By Stephen Blank and Andrew Fink
January 16, 2024
CEPA
Sanctions improve over time, as the US government is now demonstrating. Even so, additional steps must be taken to hurt Russia’s war machine
Just as Washington shut down for the long holiday on December 22, the US Treasury’s Office of Foreign Assets Control (OFAC) quietly released a determination that could have enormous impacts on Russian military production and therefore, on the war in Ukraine.
The determination authorizes the sanctioning of any foreign financial institution that has conducted or facilitated the supply, sale, or transfer to Russia of a range of items critical to Russia’s military-industrial base, including computer numerical control (CNC) machines, nitrocellulose, high-precision ball and roller bearings, turbine lubricants and turbine lubricant additives, and internal navigation systems and fiber-optic gyroscopes.
The OFAC document is not in itself a sanction. Rather it is an authorization for the US government to impose sanctions — for it to employ aggressive measures and, most importantly, sanctions enforcement.
This, after all, is how sanctions work. They begin with big-picture measures and are later improved as greater understanding emerges of how to ensure the target hurts. This is too often ignored by sanctions-don’t-work critics, who fail to grasp how the process gets better over time.
This may well be a harbinger of a whole new generation of sanctions targeting Russian military production, not just the financial facilitators of Russia’s war machine, but the trans-shippers, the intermediate companies, possibly even the salespeople and manufacturers that help Russia’s war machine keep humming.
It indicates a US government recognition of something very important — Russia has some major industrial weaknesses.
A major case in point is OFAC’s new focus on turbine lubricants and turbine lubricant additives. Mechanical lubricants are made of oil, and Russia has an unlimited supply of oil, so why on earth is OFAC trying to disrupt supply to Russia?
True, Russia has more than enough lubricants. But saying lubricants are made of oil is like saying bread is made of flour. If you don’t use other ingredients like yeast and salt, you end up baking a pretty disappointing loaf.
Modern mechanical lubricants require special chemicals called “lubricant additives” that give them special properties — like making them effective at high pressures, or changing their viscosity to work at higher or lower temperatures, or to prevent them from foaming or corroding.
Most of the companies that make these special chemicals are either American or European, and Russia is currently experiencing a lubricant shortage because these firms pulled out after Putin began the full-scale invasion of Ukraine two years ago.
Since then, much of the gap has been filled by Asian exporters, the biggest among them the Xinxiang Richful Lube additive company of Henan, China. This company appears to have one large additive manufacturing facility that is keeping Russia’s lubricant production going.
It also is obtaining more lubricant exports from South Korea, whose exports to Russia surged 116.7% in 2022. Nevertheless a search of Chinese lubricant exports and exports to Russia suggest that while China is expanding its domestic lubricant production, it still cannot satisfy Russia’s needs and demand. Hence the continuing dependence on the West.
Many of the additive chemicals used in turbine lubricants are probably also used in lubricants for other applications for the more advanced Russian tanks, but also for those used in the older diesel-powered models that Russia is restoring to service as Ukraine destroys more and more of their equipment.
OFAC’s new focus on turbine lubricant additives highlights further opportunities in the chemicals sector, where Russia has numerous major industrial weaknesses.
For example, another critical lubricant additive is lithium, which is used as a thickener in many greases, including a grease used by the Russian military (though it is unclear if lithium is used as an additive in any Russian-produced turbine lubricants.)
Unlike many other lubricant additives, lithium is not a synthetic chemical, it is just an element — but Russia has no domestic supplies of lithium. Since November 2022, Russia has imported large quantities of lithium hydroxide for use as lubricant additives, also from China.
Lubricant additives might be just the start. Take antifreeze, something that is essential to keep the Russian war machine humming in winter. The only Russian company certified to make this product for the Russian military is Nizhnekamskneftekhim in Tatarstan, a subsidiary of the Russian chemical giant SIBUR (which is also 45% owned by two of Putin’s bag-men, Leonid Mikhelson and Gennady Timchenko, both the subject of Western sanctions).
Nizhnekamskneftekhim just announced it had opened a new plant to produce propylene glycol — an important chemical used in a variety of applications like pharmaceuticals, foods, plastics, and antifreeze. According to the company, before it opened this plant, Russia had to import all of its propylene glycol. The new plant will satisfy 20% of domestic demand.
Propylene glycol is just one important chemical that Russia lacks, a look at SIBUR’s recent press releases shows it boasting about producing specialized chemicals that used to be imported, maleic anhydride (MAN) and n-butyl lithium.
Russian chemists are likely dependent on imported equipment and/or precursors to make these chemicals (and certainly, they are dependent on lithium imports). Import records show that Nizhnekamskneftekhim is still importing equipment from Europe and China to produce chemicals like benzene ethylene and propylene. And why shouldn’t it? Nizhnekamskneftekhim
and other important Russian chemicals companies are still not sanctioned by the major Western powers.
This is why the new OFAC determinations are so important. Until now many Western and Asian companies have been indirectly keeping the Russian war machine going, selling Russia the know-how it needs to destroy Ukraine and the world order, and to project the image of an industrial giant even though it is, in fact, a second or even third-rate industrial power.
If the US government and our allies act swiftly and decisively to impose new sanctions, especially on industrial tools and chemical precursors, Russian military-related production could be crippled.
Stephen Blank is Senior Fellow, Foreign Policy Research Institute. www.fpri.org
Dr. Andrew Fink is Senior Russia Analyst. www.Exovera.com