Russia

More stories

  • 113 Shares199 Views

    in Economy

    Russian Attack Threatens Even Alternative Routes for Ukrainian Grain

    by

    The attack on a grain hangar on the Danube River, an alternative export route that has become an economic lifeline, complicates Ukraine’s efforts to export its grain.For shipping companies looking for a way to bring Ukrainian grain to global markets, the options keep dwindling, escalating a trade crisis that is expected to add pressure on global food prices.Russia last week pulled out of an agreement that had allowed for the safe passage of vessels through the Black Sea. On Monday it threatened an alternative route for grain, attacking a grain hangar at a Ukrainian port on the Danube River that has served as a key artery for transporting goods while the Black Sea remains blockaded. “It’s opening a new front in the targeting of Ukrainian grain exports,” said Alexis Ellender, an analyst at Kpler, a commodities analytics firm, adding that the route had been considered safe because of its proximity to Romania, a NATO member.“This will potentially close off that route,” he said. It could also raise rates for shipping insurance and further cripple Ukraine’s ability to export grain.Hours after the predawn attack on the hangar at the Ukrainian port of Reni, dozens of vessels that had been bound to collect grain from Ukraine were clustered at the mouth of the Danube. More

  • 138 Shares189 Views

    in Economy

    Wheat Prices Remain High as Concern Grows About Black Sea Instability

    by

    As Black Sea-bound vessels clustered in the waters near Istanbul, wheat prices remained elevated on Thursday, up 13 percent since Monday, when Russia pulled out of a wartime agreement that had been considered critical to stabilizing global food prices.The termination of the deal, which had permitted Ukraine to safely export its grain through the Black Sea, could have significant long-term consequences for grain supplies, said Alexis Ellender, a global analyst at Kpler, a commodities analytics firm. Despite robust grain harvests from exporters including Brazil and Australia, prices could become volatile.“By not having Ukraine there as a supplier, we’re increasing the vulnerability of the global grain market to these shocks,” Mr. Ellender said. “In the short term, supplies are good, but longer term, if we get any more supply shocks, we’re more vulnerable in terms of the global market.”Another drought in Brazil, like in 2021, or a disruption to Australia’s barley and wheat crop caused by El Niño, could cause prices to soar, he said.Russian threats to attack commercial vessels heading to Ukrainian ports have stalled traffic in the area. Marine tracking data shows that ships that had been en route to the Black Sea are sitting in ports in Istanbul as they wait to see if an agreement could be hammered out.“They’re still deciding what they’re going to do,” he said. Some vessels could look to pick up shipments of grain from other parts of Europe.At the moment, a quick resolution looks unlikely. Russia bombarded the port city of Odesa with missiles and drones on Tuesday and Wednesday, after an apparent Ukrainian drone strike on a Russian bridge linking the occupied Crimean Peninsula to mainland Russia.The suspension of the deal between Russia and Ukraine also has implications for maritime insurers and shipowners, who will no longer have insurance coverage to travel to Ukrainian ports, said James Whitlam, a product director at Concirrus, a marine data and analytics platform. While the deal between Russia and Ukraine was in effect, ships were able to secure insurance coverage under a temporary agreement.“Insurance markets are now scrambling around trying to understand what exposure they have,” Mr. Whitlam said.Despite recent increases, grain prices are still lower than they were on the eve of Russia’s invasion of Ukraine in February 2022, partly because the end of the deal was expected, Mr. Ellender said. In addition, Ukrainian grain exports have recently been at reduced levels because of limited labor, with workers fighting the war, and limited fuel supplies and lost territory to Russia.Ukraine has also increased exports by truck, train and river barge.Ukraine is still likely to be able to export most of its wheat, corn, barley and sunflower seeds via alternative routes, said Rabobank, a Dutch bank, on Thursday. But this will put additional pressure on ports on the Danube River, which flows from the Black Forest in Germany to the Black Sea, and the cost of transport will become more expensive, and rail infrastructure will be at a higher risk of Russian attack, the note said.“The higher transport cost means that Ukrainian farmers may, quite possibly, reduce planted area in the future,” the note said.Ukraine is one of the leading exporters of grain and the leading global exporter of sunflower oil, and the deal had allowed Ukraine to restart the export of millions of tons of grain that dropped after the invasion.Ukraine has exported 32.9 million metric tons of grain and other agricultural products to 45 countries since the initiative began, according to United Nations data. Under the agreement, ships had been permitted to pass by Russian naval vessels that had blockaded Ukraine’s ports in the aftermath of Russia’s full-scale invasion.Soaring prices are expected to hit the poorest people in the world the hardest. Ukraine last year had supplied more than half of the World Food Program’s wheat grain sent to people in Afghanistan, Ethiopia, Kenya, Somalia, Sudan, and Yemen, according to the U.N. More

