The cancerous business of smugglers. The mechanics of military technology thefts and what to do about it

MOSCOW, RUSSIA – MAY 07: Russian military vehicles are on their way to Red Square by passing through Tverskaya street during the rehearsal of Victory Day military parade marking the 77th anniversary of the victory over Nazi Germany in World War II, at Red Square in Moscow, Russia on May 07, 2022. (Photo by Sefa Karacan/Anadolu Agency via Getty Images)

After the full-scale invasion of Ukraine by the occupiers, the Western world seeks to rid the aggressor of military technology. Will it work out for him?

Russia’s technological level of development does not allow the production of modern weapons. This problem dates back to Soviet times, when Soviet intelligence had to steal critical components from democratic camps.

To do this, during the Cold War in Western countries, it created an extensive network of agents who stole advanced developments and technical documentation.

Decades have passed, but the soviet tradition is alive, and today Russia is constantly embroiled in scandals involving the smuggling of optics and microelectronics.

It is noteworthy that Putin began his career in the Dresden KGB, one of the key Soviet hubs for technology theft. The dictator knows exactly how smuggling networks work and actively uses them.

In recent years, technology theft has become more widespread than during the Cold War, according to US researchers. During 2013-2018, about 3,000 people involved in technology smuggling were detained in the United States.

The Western world is trying to rid the aggressor of military technology, but it is much harder to eradicate criminal structures than to simply impose another package of sanctions. How does technology smuggling work in Russia and can it be overcome?

“No analogues”, but the stuffing is American

Russia’s weapons are catastrophically dependent on imported components.

For example, the enemy uses 9M727 missiles, capable of maneuvering at low altitudes and hitting the target at a distance of up to 500 km. It was on March 16 that the occupiers fired on the TV tower in Vinnytsia, after which the broadcasting of television and radio channels in the city and surrounding neighborhoods was temporarily stopped.

The rocket’s computer quickly processes data and withstands high temperatures. It consists of high-strength components that the Russians do not know how to produce.

Experts from the Royal Joint Institute for Defense Research (RUSI) found that the 9M727 computer was almost entirely assembled from American microelectronics.

According to military observer Alexander Kovalenko, the “Kinzhal” (or Dagger) hypersonic missile used by Russian propagandists to intimidate NATO is a 9M727 air modification. It also consists of American components.

The computer of the Russian anti-aircraft missile system TOR-2M contains an oscillator (voltage stabilizer) of British production, which is also used in the Iskander-M system, Caliber and X-101 missiles.

The RUSI report states that the Russian IL-76 landing aircraft contains 80 imported components that Russia does not manufacture. The GLONASS navigation system, which is used to guide missiles, would not work without imported chips. Their shortage inhibits the serial production of Russian satellites.

“Aqueduct” radio transmitters contain components from the United States, the Netherlands, Korea, and Japan, and Russian drones are a collection of components from around the world.

The well-known “Orlan” drone contains a GPS module from the Swiss company U-blox, a starter generator from the American Texas Instruments Incorporated and a flight controller from the French-Italian STMicroelectronics.

In 2014 Western countries restricted the sale of military technology to the aggressor, so the occupiers are constantly looking for illegal supply routes.

Get at any cost

Until February 24, 2022, the Russians used sanctions loopholes, which allowed the import of some equipment to circumvent the restrictions. However, this was not enough, because in this way it was possible to obtain not all the components.

Because of this, the Russians, in the best traditions of the Cold War, organized an extensive smuggling network around the world. For the past decade, their agents have been regularly targeted by US counterintelligence.

In 2015, a Russian emigrant from New Jersey was charged for organizing the Russian army’s 2,000 illegal supply of microelectronics for $65 million.

At the same time, a 65-year-old Russian man was detained in San Francisco for illegally exporting chips to Russia for $60 million. A year later, another agent was sentenced in prison for smuggling components for $50 million.

U.S. Department of Justice data reveals weaknesses in Russia’s military-industrial complex. For example, agents have been repeatedly detained for smuggling thermal imaging sights and night vision devices. In Russia they are in short supply.

In 2014, the Russian was arrested for smuggling D-740 sights and Flir Tau 640 thermal imaging cameras, which were placed on the occupiers’ military boats. In 2021, five people were accused of organizing a scheme under which Russian law enforcement agencies received dozens of thermal imagers from the United States for four years.

This is by no means a complete list of cases involving the smuggling of American technology in the interests of the Russian military. There are many more unsolved crimes. “I’m sure law enforcement only saw the tip of the iceberg,” said Michael Carpenter, a former US Deputy Assistant Secretary of Defense for Russia. The occupiers are stealing technology not only in the United States. A local businessman was detained in Germany for exporting dual-use machines without an export license. The goods were intended for a Russian enterprise for the production of missile systems. In 2021, the Security Service of Ukraine (SBU) prevented the smuggling of technology from Ukraine. The thieves tried to send parts of fighter aircraft to Russia.

