A Reuters exclusive investigation has revealed that Chinese drone specialists have been working side by side with sanctioned Russian arms manufacturer IEMZ Kupol to improve its drone fleet. The Russian company, long blacklisted by the West, has played a critical role in supplying drones for the war in Ukraine, despite supposedly being cut off from international markets and technology. By tapping foreign expertise, it has found ways to keep advancing its drone programme, highlighting how sanctions can be undermined not through direct trade, but through hidden networks of people and companies operating across borders.
Sanctions workaround in action
The Russian arms company at the centre of this case has been under US and EU sanctions for years, formally cut off from Western markets and suppliers. Yet according to Reuters, Chinese drone experts were brought in to work directly with its engineers, providing technical knowledge to improve the performance of its military drones. These are the same drones that Russia has deployed extensively in Ukraine, used for both reconnaissance and precision strikes.
On paper, sanctions should have crippled the firm’s ability to upgrade its technology. In practice, by tapping overseas expertise, it has managed to bypass restrictions and keep pace with the demands of modern warfare.
This is the uncomfortable truth: sanctions don’t always stop bad actors; they force them to get creative. The weak link is often not the sanctioned entity itself but the global network of suppliers, intermediaries, and consultants that feed into it.
What could be hiding in your supply chain?
When most companies think about supply chain risk, they picture missed shipments, price volatility, or quality issues. But in today’s regulatory environment, the bigger danger often lies in what you can’t see. Sanctioned entities, criminal networks, and hostile states rarely buy sensitive technology directly. Instead, they exploit the gaps in global trade: intermediaries, resellers, shell companies, and subcontractors that obscure the true end user.
Dual-use components hiding in plain sight
Drone motors, navigation chips, or high-resolution cameras might be destined for commercial use on paper, but once they leave your warehouse, do you know where they end up? These are everyday products that can easily cross the line into military applications. Without end-use verification and tracking, you risk your goods becoming part of a weapons programme.
Third-party distributors and resellers
Even if your direct customer is low risk, what about their customer? A second- or third-tier distributor might be selling your products into sanctioned markets without your knowledge. Unless you map your supply chain deeply, you could unknowingly be enabling the very activities sanctions are meant to stop.
Shell companies and hidden ownership
Sanctioned actors frequently use front companies with clean paperwork to buy what they need. These shell firms may look legitimate on the surface but exist only to disguise who is really behind a purchase. Screening only the immediate buyer is not enough: you need to identify the beneficial owners lurking in the background.
Technical expertise as a hidden export
It isn’t only goods that travel. In this case, the most valuable export wasn’t a motor or a chip but the know-how of Chinese specialists embedded in a sanctioned Russian programme. Knowledge transfer through consultancy, training, or joint ventures can be just as risky as moving physical products.
The ripple effect
The Russian drone revelations may seem like a distant problem confined to the battlefield, but their impact stretches far wider. The same week the Reuters story broke, two of Denmark’s airports were forced to close after unauthorised drones repeatedly disrupted flights. While unrelated in origin, both incidents highlight a reality that can’t be ignored: drone technology is moving quickly, crossing borders, and finding new uses: from military strikes to airport disruption.
This is the ripple effect of weak controls. Once technology or expertise slips through the cracks of sanctions, it doesn’t just fuel conflict; it sets precedents for how easily global supply chains can be bent to unintended purposes.
For regulators, that means redoubling efforts to close gaps in enforcement. For businesses, it means recognising that supply chain due diligence is the first line of defence against these risks rippling outward. A component diverted today could become tomorrow’s front-page story, whether in a warzone or at an airport.
Close gaps before they’re exploited
Sanctions, export controls, and dual-use rules are only as strong as the supply chains that support them. For businesses, the responsibility is clear:
- Map your supply chain in depth: go beyond first-tier partners and trace where components, services, and knowledge flow next.
- Screen for hidden risks: including shell companies, opaque ownership, and distributors in high-risk jurisdictions.
- Evaluate dual-use exposure: understand how seemingly harmless products could be repurposed.
- Strengthen monitoring: use technology and audits to flag anomalies before they escalate.
- Train your people: procurement, sales, and technical teams must know how to spot red flags, challenge suspicious orders, and understand the risks of dual-use items.
The cost of ignoring these steps isn’t just regulatory fines, it’s reputational damage and the risk of becoming part of someone else’s sanctions workaround.
Because if you don’t know your full supply chain, someone else might be using it for theirs.