  • 113 Shares199 Views

    in Economy

    Opposition Grows to U.S. Imports of ‘Laundered’ Russian Oil

    by

    Human rights groups and Ukrainian officials want the United States to stop buying Russian crude oil that has been refined into other products in third countries like IndiaUkrainian officials and human rights groups are asking the United States to close what they describe as a loophole that allows Russian crude oil that has been refined in other countries to be shipped to the United States.The Biden administration issued a ban in March last year on purchasing crude oil and other petroleum products directly from Russia, immediately after the Kremlin’s invasion of Ukraine. The European Union, which was heavily dependent on Russia for supplies of energy, banned Russian crude in December and then petroleum products in February.But both the United States and the European Union continue to buy Russian oil that has been refined in other countries into gasoline, fuel oil and other products. Countries like Turkey, the United Arab Emirates, Singapore, China and particularly India are snapping up Russian oil, which must now be sold at a reduced price under a cap imposed by the United States and Europe. These nations — which have been described as “laundromat” countries by environmental and human rights groups — then refine the oil and send it to other markets.This activity is legal: Once Russian crude oil has been “substantially transformed” by being refined in another country, it legally ceases to be Russian. The same standards have long applied to oil from other nations that are under sanctions, like Iran and Venezuela.Still, opposition to this sort of trade is growing.Oleg Ustenko, an economic adviser to the Ukrainian president, said such U.S. purchases meant “that we are indirectly supporting this insurrection, which is just not acceptable.”“I don’t know how it sounds in English, but in Ukrainian I’m calling this strategy as a cockroach strategy, meaning they are trying to find all possible loopholes, as a cockroach trying to crawl through these holes into your apartment,” he said of Russia’s oil trade. “And what you need to do, you need to close all these holes.”It’s difficult to estimate how much refined petroleum the United States is importing that originally came from Russia. But a report released Thursday by Global Witness, a London-based organization that advocates environmental and human rights, suggested that the volume was small but not insignificant.Take India, one of the biggest participants in this activity. The United States imported roughly 152 million barrels of refined petroleum products in the first five months of this year, with about 8 percent coming from India.More than 80 percent of refined oil that the United States imports from India came from a single port: Sikka, in Gujarat Province, which is home to the Jamnagar Refinery, the world’s largest refinery, according to calculations by Global Witness. And in the first five months of the year, the group estimated, 35 percent of the crude oil arriving at the port was of Russian origin.To block these flows, Global Witness proposes banning all imports from refineries that buy Russian crude oil. The group sent members to Washington last week to lobby members of Congress on the move, including in the committees overseeing energy and support for Ukraine.“Banning oil from refineries running on Russia crude is a common-sense decision for the U.S.,” said Lela Stanley, senior investigator at Global Witness.Mr. Ustenko and Ms. Stanley said such a ban was unlikely to have much impact on U.S. gas prices. But Tom Kloza, global head of energy analysis at the Oil Price Information Service, which tracks wholesale and retail prices of oil, said he believed it would have some effect.“If you remove a number of countries as potential sources for gasoline and diesel, there’s an impact in the U.S. and an impact in Europe,” he said.Mr. Kloza said that the Biden administration might be reluctant to take any step that would raise gas prices with an election approaching — and that such a ban could also prove difficult to police. He pointed to the example of Saudi Arabia, which last year had started importing Russian diesel, while also exporting more diesel from Saudi refineries to other countries.“There’s lots of ways to get around the Russian boycott,” he said.It also remains to be seen what such a ban would mean for the U.S. relationship with India, which the Biden administration regards as a key strategic partner. The Jamnagar Refinery is owned by Reliance Industry, which is in turn controlled by Mukesh Ambani, an Indian businessman. Mr. Ambani is a close partner to the Indian prime minister, Narendra Modi, and was a guest at the state dinner that the White House threw for Mr. Modi last week. More

