by Bruno S. Sergi
Western sanctions have pushed Russia toward costly, China-centered chip supply chains, limiting its technological autonomy.
The Ukraine war has catalyzed a profound shift in the global technology landscape, with far-reaching implications for Russia’s ambitions in artificial intelligence (AI) and advanced computing. As the United States, European Union and other Western nations imposed sweeping sanctions on Russia, restricting access to advanced semiconductors and tech equipment, Moscow found itself at the mercy of alternative—and costly—supply chains.
The United States has taken a leading role in enforcing these restrictions, compelling Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chipmaker, to halt sales to Russia. This move, coupled with Japan’s February 2023 export controls and South Korea’s April 2023 measures targeting both Russia and Belarus, has effectively hurt Russia’s ability to procure advanced tech directly. Russia’s AI and semiconductor sectors are now heavily reliant on imports from China and intermediaries. Domestic initiatives like the Baikal and Elbrus projects are facing fabrication challenges. Designed in Russia, their production was halted at TSMC in Taiwan in 2022. The only domestic option is the Mikron plant in Zelenograd, which operates at a significantly less advanced 90 nanometer (nm) compared to 16 nm and 28 nm in Taiwan. By the end of 2024, Baikal Electronics had produced 85,000 chips but did not specify where they were made. It is also thought that about half of the batches are defective, mainly due to equipment calibration issues and a shortage of skilled workers.
Russia’s tech sector confronts a new reality where access to cutting-edge hardware is both limited and exorbitantly priced. Russia faces double the costs for semiconductors as it navigates a sanctions-restructured supply chain. While global trade values had already dipped due to COVID-19, the war in Ukraine eliminated any prospect of recovery. This unfolding scenario underscores that control over semiconductor technology is a cornerstone of great power competition. As the United States and China vie for technological supremacy, Russia’s struggles highlight the vulnerabilities of relying on foreign tech in a multipolar world. Moscow’s pivot to Beijing underscores the shifting alliances shaping new geopolitics: the Moscow playbook of adapting through opacity and intermediaries may offer short-term relief but risks long-term erosion of its tech sovereignty. For policymakers, the lesson is clear: innovation leadership requires both alliances and leverage in the global tech ecosystem.
The production of advanced semiconductor chips, especially 2 nm chips for supercomputers, is mainly centered in Taiwan (TSMC) and South Korea (Samsung), accounting for about 90 percent of global output. Some countries rely on technologies from Western and Global South nations, which risks secondary sanctions. The United States exemplifies how serious this risk can be. In 2021, it accounted for 15 percent of Russia’s semiconductor imports, but by 2023, that share had dropped by 99.45 percent.
Graph 1 illustrates the changes in the countries’ exports of microchip devices to Russia (HS 8541) from 2014 to 2024. As of this writing, trade data for 2025 is not yet available for most countries. Therefore, the 2025 figures should be viewed as purely illustrative and only reflect Hong Kong’s exports.
Initially, Russia’s response was primarily organizational and constrained by tight timelines rather than technology. It involved changing suppliers, streamlining products, reducing planning horizons and redesigning workflows based on the hardware available to Russian importers. This move signaled a new strategic focus, shifting from building an independent system to depending on limited access. Although this approach incurs higher costs, slower deployment and increased reliance on intermediaries and China, it represents a notable strategic shift.
Russia became reliant on third countries for products affected by sanctions. This included technology and machinery, medical and pharmaceutical equipment, metals and other commodities. Most Western electronics were transported to Russia through China and Turkey despite international sanctions. Turkey has been strengthening its political and commercial relationships with Moscow and its machinery exports have increased by more than 208 percent from 2020 to 2024. Graph 2 shows that Russia has reconfigured its supply routes for sanctioned products, while trade values in other industries have grown more slowly.
Graphs 3 and 4 depict the alterations in Russia’s trade routes with the United States and Europe. From 2020 to 2024, some Russians continued to import goods, but imports dropped sharply, reducing market supply. This caused overall prices in Russia to rise and diminished the purchasing power of Russian families. The most notable changes are seen in machinery and electronics, where trade with Europe has declined by 85 percent in both categories since 2020. For the United States, the decline was even more drastic, at around 98 percent.
