Exclusive: The Global Supply Route That Leads To Killer Russian Drones

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DECEMBER 15 (Reuters) – Hundreds of Russian drones hover ominously over the Ukraine battlefield into a resilient, sanction-evading supply chain that often runs through a shabby office up market in Hong Kong, and sometimes through a house. of yellow stucco in suburban Florida.

The Sea Eagle Orlan 10 UAV is a relatively low-tech, cheap, decoy killer aircraft that has guided many of the 20,000 artillery shells fired by Russia per day at Ukrainian positions in 2022, killing up to 100 soldiers. per day, according to Ukrainian leaders.

An investigation by Reuters and iStories, a Russian media outlet, in collaboration with the Royal United Services Institute, a defense think tank in London, revealed a logistics trail stretching across the globe and ending at the Orlan production line, the center of special technology in St. Petersburg, Russia.

Based on Russian customs filings and bank records, the investigation marks the first time that a supply route for US technology has been traced all the way to a Russian factory, whose weapons system is used in Ukraine.

The private technology center, which once made a variety of surveillance tools for the Russian government and now focuses on drones for the military, was first targeted by US sanctions after President Barack Obama said it worked with Russian military intelligence to try to influence the 2016 presidential election. American.

The sanctions, which took effect in 2017, barred any US citizen, resident or company from providing anything that might end up at the private technology center. In March of this year, the US government tightened those restrictions by blocking all sales of any US products to any military end user, and effectively blocking all sales to Russia of high-tech items such as microchips and communications and navigation equipment.

None of that stopped production of the Orlan drone.

The Center for Special Technology did not respond to a written request for comment. But a senior scientist, who is also a major shareholder, said in an interview with Reuters that the company is seeing “high demand” for its drones.

The Russian Defense Ministry did not respond to questions from Reuters about the impact of the sanctions and their relationship to the private technology center.

The US Commerce Department, which maintains export controls on US technology, would not comment on its knowledge of the Special Technology Center, or US parts that supply Russia’s drone program.

A trade spokesperson said in a statement to Reuters that the department could not comment on the existence or lack of investigations. “We will not hesitate to use all the tools at our disposal to disrupt the efforts of those who seek to support Putin’s war machine,” the spokesman added.

Among the most important suppliers of Russia’s drone program is Hong Kong-based Asia Pacific Lynx Ltd., which, according to Russian customs and financial records, has provided millions of dollars in pieces, though not directly. Many parts are precision chips from American manufacturers.

Asia-Pacific exports to Russia were delivered primarily to a single importer in St. Petersburg with close ties to the center for special technology, those customs records show. Importer SMT iLogic shares an address with the drone maker and has several other connections.

Asia Pacific’s owner, Anton Trofimov, is a Russian expatriate who graduated from a Chinese university and has other business interests in China as well as a business in Toronto, Canada, according to his LinkedIn profile and other company filings.

According to public records, Trofimov resides in a modest East York neighborhood in Toronto. He did not respond to questions sent via email and LinkedIn. A woman who answered the door identified herself as Trofimov’s wife and said she would send him a message to contact Reuters. he did not do.

The neighborhood is a world away from the Asia Pacific office in a shabby and cramped office building off a side alley and pedestrian market in Hong Kong’s business district.

No one was in the Hong Kong office when a Reuters reporter visited recently. The company shares a room with three other tenants, according to the building’s receptionist.

Despite appearances, business has boomed this year. In the seven months between March 1 and September 30, since the Russian invasion in February, Asia-Pacific increased its business sharply, exporting parts worth an estimated $5.2 million, up from about $2.3 million in the same period in 2021, making It makes it iLogic’s largest supplier, according to Russian customs records. Records also show that many of the components were made by American technology companies.

Of the parts Asia Pacific sent to iLogic in the same period in 2022, $1.8 million were chips made by Analog Devices (ADI.O), $641,000 made by Texas Instruments (TXN.O), and $238,000 Dollars from Xilinx, according to the Russian. Customs data. The supplies also included model aircraft engines made by a Japanese company, Saito Seisakusho, used on the Orlan 10, as shown in drone photos found in Ukraine. Saito said he was not aware of the shipments.

When asked about shipments to Russia in recent months, Analog Devices did not respond to emailed questions. Texas Instruments and AMD (AMD.O), owner of Xilinx, said their companies had not shipped or approved shipments directly to Russia for several months, and were complying with all US sanctions and export controls.

AMD added that it requires its authorized distributors to implement end-use inspection procedures to track the potential sale or diversion of AMD products to Russia or restricted regions. “SMT iLogic and Asia Pacific Links are not authorized resellers of AMD,” AMD said.

Next door to the resource

Financial records provided by a Russian official and reviewed by Reuters show that the private technology center relies on a number of suppliers, but iLogic is most notable. According to iLogic’s bank receipts and payments history seen by Reuters, iLogic works almost exclusively with the drone maker.