  • 138 Shares169 Views

    in Economy

    Chinese Firm Sent Large Shipments of Gunpowder to Russian Munitions Factory

    by

    The previously unreported shipments between a state-owned Chinese company and a Russian munitions factory last year raise new questions about Beijing’s role in Russia’s war against Ukraine.On two separate occasions last year, railroad cars carrying tens of thousands of kilograms of smokeless powder — enough propellant to collectively make at least 80 million rounds of ammunition — rumbled across the China-Russia border at the remote town of Zabaykalsk.The powder had been shipped by Poly Technologies, a state-owned Chinese company on which the United States had previously imposed sanctions for its global sales of missile technology and providing support to Iran. Its destination was Barnaul Cartridge Plant, an ammunition factory in central Russia with a history of supplying the Russian government.These previously unreported shipments, which were identified by Import Genius, a U.S.-based trade data aggregator, raise new questions about the role China has played in supporting Russia as it fights to capture Ukrainian territory. U.S. officials have expressed concerns that China could funnel products to Russia that would help in its war effort — what is known as “lethal aid” — though they have not said outright that China has made such shipments.Speaking from Beijing on Monday, Antony J. Blinken, the U.S. secretary of state, said China had assured the United States that it was not providing lethal assistance to Russia for use in Ukraine, and that the U.S. government had “not seen anything right now to contradict that.”“But what we are concerned about is private companies in China that may be providing assistance,” Mr. Blinken said.Some experts said the shipments Poly Technologies had made to Barnaul Cartridge Plant since the invasion, which totaled nearly $2 million, according to customs records, constituted such lethal assistance. According to the customs records, Poly Technology intended its shipments to be used in the kinds of ammunition fired by Russian Kalashnikov assault rifles and sniper rifles.William George, the director of research at Import Genius, said that Poly Technologies “may be toeing the line on exactly what constitutes lethal aid to Russia,” but that the implications of the shipments were clear.“When shipping large quantities of gunpowder intended for the creation of military cartridges to a country at war, it’s unreasonable to imagine that the finished product won’t be used to lethal effect on the battlefield,” Mr. George said.“It is lethal support,” said Alexander Gabuev, director of the Carnegie Russia Eurasia Center. “The question is, how impactful and large scale is that?”Spent Russian ammunition casings near a destroyed Russian armored vehicle at a frontline position in the northern region of Kyiv in March 2022.Mr. Gabuev said that China had generally refrained from any actions that would “in a visible, forceful way” cross red lines the U.S. government had detailed at the beginning of the war about what would constitute a violation of Western sanctions. Since Poly Technologies has a history of shipments to the Barnaul plant before the war though, China might see those shipments as part of regular trade flows.“By and large, China tries to stick to those red lines,” he said. “Having said that, we see that there are some contracts and transactions going on.”Poly Technologies is a subsidiary of China Poly Group Corporation, which is owned by the Chinese government. Previous reports by The Wall Street Journal and CNN documented shipments of navigation equipment and helicopter parts from Poly Technologies to Russian state-backed firms.Barnaul Cartridge Plant, the recipient of the powder shipments, is privately owned. But Russian procurement records provided to The New York Times by C4ADS, a Washington, D.C.-based global security nonprofit, show the company had numerous contracts with divisions of the Russian government and military over the past decade, including the Russian Ministry of Defense.Barnaul Cartridge Plant was added to a list of companies sanctioned by the European Union in December. Open source information suggests the plant may have served as a training camp linked with the Wagner Group, a private Russian military force with ties to Russian President Vladimir V. Putin.There is no known direct link between these particular shipments of smokeless powder and the Ukrainian battlefield, and in customs paperwork Poly Technologies described the powder as being “for assembly of foreign-style hunting cartridges.”But Brian Carlson, a China-Russia expert and the head of the global security team of the think tank at the Center for Security Studies, said that while such cartridges could be used for hunting, this was rare. “These are military cartridges,” he said.Most modern firearms and other weapons used by soldiers and civilians alike rely on smokeless powder to propel a bullet to its target. When the trigger is pulled, a firing pin strikes the rear of the ammunition cartridge, igniting the powder, which burns extremely fast and forces the bullet down the barrel of a firearm.This kind of powder is also used by militaries as the propellant for mortar ammunition, launching explosive-laden projectiles weighing from four pounds to 30 pounds or more.Poly Technologies and Barnaul Cartridge Plant did not respond to requests for comment.The war in Ukraine, now in its 17th month, has intensified in recent weeks. The ability of both militaries to obtain munitions and equipment has become a crucial factor that could influence the war’s outcome.Ukrainian soldiers after firing a rocket-propelled grenade at Russian troops. The type of powder sent by a Chinese company to a Russian ammunition factory is used as the propellant for mortar ammunition.Tyler Hicks/The New York TimesWestern countries clamped down on their trade with Russia following the invasion, to try to starve the country of military goods as well as supplies that feed their economy and help the government generate revenue.But countries like China, India, the United Arab Emirates, Kyrgyzstan and Turkey stepped in to provide Russia with goods ranging from mundane products like smartphones and cars to aircraft parts and ammunition.Both state-owned and private Chinese companies have sold Russia products that could plausibly be used by either civilians or the military — including drones, semiconductors, hunting rifles, navigation equipment and airplane parts.China has remained officially unaligned in the war. Officials there argue Beijing is a neutral party and a peacemaker. In practice, however, China has become an important diplomatic, economic and security partner for Russia, after proclaiming a “no limits” partnership early last year.In a speech in April in Washington, Treasury Secretary Janet L. Yellen called that partnership a “worrisome indication” that China is not serious about ending the war. And she warned that the consequences for China of providing Russia with material support or assisting in evading sanctions “would be severe.”In recent months, U.S. officials have also privately reached out directly to Chinese financial institutions to discuss the risks of facilitating the evasion or circumvention of sanctions and export controls.Chinese companies “have a choice to make,” Wally Adeyemo, the deputy Treasury secretary, said in an interview on Fox Business TV earlier this month. “They can provide Russia with material support for their military and continue to do business with an economy that represents maybe $1.5 trillion and is getting smaller, or you can continue to do business with the rest of the world.”Poly Technologies is one of China’s largest arms exporters. It produces equipment for police and military forces, including weapons, personal protective gear, explosives and missile systems. It attracted censure in past decades for shipping small arms to Zimbabwe. In the last few years, it has sent weapons shipments to Pakistan, Sri Lanka and Nigeria, according to records accessed through Sayari Graph, a mapping tool for corporate ownership and commercial relationships.Barnaul products have been common on American shelves in recent years, including ammunition for military-style rifles, hunting rifles and American handguns. The goods came to America through several importers, including MKS Supply, LLC, a wholesale ammunition distributor in Dayton, Ohio.According to an MKS Supply official, the company stopped working with Barnaul Cartridge Plant early last year following a U.S. government ban on imports of Russian ammunition.Edward Wong More

