The Impact of Sanctions, and the West: An Analysis on Microchip Sanctions and the Russian Defense Industry

                By: Marco Dorazio

  

    On February 24, 2022 the United States banned microchip exports to Russia except for humanitarian purposes. House Resolution 956, named “Supporting the People of Ukraine” made it clear that the US wanted to completely isolate Russia economically. As states in the resolution:

"The United States, committed to coordinated economic sanctions, including severe restrictions, against Russia’s Central Bank and full blocking sanctions against Vladimir Putin." (H.R.956, 2022)

    

    The West is responsible for over 80% of microchips created, with Taiwan leading the charge at 22%, Russia, on the other hand, manufactures significantly less than 2% of global chip supplies. Prior to the invasion, Russia was importing about 70 million dollars worth of microchips to feed  their needs from the West each year, this is excluding the cost of cell phone microchips and PC components. Without a western source, Russia’s needs will be significantly disrupted and will become solely dependent on China for every microchip need, a country that has yet to develop a 3nm process. How could all of this come around, and what specific impacts will this have on Russia, and their efficacy in Ukraine? 

The Russian military, according to the Global Firepower Index, is ranked safely at second place in the world. Its ranking coming mostly from its massively outdated and humongous nuclear arsenal, Russia’s nuclear force and mutually assured destruction is just as threatening as it was in the Cold War. But, ironically, like its nukes, its armored force, once the largest and most feared component of its military is in shambles, much in part due to Western sanctions. The last truly accurate account of Russian tank numbers comes from the treaty on conventional armed forces in Europe dated to 1990. It states that at the time Russia had 141,780 armored units, out of those 41,580 were tanks. Now we look at modern-day numbers, meticulous counting, and research from satellite imagery of Russian tank storage facilities, this new number would make Khrushchev roll in his grave. Less than 3,000 tanks, these are not even tanks that are currently usable, these numbers are just counting the ones in storage which are not missing a turret or could, by some metric, still, be sent back into service to fight. With a decrepit and shrinking armored force, how did the chip ban affect it? 

    Thermal sights, which happen to be arguably the most important part of a tank. The ability to pick up on a heat signature miles away and shoot at it, when the human eye would be blind. It plays into what was described by US tankers during the Gulf War,  like in Warriors Rage: The Great Tank Battle of 73 Easting by Douglas Macgregor. He states that “In the desert, warfare is a gunfight. The side that shoots first wins.” If you can see your opponent before they do, you win. These sights also rely on a tiny little transistor, or microchip to function. Without these chips, you simply cannot make any more tanks. Since a majority of Russia’s tank production happened in the Cold War, a time when thermals were only mounted on the M60A3 TTS (Tank Thermal Sight), the main focus for the main Uralvagonzavod and Osmktransmash tank factories is upgrading old tanks with new thermal sights. Starting in the 1990s, Russia began mounting the AGAVA-1 and 2 thermal sites on the T-90 and T-80U tank variants. But, as they noticed they were falling behind in thermal quality  they resorted to using foreign imported thermals. Specifically in the proudly boasted SOSNA-U (Pine-U) thermal sight. 

    The SOSNA-U is a Russian tank gunner’s sight used on tanks like the upgraded T-72B3 (very common to see in Ukraine and in the Russian military as a whole), the T-80BVM and T-90MS (the T-90MS is the fanciest export variant tank that Russia has). The site itself was developed in Belarus by JSC Peleng and later made in Russia by JSC VOMZ. The major component of the SOSNA-U that should be focused on is the Catherine-FC thermal imager, which is made by the French multinational company, Thales. In February of 2023, a photo from the Russian Ministry of Defense popped up, showing a T-80BVM without the usual highly propagandized SOSNA-U thermals. Instead, replacing it was a 1PN96MT-02 sight, which would’ve been state of the art…in the 1970s. Boasting a visual TIR (target identification range) of 1500 meters at night and 3000 meters at day, less than half of its modern counterpart, this was not a good sign. In fact, tank experts have dubbed new downgraded variants the “Obr. 2022.” Obr, stands for Obrazets which is Russian for “Model.” In 2022, we saw a number of these new models showing up on the battlefield, following Western sanctions, each variant missing its own important components. Like the T-72B3 Obr. 2022 which is missing its SOSNA-U gunners thermals and its crosswind sensor, which would automatically calculate the tank projectile path based on live wind measurements. Microchips, however, do not only show up in tank thermals but also in guided missiles. 

