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Chinese traders and Moroccan ports: how Russia violated global tech sanctions

Chinese traders and Moroccan ports: how Russia violated global tech sanctions

Shortly after Russia invaded Ukraine last year, engineers at Russian telecommunications company Convex needed to find American equipment to transmit data to the country's dreaded intelligence service. But no gears were flowing after the West imposed sweeping new trade limits on Russia.

Convex employees soon found a solution.

While Cisco, an American technology provider, halted sales to Russia on March 3, 2022, Convex engineers easily obtained Cisco gear through an obscure Russian e-commerce site called Nag, which facilitated international trade by purchasing American The restrictions were removed. equipment through a web of suppliers in China.

Convex engineers then visited the offices of Russia's Federal Security Service, known as the FSB, in Yekaterinburg to install gear that will help classify the data and send it to authorities. “Coordinate with FSB for placement of Cisco Catalyst WS-C4948E switches,” a Convex engineer wrote on March 23, 2022, according to company communications logs obtained by The New York Times.

In the 22 months since the war in Ukraine began, Russia has been getting the technology it needs to keep its economy running. After initial trade disruptions due to export restrictions and corporate sanctions, Russian suppliers found loopholes and worked out solutions. Almost any piece of commercial hardware – including basic telecommunications equipment, surveillance gear, microchips for advanced computing and weapons systems, and drones – is very hard to obtain.

Russian officials and companies have joined together to take advantage of the cracks in the global response. They used a web of intermediaries, including intermediaries in China, and hid their activity through shell companies, according to leaked Russian government emails, business documents and records of online conversations between Russian engineers obtained by The Times.

They have also turned to countries that have staked out a neutral position in the conflict, such as Morocco and Turkey, and used their ports to receive goods from global technology manufacturing centers, which would then be shipped to Russia. They are placed on other ships headed for the U.S., a process known as transshipment. , The banned technology products were then made available for purchase from well-known suppliers and easy-to-use e-commerce sites like Naag.

Flexibility has been paramount. The documents show that in weekly emails, Russian trade officials shared tips about which ports to transfer goods to, which ones to trade in rubles and where Russian-flagged ships could be repaired. If one supplier stopped selling, they found another. If a shipping route was closed, new routes would take over.

The documents offer a rare glimpse of a race in which Russian businessmen have remained one step ahead of US-led efforts to outwit them. Their success shows how difficult it is to stop the global movement of commercial technology, raising questions about the effectiveness of Western trade sanctions and whether tech giants should better control the destinations of their products – and whether they should. It is also possible to do.

Cisco declined to comment. Convex did not respond to requests for comment.

Understaffed government investigators in the United States and Europe can't keep up with the often murky flow of goods, said Elena Rybakova, an economist who studies sanctions evasion at the Peterson Institute for International Economics, a U.S. think tank. He said major tech companies should do more to cut supplies to Russia.

“It's an endless whack-a-mole game,” she said. “Policy makers in particular should be concerned that we have announced a lot of restrictions and we may assume they are working but in reality they are not working.”

As sanctions against Russia took effect last year, Moscow-based electronics provider ProSoft suffered the brunt.

According to a message reviewed by The Times, officials from a company that sells biometric monitoring equipment and technology for heavy industry and critical infrastructure emailed the Russian government trade mission in Morocco for help.

“Just a week ago, it was not difficult to get them shipped to us from American and European suppliers,” a ProSoft executive wrote, referring to the now banned technology. Now “we are running the risk of reducing production (there are small stocks in the warehouse).”

A spreadsheet attached to the message listed hundreds of American, European, and Japanese microchips and sensors that ProSoft needed.

At the time, Russia's economy was absorbing the initial effects of the trade sanctions. The ruble collapsed, inflation and interest rates soared, Russian banks were cut off from large parts of the global financial system and oligarchs sat helplessly as their yachts were seized.

But the pain didn't last as President Vladimir V. Putin rebuilt Russia's economy. Russian officials and officials quickly worked together to find a solution. Political loyalists benefited from the flight of Western companies.

In Morocco, Russia's Trade Office, which looks after the country's economic interests abroad, also helped Russian companies gain a foothold. After ProSoft reached out to help, business executives sprang into action.

“We are in constant contact with the general director of Morocco’s state-run port Tanger Med,” a Russian official wrote in an April 2022 email. “In the event of entry of ships under the Russian flag, there will be no problems with maintenance.”

A spokesman for Tanger Med, which faces the Strait of Gibraltar, said the port leased space to shipping companies and had “no knowledge or responsibility” for ships passing through the complex. He said the port, which handles more than eight million containers annually connecting to 180 international ports, needs “information about the arrival of goods destined for Russian ports or the maintenance of Russian ships before or after being on the Tanger Med.” No”, he said.