  • 138 Shares199 Views

    in Economy

    U.K. Moves to Use Frozen Russian Assets to Help Ukraine Rebuild

    by

    As Russia’s ruinous attacks on Ukraine mount, Britain’s government is proposing legislation that would enable it to divert frozen Russian assets to the rebuilding of Ukraine and keep sanctions in place until Moscow pays compensation to its war-torn neighbor.The British announcement is in line with a decision last month at the annual Group of 7 meeting in Hiroshima, Japan, to freeze the estimated $300 billion worth of Russian assets held by banks and financial institutions in those countries — including Britain — “until Russia pays for the damage it has caused to Ukraine.”The issue of seized assets is highly contentious. While governments have the power to freeze assets, the European Central Bank has privately warned Brussels that confiscating Russian funds or giving the earned interest on those accounts to Ukraine could undermine confidence in the euro and shake financial stability, according to a report in The Financial Times. Investors might be reluctant to use euros as a reserve currency if they fear their funds could be grabbed.Ukraine’s reconstruction costs are estimated to top $411 billion, according to the most recent numbers from the World Bank, the European Commission and the United Nations. The ravaged landscape of the eastern city of Bakhmut, which President Volodymyr Zelensky of Ukraine laid out at the G7 meeting, is just one sign of the damage. “You have to understand that there is nothing,” Mr. Zelensky told reporters. “They’ve destroyed everything. There are no buildings.”The bank’s estimate was calculated before the vast devastation unleashed by the destruction of the Kakhovka dam in southern Ukraine this month.Calls to seize Russian assets and use them for Ukraine’s reconstruction have increased as the war has stretched well into its second year. Last week, the United States Senate introduced a bipartisan bill to confiscate Russian assets and use them for Ukraine’s reconstruction. And the issue is also expected to come up at a Ukraine Recovery Conference being held in London on Wednesday and Thursday.Since Russia began its full-scale invasion of Ukraine early last year, Britain has frozen roughly $23 billion in assets and imposed sanctions on 1,550 individuals. The government’s latest proposal will require people under sanctions to disclose their holdings in Britain.“Through our new measures today, we’re strengthening the U.K.’s sanctions approach,” James Cleverly, Britain’s foreign secretary, said in a statement on Monday accompanying the announcement, “affirming that the U.K. is prepared to use sanctions to ensure Russia pays to repair the country it has so recklessly attacked.” More

