Analysts found that the most exploited routes for shipping sanctioned products to Russia are through Kazakhstan, Kyrgyzstan, Uzbekistan, Georgia and Armenia, all of which, with the exception of Kazakhstan, significantly increased their exports to Russia last year. Of course, this does not mean that Kazakhstanis are not at all involved in helping Russia circumvent sanctions.
Among the key schemes and subjects of subsidized trade are:
Enterprises owned by oligarchs in Kazakhstan and Central Asian countries are sold to Russian oligarchs so that they can produce products and send them back to Russia, mainly for use in the military industry.
Central Asian companies owned or related to oligarchs purchase products from the West as if they were intended for their own needs, but when delivering goods to their countries, the consignment of goods is redirected to their destination in Russia.
Oligarchs influencing the authorities or even state corporations in third countries help Russian business move there. After the move, Russian enterprises begin to produce and supply goods and raw materials back to Russia.
Similar to the first option, the only difference is in the form of ownership.
Oligarchs from Central Asia, primarily from Kazakhstan, acquire assets in Russia, so that the companies de facto fall under the individual jurisdiction of Kazakhstan. One way to separate the company from the authorized entity.
The result of careful monitoring of trade relations with Russia in the countries of Central Asia and the South Caucasus showed the place and role of each entity in circumventing sanctions.
first nine months of 2023, allowing Moscow to maintain control over its exports and gradually raise prices. Greek ships carried 20% of all oil shipments to Russia in 2023 and almost a third of exports of its flagship Urals grade, according to shipping data.
Analysts have shown rapid growth in exports from Kazakhstan to Russia since the beginning of Russian aggression in Ukraine: from 15 to 185 million US dollars for technology goods. In general, trade turnover increased 215 times, with a particularly noticeable increase in the supply of dual-use goods that can be disassembled into microchips for military equipment (drones).
Kazakhstan continued to supply the Russian defense industry with raw materials and spare parts allowing Russia to produce weapons and ammunition. In response, Kazakhstan and Uzbekistan increased exports of cotton pulp, used in the production of gunpowder, to Russia following the 2022 invasion of Ukraine, OCCRP reported. The cotton pulp is usually collected by Russian importers, who then supply it to military factories that specialize in the production of gunpowder and other fuels. Kazakhstan, whose cotton pulp exports go almost exclusively to Russia, increased its exports in 2022, sending almost 60 percent more than last year.
The United States has identified which companies resell microchips to businesses in Russia that are currently under sanctions due to the war in Ukraine. This was announced by the head of the US State Department for sanctions coordination, James O’Brien. According to a State Department spokesman, the US identified companies from five countries: Kazakhstan, Armenia, Georgia, Turkey and the United Arab Emirates.
The German company Elix-St, owned by the Russian couple, imported microchips from Western manufacturers such as STMicroelectronics, Infineon, Analog Devices and Texas Instruments, and sent microchips to the Kazakh company Da Group, created shortly after the invasion of Ukraine. They then sent the microchips to the Russian company Stack, which sells microchips to manufacturers in Russia’s military, space and defense industries.
Despite the fact that Turkey is not mentioned in this report as one of the facilitators of helping Russia circumvent international sanctions, Turkish structures facilitate the transfer of dual-use goods to Russia, which are then used in the war in Ukraine. Specifically, it mentions Insaat Dis Ticaret Limited Sirketi (Margianna) and Demirci Bilisim Ticaret Sanayi Limited Sirketi (Demirci) as entities targeted by the US Treasury Department for their role in these activities.
“Eltex Alatau”, Kazakhstan. They supply chips from the American company Analog Devices for Sosna-U night vision devices, which are used in T-72B3M tanks. It is interesting that the official partners of Eltex Alatau – Eltex-MSK and Eltex – cooperate with the Ministry of Defense and the FSB of the Russian Federation. In addition, both the Kazakh company and Eltex have a common shareholder in the person of Russian businessman Alexey Chernikov. This situation involves a complex network of connections between companies in different countries and their connections with defense and security agencies.
Astaris – from May to September 2022, sent dozens of shipments of Western dual-use goods to the New Electronic Company in Smolensk. The owner is an entrepreneur of Belarusian origin Alexander Skorobogatiy.
