top of page

Russia's Sanction Dodging Demonstrated In New York Arrests

Written by Mark Bruno


A dramatization of US east coast architecture made of electronics components with a map of Russia in the background

In New York, four individuals have been apprehended for their involvement in two conspiracies aimed at illegally exporting controlled, dual-use technologies to Russia. The technology in question, valued at over $7 million, includes semiconductors and integrated circuits. These are crucial for the Russian military's technological capabilities, which have been stifled by sanctions.


While the case is ongoing, there are indications that this incident is part of a larger conspiracy by Russia to subvert its technological limitations for its war in Ukraine. This is not the first vector–and certainly won’t be the last–for Russia’s attempts to steal western technology.


Exports From New York


One of the arrested individuals, Salimdzhon Nasriddinov, is a Russian-Tajik national, while Nikolay Goltsev and Kristina Puzyreva hold dual Russian-Canadian citizenship. They were part of a significant sanctions evasion and export control scheme. In a separate indictment, a Brooklyn resident, Nikolay Grigorev (also of Russian and Tajik citizenship), was arrested, and two Russian nationals, Artem Oloviannikov and Nikita Arkhipov, were charged but remain at large.


The indictment reveals an illegal scheme to procure dual-use electronic components for Russian entities involved in drone development and manufacturing for the war in Ukraine. Grigorev and his partners used Quality Life Cue LLC (QLC), a Brooklyn-registered company, as a front to facilitate their illegal operations. This scheme was intended to support companies affiliated with the Russian military, including SMT-iLogic, a sanctioned entity identified as part of the production chain for Russian military drones.


Court documents show that QLC accounts received about $273,000 between October 2021 and February 2022, which were used to purchase electronics for export to Russia. A search in June 2023 at Grigorev's residence in Brooklyn led to the seizure of over 11,500 electronic components awaiting illegal export to Russia.


There are a number of methods used to circumvent sanctions. One common method is the use of third-party countries to re-export banned goods. EU-sanctioned goods are exported to certain third countries and from there further exported to Russia. This is often done to evade direct export bans from the EU to Russia, as evidenced by foreign trade data. Any entities trying to export to Russia would have to go through countries that haven’t sanctioned them. The two countries regarded as most important for this are Turkey and China. From October 2022 until the following January, imports of chips and processors from China to Russia were at least 50 percent higher than those of the previous year. However, Armenia, Kazakhstan, and Kyrgyzstan fall into this, as well. In 2022, Armenia imported 515 percent more chips and processors from the US and the European Union, with 97 percent of those being re-exported to Russia.


In the New York case, Goltsev and Nasriddinov were said to be able to order the items under assumed identities and false pretenses from US manufacturers. They allegedly were then able to ship them to Russia through intermediary companies located in Turkey, Hong Kong, China, India, and the United Arab Emirates. According to the investigation, it was found that US shipments to some of these foreign entities entirely came from Goltsev and Nasriddinov’s front companies.


Some sanctions regulations may have loopholes or exemptions that can be exploited. For instance, the Sanctions Regulation adopted by the EU allows for some possibility of continuing exporting under pre-existing, or “grandfathered” contracts, subject to a case-by-case assessment. As well, there are some exceptions for non-military use products. Among the inclusions are products intended for cooperation in space programs, civilian telecommunication, and nuclear and maritime safety among the uses listed. This could potentially be used as a way to continue exporting dual-use goods under certain conditions, though some nations can be more discerning with their export controls.


Western Technology In The Eastern Arsenal


Russia has a long history of acquiring smuggled military-grade parts from the United States, including costly specialized chips for satellites that can withstand radiation in space. That said, even more mundane products can be used in some of these weapons systems. This latter category is much easier to get past export restrictions. AMD, Intel, and Texas instruments were all able to trace thousands of shipments of such products from the time the war started.


Essential elements such as semiconductors, processing units, switching devices, storage units, power control modules, charge storage devices, and signal converters, among others, are included. The products from these 155 firms, found within Russian armaments, constituted critical component transactions amounting to $2.9 billion with Russia in the year 2022.


