Why China’s UAV Supply Chain Restrictions Weakens Ukraine’s Negotiating Power

Commentary by Aosheng Pusztaszeri

Published December 16, 2024

This series-led by the Futures Lab and featuring scholars across CSIS-explores emerging challenges and opportunities likely to shape peace negotiations to end the war in Ukraine. All contributions in the series can be found by visiting Strategic Headwinds: Understanding the Forces Shaping Ukraine's Path to Peace.

The war in Ukraine has shown the transformative role of drone technology. Ukrainian forces have used first-person view (FPV) drones for real-time intelligence, surveillance, and reconnaissance of Russian positions and troop movements while also deploying cost-effective "kamikaze" drones to target Russian military assets, including tanks, artillery, transport vehicles, and bunkers. This capability has become central to Ukraine's survival on the battlefield; its removal would weaken Ukraine's power and thus provide negotiating leverage for Russia.

China is the dominant force in the low-cost drone market, with massive leverage over the world's drone component supply chain. This gives China leverage over the prosecution of the conflict and the proceedings of negotiations. New Chinese restrictions on the sale of drones and components to Ukraine are weakening the country's ability to produce drones critical to frontline operations. Meanwhile, Russia is working with China to accelerate its drone production.

To address this bottleneck and imbalance, U.S. and European partners can provide financial and material support to strengthen Ukraine's domestic production of critical drone components. Bolstering this critical capability will keep Ukraine functional on the battlefield and strengthen its position for future negotiations.

Ukraine's Dependence on Chinese Drones and Components

China is the undisputed leader in commercial drone production. The DJI Technology Company, a Chinese company and the world's largest commercial drone manufacturer, holds a remarkable 90 percent share of the U.S. commercial drone market and 80 percent of the global consumer drone market. China also leads in the production of essential drone components, such as small lithium-ion batteries, with Contemporary Amperex Technology Company, Limited, being the largest battery maker by capacity. Ukraine heavily relies on Chinese components and pre-assembled drones (Kyiv purchased 60 percent of DJI's global production of Mavic quadcopters in 2023).

On September 1, 2024, China imposed export restrictions on Chinese-manufactured drones and drone components to Ukraine and Russia, including flight controllers, carbon frames, motors, radio modules, and navigation cameras. This followed an earlier ban in June 2023, when China restricted its export of long-range drones weighing over 7 kilograms (15.5 pounds) to Ukraine and Russia. While China claimed these moves were to prevent its drones from being used in warfare, this justification rings hollow given that China continues to supply Russia with strategically significant "dual-use" technologies, such as semiconductors and drone engines, under its "no-limits" partnership with Moscow.

Relatedly, in October 2024, China halted its sale of drone batteries to Skydio, the largest U.S. commercial drone manufacturer, over sales to Taiwan. This move is limiting Skydio's production capacity, forcing the company to ration batteries until the spring of 2025 and limiting the supply of U.S.-made drones available to Ukraine.

The loss of key components can make countries resort to dumber, less effective munitions and other extreme measures. For example, during the Syrian Civil War, Assad regime forces quickly exhausted their stockpile of advanced munitions and projectiles and were forced to rely on crude and unsophisticated weapons like barrel bombs and cluster munitions, often with devastating consequences for civilian populations. When Russia faced initial Western sanctions in February 2022, it resorted to dismantling refrigerators and dishwashers to repurpose vital computer chips for its tanks. Despite these measures, Russia has never reshored its domestic chip production, instead turning to China for 90 percent of its chip imports.

In contrast, secure access to critical components can significantly bolster a nation's ability to stay in the fight. For instance, the U.S. Lend-Lease Act of 1941-1945 supplied the Soviet Union with essential raw materials such as steel, copper, aluminum, manganese, and coal during World War II. Historians argue that U.S. materials such as aluminum-which accounted for 42 percent of all aluminum used by the Soviets during the war-were crucial for the mass production of artillery, which enabled the Soviets to effectively counter and ultimately roll back German forces by 1944.

Effects on the Battlefield

Ukraine loses an estimated 10,000 drones per month. Given these squeezed supply chains, Ukrainian manufacturers have turned to European intermediaries to circumvent China's restrictions, a workaround that often comes with higher costs and limited availability. When components are available, they are vulnerable to price gouging, with some reports indicating that certain component prices have tripled since the sanctions were imposed. These factors are making the technology more expensive and reducing Ukraine's domestic drone production well below its potential capacity. While Ukraine has expanded its domestic production of fully-assembled drones, makeshift drones, and certain drone components-driven largely by volunteers and private companies- it lacks the funding to rapidly expand production and achieve the economies of scale needed to produce drones cheaply. While Ukrainian military units have managed to offset some of these pressures through crowdfunding, this support is unlikely to sustain growing future demands.

China's selective restrictions on drone components have directly benefited Russia. While on paper, China has limited its sales of drones and drone components to both Kyiv and Moscow, it also provided Russia with $14.5 million in direct drone shipments in 2023, compared to just $200,000 for Ukraine, likely through loopholes and third-party vendors. Further, smugglers can easily move components over China's vast land border with Russia. China also has allowed Russia to establish a drone factory in Xinjiang, likely to produce long-range Garpiya-3 drones destined for Ukraine-a move Beijing denies. These combined actions have bolstered Moscow's drone capabilities, allowing it to target Ukrainian positions, armaments, and critical infrastructure and erode one of Kyiv's key advantages-its innovative use of cheap commercial and makeshift drones. Without a stable and affordable drone supply chain, Ukraine cannot fully maximize its production capacity and as effectively challenge Russian forces on the battlefield, ultimately weakening its position in potential negotiations.

U.S. and European Responses

The United States and European partners can strengthen Ukraine's defense capabilities by financially supporting its domestic arms production, known as the "Danish Model." In this case, funding could subsidize and scale Ukraine's existing production of costly components, particularly flight controllers and batteries-significantly reducing production costs over the medium to long term. Further, Ukraine does not need to produce everything itself. It could still outsource the manufacturing of other complex parts, such as drone cameras, to allied-friendly nations that already have advanced capabilities, like France. While this approach will involve higher costs, these could be partially offset if allies, like the French, supply these components directly to Ukraine in the form of interest-free credits, repayable later-akin to U.S. support to the Soviet Union during World War II. Together, these efforts could help Ukraine maximize its drone production capacity and continue to lead in drone innovation during and after any negotiations.

An important consideration, however, is the negotiation process itself. Historically, such discussions often include prohibitions on military production. To address this, U.S. and European partners could frame their support as promoting the development of commercial drone technology for peaceful purposes: for example, FPVs can monitor front-line positions to ensure both sides are complying with a cease-fire. This strategy would align with potential negotiation frameworks by avoiding explicit increases in military drone production while enabling Ukraine to maintain its technological advancements in drone innovation and production. It might also level the playing field, which is increasingly titled in Moscow's favor. While Napoleon famously declared, "An army marches on its stomach," a more modern equivalent might be, "An army marches on its supply chains." Western allies cannot allow China to manipulate this critical supply chain in Moscow's favor.

Aosheng Pusztaszeri is a research assistant with the Intelligence, National Security, and Technology Program at the Center for Strategic and International Studies in Washington, D.C

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