The Elem Group is a company associated with the Russian company Streloy Electronic Commerce, owned by businessman Kirill Tulyakov. The Strela online store supplied electronics to companies participating in Russian military-industrial exhibitions.
“Company “Electronics” is associated with the Russian ITC, supplier of the Research Institute of Automation named after. M.L. Dukhovaya”, where nuclear warheads are developed. For supplies, a Lithuanian intermediary company is used – the OTK Group company with Russians on the list of shareholders.
On July 12, 2023, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) proposed to amend the Export Administration Regulations (EAR) to add forty-two entities to the Entity List. These organizations are listed in the destinations: Armenia (3), Belarus (1), Belgium (3), China, People’s Republic of China (1), Cyprus (4), Germany (1), Kazakhstan (1), Netherlands (1) , Russia (28) and the United Arab Emirates (1). The US Government has determined that these organizations are acting contrary to the national security or foreign policy interests of the United States. The Elem group is one of them.
Another striking example of sanctions evasion is the supply of Samsung and Apple smartphones from Kazakhstan to Russia. Both companies left the Russian market. Kazakh distributors, taking advantage of the legalization of parallel imports in Russia, began supplying products to the Russian retail chains Svyaznoy, M.Video and DNS in May 2022. Most of the models had Kazakhstani markings, which means that the gadgets were originally created for the Kazakh market.
Many representatives of large Russian businesses are moving their enterprises to Kazakhstan. For example, there is a well-known story about the move to Kazakhstan of the Russian Polymetal plant, which produces rare earth metals and fell under Western sanctions in Russia. In Kazakhstan, Polymetal is headed by the Nesis brothers, who left the board of directors of Polymetal Russia, in order to avoid sanctions and continue supplying rare earth metals to Russia from Kazakhstan. In 2022, Polymetal became the owner of 75% in the project to develop copper-gold assets of the Baksy deposit in Kazakhstan.
Recently it became known that Rosatom acquired from Kazakh businessmen Vasily Anisimov and Alexander Klebanov, associated with ex-President Nazarbayev, the largest uranium deposit Budenovskoye, along with a mining and chemical plant in Stepnogorsk. The agreement took place through a 100% subsidiary of Rosatom – Uranium One Group.
Another example is Freedom Finance Co., headed by Timur Turlov, which provides brokerage services and access for Russian citizens to IPOs of Western countries, including the United States. In a short period of time, Turlov’s company announced income several times higher than the income of the Wall Street sharks. Also, ex-Russian businessman Turlov is known for issuing credit and debit bank cards, through which the finances of Russian citizens are processed.
Oligarchs from the circle of the ex-president of Kazakhstan, who continue to supply Russia with sanctioned products, are directly involved in schemes to circumvent sanctions. For example, a company close to the ex-president, Eurasia Resource Group (ERG), supplied aluminum to Russia. The capacity of the plant in Pavlodar (Aluminium of Kazakhstan) is 1.4 million tons of alumina per year. Alumina from Kazakhstan is supplied by rail. ERG sells alumina to Russia and receives payments through the then-sanctioned VTB Kazakhstan bank. Later, the sanctions imposed on VTB were lifted.
By the time Russia invaded Ukraine, wealthy Kazakh oligarchs already owned businesses in Russia, but they continued to change hands and acquire even more businesses and assets. This is directly related to the process of circumventing sanctions. Kazakh oligarchs enter into an agreement with the Russians to hide who the real owner of the business is.
Timur Kulibayev, son-in-law of the former President of Kazakhstan Nursultan Nazarbayev, together with his wife Dinara Kulibayeva, owns ALMEX Holding Group JSC. Through JSC Holding Group ALMEX, they control JSC Halyk Bank of Kazakhstan and own 40% of the shares of JSC Altin Bank. This conglomerate operates in several countries, including Kazakhstan, Russia, Kyrgyzstan, Uzbekistan, Tajikistan and Georgia. Kulibaev is also the main owner of Kipros LLC, a diversified structure
which includes various structures, such as Viled Group LLC, Emdeu Group LLC, iQ Solutions LLC and Petro Retail LLC (manages the KMG gas station network). In addition, Kipros LLC belongs to Mercury Properties LLC, which is engaged in leasing and managing commercial real estate in cities such as Almaty, Astana, Dubai and others. Moreover, Kulibayev controls Vitol Group. In 2021, Vitol Group, along with Glencore Plc and Trafigura Group, were the main companies involved in transporting approximately 40% of Russia’s Urals crude, indicating significant influence on the global energy market.
