During the last three years, an economic shift that was quite inconspicuous has been taking place within the occupied eastern and southern regions of Ukraine. Isolated commercial operations are now expanding into a complex system of supply chains of equipment and goods that allow the rebuilding and economic exploitation of these occupied oblasts.
On one hand, Russia maintains political and military power here; on the other, various private and state-affiliated companies from different countries are taking their places and filling the niches created after Western companies withdrew – mainly by providing various pieces of heavy machinery and equipment, building telecommunications networks, as well as purchasing or transporting local raw materials. This process is partially legal, partially shady, and politically explosive. While Ukraine regards it as economic collaboration, which is illegitimate from its perspective, Russia sees it as reconstruction and trade.
Documented activity — machines, quarries and construction
There have been documented instances of business dealings: In November 2023, two Chinese companies sent their representatives who signed an agreement to deliver stone-crushing equipment for use at the Karansky quarry in southern Donetsk; the news was reported in Moscow by Evgeny Solntsev, who was then the self-proclaimed “prime minister” of the Donetsk puppet state, along with staged pictures of Chinese representatives standing next to separatists and their flags.
Crushed stone from Karansky quarry has been utilized in various construction works in the occupied territories, particularly in Mariupol, where the amount of reconstruction is quite intensive and has even raised ethical questions due to the possibility of overlap between areas of reconstruction and the site of mass civilian casualties. Some firms were contacted for statements, including Zhongxin Heavy Industrial Machinery, and received no responses, whereas Amma Construction Machinery, among others mentioned, could not be confirmed through public records.
Scale and presence — dozens of companies, thousands of installations
Based on open-source investigations and human rights organizations that monitor human rights violations, there is an important presence of Chinese companies in the occupied areas. This presence of Chinese companies ranges from mining to construction to telecommunication and finance. Human rights organizations that carry out such investigations found up to 17 Chinese companies actively operating in the occupied areas. Furthermore, the total number of Chinese-made telecommunication relay towers set up in these occupied areas amounts to about 6,000.
Economic reorientation — mines, currency and supply chains
The industrial capacity of the annexed territories has drastically decreased from 2014 and especially from 2022, yet the companies and mines which still exist have been realigned towards doing business with Russian and Chinese companies. In the Donetsk and Luhansk areas, 94 coal mines were functional before 2014; however, by current estimates, there are only a few mines left, and they cooperate with other companies in this new business environment. At the same time, there is a noticeable process of “yuanization” taking place, which implies the increasing adoption of Chinese methods of payments and the selling of yuan via banks of this region as well as Telegram applications.
Commodities and Iran’s involvement
Moreover, it is also reported that traders from Iran have begun to emerge as purchasers of commodity goods from the occupied region, and these goods include coal, grain, and other merchandise which were made part of transport links which circumvented the conventional routes of trade. The mining companies and the “nationalized” businesses run by the Russians have been cited as the ones responsible for shipping goods to Iran, whereas the occupying authorities have emphasized that the local industries have shown themselves willing to sell their products such as casein to Iran.
The operational mechanics — intermediaries and informal channels
Since a direct business transaction by foreign private businesses and occupiers would expose these businesses to legal trouble and tarnish their reputation, there have been many cases of using intermediary businesses such as Russian businesses, local agents, intermediaries in other countries, and indirect supply chains that make the end destination unclear. For example, equipment could be shipped directly through a Russian company or sold to Russian contractors who in turn use the supplies within the occupied country of Ukraine. In terms of telecom and digital services, these can be supplied via Russian entities or local service providers while commodities can use different ports and shipping channels that avoid the West’s jurisdiction.
Political and legal responses — Kyiv’s sanctions and Western dilemmas
Kyiv’s response to such a problem is to impose restrictions on companies and private persons involved in economic activity in the occupied territories and to appeal to its Western allies to join the process. Several prominent organizations have been included in the list of sanctioned entities, while Ukraine’s authorities keep on lobbying for export restrictions and sanctions against companies facilitating the functioning of occupation governments. However, there are some difficulties in enforcing these measures. First, it might become very costly or time-consuming to replace cheap suppliers or specialists in a particular field, such as telecommunications. Secondly, the West would need to consider possible consequences of secondary sanctions for China.
The grey zone of official positions
While Beijing adopts an official stance of neutrality towards the war and advocacy of a political resolution, China does not recognize the occupied territories as Russian land. However, Chinese private companies have been undertaking business operations within the occupied territories, but the Chinese government does not seem to object – at least not through any official statement that would hinder such activities, but rather seems to be taking a tolerant stand, allowing private firms to balance profit and reputation. The case of Iran is clear as its actions are consistent with its geopolitical alignment with Russia.
Human-rights and ethical dimensions
There are several ethical concerns surrounding the penetration of the occupied territories by corporations. Reconstruction works that are made feasible through foreign technology could be carried out over locations where atrocities have been committed on a large scale. The mining or quarrying of raw material from such sources will also mean that those providing the materials are contributing to the economy of the occupying power, whether legally sanctioned or not. Human rights activists say that engaging in such dealings will result in aiding the establishment of the occupying administration through finances and logistics.
Strategic consequences — long-term integration risks
Analysts describe the current pattern as a form of “shadow integration” wherein economic ties — built through contracts, payments and infrastructure — create durable linkages that persist beyond the immediate conflict. Over time, these linkages could rewire regional supply chains and resource dependencies, making re-integration under Kyiv more costly and politically fraught. The development of alternative trade routes, widespread use of non-Western payment mechanisms, and material investments in infrastructure and telecommunications together create structural barriers to reversing the occupation’s economic effects.
Operational and policy implications for Kyiv and partners
For Ukrainian authorities and international partners, the policy challenge is twofold: to deter companies from engaging in occupation markets through targeted sanctions and reputational pressure, and to provide alternative suppliers, financing and technical assistance that allow non-occupation actors to serve legitimate reconstruction needs in government-controlled territories. Absent credible alternatives, price-sensitive local actors and occupation administrations will continue to choose lower-cost, readily available providers — a pragmatic choice with long-term political costs.
Evidence limits and areas requiring further reporting
Reporting to date has relied on a mix of occupation announcements, NGO monitoring, open-source imagery and investigative journalism; many corporate chains remain opaque, and some named companies have either not responded to queries or are difficult to verify in public registries. Transactional data, shipment manifests and bank records that would definitively trace flows of money and materials are rarely accessible in these contexts. This evidentiary gap underlines the need for more forensic financial investigations, satellite-tracking of shipments, and cross-border cooperation on export controls to clarify accountability and to quantify the true scope of foreign involvement.
A contested economy with global implications
The involvement of Chinese and Iranian companies in the regions of Ukraine occupied by Russian forces is not just a footnote of economics; it is a question of strategy and morality in which business risk, international law, and geopolitics become interwoven. Equipment shipments, telecommunication services, and goods trade support the processes of reconstruction and exploitation that keep the regime of occupation functioning. So long as businesses manage to find their own way through using middlemen, alternative financial channels, and the indulgence of authorities, the economy of occupation will continue to function. The response must be carefully thought out and sustained, combining legal action, punitive sanctions, and realistic alternatives for supplying and financing reconstruction activities in Ukrainian-administered territories.
