The billion-dollar supply chain behind Russia’s weapons-making ,achines: Who’s selling? 23 January 2025

...CNC machines allow for the rapid production of the necessary high-precision components made of metal and other hard materials, which are required for the production of the vast majority of defense products. Earlier, United24 media was able to identify dozens of such machines at Russian defense plants.

The Economic Security Council was able to analyze customs data from the beginning of 2023 and the first seven months of 2024. The data showed that despite the tightening of sanctions and export restrictions, imports of critical CNC equipment and components to Russia continue.

Between January 2023 and July 2024, more than 22,000 CNC machines, components, and consumables were delivered to Russia for a total of $18.2 billion. While China is Russia’s primary supplier of CNC machines and components, European countries still account for a significant portion of these critical imports. The machines and their components are supplied through intermediaries in third countries.

During the same period, Russia received more than 10,000 CNC machines worth more than $403 million, as well as related components and consumables produced by companies located in EU member states worth more than $1.1 billion (most of which came from Italy and Germany). Switzerland also accounts for a significant share of imports.

Between January 1, 2023, and July 31, 2024, more than $4 billion worth of machine tools were supplied to Russia. Manufacturers from Asia, including China, Taiwan, and South Korea, are leading the way in deliveries.

The share of manufacturers from European countries is much smaller but still significant. For example, Russia was able to import products from Italy worth more than $168 million.

In addition, Russia was able to get several dozen machine tools from EU subsidiaries in different regions...

The National Security Council of Ukraine emphasizes that, despite Russia maintaining access to the market for machine tools and their components, further exports should be prevented. Analysts from the Council recommend that the EU supranational bodies and the governments of individual member states should enhance oversight over compliance and due diligence practices employed by the operators associated with the EU. They suggest the following steps:

A. Extend all export and re-export bans and restrictions on CNC machines and related components that apply to EU parent companies (including the “No Russia” clause) to the activities of European manufacturers' subsidiaries in third countries.

B. Investigate all cases of products manufactured by third-country subsidiaries of European operators being delivered to Russia, as mentioned in this document and its annexes.

C. Provide detailed and strict instructions to European manufacturers of CNC products to investigate, stop, and prevent the supply of their products and technologies to Russia.

D. Align the obligations for sanctions compliance and due diligence between parent and subsidiary companies. In particular, require both parent and subsidiary companies to implement the same comprehensive measures to prevent, terminate, and investigate instances of their products being supplied to Russia. Furthermore, the parent company should be held accountable for the compliance or non-compliance of its subsidiaries with these obligations.

E. Enhance oversight by European manufacturers over the activities of their third-country subsidiaries, especially those in the PRC. Oblige both parent companies and related subsidiaries to conduct regular physical (on-site), photo and video inspections of the end user and end-use of products manufactured in third countries.

F. Introduce clear types and scope of liability for parent companies regarding the activities, negligence, or violations of sanctions and export restrictions by their subsidiaries. In particular, in cases where the parent company knew or should have known about the violations or negligence of its subsidiaries and failed to take appropriate measures to prevent them.

“Sanctions can only succeed if supported by robust enforcement mechanisms. It is crucial for the EU and companies operating within its jurisdiction to ensure strict compliance with export restrictions and prevent any circumvention through third countries,” stated Vladyslav Vlasiuk.