In July 2022, there was a change of owners in Kamkor Lokomotiv LLC and Kamkor Wagon LLC, both companies transferred to the balance sheet of Kazakhstan Transport Technologies LLC. The founders of Kamkor Lokomotiv LLC were first Joint Technologies LLC and Kamkor Management LLC, and the founders of Kamkor Wagon LLC were Kamkor Management LLC. Among the founders of Kamkor Management LLC were Andrey Kim, Alibek Kulibaev (nephew of Timur Kulibaev), Dias Suleimenov (business partner of Timur Kulibaev) and Joint Technologies LLC. Joint Technologies LLC, in turn, belongs to Raushan Sagdieva and Kipros LLC, owned by Timur Kulibaev. The new owner, Kazakhstan Transport Technologies LLC, has two founders: Vector Technological Solutions LLC and Discus LLC. It is curious that the beneficiary of Vector Technological Solutions LLC, created just a month before the transaction, is Russian citizen Alexey Lebedev. This complex network of ownership changes suggests a strategic realignment or restructuring of Kazakhstan’s transport sector, possibly influenced by both domestic and international interests.
Vladimir Kim, ranked first among the 50 richest people in Kazakhstan, is engaged in tolling copper concentrate and polymetals through the Zhezkent Mining and Processing Plant (GOK) and the Auezov-Bakirchinsky GOK next to persons subject to Russian sanctions. In July 2023, KAZ Minerals, a copper producer owned by Vladimir Kim and his partner Oleg Novachuk, stopped operations in Russia, announcing its withdrawal from the Baim copper project in Chukotka. As a result, the owner of PDK Baimskaya LLC, responsible for the development of the Baimskoye field, has changed. The new owner is the private Kazakh company Trianon Limited, registered in 2022 in the Astana International Financial Center (AIFC). Interestingly, the shareholders of Trianon Limited are the same persons who own KAZ Minerals, namely Vladimir Kim and Oleg Novachuk. Previously, KAZ Minerals acquired the Chukotka project Baimko for $900 million from Roman Abramovich and Alexander Abramov. This agreement, announced in 2018, was completed in 2021. These events illustrate the complex dynamics of mining projects involving prominent Kazakh business figures and their strategic maneuvers in the mining sector.
Kairat Itemgenov, a Forbes Kazakhstan businessman, owns hotels in Moscow and is the majority shareholder of the Aqniet group, which owns the Mövenpick and Pana brands in Kazakhstan. By the end of 2022, the Holiday Inn Express hotel under the management of Itemgenov was launched in Moscow under the Pana brand. An ethno-cafe “Tary” opened next to the hotel in the Russian capital. In January 2024, Itemgenov’s group made headlines by announcing the acquisition of Globaltrans, a Russian company specializing in rail freight transport in the CIS countries. The move is noteworthy because it demonstrates strategic investment in companies that can help Russia circumvent sanctions and solve logistics and transportation problems. Such investments can play a role in increasing Russia’s resilience in the face of geopolitical and economic pressure.
Earlier it was reported about Kenes Rakishev, who is the closest friend of the sanctioned Chechen President Ramzan Kadyrov. Rakishev heads Fincraft Group LLP. The group does business in Kazakhstan, the USA, Ukraine, Romania, Belarus, Russia, Cyprus and the Isle of Man. In Kazakhstan, he allegedly signed a contract as a private investor in 2017 together with the Ministry of Finance, the National Bank of the Republic of Kazakhstan, National Welfare Fund Samruk-Kazina JSC, Problem Loan Fund JSC, Kazkommertsbank JSC. BTA Bank and Halyk Savings Bank of Kazakhstan JSC will invest trillions of tenge in saving two banks BTA and Kazkommertsbank, providing them with financial support. The agreement was concluded in a non-transparent manner, without any assessment of market value and tax deductions.
