Dec 15 (Reuters) – The hundreds of Russian drones hovering ominously over the battlefields of Ukraine owe their existence to a resilient, sanctions-avoiding supply chain that often runs through a seedy office over a market from Hong Kong and sometimes for a yellow stucco house in suburban Florida.
The Orlan 10 “Sea Eagle” UAV is a deceptive, relatively low-tech, cheap killer that has targeted many of the up to 20,000 artillery shells that Russia has fired daily at Ukrainian positions in 2022, killing up to 100 soldiers in day, according to Ukrainian commanders.
An investigation by Reuters and iStories, a Russian media outlet, in collaboration with the Royal United Services Institute, a London-based defense think tank, has uncovered a logistical trail that stretches across the globe and ends at the production line of Orlan, the Special Technological Center of St. Petersburg, Russia.
Based on Russian customs documents and bank records, the investigation is the first time a US technology supply route has been traced to a Russian manufacturer whose weapons system is used in Ukraine
The Special Technology Center, which once made a variety of surveillance equipment for the Russian government and now focuses on drones for the military, was the first target of US sanctions after President Barack Obama said he had worked with Russian military intelligence to try to influence the 2016 US presidential election.
The sanctions, which took effect in 2017, prohibited any US citizen or resident or US company from supplying anything that could end the Special Technology Center. In March of this year, the US government tightened these restrictions by blocking all sales of any US product to any military end user and effectively blocked all sales to Russia of high-tech items such as microchips, communications and navigation equipment.
None of this has stopped production of the Orlan drone.
The Special Technology Center did not respond to a written request for comment. But a top scientist, who is also a major shareholder, told Reuters in an interview that the company was experiencing “high demand” for its drones.
Russia’s Defense Ministry did not respond to questions from Reuters about the impact of the sanctions and its relationship with the Special Technology Center.
The U.S. Commerce Department, which enforces controls on the export of U.S. technology, would not comment on its knowledge of the Special Technology Center or the U.S. parts that supply Russia’s drone program.
In a statement to Reuters, a Commerce spokesman said the department cannot comment on the existence or non-existence of investigations. The spokesman added: “We will not hesitate to use every tool at our disposal to obstruct the efforts of those who seek to support Putin’s war machine.”
Among the biggest suppliers to Russia’s drone program is a Hong Kong-based exporter, Asia Pacific Links Ltd, which, according to Russian customs and financial records, provided millions of dollars in parts, though never directly. Many of the parts are microchips from American manufacturers.
Exports from Asia Pacific to Russia were mainly delivered to a St. Petersburg importer with close ties to the Special Technology Center, customs records show. The importing company, SMT iLogic, shares an address with the drone manufacturer and has many other connections.
Asia Pacific owner Anton Trofimov is a Russian expatriate who graduated from a Chinese university and has other business interests in China as well as a company in Toronto, Canada, according to his LinkedIn profile and other corporate documents .
According to public records, Trofimov is a resident of a modest East Toronto 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 leave a message for him to contact Reuters. He never did.
The neighborhood is a world away from the Asia Pacific office in a cramped, dilapidated 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. According to the building’s receptionist, the company shares a screened-in room with three other tenants.
Despite appearances, business has picked up this year. In the seven months between March 1 and September 30, since Russia’s invasion in February, Asia Pacific increased its business sharply, exporting about $5.2 million worth of parts, more than about $2.3 billion in the same period in 2021, making it iLogic’s largest supplier, according to Russian customs records. Many of the components were made by U.S. technology companies, records also show.
Among the parts shipped by Asia Pacific to iLogic during the same period in 2022 were $1.8 million of chips made by Analog Devices ( ADI.O ), $641,000 made by Texas Instruments ( TXN.O ) and $238,000 by Xilinx, according to the Russian. customs data The supplies also included model aircraft engines made by a Japanese company, Saito Seisakusho, which are used in the Orlan 10, as shown in photos of drones recovered in Ukraine. Saito said he was unaware of the shipments.
