Exclusive-The global supply trail that leads to Russia’s killer drones

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By Stephen Grey and Maurice Tamman. Maria Zholobova

(Reuters) – Russian drones hovering over Ukraine’s battlefield are due to a flexible, sanctions-evading supply network that runs through a shabby office in Hong Kong and sometimes through a suburban Florida yellow stucco house.

The “Sea Eagle,” Orlan 10 UAV (or Sea Eagle) is deceptive, low-tech and cheap. According to Ukrainian commanders it has directed up to 20,000 artillery shots that Russia has fired on Ukrainian positions daily in 2022. This has resulted in the deaths of up to 100 soldiers every day.

Reuters and iStories, a Russian media outlet and in collaboration the Royal United Services Institute (a defence think tank based in London), have found a trail of logistics that spans the globe. It ends at Orlan’s production line, St. Petersburg’s Special Technology Centre.

The investigation was based on Russian customs filings as well as bank records. It marks the first time that a supply route for American technology is traced all the the way to a Russian producer, whose weapon systems are used in Ukraine.

The Special Technology Centre used to make surveillance devices for Russia, but now it focuses on drones for military use. This was after President Barack Obama stated that the Centre had worked with Russian military intelligence to influence the 2016 U.S. presidential elections.

The 2017 sanctions prohibited any American citizen, resident or company from supplying any item that could end up with the Special Technology Centre. The U.S. government imposed additional restrictions in March 2017. It banned all American products from any military end-user and effectively stopped all Russian sales of high-tech items such as microchips and communications equipment.

None of this has prevented the Orlan drone from being produced.

The Special Technology Centre didn’t respond to our written request. One top scientist who is also a major shareholder stated in an interview with Reuters, however, that drones were in high demand.

Reuters asked Russia’s Ministry of Defence for information about sanctions and their relationship with the Special Technology Centre. They did not respond.

The U.S. Department of Commerce enforces technology export controls and would not comment on U.S. knowledge of the Special Technology Centre or U.S. parts that supply Russia’s drone program.

Commerce spokesperson told Reuters that they cannot comment on the existence of investigations. The spokesperson said that they would not hesitate to use any tool at their disposal to stop those seeking to support Putin’s war machine.

Asia Pacific Links Ltd of Hong Kong, one of Russia’s most important suppliers, supplied parts for the drone program. Many of the parts come from U.S. producers.

According to customs records, Asia Pacific’s Russia exports were primarily sent to one St. Petersburg importer with close ties. SMT iLogic, an import company, shares an address and has many other connections.

Anton Trofimov is an ex-pat Russian who studied at a Chinese university. He also has business interests in China and a Toronto company, Canada according to his LinkedIn profile.

According to public records Trofimov is a Toronto resident, but he lives in a small East York neighbourhood. Questions sent via email and LinkedIn did not receive a response. Trofimov’s wife was the woman who answered the door. She told him she would send him a message so Reuters could contact her. He never did.

It is far from Asia Pacific’s office, which is located in a narrow and shabby office building in Hong Kong’s business district.

Reuters journalists visited the Hong Kong office recently and found no one there. According to the receptionist at the building, the company shares a partitioned space with three other tenants.

Despite all appearances, the year has seen a boom in business. Between March 1 and September 30, after Russia’s February invasion of Afghanistan, Asia Pacific saw a sharp increase in its business. The company exported parts worth approximately $5.2million, up from $2.3million in the same period 2021. According to Russian customs records it was iLogic’s largest supplier. The records show that many of these components were manufactured by U.S. tech companies.

According to Russian customs data the parts sent by Asia Pacific were $1.8 Million of Analog Devices’ chips, $641,000 of Texas Instruments’ chips and $238,000 from Xilinx. As shown in photos of unmanned drones in Ukraine, the supplies included models made by Saito Seisakusho in Japan. Saito claimed it wasn’t aware of the shipments.

Analog Devices refused to answer emailed questions about the recent Russian shipment. Xilinx owner Texas Instruments and AMD said that their companies hadn’t approved or sent any shipments to Russia for several months. Additionally, they are in compliance with all U.S. Export Controls and sanctions.

AMD also stated that its authorized distributors are required to implement end use screening measures in order to monitor the sale or diversion of AMD products to Russia and restricted regions. AMD stated that SMT iLogic, Asia Pacific Links and AMD are not authorized AMD distributors.

THE SUPPLIER NEXT DOOR

Financial records that a Russian official reviewed and provided to Reuters showed that the Special Technology Centre depends on a variety of suppliers, most notably iLogic. Reuters was able to see a record that iLogic has kept of its bank receipts, and the payments it made. Apparently, iLogic is almost exclusively employed by the drone maker.

