Espreso. Global

Russia’s imports of Taiwanese products increase as war approaches one-year mark 

13 February, 2023 Monday
17:27

Taiwanese goods are still being sold to Russia despite official restrictions on exports to Russia and Belarus

client/title.list_title

As the Russia-Ukraine war approaches its one-year anniversary, Taiwan's Ministry of Economic Affairs (MOEA) announced new export restrictions to Russia and Belarus, Taiwan’s CommonWealth Magazine reports. In addition to the restrictions imposed last April and May on the export of 57 goods and products spanning the computer and telecommunications, sensors, lasers, and aerospace categories, new additions include nuclear energy materials, chemicals, and machine tools.

From the standpoint of the machine tool industry, the implementation of expanded sanctions was only a matter of time. The official notice issued last year only stated that precision five-axis CNC machines and high-end controllers capable of being used in aerospace military weaponry must be submitted for authorization. "Any kind of CNC machine is now off limits," says the manager of a machine tooling facility in central Taiwan, reflecting on a Bureau of Foreign Trade communique.

Machine tool exports to Russia have increased by 10% since the Ukraine war

Despite accounting for only 4% of Taiwan's machine tool exports in terms of value, Russia is the fourth-largest buyer of Taiwanese machine tools. Surprisingly, as the one-year anniversary of Russia's full-scale invasion of Ukraine war approaches, the value of Taiwanese exports to Russia increased by more than 10% last year.

Industry insiders estimate that, in contrast to the avalanche-like drop in Japanese and Euro-American machine tool exports to Russia, the increase in Taiwanese machine tool exports to Russia is caused by two factors: First, unlike high-end machines from major Japanese and European manufacturers, Taiwanese machine tools can be easily used in aerospace and weaponry; second, when major manufacturers in Europe, the United States, and Japan explicitly declared that they would stop sales to Russia, Russian buyers redirected their orders to Taiwan for civilian use, resulting in a steady increase in orders.

In reality, customs data understates Russia's demand for Taiwanese goods. Over the last year, Russian customers have adopted multiple identities in different countries, Taiwan’s economic news media says.

China is a favored safe haven

"Russian buyers keep coming to me," says a senior executive at a major auto parts manufacturer. Last year, shortly after the war began, major shipping companies and cargo service agents avoided doing business with Russia, putting a two- to three-month halt on exports to Russia. Then, in collaboration with customers, they devised a new strategy: make China the destination country rather than Russia, and collect payment first before dispatching shipments.

Statistically, this appears only as exports from Taiwan to Shanghai or Hangzhou, with the subsequent transport to Russia hidden.

According to this executive, orders have been steadily increasing since the second half of 2022. "Right now, all of our cargo bound for Russia is routed through China," he explains in an interview to CommonWealth Magazine.

Turkey makes a great landing location as well

 "Turkish customers tell us that many Russians are establishing enterprises in Turkey these days,” a manager of a CNC tooling facility claims.

Customers from Russia buy partially assembled Taiwanese machinery parts and then buy top American, Japanese, and European controllers in Turkey for final assembly before shipping to Russia. The entire machine might also be kept in Turkey, where a production line would be established, and the final goods would be shipped to Russia.

However, Taiwan's accounting records only include sales to Turkey. Due to Turkey's geographical closeness to the European market, it has a flourishing manufacturing indusrty and is already the third-largest importer of Taiwanese machine tools.

"There are no sales on the records, it's happening covertly"

For complete openness, Taiwanese suppliers frequently state on estimates or order confirmations that sales to specific locations are forbidden. The CNC plant manager acknowledges that it may be challenging to pinpoint the final location if the goods spend several months in an intermediary zone before being resold.

According to data from Central Asian nations, Taiwan's exports of machine tools to Kazakhstan in the most recent few years came to less than USD 200,000. However, it rose to a record high of almost USD 3.7 million last year, which was 18 times higher than in prior years.

A sales representative for a European tech manufacturer says, "It's true that we have considered routing through Kazakhstan to access Russia, and we've also considered traveling through Uzbekistan, Mongolia, and China." Since the outbreak of the war, inspection delays for commodities have been endless, and export licenses are never granted. The departure of American rivals from the Russian market presents fantastic chances for Taiwanese enterprises, who must embrace the opportunity and move swiftly.

Trade lines passing via intermediary regions may potentially slow down after Taiwan tightened its restrictions. It may be challenging to explain if MIT equipment were discovered in Russia and opened up to reveal their Taiwanese origin. This is particularly true for machinery with unique characteristics and custom goods, where the risks are higher.

