Bring to Bear: A Look at Taiwanese critical import to Russia

It started when the Soviet Union severed relations with Taiwan on October 3, 1949. In response, Taiwan banned trade and investment in the USSR. The absence of diplomatic relations hampered trade and economic cooperation between the countries, which was mainly carried out on a non-governmental basis.

In 2014, after Russia's occupation of the Crimean peninsula and started a hybrid war against Ukraine, relations between Russia and Taiwan experienced a noticeable downturn.

However, by 2018, bilateral trade had generally adapted to the sanctions. Russia's full-scale invasion of Ukraine dealt a serious blow to the bilateral relations between Russia and Taiwan. 

A comparison of the value of exports (direct imports from Taiwan to the Russian Federation) and total imports day after the outbreak of the war, the Taiwanese Foreign Ministry strongly condemned Russia's actions.

In response, the Russian government added Taiwan to its list of unfriendly countries.

Since then, according to the Customs Administration of the Ministry of Finance of Taiwan, the volume of mutual trade has consistently declined year-on-year.

At the same time, Russia is heavily dependent on imports- in April 2022 62% of Russian companies reported that they could not find suppliers in the Rus-sian domestic market.

Because of the failure of Russia's domestic industry to meet these requirements, interest in cutting-edge Taiwanese technologies has grown significantly.

Taiwan's lack of systematic enforcement of export control against Russia has allowed the latter's importers to become more active.

Imports through third countries contributed to the increase in supplies to the Russian Federation.

Data on the volume of such imports represent the difference between the value of exports from Taiwan to the Russian Federation and the total value of all imported Taiwanese products received by Russia.

If during 2019-2021 indirect supplies did not exceed $840 million annually, then in 2022 they amounted to $1.75 billion, and in 2023 - $1.85 billion.

Following Russia's full-scale invasion of Ukraine in 2022, the European Union and the G7 imposed sanctions on Russian fossil fuel exports, including coal as of August 2022.

Before the invasion, the key buyer of Russian coal for Taiwan's energy needs was the Taiwan Power Company, commonly known as Taipower. In September 2022, Taipower announced that it had received its final batch of coal from Russia.

Although Taipower decided to stop importing Russian coal, supply to Taiwan has continued, albeit at a reduced level. According to data from the Taiwan Customs Service, from October 2022 to September 2024, Taiwan purchased $3.84 billion worth of Russian coal.

From March to December 2022, Taiwanese machine tools worth more than $133 million were imported to Russia. Thus, Taiwan became the second country after China, whose products were supplied to the Russian Federation.

The top-5 manufacturers whose machine tools were imported to Russia in 2022-2023 are I Ma-chine Tools Corp, Victor Taichung Machinery Works Co., Ltd, Kao Fong Machinery Co., L.K. Machine-ry Corp, Akira Seiki Co., Ltd.

In 2022, after the introduction of international sanctions, Russian companies faced the need to circumvent these restrictions. As a result, manufacturers and importers have had to establish cooperation with manufacturing plants from Taiwan through third countries.

In addition, the Russian trend has been to conceal the true origin of the machines. This is how numerous trademarks appeared under which imported equipment is sold.

In some cases, Russian entrepreneurs mark products with the brands of non-existent foreign manufacturers, while in others they label imported machines as made in Russia. 

One of the reasons is the fact that Russian legislation gives priority to Russian equipment during defense procurement. And getting a contract for supply to defense industries is always attractive for private businesses.

Overall, the Russian defence industry has been forced to increase the production of weapons and military products many times since 2022.

The corresponding demand for inputs has led to the intensification of supplier companies with close ties to the defence industry. The table in Annex 1 provides detailed data on manufacturers, importers, and suppliers of machine tools.

In 2022, after Russia's full-scale invasion of Ukraine, Taiwan strongly condemned Russia's actions, and Russia added Taiwan to its list of unfriendly countries.

Despite the political cooling, Russia's dependence on imports, especially of high-tech goods, has significantly increased demand for Taiwanese products as Western suppliers have become unavailable due to sanctions. 

In 2022-2023, Russian importers stepped up purchases of goods from Taiwan, such as machine tools, microelectronics and semiconductors, often using third countries to circumvent sanctions. 

Starting in 2022, the share of goods produced in Taiwan has significantly increased in the Russian market, which are not supplied directly from Taiwan to the Russian Federation but are supplied from third countries, such as China, Turkey and others.

Despite sanctions on Russian fossil fuels, Taiwan imports coal from Russia. From October 2022 to September 2024, Taiwan imported $3.8 billion worth of coal.

Others are metalworking machines and CNC equipment,  Taiwanese brands such as Sunmill and Tongtai Machine & Tool Co. supply equipment to Russian defence companies, including Zenit, Kovrov Electromechanical Plant and others and Taiwanese machine tools are fundamental for manufacturing of defence products at several Russian plants within the Rostec Corporation.