Taiwanese companies have been supplying Russia with strategic machine tools despite the international restrictions, according to a new report.
In an investigative collaboration, Taiwan Reporter, an independent Taiwanese media outlet, and The Insider, an independent company specializing in Russian affairs, claim to have unveiled a web of covert dealings involving Taiwanese machine tools flowing into Russian state-owned military industrial enterprises and nuclear physics institutes.
The revelation comes against the backdrop of heightened global scrutiny, trade sanctions and export controls. Since the beginning of the Russia-Ukraine war, Moscow's access to strategic tools to maintain its war machine has become difficult as sanctions sought to close export control loopholes.
President Vladimir Putin has sought to soften the blow to the Russian economy by seeking a close economic partnership with China, but Beijing alone hasn't been able to support Moscow's technological requirements because of complex supply chains.
The investigation delved into Russian customs data, revealing that export controls couldn't effectively deter Russian manufacturers from obtaining Taiwanese machine tools through intermediaries. Moreover, it was discovered that some of these machine tools ended up in nuclear research institutes and military industries.
Taiwan Reporter and The Insider obtained exclusive procurement information from the Russian government, shedding light on a situation where Taiwanese manufacturers can't seemingly regulate the destination of their machine tools, the report said on January 24.
The investigation unearthed the significant role played by Turkey as a transit point for Taiwan's exported machine tools. Customs statistics showed a 45% increase in the total value of Taiwan's machine exports to Turkey between January and October 2023, compared to the same period in 2022. This sudden spike catapulted Turkey into being Taiwan's leading export market for machine tools, albeit unofficially.
While many Western countries, including Germany, ceased machine tool exports to Russia in the wake of its invasion of Ukraine, Taiwan continued to engage in the trade and witnessed a substantial surge in machine tool exports to Russia throughout 2022.
"Taiwan has cooperated with the resolutions of the international community from the beginning and announced that it will join economic sanctions against Russia. The Ministry of Economic Affairs has also successively announced a stricter review of exports of Russian products and expanded export controls to Russia," Taiwan's Ministry of Foreign Affairs told Newsweek in a statement.
Taiwan's Ministry of Economic Affairs and the U.S. State Department didn't reply to the request for comment by the time of publication.
The investigation further exposed the pivotal role of a Russian importer primarily engaged in evading sanctions related to machine tools. Among the Russian companies procuring Taiwanese machine tools via third countries in 2023, I Machine Technology emerged as the largest importer in terms of volume.
An anonymous Taiwan machine tool and components industry association employee recounted his experience at a Machine Tool Exhibition in Beijing in April 2023. Despite the prevailing conditions, Russian buyers were present at the event, conducting cash transactions and transporting their purchases back to Russia.
In an interview with The Reporter, "Mr. Chen," a manager at Excetek, a Taiwanese manufacturer, discussed how his company navigated Taiwan's expanded export controls in January 2023. The company sent its export models for approval to Taiwan's Industrial Technology Research Institute, and the report confirmed that the wire-cutting machines in question didn't fall under Taiwan's export control purview.
Mr. Chen emphasized that Excetek was unaware of any procurement related to the Budker Institute of Nuclear Physics and pledged to urge their agent to refrain from selling products to sanctioned buyers.
Additionally, Mr. Chen highlighted the challenges Taiwanese manufacturers face in controlling the flow of machines, citing the confidentiality of customer lists and concerns about direct contact between manufacturers and end buyers as hurdles.
The investigation extended to other Taiwanese manufacturers, with Excetek also implicated in a similar case. Russian procurement data revealed that the Budker Institute of Nuclear Physics, sanctioned by the U.S. Department of the Treasury, purchased Excetek's "NP600L" and "VG500" machines through the importer Sodikom-Tsentr in June 2023.
Furthermore, Taiwan Reporter uncovered Russian government procurement records indicating that Russia's state-owned military enterprise the Comet Company acquired a five-axis machining center from Taiwan's Pinnacle Machinery through Moscow-based trader AMG in September 2023. The machine's purchase price amounted to approximately NT$34.2 million (97.7 million rubles).
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About the writer
Aadil Brar is a reporter for Newsweek based in Taipei, Taiwan. He covers international security, U.S.-China relations, and East Asian ... Read more
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