  • 150 Shares99 Views

    in Economy

    How the G7 Oil Price Cap Has Helped Choke Revenue to Russia

    by

    Group of 7 leaders are prepared to celebrate the results of a novel effort to stabilize global oil markets and punish Moscow.In early June, at the behest of the Biden administration, German leaders assembled top economic officials from the Group of 7 nations for a video conference with the goal of striking a major financial blow to Russia.The Americans had been trying, in a series of one-off conversations last year, to sound out their counterparts in Europe, Canada and Japan on an unusual and untested idea. Administration officials wanted to try to cap the price that Moscow could command for every barrel of oil it sold on the world market. Treasury Secretary Janet L. Yellen had floated the plan a few weeks earlier at a meeting of finance ministers in Bonn, Germany.The reception had been mixed, in part because other countries were not sure how serious the administration was about proceeding. But the call in early June left no doubt: American officials said they were committed to the oil price cap idea and urged everyone else to get on board. At the end of the month, the Group of 7 leaders signed on to the concept.As the Group of 7 prepares to meet again in this week in Hiroshima, Japan, official and market data suggest the untried idea has helped achieve its twin initial goals since the price cap took effect in December. The cap appears to be forcing Russia to sell its oil for less than other major producers, when crude prices are down significantly from their levels immediately after Russia’s invasion of Ukraine.Data from Russia and international agencies suggest Moscow’s revenues have dropped, forcing budget choices that administration officials say could be starting to hamper its war effort. Drivers in America and elsewhere are paying far less at the gasoline pump than some analysts feared.Russia’s oil revenues in March were down 43 percent from a year earlier, the International Energy Agency reported last month, even though its total export sales volume had grown. This week, the agency reported that Russian revenues had rebounded slightly but were still down 27 percent from a year ago. The government’s tax receipts from the oil and gas sectors were down by nearly two-thirds from a year ago.Russian officials have been forced to change how they tax oil production in an apparent bid to make up for some of the lost revenues. They also appear to be spending government money to try to start building their own network of ships, insurance companies and other essentials of the oil trade, an effort that European and American officials say is a clear sign of success.“The Russian price cap is working, and working extremely well,” Wally Adeyemo, the deputy Treasury secretary, said in an interview. “The money that they’re spending on building up this ecosystem to support their energy trade is money they can’t spend on building missiles or buying tanks. And what we’re going to continue to do is force Russia to have these types of hard choices.”Some analysts doubt the plan is working nearly as well as administration officials claim, at least when it comes to revenues. They say the most frequently cited data on the prices that Russia receives for its exported oil is unreliable. And they say other data, like customs reports from India, suggests Russian officials may be employing elaborate deception measures to evade the cap and sell crude at prices well above its limit.“I’m concerned the Biden administration’s desperation to claim victory with the price cap is preventing them from actually acknowledging what isn’t working and taking the steps that might actually help them win,” said Steve Cicala, an energy economist at Tufts University who has written about potential evasion under the cap.The price cap was invented as an escape hatch to the financial penalties that the United States, Europe and others announced on Russian oil exports in the immediate aftermath of the invasion. Those penalties included bans preventing wealthy democracies from buying Russian oil on the world market. But early in the war, they essentially backfired. They drove up the cost of all oil globally, regardless of where it was produced. The higher prices delivered record exports revenues to Moscow, while driving American gasoline prices above $5 a gallon and contributing to President Biden’s sagging approval rating.A new round of European sanctions was set to hit Russian oil hard in December. Economists on Wall Street and in the Biden administration warned those penalties could knock oil off the market, sending prices soaring again. So administration officials decided to try to leverage the West’s dominance of the oil shipping trade — including how it is transported and financed — and force a hard bargain on Russia.Oil tankers near the port city of Nakhodka, Russia. Many analysts were concerned that a price cap might prompt Russia to restrict how much oil it pumped and sold. But the country has mostly kept producing at about the same levels it did when the war began.Tatiana Meel/ReutersUnder the plan, Russia could keep selling oil, but if it wanted access to the West’s shipping infrastructure, it had to sell at a sharp discount. In December, European leaders agreed to set the cap at $60 a barrel. They followed with other caps for different types of petroleum products, like diesel.Many analysts were skeptical it could work. A cap that was too punitive had the potential to encourage Russia to severely restrict how much oil it pumps and sells. Such a move could drive crude prices skyward. Alternatively, a cap that was too permissive might have failed to affect Russian oil sales and revenues at all.Neither scenario has happened. Russia announced a modest production cut this spring but has mostly kept producing at about the same levels it did when the war began.Fatih Birol, the executive director of the International Energy Agency, has called the price cap an important “safety valve” and a crucial policy that has forced Russia to sell oil for far less than international benchmark prices. Russian oil now trades for $25 to $35 a barrel less than other oil on the global market, Treasury Department officials estimate.“Russia played the energy card, and it didn’t win,” Mr. Birol wrote in a February report. “Given that energy is the backbone of Russia’s economy, it’s not surprising that its difficulties in this area are leading to wider problems. Its budget deficit is skyrocketing as military spending and subsidies to its population largely exceed its export income.”Biden administration officials say that there is no evidence of widespread evasion by Russia, and that Mr. Cicala’s analysis of Indian customs reports does not account for the rising cost of transporting Russian oil to India, which is embedded in the customs data. A White House official told reporters traveling with Mr. Biden in Hiroshima on Thursday that the Group of 7 leaders would adopt new measures meant to counter price-cap evasion in their meeting this weekend.There is no dispute that the world has avoided what was privately the largest concern for Biden officials last summer: another round of skyrocketing oil prices.American drivers were paying about $3.54 a gallon on average for gasoline on Monday. That was down nearly $1 from a year ago, and it is nowhere near the $7 a gallon some administration officials feared if the cap had failed to prevent a second oil shock from the Russian invasion. Gas prices are a mild source of relief for Mr. Biden as high inflation continues to hamper his approval among voters.After rising sharply in the months surrounding the Russian invasion, global oil prices have fallen back to late-2021 levels. The plunge is partly driven by economic cooling around the world, and it has persisted even as large producers like Saudi Arabia have curtailed production.Falling global prices have contributed to Russia’s falling revenues, but they are not the whole story. Reported sales prices for exported Russian oil, known as Urals, have dropped by twice as much as the global price for Brent crude.The Group of 7 leaders meeting in Japan this week will probably not spend much time on the cap, instead turning to other collective efforts to constrict Russia’s economy and revenues. And the biggest winners from the cap decision will not be at the summit.“The direct beneficiaries are mostly emerging market and lower-income countries that import oil from Russia,” Treasury officials noted in a recent report.The officials were referring to a handful of countries outside the Group of 7 — particularly India and China — that have used the cap as leverage to pay a discount for Russian oil. Neither India nor China joined the formal cap effort, but it is their oil consumers who are seeing the lowest prices from it. More