Kairat Mazhibaev, founder of RG Brands JSC, runs a private company registered in Dubai since 2021. This company is a subsidiary of Area Plus DMCC, which is based in Dubai and finally owned by Mazhibayev himself. Although RG Brands primarily focuses its activities in Kazakhstan, the company also has foreign subsidiaries. One of these subsidiaries is RG Brands North LLC, located in the Novosibirsk region of Russia. RG Brands North LLC, established in 2016, is engaged in the sale and distribution of the group’s products in Russia. In terms of financial performance, RG Brands experienced significant revenue growth: group revenue in 2022 amounted to 156.4 billion tenge compared to 100.1 billion tenge a year earlier.
The owner of the Almaty Fan Plant (AVZ), Marat Bakkulov, has his own plant in Russia: in 2020, the company opened production in Tatarstan to “meet the needs of the Russian market.” The Russian enterprise, called BhB System, has a central office in Kazan, an office in Moscow and a representative office in Nizhny Novgorod. It is unclear whether the sanctions regime has been violated, but the fact remains that this company is doing business on a very thin line.
In addition to trade, Kazakhstan maintains a serious relationship with Russia in the field of military cooperation, including the lease of sites for testing weapons systems. Located between Almaty and Astana, the Sary-Shagan test site is used by Russia to test intercontinental ballistic missiles, as evidenced by the announcement of a new missile test in April 2023. In addition, the Baikonur Cosmodrome in Western Kazakhstan has long been leased to Russia on a long-term basis for launching space rockets.
Kyrgyzstan
2021 Kyrgyzstan exported $392 million in goods, compared to triple 2022’s $1.06 billion in goods. Imports remained in the same corridor in 2021 – $1.9 billion versus $2.4 billion in 2022. The growth allows us to conclude that there has been a jump in the export of goods to Russia; this may be due to the processes of evading sanctions. Data for 2023 has not yet been released.
According to UN trade data, Kyrgyzstan did not import or export any aircraft, helicopter or drone parts in 2021, but in 2022 Kyrgyz firms imported US$3.5 million worth of such parts – mostly from the US – and exported 1 5 million US dollars of the same category of goods to Russia.
RM Design and Development (Kyrgyzstan) – supplies the Russian company Micropribor with AD822 operational amplifiers from the American Analog Devices for the BMP-1AM Basurmanin missile. The founders of Micropribor are accountant Liliya Ismagilova and karate instructor Maria Fedorova, who previously worked at the Izhevsk Radio Plant and work for the Russian armed forces.
It is known that currently five companies from Kyrgyzstan have been included by the US government in the list of sanctions for cooperation with Russia. This decision was officially announced by the US Department of the Treasury, in particular the Office of Foreign Assets Control (OFAC).
RM Design and Development LLC (“RM Design and Development”). The company was established in March 2022, is based in the Kyrgyz Republic and is engaged in the sale of electronic and telecommunication equipment and spare parts. According to US authorities, since its founding last year, it has been actively supplying dual-use goods to Russia. It is reported that the company sent hundreds of shipments of goods, including semiconductor devices, electronic integrated circuits and capacitors to the Russian LLC Basis Trade Prosoft (BTP), Radiotekhsnab (RTS), Region-Prof. All three are also included in the sanctions list.
Progress Leader LLC, established in March 2022, has been involved in numerous deliveries to the Russian company Siaisi (CIC), which is mainly engaged in electronic and optical equipment, as well as computers and related equipment. CIC is owned and headed by Russian citizen Tatyana Grigorievna Ivanova, who is also the CEO and owner of Progress Leader.
CIC and Ivanova were previously included in the sanctions list, and Progress Leader has now been added to the list of providing material assistance, sponsorship or financial, material or technological support, or goods or services to or in support of CIC.