Since 2017, iLogic has imported about $70 million in mostly electronic products to Russia, according to customs records. According to financial documents examined by iStories and Reuters, nearly 80% of the company’s income comes from its business with the Center for Private Technology.

In turn, these financial records show that the CPC’s largest customer is the Russian Defense Ministry, which paid it nearly 6 billion rubles ($99 million) between February and August of this year. Checked records list all transfers to and from the company’s bank accounts during that period.

Reached by phone, Alexey Terentyev, a senior scientist and major contributor to the Center for Special Technology, said the war had forced it to focus on making drones.

“Because Orlan is in high demand, we don’t have the resources to do something else now. The demand for it is much greater than what we can produce,” he said.

He said the US sanctions had caused the company problems, but it had always found someone in the world who would sell it what it needed. “One of the most powerful countries in the world imposed sanctions on us,” Terentyev said. “We should be proud of this.”

Terentyev declined to say whether iLogic was one of those suppliers. When asked about iLogic, he said, “You ask me about a company I don’t know.” He mentioned that he was listed as a co-founder of iLogic in Russian corporate registries, and said that if his name appeared in the documents, he would likely be a shareholder. He said, “Yes, I remember something.” But he couldn’t remember what iLogic did. “I’ve lost contact with this company,” he said.

These company records show that iLogic is located at the same Saint Petersburg office address as the Special Technology Center. Russian corporate records show that it was founded by Terentyev and other senior executives of the drone manufacturer or their relatives.

In a short phone interview, Roman Agavonikov, CEO of the Center for Private Technology, said he knew nothing about iLogic.

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On the coast of Southeast Florida, someone else lives in a smart house in the suburbs right behind a nature preserve, another person who introduced the drone program to Russia.

Igor Kazdan, a 41-year-old Russian-American, owns IK Tech, which sold nearly $2.2 million in electronics to Russia between 2018 and 2021, according to Russian customs records, more than 90% of which was sold to iLogic.

Russian customs records show that IK Tech sold iLogic about 1,000 US-made circuit boards between October 2020 and October 2021, at a time when federal law prohibited the supply of any such technology to the private technology center, either directly or through another company.

The panels, valued at about $274,000, were made by a California manufacturing company, Gumstix. The California-based company told Reuters it was “very concerned” to hear about the shipments and would investigate. It said it had no customers located in Russia nor any products or services intended for Russia, adding: “We will take all appropriate measures to address any identified diversion of products from legal end use.”

Photos inside a captured drone taken by Ukrainian officials and seen by Reuters show a Gumstix board that is nearly identical to the boards shipped by IK Tech. According to a list of components found on another drone provided to RUSI and Reuters by the Ukrainian government, the board is part of the Orlan 10 control unit.

Kazdan’s activities attracted the attention of the US authorities. Just two weeks before Russian tanks rolled into Ukraine and Orlan drones began flying overhead, federal agents arrested Kazdan. He was later charged with 13 counts of smuggling and evading export controls when selling electronic components to Russia between December 2021 and February 2022.

The indictment relates to the sale of high-end loudspeakers provided by the US company Qorvo, which required an export license to Russia. It is not clear from the court documents whether US authorities knew of the final destination of the products. Qorvo loudspeakers, which are often used in radar, communications and radio equipment, have been found in Orlan drones’ radio communications circuits, according to Ukrainian officials. Corvo said in a statement to Reuters that the “stated destination” for the parts cited in the case was a Florida distributor. She added, “Qorvo has never run a business or had any relationship with IK Tech or Igor Kazhdan, and the company’s products were exported and used without our knowledge.”

In November 2022, after Kazdan pleaded guilty to two counts, a federal judge sentenced him to three years in prison, fined him $200 and ordered him to forfeit about $7,000. If convicted on all counts, Kazdan could have faced 40 years in prison.

Speaking on his doorstep in Dania Beach, Fla., Kazdan, who wore a bushy beard in shorts and a short-sleeved T-shirt, said his exports to Russia were small compared to other companies when it was brought to him that they might be helping Russia’s drone program. .

“I don’t think that whatever that is, it’s important that you write this story,” Kazdan said. “This is just a comic.”

Beyond that, he won’t talk about the case or his shipments to Russia.

At his November 2022 sentencing hearing, Kazdan told a South Florida district judge that he began doing business with Russia after contacting importers at a satellite conference in 2016. Soon after, he said, importers convinced him to avoid reporting and licensing requirements.

The US Department of Justice declined to comment on the case.

((This article was written by Stephen Gray in London, Maurice Taman in New York and Florida, and Maria Zholubova, iStories correspondent; Additional reporting by James Pomfret in Hong Kong and Anna Mehler-Paperney in Toronto; Editing by Janet McBride))

Our Standards: The Thomson Reuters Trust Principles.

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