Taiwan sanctions Russia after the Russia-Ukraine War

Following Russia's invasion of Ukraine, Taiwan's government immediately moved to enact export controls and other measures to restrict trade between Taiwan and Russia.

A day after Russia's invasion of Ukraine on February 24, Taiwan's Ministry of Foreign Affairs declared that the island nation would impose sanctions on Russia alongside the United States, the European Union, and other countries. Since then, we have kept a close eye on developments in this area.

Following the invasion, Minister of Economic Affairs Wang Mei-hua declared that all exports from Taiwan to Russia would be subject to review by her ministry's Bureau of Foreign Trade (BOFT) in accordance with the voluntary Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement). Taiwan is not a part of this regime, but it is still given a set of rules to abide by, including a list of goods and one of weapons. We anticipate that these lengthy lists will be used when Taiwan conducts its stringent export reviews given its strengths in semiconductors, computers, and other electronic goods.

The "High-Tech Commodities List for Exportation to Russia" (the List) was published by the BOFT on April 6 in accordance with Item 3 of Article 13 of the Foreign Trade Act, and new restrictions were placed on the 57 commodities listed. These goods are coordinated and largely the same as those that other Wassenaar Arrangement participants have restricted. Electronics, computers, telecommunications, information security, sensors and lasers, navigation and avionics, as well as a number of other fields, are among them. Exporters may not export such goods to Russia after the date of the List's publication without first obtaining special permits. If they do not comply, they risk having their import/export licenses suspended for up to a year or a fine of up to NT$3 million (US$102,000).

In response to Belarus' participation in Russia's invasion of Ukraine, Taiwan also announced a ban on high-tech product exports to Belarus on May 6. Given Taiwan's scant trade with Belarus, the ban is seen as primarily symbolic and follows similar actions by the U.S., EU, UK, and Japan.

It may be challenging to guarantee complete compliance with the sanctions programs for goods made outside Taiwan, given the volume of manufacturing many Taiwanese electronics companies do within the People's Republic of China (PRC) and that nation's unwillingness to participate in international sanctions against Russia.

The largest chip foundry in the world, Taiwan Semiconductor Manufacturing Co. (TSMC), has abandoned the Russian market, ending its contract manufacturing with the Moscow Center for SPARC Technologies' Elbrus chips, which are allegedly used in Russian military and intelligence systems. According to recent reports, the Russian Lada car brand was forced to halt production because of a shortage of the chips used in the automotive industry, which are also produced in large part by TSMC.

Taiwanese electronics manufacturer ASUS carried on doing business with Russia for a while after the start of the war. However, in response to strong international pressure, which included a direct appeal from Mykhailo Federov, the vice prime minister of Ukraine and minister of digital transformation, the company declared on March 14 that its shipments to Russia were at a "effective standstill" and that it would adhere to international laws. The Taiwanese government-sponsored humanitarian relief fund for Ukraine would receive NT$30 million ($1.02 million) from ASUS, it was then announced.

Additionally, after the contract with Sakhalin Energy Investment Co. Ltd. expired in late March, Taiwan's state petroleum company, CPC Corp., decided not to renew its five-year sales and purchase agreement for Russian liquid natural gas imports. 9.7% of Taiwan's 19.44 million metric tons of LNG imports in 2021 came from Russia.

Although Taiwan has not yet formally imposed financial sanctions on Russia, the government has made it clear that it will carefully evaluate the risks and take steps to stop Taiwan from becoming a hub for money laundering as a result of the wave of international sanctions. In order to facilitate the timely reporting of suspicious transaction records by Taiwan's financial and related units, the Financial Intelligence Unit (FIU), a special unit under the Ministry of Justice's Investigation Bureau, has established a "Russia Sanctions Zone" to link the sanctions lists of the EU and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC).

The FIU mandates that financial institutions examine the transactions they handle and assess their compliance with sanctions regulations by comparing them to sanctions lists released by the US and Europe. To avoid Taiwan becoming a hub for money laundering, financial institutions should keep track of transactions that are unusually large. Practically speaking, however, local banks are reportedly making conscious efforts to avoid any business or transactions involving Russia in the interim.

Taiwan may face Russian sanctions, which must be taken into account. Taiwan is one of the 48 nations and territories Moscow has deemed "unfriendly," according to a list released by the Russian government on March 7. Russia does not supply a sizable portion of Taiwan's industrial materials, according to Taiwanese authorities, so such inclusion is likely to have little impact on Taiwan.

By fLEXI tEAM