According to customs records, iLogic has imported approximately $70 million worth of electronic products into Russia since 2017. According to financial records analyzed by Reuters and iStories, almost 80% of the company’s income comes from its business with Special Technology Centre.

The financial records reveal that the Special Technology Centre is Russia’s Ministry of Defence as its largest customer. This Ministry paid it close to 6 billion rubles ($99m) between February and August of 2012. All transfers from and to the company’s accounts were listed in the records.

Alexey Terentyev (a top scientist and major shareholder of the Special Technology Centre), was reached by telephone. He stated that the war has forced the centre to concentrate on drone production.

“Due the high demand of Orlans, it is impossible for us to produce anything else at the moment. He said that the demand is greater than what we can produce.

He said that U.S. sanctions had caused problems for the company, but that it found someone around the globe to sell it the things it needed. Terentyev explained that sanctions were imposed by one the most powerful countries on the planet. This should make us proud.

Terentyev declined a request to confirm if iLogic was one such supplier. When asked about iLogic, he replied, “You ask about a company that I don’t know.” Recalling that he was one of iLogic’s founders as per Russian corporate records, he replied that if his name appeared in documents it was “likely correct”. He was a shareholder. He replied, “Yes. I remember something.” He couldn’t recall what iLogic had done. He said, “I have lost contact with this company.”

These corporate records indicate that iLogic is based at St Petersburg’s same address as the Special Technology Centre. Russian corporate records indicate that it was founded in Moscow by Terentyev or other senior executives of drone maker, or their families.

Roman Agafonnikov (chief executive officer at the Special Technology Centre) said that he did not know much about iLogic in a telephone interview.

FLORIDA

A smart suburban home on the coast of South Florida is where another person has provided Russia’s drone program.

Igor Kazhdan is a 41 year-old U.S. citizen. His company, IK Tech sold electronics worth $2.2 million to Russia between 2018-2021. Russian customs records indicate that more than 90% of these were sold to iLogic.

Russian custom records reveal that IK Tech sold iLogic around 1,000 American-made circuit boards from October 2020 to October 2021. This occurred at a moment when federal law forbade the direct or indirect supply of such technology to any Special Technology Centre.

Gumstix, a California-based manufacturer, made the boards. They are estimated to be worth $274,000 The California company informed Reuters that it was “very worried” to learn about the shipments. It promised to investigate. The company stated that it has no customers in Russia and does not intend to sell products or services to Russia. It also said that it will investigate any diversion of products.

The inside of a captured drone was photographed by Ukrainian officials and was seen by Reuters. It shows a Gumstix Board that looks almost identical to IK Tech’s boards. According to a list containing components from another drone that was supplied by Ukraine to RUSI/Reuters, the board is part and parcel of the Orlan 10 control unit.

U.S. authorities became aware of Kazhdan’s activities. Two weeks before the Russian tanks invaded Ukraine, and Orlan drones began flying overhead, Kazhdan was arrested by federal agents. Later, Kazhdan was indicted on 13 counts for smuggling and evading Export Controls when he sold electronic components to Russia between 2021 December and 2022.

Indictment related to the sale of sophisticated amplifiers manufactured by Qorvo, a U.S. company. This required an export license from Russia. The court documents don’t indicate whether U.S. authorities knew of the final destination of the products. According to Ukrainian officials, the Qorvo amplifiers are used in radio communications, radio equipment and radar. Qorvo confirmed to Reuters that Florida was the “declared recipient” of the parts. Qorvo said that it had never conducted business with IK Tech or Igor Kazhdan. The Company’s products were also exported and used without our knowledge.

After Kazhdan had pleaded guilty on two charges in November 2022, a federal judge sentenced Kazhdan to three years probation, $200 fine and a forfeiture of $7,000. Kazhdan could have spent 40 years prison if he were convicted on all the charges.

Kazhdan, a scruffy man with a beard and short-sleeve shirt said that his Russian exports were small compared to other companies. He was also asked if he was helping Russia’s drone program.

Kazhdan stated that “I don’t think this, whatever it is, should be a big deal that I should be writing this tale.” This is comical.”

He declined to comment on the case or about his shipments to Russia beyond that.

Kazhdan stated to the Southern Florida District judge, November 20,22, that he had started doing business in Russia after meeting with importers at a 2016 satellite conference. He stated that the importers persuaded him to ignore reporting and licensing requirements shortly after.

The U.S. Department of Justice did not comment on the matter.

((This article was originally reported by Stephen Grey, Maurice Tamman in New York, Florida, and Maria Zholobova. Additional reporting by James Pomfret, Hong Kong, and Anna Mehler Paperny, Toronto. Editing by Janet McBride.

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