JSC GTME Technologies, registered in the Kyrgyz Republic and established in June 2022, has made numerous shipments of products to Russia, including high priority products listed in the FinCEN-BIS Supplemental Alert, such as tantalum capacitors and electronic integrated circuits. The main customer of GTME Technologies was the Russian company Technologies Systems and Complexes Limited (TSC), a supplier of electronic and digital equipment. Both GTME Technologies and TSC were included in the list of sanctions for their participation in the technology sector of the Russian economy.
Cargoline LLC, created last March with headquarters in Kyrgyzstan, has supplied millions of dollars worth of foreign-made aircraft to Russia, including directly to airlines subject to US export controls. As a result, Cargoline was included in the list of sanctions under the category “with the assistance of activities in the aerospace sector of the economy of the Russian Federation.”
Weitmann Handeln Allianz LLC (“Weitmann”), based in the Kyrgyz Republic, offers turnkey supply, logistics and customs clearance services to foreign clients. Weitmann sent hundreds of shipments to Russia containing automatic data processing machines and disk storage devices. As a result of its activities, Weitmann was included in the list in accordance with Decree No. 14024 for activities in the technological sector of the economy of the Russian Federation.
Uzbekistan
It seems that, despite sanctions against Russia, trade turnover between Russia and Uzbekistan is growing steadily, as evidenced by data from the State Statistics Committee of Uzbekistan. Trade between the two countries reached $5.6 billion in the first eight months of 2022, marking a significant increase of 27.1% compared to the same period in 2021. This growth is mainly due to a significant increase in exports of 45.4%. In addition, the flow of goods from China to Uzbekistan has increased noticeably, increasing by almost $1 billion.
The significant growth in exports from Uzbekistan to Russia, reflected in UN Comtrade data for 2021 and 2022, is truly noteworthy. In 2022, Uzbekistan exported $2.6 billion worth of goods to Russia, up from $1.7 billion in 2021. Similarly, imports from Russia to Uzbekistan also increased slightly, from $5.3 billion in 2021 to $6.05 billion in 2022. Such significant changes in trade volumes between the two countries may be associated with attempts to circumvent sanctions.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on February 1, 2023, against 22 individuals and entities for their participation in helping Russia evade sanctions. This action was part of the efforts of the Russian Elites, Proxies and Oligarchs (REPO) Task Force, which aims to identify, investigate and freeze Russian assets around the world. The sanctions directly target a network led by arms dealer Igor Vladimirovich Zimenkov, based in Russia and Cyprus. This network, known as the Zimenkov network, was involved in projects related to the supply of Russian defense products, particularly related to high-tech devices following Russia’s full-scale invasion of Ukraine on February 24, 2022. Members of this network have also been involved in various agreements related to Russian cybersecurity and foreign helicopter sales, and have direct ties to Rosoboronexport, the Russian state-owned military export company. Alexander Volfovich, the public and registered owner of six companies in Zimenkov’s network, including businesses located in Cyprus, Bulgaria and Israel, was involved in facilitating these activities. In addition, Max Borisovich Piflax, based in Uzbekistan and serving as a director of Mateas Limited, along with his son.
A very well-known fact is that the Uzbek Fergana Chemical Plant is actively involved in the supply of cotton pulp to Russian military factories that are under sanctions from Ukraine, the United States and Switzerland. The company not only supplied products to Russian importers, but also made direct deliveries to Russian factories, including gunpowder factories in Kazan and Perm. According to trade data, these direct deliveries amounted to over $2.2 million in 2022. In addition, in the same year, the company made direct deliveries to the Russian Tambov Powder Plant for almost half a million dollars. In 2023, the company’s exports to Russia increased significantly, amounting to at least $2.6 million, indicating a significant increase compared to the previous year. This information, as reported by OCCRP, marks Uzbekistan’s participation in supplies to the Russian military industry and raises concerns about sanctions imposed on Russian factories by a number of countries.
The Office of Foreign Assets Control (OFAC) has imposed sanctions against five Uzbek companies for various activities:
Three companies from Alisher Usmanov’s network: JOINT STOCK COMPANY “ALAKHANGARANTSMENT”, LIMITED LIABILITY COMPANY “AKKERMANN CEMENT SA” and “WINDFEL PROPERTIES. These companies appear to be linked to Alisher Usmanov, a Russian oligarch. Specific reasons for the sanctions were not specified.
