Hong Kong remains a key link in the flow of illicit memory chips to Russia, despite a drop in the supply of semiconductors and other restricted goods to Moscow to fuel its war effort in Ukraine.
US Commerce Department data showed deliveries through China and the territory fell by a fifth this year, while transshipments just through Hong Kong of Common High Priority Items (CHPL) – advanced components including microelectronics deemed by the US and EU as likely to be used for Russia’s war in Ukraine – fell 28% between January and May.
For the same period, transshipments of those items through mainland China, excluding Hong Kong, fell 19%, the official said.
Also on AF: Nikkei Slides in Wake of IT Chaos, China Tech Lifts Hang Seng
Both Hong Kong and China are seen by the US government as key global routes for Russia to source materials for its military, including semiconductors and drone parts.
“I think there’s some cause for being at least optimistic that we have been able to slow down some of this trade,” the official said, but added: “China is still our number one concern.”
The United States and its allies have accused China of supporting Russia’s war in Ukraine, in part by exporting parts and equipment needed by Moscow’s weapons makers.
The US State Department and Treasury imposed several rounds of sanctions on entities around the world with alleged commercial links to Russia’s military, including shell companies in Hong Kong that had been diverting semiconductors.
The official, who spoke on condition of anonymity, said the dip in illicit flows was the result of several factors, including aggressive enforcement by US authorities, as well as engagement with companies whose products are being transshipped.
“We are talking to any company whose items are showing up on the battlefield,” the official said, without giving names.
The Hong Kong government said it was “enforcing vigorously” sanctions imposed by the United Nations Security Council, following instructions from China’s Foreign Ministry, including those with regard to North Korea.
Sanctioned Russian Firms
A separate customs dataset from C4ADS, a Washington-based global security non-profit, showed that over 200 Hong Kong-registered firms shipped nearly $2 billion worth of goods to Russian buyers between August and December 2023.
The data, outlined in an upcoming report by The Committee for Freedom in Hong Kong Foundation (CFHK) and reviewed by Reuters, showed $750 million worth of CHPL items – ranging from high-end chips by Nvidia and France’s Vectrawave, to lower-end chips from Texas Instruments and Intel – were shipped via Hong Kong between August and December 2023.
Some of these restricted goods were shipped to sanctioned Russian firms, CFHK said.
Nvidia said in a response to Reuters questions that it halted sales to Russia in March 2022 and requires its customers to comply with all applicable US laws.
Texas Instruments told Reuters it “strongly opposes” the use of its chips in Russian military equipment and the illicit diversion of its products to Russia.
Intel said it operates in strict accordance with US export regulations and sanctions and holds suppliers and distributors accountable to the same standards.
Vectrawave did not respond to a request for comment.
Ukraine Drone Components
“Our research has highlighted numerous instances where Hong Kong-based companies have facilitated the transfer of sensitive technologies and commodities, undermining international security and stability,” said Samuel Bickett, a lawyer and author of the CFHK report.
Between August and December last year, a total of $17.6 million worth of Nvidia goods were shipped into Russia by Hong Kong consignors after being traded in countries including China, Taiwan, Turkey, Thailand, Serbia and the United Arab Emirates, according to customs records reviewed by Reuters.
Consignments included “Jetson TX2” Edge AI systems, which are among the components used in drones the Ukraine government has discovered on the battlefield.
“Pre-owned Jetsons are available through many second-hand channels. Although we cannot track products after they are sold, if we determine that any customer is violating US export controls, we will take appropriate action,” said John Rizzo, an Nvidia spokesperson.
Other high-end consignments included two shipments worth $1 million each of semiconductors from Vectrawave that were labelled as microprocessors.
Vectrawave is a maker of specialised semiconductors for high-tech communication and defence systems including radar.
The ease of setting up and registering new firms in Hong Kong has led to a proliferation of shipping and logistics firms and other intermediaries that have also facilitated restricted trade and monetary flows with Iran and North Korea, according to the CFHK report and an examination of Hong Kong companies registry filings by Reuters.
Some of these have been sanctioned by US authorities.
- Reuters with additional editing by Sean O’Meara
Read more:
As US Draws Up Firmer Curbs, Nvidia Plans New AI Chip For China
Russia Halts Trade on Main Bourse After Latest US Sanctions
Hong Kong, UAE Firms Hit With Sanctions for Russian Gold Deals
China Firms ‘Face More US Sanctions for Goods Going to Russia’
US ‘Looking Closely’ at China Banks Over War Aid to Russia
