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Japan Struggles to Halt Semiconductor Flow to Russia Amid Complex Global Trade Channels

Despite the harsh economic sanctions enforced by Japan against Russia in the wake of its incursion into Ukraine, the trade of Japanese-produced semiconductors to Russia persists, unfettered, largely via intermediary nations like China. Such complex trade routes circumvent Japan’s stringent laws that regulate direct exports, implying that a more comprehensive strategy is required to stem this technological supply.

An investigative report by Nikkei Asian Review indicates that the US and Japan uphold equivalent economic restrictions against Russia. However, Russian customs data collated by Indian research firm Export Genius unveil an intriguing aspect of the bilateral trade. An examination of import records from February 24, 2022, to March 31, 2023, for transactions exceeding US$50,000 reveals a minimum of 89 semiconductor transactions involving Japanese manufacturers. These deals, worth approximately US$11 million and encompassing at least two million units, predominantly stemmed from China (including Hong Kong), South Korea, and Turkey, in that order.

A similar report from Nikkei in April highlighted that despite the White House’s embargo on US-made semiconductors to Russia, they managed to infiltrate the Russian market through Hong Kong-based trading firms.

US regulations impact companies in these third-party nations, however, the Japanese Foreign Exchange Law only pertains to direct exports from Japan. Data on Japanese trade suggests that the total semiconductor exports to Russia in 2022 declined by 85% from the previous year to 150,000 units. Yet, Japan’s control over the chip trade via other countries remains significantly ineffective.

A case in point is a Hong Kong trading firm that offloaded about 4,000 Kioxia semiconductors to a Russian company last October, netting roughly US$170,000. Although Kioxia acknowledged its products are under export controls and mandates distributors to adhere to each country’s export regulations, it conceded it was unable to verify any instances of its products reaching Russia.

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