Crime and circuit boards. How Russia works around sanctions to procure microchips for missiles

As for the impact of sanctions, there was indeed a lull in rocket fire last summer, but the Kremlin began a destruction campaign targeting the Ukrainian energy infrastructure on October 10, 2022, with those very high-precision missiles, hoping to deprive Ukrainians of electricity and heating during the cold winter and force the government in Kyiv to negotiate on Russian terms. After another massive raid, the Russian Ministry of Defense, as if in mockery of those who’d hoped for the sanctions to make a difference, posted an illustrative picture titled «We’ll never run out of Kalibrs!” in its Telegram channel.

The first massive missile attack on Ukraine in 2023 involved Kh-22, Kh-101, Kh-555, and Kalibr cruise missiles and Kh-59 guided air missiles and led to a tragedy in the city of Dnipro, where, according to Ukrainian officials, a Kh-22 missile launched by a long-range Tu-22M3 bomber from the air space of the Kursk region hit a residential building. The missile killed 45 people, including six children, and injured 79. The next morning, the Russian MoD Telegram channel posted an equally cynical image, captioned “Charging to the full”.

How the Kremlin works around sanctions

The RUSI report we mentioned earlier suggests that all of the Kremlin's efforts to substitute the import of critical technologies for the defense industry have been failing since 2014. Russia has not been able to develop domestic analogs for Western electronics or procure such analogs from neutral or friendly countries. At first glance, this is indeed the case.

Despite all the efforts to boost the radio-electronic industry through federal target programs (that go back to 2008, pre-dating the sanctions), on the verge of the war in Ukraine, Russia's components for the military radio-electronic equipment lagged behind global standards across all of the crucial categories. From January to September 2022, even at the height of the war, the Russian government covered only 13.9% of the funding required for the Development of the Electronic and Radio-Electronic Industry state program.

Citing internal documents of a Russian research institute, Reuters reported that in 2017, an examination of a promising helicopter-mounted electronic warfare system revealed that out of 921 foreign components needed to start production, only 242 have domestic counterparts. Even the Sarmat strategic intercontinental ballistic missile, with which Vladimir Putin and smaller figures are trying to intimidate the West, may include a share of foreign electronic components.

Bloomberg cited curious data on the progress of import substitution in the defense sector from a classified government report. The document states that the 2025 import substitution program, which covers 177,058 parts, units, and assemblies in 258 types of weapons and equipment, has failed miserably. In 2020, Russia managed to replace only 3,148 components (out of the target 18,047) in five types of equipment (out of the planned 43).

In September 2022, Politico published a no less curious document: a list of foreign microelectronics needs, broken down into three levels of priority, drawn up somewhere in the belly of the Russian bureaucratic beast. The ‘urgent need’ category includes 25 American, Japanese, and German-made chips; some of them have disappeared from the market due to the global shortage of semiconductors, and not because of sanctions.

Be that as it may, the missile attacks on Ukrainian territory have not stopped. The latest waves of massive attacks used cruise missiles manufactured just a few months ago. This could further evidence the reports about Russia exhausting its stocks of missile weapons. However, it could just as well prove the successful work of Russia’s military industry, which has retained the ability to produce technology-intensive products despite all the sanctions and export control regimes.

Russian importers successfully circumvent all restrictions using a variety of tricks and loopholes: engaging intermediaries, using consumer electronics in military products, substituting foreign microchips with hopelessly outdated but functional Soviet components, consciously rejecting more advanced foreign models in favor of less advanced ones, resorting to industrial espionage, and re-exporting through third countries.