The West’s Dilemma: Controlling Technology Supply for Russian Weapons

The West’s Dilemma: Supplying Technology for Russian Weapons

As Russia’s war in Ukraine continues, Western regulators are facing a tough challenge in controlling the supply of technology for Russian weapons. Despite efforts to enforce sanctions, Russia has managed to ramp up its weapons production using Western components. This has prompted Western countries to crack down on exports, but more needs to be done to prevent Russia from accessing the supplies it needs to continue waging the war.

The objective of Ukraine’s Western supporters is to disrupt Russia’s military supply chains and impose higher costs on the Russian military-industrial complex. However, Russia has been successful in circumventing restrictions by rerouting critical imports via third countries, obfuscating customs data, and using civilian proxy entities to redirect items to military firms.

To address this challenge, the United States and 37 other countries have enacted wide-ranging export controls on Russia, but enforcement has been lagging. Russia has been exploiting regulatory differences among countries not participating in the sanctions, such as China, Turkey, and the United Arab Emirates, to reexport Western technology.

In response, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and the U.S. Commerce Department’s Bureau of Industry and Security (BIS) have published a list of high-priority items and commodities of concern that are highly susceptible to being diverted to Russia and its close ally, Belarus. The international coalition, including the United States, the European Union, Britain, and Japan, has coordinated and expanded their lists to 45 high-priority items, focusing on critical items used for precision-guided weapons systems.

The focus on weapons supply chains has put export controls back on the list of Western priorities, echoing Cold War-era efforts to restrict the Soviet Union’s access to Western technology. However, the scope of relevant items today is much broader, including a broad range of industrial and consumer items that can be repurposed to make weapons, making exports significantly more complex to track.

To improve sanctions enforcement, the G-7 countries have increased monitoring of their companies and issued guidance and red flag alerts to keep companies abreast of a heightened risk of export control violations. The financial sector is once again at the forefront of economic warfare, with U.S. banks reporting suspicious transactions to the government and collaborating with government agencies to uncover illicit procurement networks.

In addition, a new international coalition, the Export Enforcement Five (E-5), consisting of Australia, Britain, Canada, New Zealand, and the United States, has issued joint guidance to coordinate export control enforcement and prevent the diversion of critical items to Russia through third countries. This shift places the burden of compliance on the banking sector, requiring enhanced due diligence and monitoring of transactions.

Despite these efforts, challenges remain. Banks lack in-house technical expertise on weapons components, and the nexus between money laundering and export control evasion has become particularly strong. To address these challenges, better coordination is urgently needed among customs, export control agencies, intelligence services, and financial institutions to map out the entire supply chain and identify evasion tactics.

In conclusion, the West faces a complex and evolving challenge in controlling the supply of technology for Russian weapons. While efforts have been made to enforce export controls and prevent Russia from accessing critical items, a whole-of-government approach is needed to effectively tackle the issue. By addressing the loopholes in export controls and enhancing coordination among various agencies, the West can better disrupt Russia’s military supply chains and support Ukraine’s efforts on the battlefield.