TECHINT Western Electronics At The Heart Of Russia's War Machine

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North Korean missile that hit Ukraine consists almost entirely of American and European parts, CNN reports. Of the 290 components studied: 75% were designed and sold by companies incorporated in the US, 16% were associated with European companies and 9% were registered in Asia.
 

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Financial intelligence agencies highlighting attempts to export sensitive technology to Russia​



Canada's financial intelligence agency and European allies are highlighting attempts to export sensitive technology to Russia in violation of sanctions imposed against Moscow.

The warning comes in a new joint advisory from the Financial Transactions and Reports Analysis Centre of Canada, known as Fintrac, and its counterparts in the Netherlands and Germany.

The agencies say they received reports "from a variety of sources" about suspicions of such illicit activities after Russia's full-scale invasion of Ukraine in 2022.

The agencies discovered that the individuals and organizations trying to evade sanctions and export control measures in their respective jurisdictions were using similar tactics.

The advisory is intended to help banks and others recognize financial transactions and related activity that could be linked to the purchase of goods for illegal export as well as the laundering of criminal proceeds from this activity.

The specific aim is to prevent the Russian Federation from accessing needed technology and goods to supply and replenish its military and defence industrial base.

The joint advisory was developed by the three countries' financial intelligence units in consultation with the U.S. Department of the Treasury's Financial Crimes Enforcement Network.

Banks given guidance on how to spot abuses​

Among the items of concern are microelectronics and products related to wireless and satellite communication.

"When attempting to identify whether your customers engage in sanctions evasion or export control evasion with dual-use goods, it can be helpful to look at the products, at the actors involved in the transactions, and at their financial behaviour," the advisory says.

Fintrac tries to pinpoint money linked to illicit activities by electronically sifting millions of reports about suspicious transactions from banks, insurance companies, money services businesses and others. It then discloses intelligence to police and other law-enforcement agencies about the suspected cases.

The advisory provides guidance to reporting entities on possible signs that clients are trying to skirt sanctions or controls. These include:

  • a company with previously large export volumes to Russia showing no decline in transaction activity post-invasion;
  • entities involved in the shipment of goods are not the same as those transferring funds to pay for the goods;
  • payment is handled by a third party not involved in the trade transaction;
  • the goods are shipped through Russia, using a fictitious end user in another country;
  • or the goods are shipped to countries bordering Russia, where middlemen can re-export the items to the sanctioned jurisdiction.

 

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Russia’s Backdoor for Battlefield Goods From China: Central Asia


Trade routes through the region are increasingly important to Moscow’s efforts to thwart Western sanctions



Two years after the invasion of Ukraine, drones and U.S.-made computer chips are increasingly flowing to Russia from China through Central Asian trade routes, showing the difficulty of strangling supplies to Moscow’s war effort.

Trade routes snaking through former Soviet republics Kazakhstan and Kyrgyzstan are among the many paths into Russia for so-called dual-use goods—singled out by the U.S. and its allies because they can be used on the battlefield.

Despite their efforts, Central Asia is a growing pipeline for Russia, made possible by thousands of miles of open borders, opaque trade practices and opportunistic middlemen. The goods often originate in China, where they are manufactured in some cases by major U.S. companies, which say the items are being imported by Russia without their permission.

“The Central Asian trade route is especially important because it feeds a high concentration of Western-produced goods into Russia. It is a key route for microelectronics, car parts, luxury goods—items both used on the battlefield in Ukraine and for personal consumption,” said Natalie Simpson, a Russia analyst at C4ADS, a Washington-based nonprofit research firm that specializes in national security.
The U.S. and its allies maintain a list of dual-use goods targeted by sanctions, including computer chips, routers and ball bearings used in tanks. There were 45 items on the list last year, with another five added in February.
Chinese exports of dual-use goods to Kazakhstan and Kyrgyzstan have surged since February 2022, when the war began, according to China’s customs data. Exports of the 45 targeted goods rose to $1.3 billion in 2023, up 64% over 2022 levels. Many of these goods were then sent to Russia, according to trade records shared by C4ADS.

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The two Central Asian nations aren’t the only source of dual-use goods to Russia. Goods are also flowing through countries such as the United Arab Emirates and Turkey. China, the largest source, exported $4.5 billion of such goods directly to Russia last year.

“Chinese companies shipping their own products can take the direct route across the border, but those who are transshipping Western goods often look for an extra degree of obfuscation,” said Simpson. “They can find this in Central Asia.”

