sanctions, the Russian defense industry increasingly uses machine tools from Chinese manufacturers. Today, Chinese brands that export products that they have manufactured themselves are the largest suppliers of equipment to Russia.
However, Chinese machine tools entering Russia can only be produced with Western technology. 13 of the 16 largest Chinese CNC machine tool manufacturers exporting to Russia maintain close ties with the countries of the sanctions coalition by importing high-tech Western components, opening R&D centers in Germany or Japan, entering partnerships with Western technology corporations, and establishing subsidiaries in Western and Western-allied countries.
The analysis presented in this study demonstrates that manufacturers of dual-use goods, in particular CNC machines and related components, are not making maximum efforts to block Russia's access to critical technologies. While Chinese producers are looking for ways to occupy a free niche in the Russian market, Western companies do not control their distribution networks, the activities of their subsidiaries, or the ultimate destination of the final products, of which their components and software become a part. Thus, not only do manufacturers and their subsidiaries not contribute to enhancing the sanctions regime, but they may also undermine the effectiveness of existing sanctions instruments, such as those used in the financial sector.
The states of the sanctions coalition, in particular those with the most significant extraterritorial influence, need to create new tools and improve existing ones to:
- Encourage Western manufacturers of CNC machines and related components to closely monitor the export of their products to China and prevent their equipment from being supplied not only directly to Russia but also to irresponsible Chinese manufacturers, taking all necessary measures, including controlling the activities of their subsidiaries in the PRC.
- Discourage Chinese manufacturers of CNC technology from cooperating with the Russian market in any available form, directly or indirectly, as well as to conduct thorough due diligence on their part.
Achieving these two goals is only possible with the large-scale use of leverage underlying economic statecraft, namely the dependence of both Western and Chinese manufacturers on constant access to foreign expertise, technology, investment, markets, etc.
Some members of the sanctions coalition already have tools suitable for this purpose, and their decisive use in practice can further disrupt Russian supply chains that have not yet recovered from recent financial sanctions1. At the same time, each of the instruments analyzed in this report has numerous gaps that reduce their effectiveness.
The members of the sanctions coalition need to urgently close these gaps to put the instruments into operation as quickly as possible or create a new legal framework that would fully meet the needs and threats of the time and pose a deadly threat to violators, as happened to banks at the end of last year.
In addition, Western and Western-allied states need to move away from the reactive, cautious, and ad hoc application of primary and secondary sanctions and begin strategically and massively countering Russian trade networks to achieve real supply chain disruption.
Read more about China’s rising role in Russian supply chains of equipment used in the military production in the full report attached below.
