Russian Defense Giant Rostec Adapts to International Sanctions and Continues Producing Weapons with Western Components - New NAKO Analytical Report

International sanctions and export controls against the Russian defense conglomerate Rostec are being implemented unevenly. This allows the Kremlin to shift the Russian economy to a "wartime footing" and continue the production of weapons. These are the findings of a new analytical report (https://nako.org.ua/en/direct/sankciyi/rostec-under-pressure-sanctions-export-controls-and-the-evolution-of-russia-s-military-industrial-giant/) by the Independent Anti-Corruption Commission (NAKO), prepared with the support of the International Renaissance Foundation.

Rostec is Russia's largest state-owned defense and technology conglomerate, uniting hundreds of enterprises that produce military electronics, aviation, armored vehicles, and optics for the Russian army. NAKO researchers identified at least 482 key entities within the corporation, including 16 holding companies and 33 direct subsidiaries.

NAKO's analysis demonstrates that the global system of restrictions against the Russian military-industrial complex is fragmented, and country approaches differ substantially.

For instance, Ukraine has imposed sanctions on nearly 72% of all identified Rostec companies, while the US stands at 45%, and the EU shows more modest figures at 23%. Despite this, Switzerland, which formally mirrors European sanctions packages, has additionally included American designations in its lists, reaching a coverage of nearly 40%. The United Kingdom introduces sanctions only against a limited number of companies that strictly satisfy its domestic legal standards and sanctions priorities. Canada and New Zealand respond only when sanctions have been simultaneously imposed by both the US and the EU, while Australia adopts the most conservative position, acting exclusively after a broad international consensus is reached.

NAKO analysts emphasize that restrictions against Rostec are not limited to traditional sanctions. Export controls play a massive role, as they operate faster and more flexibly than political sanctions packages.

The United States serves as a prime example. Out of 218 Rostec structures within the US regulatory scope, 41 companies are not subject to traditional sanctions but are listed on export control blacklists (the Industry and Security Bureau's Entity List under the US Department of Commerce). These include 18 enterprises of the KRET concern, 16 from Roselectronics, and two each from Technodinamika and the Kalashnikov Concern. This deprives them of access to US-origin goods and technologies without lengthy bureaucratic procedures.

One of Rostec's holdings-KRET (Radio-Electronic Technologies Concern)-unites 80 enterprises, according to the Main Directorate of Intelligence of the Ministry of Defense of Ukraine (GUR). NAKO, however, analyzed just over 40. The concern produces electronic warfare (EW) systems and avionics for Su-35 fighter jets, which regularly attack Ukraine. Despite investigations documenting the presence of British microelectronics in KRET systems, the United Kingdom has imposed sanctions on only one enterprise within this holding, completely ignoring the other eight companies involved in production.

Although Rostec has managed to localize certain production lines, it remains critically dependent on Western and, now, Asian microelectronics and precision machine tools. Russia is incapable of independently creating the most advanced technological layers (such as high-end semiconductors and sensors). Consequently, it is deepening cooperation with China, India, and countries in the Middle East and Africa.

As noted by Viktoriia Vyshnivska, the author of the analytical report and senior researcher at NAKO, Rostec is a conglomerate of large and small companies combined to achieve maximum centralization of the Russian military industry.
"Under the pressure of sanctions, this backbone of the Russian military machine simultaneously demonstrates an ability to adapt alongside significant structural challenges. This is precisely why pressure on Rostec must only intensify: through sanctions, export controls, financial, and resource restrictions," Vyshnivska emphasizes.

Independent Anti-Corruption Commission (NAKO)

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The Independent Anti-Corruption Commission (NAKO) is a Ukrainian non-governmental organization that has been fighting corruption in the security and defense sector since 2016. Since the beginning of the full-scale invasion, NAKO has focused on identifying Western components in Russian, Iranian, and North Korean weaponry, as well as formulating proposals for the sanctions lists of the EU, US, and UK. Representatives of the organization are members of the Public Anti-Corruption Council under the Ministry of Defense of Ukraine and coordinate the Public Sanctions Council under the Office of the President of Ukraine.

This release was published on openPR.