Insights

Shifting Trends in Russian Biotech Supply Chains

 

In 2021 and early 2022, the United States and European Union enacted a series of coordinated sanctions and export restrictions on Russian entities following the poisoning of Russian opposition figure Aleksey Navalnyy and Russia's invasion of Ukraine—4,000 entities between the Departments of State and Treasury in the first two years of the war, and the number is steadily climbing. 

 

The impact of these sanctions is reflected in export data from the US Census Bureau, which suggests Russia may also be circumventing sanctions and export restrictions to obtain US laboratory equipment through third countries, including Hong Kong, Taiwan, and Turkey. As a test case, this study explored exports of US gas chromatographs—an exemplar of sophisticated, though commonly used. laboratory technology—to assess Russian import trends between 2018 and 2023.

 

US Census Bureau data revealed exports of US gas chromatographs to Russia cratered between 2018 and 2023, going from over $1200k in annual exports to zero in 2022 and 2023. In a different fashion—though suggesting the same overall trend—sales of microscopes and similar optical equipment leapt from around $200k to $1200k between 2020 and 2021, and then vanished, with no recorded exports in 2022 and 2023.

The same data, however, revealed a significant increase in exports to Hong Kong, Taiwan, and Turkey (depicted below, top to bottom), with exports more than doubling to Hong Kong and Taiwan between 2018 and 2023, and skyrocketing nearly 400 percent to Turkey during the same time. Exports to Belarus and Azerbaijan also increased during that time frame, though the value of those sales was too low to draw any conclusions, and sales to Kazakhstan were irregular, though similarly too low to be an indicator. There was no appreciable change in exports to China.
 

 

It is likely this indicates a shift in Russian procurement routes, potentially leveraging companies in these third countries to circumvent restrictions on exports to Russia. Taiwan and Hong Kong already have well established life sciences industry and these shipments are unlikely to raise flags of regulators. In the case of both Hong Kong and Turkey, the marked increase in exports occurred between 2021 and 2022—corresponding with the war and imposition of restrictions.

 

Given the global upheaval between 2018 and 2023—the pandemic, sanctions, and invasion of Ukraine--it is also possible the decrease in Russia and increase in these countries is unrelated. For example, another plausible explanation would be an increase in life sciences research in these countries following the pandemic. If this were the case, however, one might expect exports to other countries in the region—such as China—to also rise, which is not the case. While China has robust manufacturing capabilities and could possibly produce this technology indigenously, the industry leaders in gas chromatography remain Western countries and therefore China would be likely to require some imports from abroad.

 

Analysis of data for other technology types and over a longer period would help confirm the existence of and reason for these trends.

 

Source: US Census Bureau; "Global Market Finder: An Interactive Tool for U.S. Exporters"; https://www.census.gov/library/visualizations/interactive/export-markets.html; Accessed 30 March 2024; Search terms included for HS codes 9027.20.2000 and 9012.90.000, filtering for Azerbaijan, Belarus, China, Kazakhstan, Hong Kong, Taiwan, Turkey, and Russia.