Black market and defective equipment: how sanctions are crippling the Russian military industry
Léa Polverini – 27 June 2025 at 12:00 p.m.
Deprived of access to Western technologies, Russia is attempting to maintain its arms production through parallel channels. However, the components delivered are often defective or counterfeit, delaying deliveries and weakening its military capabilities.
The sanctions imposed by the European Union against Russia, which include a ban on the export and import of certain goods and are worth more than €139 billion, have significantly affected the economy of the country responsible for the invasion of Ukraine in 2022. The independent Russian media outlet The Insider examined the effects of these sanctions on a key sector in Russia today: the military industry.
In the defence sector, Moscow has been forced to implement a parallel market to continue sourcing military technology, and the manoeuvre has brought with it a host of complications. According to the newspaper, the market is saturated with commercial disputes and conflicts between suppliers and the state, particularly due to the delivery of defective components that often turn out to be Chinese counterfeits intended to replace Western brands that Russia is now deprived of.
One of the biggest smuggling cases uncovered by The Insider involves ARP Investment Limited, a company registered in the British Virgin Islands, a Caribbean tax haven, which was supposed to supply the Russian Ministry of Defence with microchips via the St Petersburg-based company Northern Star LLC... and which was not paid after delivering poor-quality components.
While the Caribbean company filed a lawsuit for 65 million roubles (nearly 707,600 euros), court documents state that the electronic components normally subject to sanctions came from Chinese manufacturers, with ARP being used to circumvent the export ban.
Have you considered refurbished goods?
Elsewhere, Russian arms technology giant Zaslon JSC refused to pay for a shipment of used and refurbished microchips delivered by importer ITC LLC. The latter, which had claimed nearly €850,000 in court, had its complaint dismissed by the court, which recognised the poor condition of the goods supplied.
This type of case is becoming increasingly common, as banks in Central Asia and Turkey are closing exporters' accounts at the first sign of dubious deliveries, and the Russian Defence Ministry is struggling to source high-quality electronic components, which are the cornerstone of modern weaponry.
As a result, the Russian army is facing several delays in the delivery of equipment such as drones, which are essential in the field, surveillance antennas, and intelligent target recognition systems for its air defence units, radars and missile guidance systems.
It is also impossible for Russia to set up a local production chain: the failed attempt by the Priboy factory in Taganrog to supply control equipment clearly showed that Russian manufacturers were unable to produce certain essential electronic components, which are usually manufactured abroad and therefore subject to sanctions.
It would take Russia between 15 and 20 years to develop a competitive national electronics sector, a long time that it does not have today in its war with Ukraine. In the meantime, the disorganisation of the Russian military industry testifies to the direct material impact of economic sanctions on the functioning of the Russian military-industrial complex.
Translated with DeepL.com (free version)