The long-term outlook for Russia is characterized not by a collapse, but by constraints and altered planning. Rerouted trade channels facilitate the movement of goods, albeit under conditions that differ significantly from those before 2022. This situation results in higher markups, longer delivery times, diminished service quality, shorter warranty periods and heightened transaction risks. Additionally, it shifts dependence from Western suppliers towards China and intermediary entities, rather than achieving genuine self-sufficiency in semiconductor production. The hardest bottlenecks remain upstream: electronic design automation (EDA) tools, advanced fabrication equipment and process know-how. Comparative evidence on China suggests that even a much larger industrial base still struggles with those layers. Russia is therefore unlikely to solve them quickly. The more realistic pattern is short-run resilience, medium-run fragility and long-run technological constraint.
In April 2025, the United States imposed new licensing requirements on Nvidia’s H20 and AMD’s MI308 exports to China, forcing both companies to record major charges tied to stranded inventory and disrupted sales. By mid-2025, Washington was signaling that some China sales could resume under a licensing arrangement. Later reporting indicated an unusual arrangement in which the US government expected to receive a share of revenue from certain licensed sales in China.
On January 1, 2026, the United States granted TSMC an annual license allowing continued import of US chipmaking tools into its Nanjing operations. Less than two weeks later, the Trump administration formally approved exports of Nvidia’s H200 to China under technical and volume conditions, only for Chinese customs authorities to reject the chip. By late May, the US Commerce Department was moving to close loopholes involving overseas subsidiaries of Chinese firms. By early June, senators were pushing for tighter scrutiny of foundries themselves.
This environment has shifted from a simple yes-or-no system to one of conditional and reversible access. Licenses, conditions, workarounds, third-country reviews and foundry oversight now dictate who can access what, through which routes and at what risk level. For Russia, this is not just background noise but the operational context for rerouting imports. Although direct shipments from countries imposing sanctions have declined, there has been a noticeable increase in transit through Central Asian and Caucasian nations, indicating a shift in routes. Other research suggests that official statistics fall short in capturing the true extent of controlled goods that still make their way into Russia. This evasion relied heavily on numerous intermediaries, established pathways, financial institutions—which became one of the major problems after the secondary sanctions imposed in 2023—and transit countries. Meanwhile, parallel imports were formally legalized in 2022 and domestic firms can use them without risk of prosecution in Russia.
Recent US–China licensing decisions involving advanced Nvidia chips and TSMC’s Nanjing operations do not, by themselves, prove that Russian import channels have changed. Their significance is indirect: they alter the availability, price, competition and compliance risks surrounding the China-centered channels on which Russian buyers—defense and state buyers, banks and private firms and consumers—increasingly depend. A partial normalization of US–China chip relations would therefore not eliminate Russia’s constraints. It could provide cheaper, more reliable access through Chinese suppliers, but it could also make those suppliers more cautious about risking exposure to licensed trade by serving Russia. For Russia, this is the operational context in which rerouting takes place. Thus, Russia is not permanently isolated but is conditionally exposed to changes in the terms of Sino-American access to technology.
This does not imply that restrictions are useless; rather, they function differently than many expect. They do not completely border the market but instead weaken it by making supply less dependable. As a result, service levels decline, warranties fade, lead times lengthen and prices rise. Dependence on suppliers grows more concentrated and intermediaries expand their influence.
The narrative is shifting from geopolitics to management. Russia is unlikely to overcome its challenges quickly and will need to adapt rather than achieve self-sufficiency. Russia’s potential advantage in AI will stem from institutions that optimize limited hardware rather than from acquiring advanced microchips. Firms that excel will be those that redesign workloads for older technology, manage mixed hardware environments, extend equipment lifespan and adapt procurement as conditions change. Therefore, managing usable computing resources is more critical than having access to the latest processors. The real edge lies with managers who can preserve computing power amidst shifting access and supply challenges. Yandex and Sber demonstrate this approach, maintaining proprietary models and cloud services despite Russia’s semiconductor weaknesses. Yandex’s model compression work reduces hardware costs, while Sber’s GigaChat concentrates compute and data within a state-linked platform.
These developments signal that integrated institutions can convert constrained access into usable capability. India will not replace China as Russia’s tech lifeline; US-India collaboration on semiconductors and secure supply chains may limit alternative routes. Turkey and Asian states will remain key intermediaries, but China’s role as Russia’s main supplier is solidifying. Russia’s ability to succeed relies on adjusting to restricted access rather than on claims of autonomy.
Mr.BadGuy
Publisher
Mr.BadGuy
Publisher
These soldiers are from a country whose president is a Jew Zelensky. Orthodox churches are also being destroyed in this country. Synagogues are not touched. Surprisingly, it turns out that Jews get along well with the Bandera Nazis.