By November 2022, Russian trade officials in Morocco were bragging that their “direct support” had transformed the African country into an electronics transshipment hub. Goods from Taiwan, China and other manufacturing centers were unloaded at Tanger Med and then placed on other ships headed to Russia.

“Given the long-term nature of cooperation with the Moroccan partner, the volume of supplies could amount to about $10 million per year,” trade officials wrote about their work for ProSoft.

ProSoft also maintained a supply of Western technology with the help of an obscure scrap metal company registered in Casablanca, Morocco. After the war began, the company, Invent Maroc, set up a new website and, according to trade data, transported contraband technology to Russia through Morocco, including microchips from Texas Instruments, Intel and NXP. In 2022, the United States limited exports to Russia of semiconductors made with American equipment or intellectual property.

Invent Maroc, run by a man named Alexander Trinz, had no prior history of international exports. Yet it supplied electronics from Costa Rica, Malaysia, Taiwan, China, Japan and Mexico, according to trade records.

In a call this month, Mr. Trinz said he had supplied technology to Russia in the past, but not since the war. “Earlier we used to work with Russia, but at the moment we cannot do that,” he said.

An analysis of ProSoft's offerings found nearly 300 products for sale that included Intel chips, as well as components made by Nvidia and an AI optimized computer chip designed by Google. Although it is unclear how the imports were ultimately used, American chips have been found on Russian missiles and drones, according to weapons experts.

Nvidia, Intel and Google declined to comment. Texas Instruments said it opposes “illegally taking our products to Russia.” ProSoft, NXP and Russia's trade representative in Morocco did not respond to requests for comment.

According to a weekly shipping report, in October 2022, Russian trade officials said they eventually established 20 operators at the Tanger-Med port to “immediately complete” the logistics of loading cargo onto “feeder” ships bound for Russia. Did. Another report said ports in Turkey, a member of the North Atlantic Treaty Organization, had accepted payments in rubles.

“Sanction restrictions have been successfully bypassed,” a government report about the Turkish trade route said this March.

On little-known Russian e-commerce sites such as Nag, OCS Distribution, 3Logic Distribution and 4Telecom, complex technologies made by major American and European telecommunications manufacturers such as Cisco, HP, Juniper, Ericsson and Nokia are listed for sale.

Many of these sites continued to sell Western technology independently for decades, but the war caused changes in their supply chains. Since then, the platforms have received technology worth millions of dollars from China, according to trade records.

China and Hong Kong supplied 85 percent of semiconductors imported to Russia from March 2022 to September 2023, up from 27 percent before the conflict, according to Silverado Policy Accelerator, a nonprofit that studies Russian trade routes.

Nag, which sells hardware to regional telecommunications and surveillance contractors, is a leading platform. According to trade figures, it has bought about $100 million worth of restricted US technology through intermediaries since the war began. Overall, it imported $150 million worth of hardware from China this year, the data shows. The communication device, which is apparently restricted from reaching Russia, is easily available on its site by filtering by price, product type and quantity.

According to internal communications, Nag employees have talked about the logistical challenges arising due to international sanctions. In May 2022, a Viper employee wrote to a Russian customer that “the old transit system is dead”, delaying the delivery of $20,000 Juniper equipment. A month later, Nag said the problem had been resolved and the gear would arrive in the coming months.

The technology to create online surveillance and censorship was also available. Russian telecom operators are required by law to provide communications data about subscribers to security services, which means they have to purchase special equipment that sends information to government agents. On Viper message boards, which are now accessible only from within Russia, engineers posted technical tips to make the system work according to FSB specifications.

Ericsson, Juniper, Nokia and IBM said that any imports into Russia were made without their consent. OCS Distribution said it “does not sell products in violation of international sanctions and embargoes” and that any such technology listed on its website for purchase was because it was in the midst of overhaul. HP, 3Logic Distribution and 4Telecom did not respond to requests for comment.

The network of Nag-operated companies and brands in Kazakhstan, Uzbekistan and the United Arab Emirates has also facilitated the shadowy shipment of approved technology. In total, Nag brought about $10 million in Cisco equipment and about $1 million in Nokia and Intel products to Russia last year.

According to Convex records, at the FSB offices in Yekaterinburg, the Cisco gear that Convex engineers installed was paired with routers made by Juniper. Less than a year later, the availability of Western technology was so abundant that Convex engineers could make purchases.

In a conversation on Convex's internal messaging system this year, engineers focused on a new supplier they had “looked at.” Operating under the name sale-server.ru, the supplier had access to much of the restricted name-brand technology from HP, IBM and others. More importantly, the price was right.

“Cheaper than a snake,” wrote one Convex employee.




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