Many of the weapons systems used against Ukraine have a need for these more consumer-grade components. To anyone following the conflict, this would include familiar-sounding systems such as Iskander-K missiles, Orlan and Korsar drones, T-72 tanks, Typhoon-K vehicles, and Tornado-G rockets. As well, components can be cannibalized for use in helicopters, electronic warfare systems, and other small electronic devices.


They’re not just making their way into Russian equipment, but even more historically sanctioned arsenals such as those of Iran. New research has revealed that the Iranian drones deployed by Russia in Ukraine are powered by stolen Western technology. According to Conflict Armament Research (CAR), the Shahed-136 drones sold to Russia by Iran are powered by an engine based on German technology, which was illicitly acquired by Iran almost 20 years ago.


There's evidence suggesting that US and Israeli components, including American-made microelectronics, are ending up in Iranian-made drones, as well. An investigation by the UK-based organization Conflict Armament Research found that 82% of the components in some of the drones downed in Ukraine were manufactured by companies based in the US.


Much of Russia's weapons are running on Western-designed devices, core operating systems, and networking software. Companies such as Microsoft, Google, Oracle, IBM, and others have been named in reports. In a similarly-related situation, Russia's access to Western cloud computing resources and cloud-based data, such as commercial satellite imagery and GIS systems, has been critical in the ongoing conflict. Access to IT service providers such as Microsoft, Google (Cloud and Android), SAP, Oracle, IBM, Cisco and dozens of others, have been instrumental for Russia.

Before the war, Russia's plan was to engineer systems well-prepared for future conflicts, with a strong emphasis on the development of artificial intelligence technologies. However, the Ukraine war and subsequent sanctions have hindered this plan. Nonetheless, there are indications suggesting Russian entities have attempted to employ artificial intelligence to bolster their disinformation efforts. Simultaneously, the Russian military is heavily deploying loitering munitions to strike at Ukrainian urban centers and hinder the Ukrainian forces' retaliatory actions. Loitering munitions, while it hasn’t been firmly established, are generally considered a place for AI implementation to grow rapidly within weapons development.


Russia has made visible technological progress in hypersonic technology, with the development of hypersonic glide vehicles and cruise missiles. The Avangard intercontinental ballistic missile system, the sea and ground-launched hypersonic cruise missile Tsirkon, and the air-launched ballistic missile Kinzhal are examples of such advancements. Famously before the invasion of Ukraine, Russia had showcased the Kh-47 Kinzhal, which has since been used to strike targets as far from Russian airspace as Lviv, near the Polish border, and is shown to be capable of avoiding early detection. While specifics of the design are naturally considered sensitive data, it’s relatively easy to speculate that such an advanced weapon would require more sophisticated components than what Russia is able to develop domestically.


A Challenge To The International Order


One of the promises of globalization is its ability to resolve conflict through rational economic interests. Within this framework, sanctions seem like one of the best controls for dealing with states that overextend themselves and commit violations of the international order. However, Russia has seemingly managed to subvert what appear to be massive sanctions, while waging the largest land war in recent history, all while having an economy smaller than most of its military peers. That is not to say it’s weathered the storms without massive costs, but events such as the recent arrests in New York show that there is a long way to go before its supply chains are severed.


An additional element in this context is that countries friendly to Russia–including China, Iran, and North Korea–have all demonstrated a willingness to not only share technology and designs with Russia, but also a willingness to steal designs and software from western developers.


The New York arrests reveal Russia's persistent attempts to circumvent sanctions and procure dual-use technologies, demonstrating the extent of its efforts to bolster its military capabilities amid ongoing conflicts. As it stands right now, it would seem that sanctions are merely adding an additional step to Russia’s acquisitions. The case underscores the need for ongoing dialogue and cooperation between governments to address the global security challenges posed by sanctions evasion and technology misuse.

 

Russia's Sanction Dodging Demonstrated In New York Arrests
.pdf
Download PDF • 1.34MB

 

Edited by Jacob Dickinson

About the Author


Mark Bruno is a noncommissioned officer in the United States military, where he serves as a Combat Medic and a Public Affairs Representative. He holds a Master’s Certificate in Information Assurance from the University of Maryland, and a Bachelor of Science in Communication from the State University system of New York. All statements made in this article are his own, and do not reflect any policies or positions of the United States Department of Defense.





50 views0 comments

Comentarios


bottom of page