Elena Buturlim20:24, 06/18/24

Shadow buyers are looking for used Western-made equipment.

Russia is scouring China for used machine tools using shadowy networks of buyers as the Kremlin tries to secure vital equipment to boost arms production, the Financial Times reports .

It is noted that Moscow’s secret strategy to obtain high-precision equipment is an attempt to circumvent increasingly stringent Western sanctions and export controls. The transactions, carried out through networks of opaque companies, involve old high-tech machine tools made by Western companies that remain in China after decades of being sold to local factories.

The Washington-based Center for Advanced Defense Studies (C4ADS), which uncovered the shady trade, said the complex supply patterns suggested Moscow’s claims about precision tools being produced in Russia were likely “exaggerated.”

C4ADS analyst Allen Maggard points out: “Just because a machine is two or three decades old does not mean it is not capable of producing simple weapon components.”

Working through intermediaries

One procurement network uncovered by C4ADS and confirmed by the FT involves Moscow-based AMG, a Russian military supplier that was hit with US sanctions last year. In 2022, AMG increased imports of computer numerical control (CNC) tools made by Japanese high-end machine tool manufacturer Tsugami. Such tools are important to the defense industry because they enable the automation of high-precision, high-speed metal manipulation and milling.

According to journalists, public documents show that AMG entered into contracts to purchase machine tools for the Kometa company, which develops weapons systems for Russia, in particular, missile defense systems, rocket weapons and missile systems. Tsugami machines have been seen in use at various military installations.

At the same time, customs documents show that AMG bought about $600,000 worth of Tsugami equipment in 2021 from an official Japanese supplier. After the invasion, this amount grew to $50 million in 2023, with the entire increase coming from two shadowy middlemen. The first supplier is Amegino, which is under US sanctions and based in the UAE. The second intermediary is ELE Technology, which fraudulently represents itself as “a division of Gray Machinery Company,” a US machine tool distributor. ELE Technology is actually based in China.

Tsugami told the FT it did not supply any goods directly to ELE. According to ELE’s website, it currently sells two used Tsugami machines, which were manufactured in 2001 and 2005. Documents show that Amegino arranged for ELE to ship goods worth $2.7 million to Russia in early 2023.

Tsugami has been relying on the Chinese market for about 20 years. One person associated with the company estimates there are more than 100,000 Tsugami machines in China out of 200,000 worldwide. This is the market that Moscow has set its sights on after official Tsugami machine suppliers left Russia in 2022. Japan’s Commerce Ministry said it is working with G7 partners to strengthen measures against sanctions evasion.

The article also indicates that another Russian company, UMIC, purchased machines and parts worth $2.9 million in countries such as Israel, Japan, Korea, Germany, Sweden and Switzerland. In all cases, the equipment was shipped from China and purchased in RMB through trading partners based in China. Unlike AMG, UMIC is not subject to US sanctions.

Defense industry of the Russian Federation

The defense industry of the Russian Federation, despite limited production capacity, will be able to provide a material advantage over Ukraine in 2024. This is what the UK Ministry of Defense thinks.

Earlier, UNIAN wrote that due to the war against Ukraine, the modernization of the Russian army was set back 18 years. Now the Russian defense industry is dismantling refrigerators for spare parts.

(C)UNIAN 2024