Asked about shipments to Russia in recent months, Analog Devices did not respond to emailed questions. Texas Instruments and AMD ( AMD.O ), the owner of Xilinx, said their companies had not sent or approved shipments directly to Russia for many months and were complying with all U.S. sanctions and export controls.
AMD added that it requires its authorized distributors to implement end-use control measures to track the possible sale or diversion of AMD products to Russia or restricted regions. “SMT iLogic and Asia Pacific Links are not authorized AMD resellers,” AMD said.
THE SUPPLIER IN FRONT
Financial records provided by a Russian official and reviewed by Reuters show that the Special Technology Center relies on several suppliers, but most notably iLogic. According to a record of iLogic’s own bank receipts and payments seen by Reuters, iLogic works almost exclusively for the drone maker.
Since 2017, iLogic has imported about $70 million of mostly electronic products into Russia, according to customs records. And according to financial documents reviewed by iStories and Reuters, nearly 80% of the company’s revenue comes from its business with the Special Technology Center.
In turn, those same financial records show that the Special Technology Center’s largest customer is Russia’s Ministry of Defense, which paid it nearly 6 billion rubles ($99 million) between February and August of this year year. The records examined list all transfers to and from the company’s bank accounts during that period.
Reached by phone, Alexey Terentyev, a leading scientist and major shareholder of the Special Technology Center, said the war has forced him to focus on drone manufacturing.
“Because of the high demand for Orlans, we don’t have the resources to do anything else right now. The demand is far greater than what we can produce,” he said.
U.S. sanctions had caused problems for the company, he said, but he always found someone in the world to sell him what he needed. “Sanctions were imposed on us by one of the most powerful countries in the world,” Terentyev said. “We should be proud of that.”
Terentyev declined to say whether iLogic was one of those providers. Asked about iLogic, he said, “You’re asking me about a company I don’t know.” Recalling that he was listed as one of the founders of iLogic in Russian corporate records, he said that if his name appeared on the documents, it was “probably correct” that he was a shareholder. “Yes, I remember something,” he said. But I couldn’t remember what iLogic did. “I’ve lost touch with this company,” he said.
These corporate records show that iLogic is headquartered at the same St. Petersburg office address as the Special Technology Center. Russian corporate records show it was founded by Terentyev and other top executives at the drone maker or their relatives.
In a brief telephone interview, Roman Agafonnikov, executive director of the Special Technology Center, said he knew nothing about iLogic.
FLORIDA
On the southeast coast of Florida, living in a smart suburban home just behind a nature preserve, is another person who has supplied Russia’s drone program.
Igor Kazhdan, a 41-year-old Russian-American citizen, owns a company, IK Tech, that sold about $2.2 million worth of electronics to Russia between 2018 and 2021, customs records show Russians, more than 90% of which were sold to iLogic. .
Custom Russian records show that IK Tech sold about 1,000 US-made circuit boards to iLogic between October 2020 and October 2021, at a time when federal law prohibited the supply either directly or through a other company, of this technology at the Special Technology Center.
The boards, valued at about $274,000, were made by a California manufacturer, Gumstix. The California-based company told Reuters it was “very concerned” to hear about the shipments and would investigate. It said it has no customers located in Russia or any products or services destined for Russia, adding: “We will take all necessary steps to address any identified diversion of products from legal end use.”
Photos taken by Ukrainian officials of the interior of a captured drone and seen by Reuters show a Gumstix board that is nearly identical to the boards sent 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’s control unit.
Kazhdan’s activities drew the attention of American authorities. Just two weeks before Russian tanks rolled into Ukraine and Orlan drones began buzzing overhead, federal agents arrested Kazhdan. He was later charged with 13 counts of smuggling and evading export controls when he sold electronic components to Russia between December 2021 and February 2022.
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