  • 150 Shares169 Views

    in Economy

    Biden Team to Counter Tech Espionage Unveils Cases Involving China and Russia

    by

    A new division set up by the government to pursue sanctions evasion and technology espionage announced arrests of individuals with ties to foreign governments.The Biden administration announced arrests and criminal charges on Tuesday in five cases involving sanctions evasion and technology espionage efforts linked to Russia, China and Iran.Two Russian nationals were taken into custody last week under accusations of sending aircraft parts to Russia in violation of sanctions imposed after the invasion of Ukraine. In another case, a former Apple engineer is accused of stealing the company’s autonomous vehicle technology to provide it to a Chinese competitor.The announcements were the work of a recently established “technology strike force,” which aims to protect critical American technology or data from theft by hostile nations. The strike force was set up in February and brings together agents with the Commerce and Justice Departments, as well as the F.B.I. and local attorneys offices.Federal agents are working to trace the global movement of U.S. goods and data, as well as the funds used to pay for them. The effort seeks to crack down on the global networks that are channeling goods and technology through opaque jurisdictions and middlemen to try to circumvent sanctions and technology restrictions imposed by the United States.In another case unveiled Tuesday, a California-based engineer is accused of trying to steal source code for advanced machinery that can be used to make parts for military submarines and aircraft to sell it to several Chinese companies.Two other cases were announced, including charges against China-based agents who were accused of attempting to send materials used in weapons of mass destruction to Iran, according to U.S. officials, and charges involving the alleged provision of advanced technology to Russia that could be repurposed by the Russian military.Matthew G. Olsen, the assistant attorney general of the Justice Department’s national security division, told reporters that the cases showed the U.S. government’s ability “to accelerate investigations and surge our collective resources to defend against these threats.”“Foreign nation states are working hard to acquire our most sensitive technologies,” said Matthew Axelrod, the assistant secretary for export enforcement at the Commerce Department’s Bureau of Industry and Security. “We’re working even harder to stop them.”Oleg Patsulya and Vasilii Besedin, the two Russian nationals who were arrested last week under suspicion of trying to procure millions of dollars of prohibited parts for Russian airlines, were charged with conspiracy to violate the Export Control Reform Act and conspiracy to commit international money laundering. If convicted, they would face up to 20 years in prison for each charge.The Commerce Department issued a temporary denial order Tuesday against the men, which prohibits them from transactions involving any U.S. products for 180 days.The order also applies to a freight forwarder in the Maldives that the men had utilized to route shipments of prohibited products into Russia, as well as a Russian airline, Smartavia, that sought to purchase these products.On Thursday, federal officials seized luxury goods purchased with proceeds of their scheme, a U.S. official said. More

