Taiwan’s government has taken immediate steps to implement export controls and other measures to limit economic activity between Taiwan and Russia following the latter’s invasion of Ukraine.
Within a day of Russia’s February 24 invasion of Ukraine, Taiwan’s Ministry of Foreign Affairs announced that it would join the U.S., EU countries, and other nations in imposing sanctions on Russia in the aftermath of the country’s invasion of Ukraine. Since then, we’ve been watching developments in this area closely.
Immediately following the invasion, Minister of Economic Affairs Wang Mei-hua, announced that her ministry’s Bureau of Foreign Trade (BOFT) would review all exports from Taiwan to Russia based on the voluntary Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement). While Taiwan is not a member of this regime, the arrangement provides a set of guidelines for it to follow, including a list of goods and one of munitions. Given Taiwan’s strengths in semiconductors, computers, and other electronic goods, we expect these extensive lists to be applied when Taiwan conducts its strict export reviews.
The BOFT took action on April 6, publishing the “High-Tech Commodities List for Exportation to Russia” (the List) pursuant to Item 3 of Article 13 of the Foreign Trade Act and imposing new restrictions on the 57 commodities listed. These commodities are synchronized and principally similar to those restricted by other countries participating in the Wassenaar Arrangement. They include those categorized as electronics, computers, telecommunications, information security, sensors and lasers, and navigation and avionics, as well as several others. Effective immediately on the date of the List’s publication, exporters must apply for special permits to continue exporting goods of this nature to Russia. Those who do not comply could face a penalty of up to NT$3 million (US$102,000) or suspension of their import/export licenses for up to one year.
On May 6, Taiwan also announced a ban on exports of high-tech products to Belarus in response to the country’s role in the Russian invasion of Ukraine. The ban follows similar moves by the U.S., EU, UK, and Japan, and is seen as largely symbolic given Taiwan’s minimal trade with Belarus.
Considering the amount of manufacturing many Taiwanese electronics companies do within the People’s Republic of China (PRC) and that country’s unwillingness to participate in international sanctions against Russia, it may be difficult to ensure full compliance with the sanctions programs for goods manufactured outside Taiwan.
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chip foundry, has ditched the Russian market, cutting off the company’s contract manufacturing for the Moscow Center of SPARC Technologies’ Elbrus chips, which are reportedly used in Russian military and intelligence systems. TSMC also has a key role in the production of chips used in the automotive industry, and recent reports indicate the Russian Lada car brand has had to halt production due to shortages of such chips.
For a period following the outbreak of the war, Taiwanese electronics manufacturer ASUS continued to conduct business with Russia. However, facing intense international pressure, including a direct appeal by Ukraine’s Vice Prime Minister (and Minister of Digital Transformation) Mykhailo Federov, the company announced on March 14 that its shipments to Russia were at an “effective standstill,” and that it would follow international regulations. ASUS then announced that it would donate NT$30 million (US$1.02 million) to the Taiwan government-sponsored humanitarian relief fund for Ukraine.
In addition, Taiwan’s state petroleum company, CPC Corp., decided not to renew its five-year sales and purchase agreement for Russian liquid natural gas imports after the contract with Sakhalin Energy Investment Co. Ltd. expired in late March. Russia accounted for 9.7% of Taiwan’s total LNG imports of 19.44 million metric tons in 2021.
Taiwan has not yet explicitly levied financial sanctions on Russia, but the government has indicated that it will carefully assess the risks and work to prevent Taiwan from turning into a money laundering location as a result of the global sanctions wave. 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) in order to facilitate reporting by Taiwan’s financial and related units of suspicious transaction records in a timely manner.
The FIU requires financial institutions to review the transactions they handle and compare them with sanctions lists issued by Europe and the U.S. to determine whether they are subject to sanctions rules. In the case of abnormally large transactions, a financial institution should keep a record of them to prevent Taiwan from becoming a money laundering transit location. As a practical matter, however, we are hearing from local banks that in the meantime, they are taking deliberate steps to avoid all Russia-related business and transactions.
Potential Russian sanctions on Taiwan must also be considered. Taiwan has been included in the list of 48 countries and territories considered “unfriendly” by Moscow, published on March 7 by the Russian government. However, Taiwan authorities have said that such an inclusion is likely to have little effect on Taiwan, because Russia does not supply a significant portion of Taiwan’s industrial materials.