The author is a nonresident senior fellow at the Peterson Institute for International Economics and director of the International Affairs Program at the Kyiv School of Economics.
Russia’s recent gruesome attack on a children’s cancer hospital in Kyiv earlier this month raises serious questions about how the country can produce missiles and drones on a large scale using Western components. Despite numerous export controls, Western companies still bear much of the responsibility for Russia gaining access to these critical parts. For export controls to be effective, we must hold them accountable.
In an unprecedented multilateral action, more than 50 countries imposed sanctions on Russia, including export controls, shortly after the large-scale invasion of Ukraine in February 2022. These have increased production costs for the Russian military and crippled the country’s supply chains. Yet they remain a game of whack-a-mole played by a few hundred government employees against a flood of distribution networks that bypass them.
Making export controls effective requires a “corporate enforcement” strategy – a government euphemism for punitive measures against our own companies – complemented by secondary sanctions and a significant increase in funding for regulators.
Russia’s military-industrial complex relies on Western-made components. In 2023, Ukrainian authorities released a unique resource that provided unprecedented insight into the Russian military: Components of the Aggressor’s Weapon, soon followed by Instruments of War (foreign equipment used by the aggressor to produce weapons).
Authorities have identified 3,638 components in 134 different weapons units. For example, a Shahed-238 drone that terrorizes Ukrainian civilians and critical infrastructure is equipped with electronic components from countries such as Canada, China, Germany, the Netherlands, Switzerland, Taiwan and the United States. These findings confirm Russia’s own research that its military is 70 to 90 percent dependent on Western-made components.
In its recent attacks on Ukraine’s civilian infrastructure, Russia has deployed new types of weapons, most notably the Kh-69 and Zircon missiles. This shows that the country is capable of developing weapons that require even more sophisticated Western components. Russia is still able to adapt, but it is doing so with Western help. It does not have to be this way.
Since Russia’s large-scale invasion of Ukraine, coalition countries have improved the consistency of their export control regimes and strengthened enforcement. The G7 has effectively become a major coordinating body for sanctions against Russia, with coordinators from the US, EU, UK and other countries working together to encourage third countries to prevent Russia’s evasion of sanctions.
The recent US measures to involve financial institutions in the disruption of distribution networks are already having an effect. China’s banks are increasingly scrutinizing or rejecting transactions with Russia. However, no systemically important institution has yet been subjected to US sanctions. To be effective, the US cannot just threaten, but must also use its powerful tools. And while the involvement of financial institutions is valuable, successful implementation requires the participation of the companies themselves.
Since February 2022, investigative journalists, think tanks and lobby organizations have presented extensive evidence of how components from Western companies get into Russia, attracting the attention of politicians and lawmakers. The problem is clear to everyone except the companies involved. In response, most companies have hidden behind standard legal wording, often from trade organizations rather than the companies themselves.
In the US, recent congressional hearings have focused on corporate responsibility for inciting Russia’s war in Ukraine. Think tanks have contacted companies whose products are found in Russian weapons for comments. The US Department of Commerce and Justice are also targeting companies, although they have not shown the same enthusiasm for aggressive action as they have toward China.
U.S. companies have a responsibility not to violate export control regulations. This includes denying Russia access to certain products and restricting almost all exports to Russia for military purposes or by military end users. Companies must make more efforts to strengthen due diligence in their distribution networks and comply with export control regulations. Failing that, only billions of dollars in penalties for evading export controls, similar to those that banks face for money laundering and terrorist financing, can change companies’ risk-reward calculations.