  • 100 Shares189 Views

    in Economy

    U.S.-Made Technology Is Flowing to Sanctioned Russian Airlines

    by

    Russian customs data shows that millions of dollars of aircraft parts made by Boeing, Airbus and others were sent to Russia last year despite sanctions.Last August, Oleg Patsulya, a Russian citizen living near Miami, emailed a Russian airline that had been cut off from Western technology and materials with a tempting offer.He could help circumvent the global sanctions imposed on Rossiya Airlines after Russia’s invasion of Ukraine by shuffling the aircraft parts and electronics that it so desperately needed through a network of companies based in Florida, Turkey and Russia.“In light of the sanctions imposed against the Russian Federation, we have been successfully solving challenges at hand,” Mr. Patsulya wrote, according to a criminal complaint filed Friday with the U.S. District Court in Arizona.Mr. Patsulya and his business partner were arrested Thursday on charges of violating U.S. export controls and international money laundering in a case that illustrates the global networks that are trying to help Russia bypass the most expansive technological controls in history.Since the Russian invasion of Ukraine, the United States has acted in partnership with nearly 40 other governments to impose sanctions on Russia, including limits on Moscow’s access to weapons, computer chips, aircraft parts and other products needed to fuel its economy and its war. The sanctions also applied to Russian airlines including Aeroflot, its subsidiary Rossiya and others.But despite these far-reaching sanctions, thousands of shipments of aircraft parts were successfully sent into Russia last year, according to a trove of Russian customs data obtained by The New York Times.The data, which was compiled and analyzed by Import Genius, a U.S.-based trade data aggregator, shows that tens of millions of dollars of aircraft parts were sent to Russian airlines explicitly sanctioned by the Biden administration, including to Rossiya Airlines, Aeroflot, Ural Airlines, S7 Airlines, Utair Aviation and Pobeda Airlines.Those shipments were made possible by illicit networks like Mr. Patsulya’s, which have sprung up to try to bypass the restrictions by shuffling goods through a series of straw buyers, often in the Middle East and Asia.For instance, dozens of shipments of copper wires, bolts, graphite and other parts marked as made in the United States by Boeing slipped into the warehouses of Aeroflot last year. They traversed obscure trading companies, free-trade zones and industrial parks in the United Arab Emirates and China, and then traveled into Russia, to help patch up Aeroflot’s dilapidated fleet.The data captures more than 5,000 individual shipments of aircraft parts into Russia over a period of eight months in 2022, from simple screws to a Honeywell-branded aircraft engine starter valued at $290,000.In all, it shows that $14.4 million of U.S.-made aircraft parts were sent into Russia during the eight months, including $8.9 million of parts that are described as being manufactured or trademarked by the U.S. plane maker Boeing and sold into Russia via third parties.Boeing said it had fully complied with U.S. sanctions and had suspended providing parts, maintenance and technical support for customers in Russia in early 2022. Experts in the aviation supply chain said the parts probably came from a variety of sources, such as existing overseas stocks from airlines and repair facilities or resellers who trade in scrapped parts.A Boeing plant in Renton, Wash. Millions of dollars of parts described as being manufactured or trademarked by the U.S. plane maker were sold into Russia via third parties.Grant Hindsley for The New York TimesMost of the products were routed through countries like the United Arab Emirates, Turkey, China and the Maldives, according to the data. But a handful of shipments — including to Rossiya — were sent directly from the United States or Europe.The shipments also increased over the course of last year as Russia recruited global businesses to help it bypass the sanctions. The trend suggests that “networks for evading sanctions took time to establish during the immediate post-export-control scramble but are now in a position to help Russian airlines source some key parts,” said William George, the director of research at Import Genius.The Russian nationals taken into custody on Thursday began setting up their scheme last May to send aircraft parts from the United States to Russia in violation of export regulations, according to the criminal complaint.The men are accused of fielding requests for parts, including expensive brake systems for a Boeing 737, from at least three Russian airlines, including two that had been strictly barred from purchasing U.S.