Since their ban at the start of the war, China has been the main supplier of microchips to Russia. According to CNBC:  

"Sellers from China, including Hong Kong, accounted for more than 87% of total imports  in the fourth quarter of 2022, compared with 33% in Q4 2021. More than half (55%) of those goods were not manufactured in China, but instead produced elsewhere and shipped to Russia via China and Hong Kong-based intermediaries."

    This microchip ban has put further pressure on China benefiting them. Western leaders calling for Beijing to speak out against Putin, while they simultaneously make billions from their technology exports to Russia. In guided missiles, Chinese circuits have been found inside the S-300 9M96E air-to-ground missile. In fact, China has even been blamed for smuggling in American microchips into Russia. If these accusations do turn out to be true, will this mean that China is next on the sanction list?  Due to Western sanctions, the Russo-sino relationship has been growing closer in an economic sense. While this may give benefits to Russia, China is not so happy as they do not want to be socially ostracized from the global economy for supplying Russia. We can see this result in their votes condemning the war in Ukraine, or the humanitarian aid they have sent so far. But, Russia’s seemingly reliant military is not as bad as it may seem. Recently, Russia’s military has favored a more “closed-cycle” method of production. Leading to Russian copies of imported Western equipment. For example, the SOSNA-U’s Russian copy is called the PNM-T, designed and manufactured 100% in Russia. Russia’s push for self-sufficiency began in 2014, but because of its need for high-tech items, it produced weak results. In October of 2021, Russia’s Ministry of Industry and Trade announced that it will spend 1.2 billion USD to try and build up Russia’s domestic semiconductor industry. But this number pales in comparison to its allies and enemies. The US alone has passed over $80 billion in semiconductor investments since 2021. For Moscow, the EU’s ban on Russian manufactures is only part of its “securitization” of the economy. Vladimir Putin has depressed the need for important structural changes to the Russian economy, which has been playing out since Ukraine was invaded in 2022. 

    But the Russian industry will never be able to recover from these sanctions because they lack an experienced and qualified workforce, like the likes of China and the US. In March, Moscow reported that 70,000 IT specialists had left the country. Moscow had earlier announced that the economy would need 1 million of these specialists. Even if Russia can curb its increased imports and reliance on China, brain drain, and lack of funding, achieving any kind of self-sufficiency is just too complex to achieve within the next 10 years, if ever.  Literally, zero countries have total control over their microchip industry.  But during its loss of trade with the West, Russia has still managed to become more self-sufficient and less dependent on certain importance than it was before sanctions were put into place. The Russian MOD has also made sure that the defense industry is not allowed to make too many profits from state defense orders. While this has caused a debt bubble within the industry, it also proves that Moscow is able to get more output from the defense industry relative to other sectors of the economy. So while the supply cut-off has crippled parts of Russian industry, it has also sparked a Russian movement towards autarky, which would make this rogue state even more dangerous. 

    The war in Ukraine is one of attrition, as the front lines halt their movement and progress from both sides' stalemates, the winner will be determined by who can outproduce who. Ukraine has the support of 49+ countries sending lethal aid. Russia is backed by regimes in Iran and North Korea. The sanctions have hurt Russia's efforts to outlast Ukraine. Inspections of weapons by Western export controls show that Russian equipment, as shown, is highly reliant on Western microchips. Like the Iskander-M, Kh-101 cruise missile, and Kalibir which are reliant on oscillators built by the British company Golledge Electronics. Other cruise missiles are reliant on circuit boards from Texas Instruments, a US-based company. These sanctions, experts predict, may cause somewhat of reverse industrialization for Russia. Pre-2014 Russia was focused on catching up to its Western counterparts, now its objective is to rely less on the very technology it tried to use. Examples of this come directly from the battlefield in Ukraine, a T-55/54, designed in 1945, has been spotted and destroyed while fighting for the Russians in Ukraine. 

The microchip ban's aftermath has positioned Russia's military and technological trajectory at a crossroads, where stark statistics illuminate the magnitude of impact. The decline from 141,780 armored units to under 3,000 tanks—a mere fraction of its former might—reveals the toll of Western sanctions. China's ascendancy as a microchip supplier, contributing over 87% of imports, underscores the delicate balance between economic dependence and political maneuvering. Amid these shifts, Russia's drive for self-sufficiency encounters a workforce exodus. As Russia attempts to bridge its technological gap, paltry domestic semiconductor investments. Against this backdrop, the war in Ukraine becomes a proving ground for both sides' resilience and production capacity, showing the intertwined fates of military readiness and technological sovereignty.

     This is the first of multiple articles, this one serves as an overview expect less analysis. 

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