MVISION LLC, which acted as an intermediary in the import of spare parts to Russia. Details of specific parts and their use were not mentioned.
PRIVATE COMPANY PROMKOMPLEKTLOGISTIK, which has actively supported Radioavtomatika in its efforts to evade US sanctions since Radioavtomatika’s inclusion on the list on March 3, 2022. The private company Promkomplektlogistik supplied Radioavtomatika with electronic components, including microcircuits.
Georgia
Georgia’s imports from Russia increased significantly, nearly doubling from $1.023 billion in 2021 to $1.8 billion in 2022, while exports remained relatively stable at $610 million in 2021 and $642 million in 2022. concerns about possible evasion of sanctions.
The United States has named five countries, including Georgia, that are likely helping Russia evade sanctions.
Energy sector: Russian companies are engaged in the production, supply, transmission and trading of electricity. For example, the Russian Inter RAO owns Telmico, which supplies electricity exclusively to the capital of Georgia, Tbilisi.
Oil and gas sector: One of the largest retail oil operators in Georgia is owned by Russia. Additionally, by May 2021, Russia owned a 33% stake in the oil terminal at the port of Poti, indicating involvement in oil trading.
communications market: a significant part, 25%, of the communications market in Georgia belongs to Russian citizens, which implies a presence in telecommunications infrastructure or services.
Mineral water and mining: Seven of the largest companies in the mineral water and mining sectors in Georgia are under Russian control, indicating significant investment and influence in these industries.
In 2022, Georgia’s ruling Georgian Dream party, due to its warm relations with Russia, was suspected of helping the latter evade sanctions. A tanker with Russian oil products was spotted in the port of Batumi. This was reported by the Georgian opposition channel Mtavari, admitting that Georgia plans to change the origin of the cargo and send it to Europe as goods from Kazakhstan.
Armenia
A significant increase in both exports and imports is observed to Russia from Armenia, as evidenced by UN Comtrade data between 2021 and 2022, which of course implies a noticeable increase in trade between the two countries. In 2021, Armenia exported $793 million worth of goods, a figure that rose to $2.4 billion in 2022.
Similarly, imports from Russia to Armenia increased from $1.8 billion in 2021 to $2.6 billion in 2022.
The 2.4-fold increase in Armenian exports to Russia compared to previous levels suggests a significant shift in trade dynamics and potentially points to strategic economic maneuvers aimed at mitigating the effects of sanctions or taking advantage of new market opportunities.
A document provided to Politico by the US Bureau of Industry and Security provides a troubling pattern of Armenia potentially being a conduit for goods, especially electronic components such as chips and microprocessors, destined for Russia.
Below are the key points:
a sharp increase in imports of chips and microprocessors. Between 2021 and 2022, imports of chips and microprocessors to Armenia from the US increased by 515%, while imports from EU markets increased by 212%. The US Bureau of Industry and Security estimates that up to 97% of these imported goods were re-exported to Russia.
Confirmation of cooperation between the Government of Armenia and Russia: The Government of Armenia confirmed the further expansion of cooperation with Russia in various sectors, including the political, economic, military and security spheres. This indicates close relations between Armenia and Russia, facilitating trade flows between the two countries.
Top exports to Russia: Electrical and electronic equipment topped Armenia’s exports to Russia in 2022, totaling $462.35 million, according to Trading Economics.
limited industrial potential of Armenia: it is noted that Armenia lacks the industrial potential and resources to significantly increase exports to Russia during the year. Therefore, a significant increase in exports to Russia raises questions about the origin and nature of these goods.
Increase in imports from major economies: There has been a significant increase in Armenian imports from major economies such as Vietnam, Mexico and Japan, suggesting that these countries may have been using Armenia as a back door to access the Russian market.
Armenia’s assistance in circumventing sanctions is not limited to technology transfer. In just one year, remittances to Armenia reached record levels. Compared to 2021, the growth occurred 2.5 times; it was remittances from Russia to Armenia that increased at least four times, amounting to $3.6 billion. The unprecedented growth in remittances was largely caused by the interest of different countries in trade exchanges with Russia, which Armenia needed to bypass the sanctions barrier. The Russian market is flooded with Armenian cars brought to Russia through Georgia. The cars were purchased from the USA and received at the port of Poti in Batumi, and then transported directly to Russia, as confirmed by many individual entrepreneurs.