Fake documents and allied smugglers

The United States has extensive experience in export controls, but the Russians manage to circumvent it. The EP analyzed known cases of electronics smuggling and determined the scheme by which it enters the aggressor country.

Step 1: Recruit an agent. Russia has no problems finding “its” people. Military technology is bought by naturalized emigrants or recruited foreigners.

Step 2: Buy equipment. If you need a small quantity, agents order it from American distributors. In Brooklyn, detained a participant in the scheme, who bought parts for sniper rifles online and tried to send them to Russia. Weapons are legalized in the United States, so it is easy to find spare parts.

          Smugglers set up fictitious technology companies to buy big batches of electronics. Their owners convince suppliers that they will use the products only in the United States, and even say in writing that they are aware of the inadmissibility of exporting purchased items to Russia.

The cost of goods shipped often exceeds millions of dollars, so smugglers pay for big batches from accounts opened in offshore countries. They are used to cover money of Russian origin.

Step 3: Send to resellers. It will not be possible to send dual-use goods by mail, because the United States strictly controls the export of technology. Therefore, smugglers forge export documents.

For example, a convicted smuggler from New York wrote on boxes with thermal imagers that he was sending a camera with a case. Another criminal hid parts for rifles in a pile of jeans and sneakers.

If customs control is passed, the parcel does not immediately reach Russian military plants. First it comes to the mediator. Some of them send equipment to fictitious addresses in Moscow. Then special services pick it up.

If we are talking about large batches, then we need a serious conspiracy. In such cases, the parcels are first sent to controlled companies in the EU and only then smuggled to Russia. To create such schemes, the Russians are working with partners in Estonia, Bulgaria and Finland.

Step 4: Delivery to Russia. At this stage, the criminal and business connections of the Russian secret services in neighboring countries are being used.

For example, an article by political scientist Mark Galeotti states that Russian businessmen are involving Finnish-controlled companies in smuggling schemes. Galeotti even points to the connection of Stockholm’s port to the Tambov criminal group, which specializes in smuggling.

The Russians also have strong connections to Baltic criminal circles. For example, the American publication BuzzFeed in 2017 published an investigation the FSB recruited Estonian smugglers who worked in the interests of Russia.

Russia has similar criminal connections in most of its neighbors. Controlled logistics companies and gangs of smugglers smuggle technological goods across the border and hand them over to customers.

There are many ways to steal technology. Some of them are very original. For example, in 2021, the United States imposed sanctions on suspicious chemical companies from the EU that allegedly helped Russia obtain technology.

Journalists learned that one of them, the German Riol Chemie, linked to Russian business, was purchasing American radiation-resistant integrated circuits used on satellites.

          Russia also involves its allies in smuggling schemes. Reporters found that in April, Iran handed over Russian RPGs, anti-tank missiles and two Brazilian Astros II volley fire systems imported from Iraq. Experts fear that the occupiers could even get British technology through India.

How to overcome smuggling

After February 24, the United States and the European Union tightened technological sanctions against Russia. The aggressor was denied access to microelectronics and reduced opportunities to circumvent the restrictions. It has become even more difficult to buy equipment for the Russian military-industrial complex.

          This means that smugglers’ activity will soon peak and the Western world will face an unprecedented threat of illegal technology exports. To overcome it, it is necessary to strengthen control over vulnerable areas.

It is necessary to form a list of Western technologies that the aggressor uses in military equipment. Ukraine can help its Western partners in this: the occupiers are leaving military equipment here, the insides of which can be explored.

This list was formed by the British group Conflict Armament Research. Since 2014 it has been collecting Russian equipment in Donbass and publishing a report indicating the origin of each spare part. The list can now be expanded.

To prevent technology from falling into the hands of criminals, it is necessary to strengthen control over the sale of sensitive electronics by complicating the procedure for concluding purchase agreements. Authorities should demand more transparency from buyers.

The United States may investigate companies with Russian capital and draw attention to Russia’s offshore network involved in smuggling schemes. It is also important to monitor potential intermediary countries.

According to the Secretary of the Economic Security Council of Ukraine Roman Vibranovsky, Western countries should review the terms of the Wassenaar Arrangements, which regulate the export of weapons and dual-use goods between 33 countries. In his opinion the conditions set in 1996 are not strict enough.

The new export rules should be extended to as many neutral countries as possible and a mechanism for tracking goods should be introduced even after its export.

“Export control should be extended not only to goods produced in the EU and the US. Restrictions should affect equipment produced by third countries using Western technologies. The US already applies this practice, the same rules must be approved by the EU,” said Vybranovsky.

This could keep the Chinese semiconductor giant SMIC from helping Russia and prevent the smuggling of British technology from India.

Vybranovsky believes that the United States and the EU should introduce criminal liability for violating sanctions. According to Politico, the European Union is already discussing the possibility of introducing such a rule.

The United States is debating its recognition of Russia as a sponsor of terrorism. If such a decision is made, export controls will be strengthened.

All these steps are important to combat technology smuggling in Russia. Ukraine must lobby for such changes in the allied countries so that the demilitarization of Putin’s Russia is real and final.



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