Drones, which aren’t on the list of sanctioned goods, have become an essential tool of war. In the two years before the war, China didn’t report exporting a single drone to Kazakhstan.

But in 2023, Kazakhstan bought $5.9 million worth of unmanned aircraft from China and exported $2.7 million worth of such products to Russia, according to Kazakhstan and Chinese trade data. Kazakhstan isn’t a major producer of drones.

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Chinese exports of dual-use goods to Kazakhstan have surged since the war began. A port in Lianyungang, China, that handles cross-border trade with Kazakhstan. Photo: Cfoto/Zuma Press


Diverted trade originating from China and traveling through Central Asia has only risen in importance as U.S. and European Union regulators have clamped down on their own chip exports. In 2022, the first year of the war, millions of dollars worth of U.S. and EU chips exports ended up in Russia via Kazakhstan, Kyrgyzstan and Armenia. But in 2023, U.S. and EU chip exports to those countries fell by 28% to about $22 million.

U.S. and European officials have pressed these nations and China to clamp down on gray-market trade with Russia.

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Kazakhstan and Kyrgyzstan didn’t reply to requests for comment. China’s Foreign Ministry said that Russia was an important trading partner and that it had nothing to hide. “China always handles export of military items in a prudent and responsible manner, and has followed relevant laws and regulations when it comes to the export controls of dual-use items,” it said.

China is already the largest official source of Moscow’s imports, with bilateral trade roughly doubling to $200 billion in 2023 over the past five years, according to Chinese trade data. China sells computer chips, jet-fighter parts and jamming technology to Russian defense companies, The Wall Street Journal has reported. China has said it doesn’t send lethal weapons to parties involved in conflicts, and the U.S. hasn’t accused it of doing so.

Still, shipments of battlefield items, even if nonlethal, threaten to become a sticking point between U.S., Chinese and European leaders. U.S. trade officials have raised concerns with Beijing about Chinese companies violating export controls by transshipping U.S. items to Russia.


Russia managed to import $8.8 billion worth of dual-use goods from around the world in the first 10 months of 2023, just 10% lower than in the pre-sanctions period, according to a January report by the Kyiv School of Economics.

Russia stopped publishing detailed trade data after the invasion and resumed releasing some data a year later. Using commercially available Russian customs records, C4ADS said it was able to track about $64 million of goods exported to Russia from Kazakhstan and Kyrgyzstan during the first seven months of 2023, although it cautioned the data set it was working with may not reflect the full extent of the transactions.

Many of the goods that are originating in China are made by U.S. companies, according to a review of customs databases. For example, seven shipments of “computing machine devices” that are considered dual-use goods were made in June 2023 from a Chinese subsidiary of

International Business Machines to a trader in the Kyrgyz capital of Bishkek. Those shipments, worth $3,700, ended up at OOO BSO, a Russian business on a Treasury Department blacklist.


IBM said it doesn’t do business with those companies and is conducting an internal review. “Any diversion of IBM products to Russia is happening in direct violation of our company’s policies and internal controls,” an IBM spokeswoman said.

In another instance around the same time, a shipment of transistors left the Chinese factory of

Vishay Intertechnology, an electronics company based in Malvern, Pa. The Vishay components were sold to a Kazakh company, which then resold them to a Russian electronics wholesaler, according to customs data.


A database run by Ukraine’s Foreign Ministry shows transistors made by Vishay turning up in Russian reconnaissance drones and satellite communication stations on the battlefront. Vishay didn’t respond to requests for comment.

The Kazakh company involved in the transaction, Elem Group, was added to the U.S. Commerce Department’s trade blacklist in December for its potential role in the diversion of export-controlled items. Elem Group exported at least $1.15 million worth of products to Russia between March and August 2023, according to U.S.-based trade-data aggregator ImportGenius.


They included electronic items produced by U.S. companies, including

They included electronic items produced by U.S. companies, including Texas Instruments, based in Dallas, and Analog Devices, based in Wilmington, Mass. China was the largest supplier to Elem Group in the same period, the data shows, providing about 35% of its imports.


Analog Devices said that it has ceased business activities in Russia and Russian-backed regions of Ukraine in compliance with U.S. sanctions. “Any post-sanctions shipment into these regions is a direct violation of our policy and the result of an unauthorized resale or diversion of ADI products,” it said.