There are currently sanctions imposed by the Office of Foreign Assets Control (OFAC) on three Armenian companies:
JOINT STOCK COMPANY “VTB BANK Armenia”: This Armenian bank was sanctioned by OFAC due to its connections with leading financial institutions in Russia. Sanctions against such institutions are aimed at preventing Russia from raising capital that could be used to support aggressive actions.
Taco LLC: intended to support Radioavtomatika, a Russian company operating in the military or defense sector. Radio Automation was previously sanctioned, and Taco LLC’s support led to its own inclusion on the list.
Milur Electronics LLC: This Armenian entity was designated by OFAC for its ties to Milandr, a Russian integrated circuit designer and manufacturer involved in military research and development. Milur Electronics LLC was used as a front company for Milandra’s business with foreign partners.
China
A study conducted by The Diplomat on the import of products from China into Central Asian countries and their further export to Russia, provides a potential model for Chinese assistance to the Russian military machine through Central Asia. Although China maintains a neutral policy stance towards international sanctions, this analysis points to a correlation between increased shipments from China to Central Asian countries and their exports to Russia, especially since the outbreak of the conflict in Ukraine. Central Asia, located between China and Russia, provides an intermediate buffer zone for trade and other interactions between the two countries.
The significant increase in supplies in both directions since the outbreak of the war in Ukraine raises suspicions about the nature of these agreements and their potential consequences. It is possible that China is using its economic ties with Central Asian countries to indirectly support Russia’s military efforts by supplying goods or resources that can be used in military operations or to evade sanctions. This highlights the complex dynamics of international relations and the challenges faced in enforcing sanctions and preventing illegal activities in the world.
In Uzbekistan, two new categories appeared in the list of main imports from China and exports to Russia for 2022: nuclear reactors, boilers and equipment, which grew by 264%, and electrical machinery and equipment, which grew by 150%. In Kyrgyzstan, four new categories appeared in both lists of imports from China and exports to Russia in 2021-2022: nuclear reactors, boilers and machinery, which increased by 23 times or 41%, knitted fabrics increased by 411 times, footwear products increased by 7 times, and various products made of base metals increased 1.2 times.
However, cotton exports accounted for almost a quarter of last year’s growth in supplies to Russia, increasing by 7.5%. In Kazakhstan, nuclear reactors, boilers and machinery, as well as electrical machinery and equipment were also included in the list of major imports from China in 2022 and exports to Russia. These categories have increased fivefold since 2021. Iron and steel are the new top category in 2022, and inorganic chemicals as well as non-rail also saw notable growth. All of these categories may include products that are restricted by sanctions and that may be consumed by the Russian military-industrial complex.
FinCEN’s analysis identified transactions linking trading activity (likely involving sensitive goods) between end users in Russia and China, Hong Kong, Turkey and the UAE. Payments often went through correspondent accounts in the United States. Data from 2021-2022 revealed a network of China and Hong Kong-based organizations that may support Russia’s military and/or defense industrial base by making payments through payment intermediaries located in China. According to the BSA report, which details transactions between October 2022 and February 2023, a global financial network was identified that was associated with the possible trade of dual-use goods intended for military end users in Russia and the procurement of non-lethal military equipment. This financial network included at least four Turkish enterprises, as well as enterprises located in China, Hong Kong and Russia.
Some electronics companies listed in BSA reports were headquartered in Hong Kong and had bank accounts in China, Hong Kong and Russia. An analysis of BSA data identified a US manufacturer of radio frequency products that received transfers from companies in Azerbaijan and China between March 2022 and January 2023. The American company was suspected of selling products to airlines, electronic warfare companies, the government, the military and wireless companies in Azerbaijan and China to circumvent global sanctions against Russia.
In general, the analytical study, occupying more than fifty pages of text, thoroughly examined the mechanisms and subjects of circumvention of sanctions. And although the Russians introduce new schemes every time, in the end no one can escape responsibility.
