- Russia is expanding arms production by buying secondhand tools via China to evade sanctions.
- A new report sheds light on how the Kremlin is circumventing Western restrictions.
- There's a lack of compliance in the secondhand market, the lead researcher told the FT.
Russia is rushing to expand its arms production by buying secondhand machine tools from China through covert networks to get around Western sanctions.
A report from Washington-based nonprofit think-tank The Center for Advanced Defense Studies, or C4ADS, said that Russia's arms manufacturers were "scrambling to expand their production capabilities using whatever they can get."
And Russian defense industry analyst and lead researcher Allen Maggard told the Financial Times that the decades-old machine tools Russia is importing are still effective.
"Just because a machining center is two or three decades old doesn't mean that it's incapable of producing simple components for weapons," he said.
"This speaks to a lack of compliance in the second-hand market, not to mention that manufacturers are unlikely to care about where their products end up after being sold," he added.
Getting around sanctions
Since it launched its full-scale invasion of Ukraine in February 2022, Russia has had to find the supplies needed to keep its war machine going.
One of Russia's greatest vulnerabilities is its reliance on foreign technologies, including machine tools that automate the manufacture of precision-guided munitions and aircraft parts, among other key defense equipment, the researchers wrote in the report.
Faced with restrictive sanctions and export controls, the Kremlin has turned to complicated arrangements with opaque companies that act as middlemen.
Many Russian military suppliers have been placed under sanctions by the US. However, they are finding workarounds.
One supplier, AMG, increased its buying of high-end defense equipment made by a Japanese company, Tsugami, from $600,000 in 2021 to $50 million in 2023, according to customs documents.
In 2023 more than 60% of Tsugami sales were to China.
The rise from AMG has come through two middlemen, according to the report: Amegino, a US-sanctioned company based in the UAE and owned by Andrey Mironov, and ELE Technology, a company based in China that fraudulently claims to be part of US company Gray Machinery.
Glenn Gray, the president of Gray Machinery, told the FT he'd never heard of the company.
Tsugami also told the publication that it hasn't sold any products directly to ELE.
Documents seen by C4ADS show that Amegino and ELE have worked together to procure goods for Russia, according to the report, with Amegino acting as a broker, commissioning Chinese companies such as ELE to ship goods to Russia.
C4ADS found other similar cases including a Russian company, UMIC — not sanctioned by the US but thought to be owned by the wife of the owner of AMG — acquiring machine tools made in various countries around the world, but all bought in yuan through Chinese traders and shipped from China.
UMIC and ELE did not immediately reply to Business Insider's request for comment.