A Texas Instruments spokesperson said that the company stopped selling products to buyers in Russia in February 2022 and that any shipments of its chips into Russia were illicit and unauthorized. TI said it strongly opposed the use of its chips in Russian military equipment and the illicit diversion of its products to Russia.

Elem Group, which was founded less than a month after Russia’s invasion of Ukraine by a Russian businessman, had fewer than five employees and made an estimated $14.5 million in revenues in 2022, according to corporate database Statsnet. In March 2023, ownership was transferred to a Kazakh national. Elem Group didn’t respond to requests for comment.


 

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US says China is supplying missile and drone engines to Russia​



The US has accused China of providing Russia with cruise missile and drone engines and machine tools for ballistic missiles, as it urges Europe to step up diplomatic and economic pressure on Beijing to stop the sales. In disclosing previously classified intelligence, senior US officials said Chinese and Russian groups were working to jointly produce drones inside Russia. They said China had also supplied 90 per cent of chips imported by Russia last year which were being used to make tanks, missiles and aircraft.

The officials added China was also helping Russia to improve its satellite and other space-based capabilities to help prosecute its war in Ukraine, and Beijing was also providing satellite imagery. Dennis Wilder, a former top China military analyst at the CIA, said the disclosure “far exceeds previous estimates and shows a concerted programme by China’s leaders” to help Moscow prosecute the war in Ukraine.

“Russia lost access to critical machine tools from Europe at the beginning of the conflict and China has moved to fill the gap,” said Wilder, now at Georgetown University.

Wilder said chips were essential for targeting systems and radars and China was also a world leader in drones for military and civilian purposes. People familiar with the situation said the US believed European pressure would be critical to convince Beijing to stop exporting the materiel.

The US disclosures on Friday comes after officials including secretary of state Antony Blinken in recent weeks raised concerns with European capitals about China’s provision of military-related technology to Russia, and pushed allies for help. In addition to rhetorical pressure, the US wants Europe to increase its use of economic tools. One person said Europe had sanctioned three Chinese groups since the invasion in comparison to more than 100 by Washington.

The person said Beijing had become increasingly confident that its support for Moscow would not jeopardise economic relations with Europe, and it would be concerned about any stepped up pressure given its economic problems. She said sanctions from European countries could have a very significant impact on changing the calculus in China. The person said the US was also making clear to banks — in China and beyond — about the implications of facilitating trade payments from Russia to Chinese groups that help Moscow reconstitute its military.

The campaign to press European countries to increase pressure on China comes just two weeks after US President Joe Biden raised the issue in a phone call with China’s leader Xi Jinping. A second person said Washington had not seen any sign of Beijing pulling back since the call between the leaders. Senior US officials said China had over two years built up support for Russia and Beijing believed it could avoid crossing any red lines by providing materiel that technically did not equate to “lethal” assistance.

But the Chinese support is helping Russia rebuild its defence industrial base and reduce the impact of western sanctions and export controls.

“These materials are filling critical gaps in Russia’s defence production cycle,” said one senior US official. “As a result, Russia is undertaking its most ambitious defence expansion since the Soviet era and on a faster timeline than we believed possible early on in this conflict.”

The officials said several Chinese groups — including Wuhan Global Sensor Technology, Wuhan Tongsheng Technology, and Hikvision — were providing optical components for use in Russian weapons systems, including tanks and armoured vehicles.

They said Russia had also obtained military optics for weapons from iRay Technology and North China Research Institute of Electro-Optics. Washington also accused Dalian Machine Tool Group, one of the biggest such companies in China, of providing tools to Russia.


The officials added Chinese entities were also “likely providing” Russia with nitrocellulose, which is used to make propellants for weapons. They said this had enabled Moscow to “rapidly” expand its ability to produce critical munitions, including artillery rounds.

Washington is hoping European countries will be more forceful with China in upcoming trips to Beijing. Germany’s Chancellor Olaf Scholz will have an opportunity to convey the message to Xi when he meets him on Tuesday during his second official trip to China. Ahead of the trip, one senior German official said Berlin was “concerned” Beijing was “delivering goods to Russia that support its war effort — dual-use technologies that Russia can use for military purposes”.

“It’s something we’re very concerned about,” he said. “We will make that clear in the talks.”

The Chinese embassy in the US said China had “not provided weaponry to any party” in the Ukraine conflict. “The normal trade between China and Russia should not be interfered or restricted. We urge the US side to refrain from disparaging and scapegoating the normal relationship between China and Russia,” said Liu Pengyu, the embassy spokesperson.
 

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