There are precedents for the detection of concealed countries of production.

"There was a case of a business in the industry selling machine tools to North Korea. Having received a tip from the FBI, the Taiwanese Bureau of Investigation visited and questioned people,” says the CNC factory manager. He acknowledges that sales to Russian customers in Turkey in the second half of 2022 increased steadily, but that this would soon have to end.

Is it really possible for small and medium-sized businesses to leave Russia and its population of over 146 million? “All I can say is that wherever there are a lot of people, there is a market,” reveals an executive at an auto parts and components manufacturer. 

As long as something is not on the restricted list, businesses will not lose any opportunity to make money.

Tags:
Read also:
  • News
2024, Thursday
19 September
14:57
EU allocates €400 million from frozen Russian assets for Ukrainian weapons, more to come — EU Ambassador
14:46
Exclusive
Strategic strike plans in place: Insights into Ukraine's planning process
14:26
Russian Defense Ministry pressures Putin to announce new mobilization
13:58
EU to allocate €160 million to Ukraine for energy security
13:35
KN-23 missiles
Russia's main allies in war against Ukraine: what they supply to Russian army
13:15
Crimea could be placed under UN mandate for "fair referendum" — Polish FM Sikorski
12:58
OPINION
Why Erdogan should not be considered Ukraine’s ally
12:32
Ukraine could join EU by end of this decade, says EU Ambassador
12:16
Exclusive
Russia deploys more forces to attemp advance on Lyman-Kupyansk direction - Kara Nebesna UAV crew commander
11:53
Exclusive
Strike on warehouses in Tver region will impact long-range weapon usage approval — military expert
11:28
Russia's September 19 missile, drone attack on Ukraine kills one civilian
11:05
Ukrainian strikes on Russian military depots may change entire combat theater - ISW
10:34
187 combat clashes errupt on Russian-Ukrainian frontline over last day — Ukraine's General Staff
10:18
Harris to meet Zelenskyy in Washington next week – Bloomberg
09:57
Russia loses 1,130 troops, 14 tanks and 13 armored vehicles in one day of war in Ukraine
09:37
Europe should be ready for war with Russia in 6-8 years — European defense chief
2024, Wednesday
18 September
21:20
Interview
"Where Russians committed atrocities, people greeted us on knees”: Ukrainian soldier’s story
20:54
At least 575 Ukrainian children killed as result of Russia's armed aggression
20:40
'US military aid to Ukraine draws world closer to brink of Armageddon': foreign manipulations for September 18
20:22
Russian drone drops explosives, injuring five civilians in Ukraine’s Kherson
20:10
What weapon might Ukraine have used to strike Tver ammo depot in Russia
19:55
103 combat engagements recorded in frontline, mostly in Kurakhove, Pokrovsk sectors
19:40
Ukraine may have struck Russian warehouse in Mariupol with Neptune missile
19:19
Ukrainian forces stop Russian counter-offensive in Kursk region - representative of AFU Commandant's Office
19:00
70 million tons of cargo transported through Ukrainian sea corridor over year - Zelenskyy
18:42
Exclusive
"Unprecedented explosions in military history”: Defense Express on ammunition depot destruction in Russia's Tver region
18:20
Exclusive
Corruption in Russia's MoD will help Ukraine to hit ammo arsenals: military observer on Tver region attack
17:51
OPINION
Victory plan essential, but implementation must follow
17:30
Ukraine’s parliament adopts UAH 500 billion increase in defense spending
17:12
NATO must respond to Russian drones' intrusion into its airspace — Romanian Defense Minister
16:53
Ukraine to receive second SAMP-T system from Italy by late September
16:24
Russia has its first FPV anti-aircraft drones: warfare enters new realm
16:19
Russian shelling of Ukraine’s Nikopol results in one death, child among the injured
16:16
Exclusive
September 11-18 live war map: Russia shifts offensive from Pokrovsk to south, Ukraine tears up Russian border
15:38
EU sanctions target financing of Russia’s battlefield products, says envoy
15:23
OPINION
Why is Putin blackmailing United Kingdom?
14:50
Lithuania to provide Ukraine with €50 million in additional aid by year-end
14:15
Finnish President Stubb calls for Russia’s removal from UN Security Council
13:57
"Strategy that can work": U.S. reviews Zelenskyy's Victory Plan
13:27
"10 months of ammo destroyed": military expert on Ukraine’s attack in Tver region
More news