-made products through a so-called temporary denial order issued by the Commerce Department. F.B.I. agents raided a condo owned by the men’s company in the Trump Towers in Sunny Isles Beach, Fla., on Thursday, The Miami Herald reported.Lawyers for the men did not immediately respond to a request for comment.Despite the level of sanctions evasion, airplane shipments into Russia remain significantly lower than before the war. U.S. officials say Russian airlines have been forced to cannibalize planes, breaking them down for spare parts to keep others in operation, as well as turning to Iran for maintenance and parts.Russia’s imports of aircraft and aircraft parts fell from $3.45 billion annually before the invasion to only about $286 million afterward, according to The Observatory of Economic Complexity, a data visualization platform that explores global trade dynamics.According to Silverado Policy Accelerator, a Washington nonprofit, China has been the leading overall exporter of parts for aircraft, spacecraft and drones to Russia since the invasion, accounting for about half of all shipments, followed by India. The number of single-aisle planes in use in Russia fell about 16 percent from the summer of 2021 to the summer of 2022, after the invasion, according to Cirium, an aviation data provider. The number of larger twin-aisle planes, often used on international routes, was down about 40 percent.Aviation experts say it will become more challenging for Russian airlines to continue flying planes without access to Western suppliers and help from Boeing and Airbus. The manufacturers regularly consult with airlines to assess any damage and strictly control access to technical documentation used by mechanics.But for now, Russian airlines have been kept alive with the help of international shipments and the use of hundreds of foreign jets that were stranded there after the war began.Tens of thousands of flights are expected to crisscross Russia this month, according to schedules published by Cirium. More than 21,000 flights — over half of them operated by Russian airlines — are expected to carry passengers to and from countries in Central Asia, as well as Turkey, the United Arab Emirates, Egypt, China and Thailand.Half a dozen export control lawyers and former government officials consulted by The New York Times said that many of the shipments in the Import Genius data likely violated sanctions, but that plane makers like Boeing or Airbus were not necessarily at fault. The aviation supply chain is complex and global, and the parts could have come from a variety of sources.“There is pretty clearly a violation,” said William Reinsch, a trade expert at the Center for Strategic and International Studies who oversaw export controls during the Clinton administration. “Less clear is the guilty party.”Aircraft parts originating in the European Union, including those marked as being manufactured or trademarked by Airbus, were also shipped into Russia last year, according to the data.Working on an Airbus A320 plane at a hangar in Haikou, China, in May. Airbus parts were also shipped into Russia last year.Zhang Liyun/Xinhua, via Getty ImagesJustin Dubon, a spokesman for Airbus, said that the company keeps track of genuine parts and documentation provided to its customers and conducts due diligence on all parties requesting spare parts. Restrictions in the United States and Europe mean that “there is no legal way that genuine aircraft parts, documentation and services can get to Russian carriers,” he said.U.S. restrictions technically allow companies to apply for a special license to continue sending products to Russian carriers for “safety of flight” reasons, but both Boeing and Airbus said that they had neither sought nor received such a license. In addition, Airbus said that E.U. laws prevent it from shipping such goods to Russia, regardless of U.S. licensing.Current and former U.S. officials say that some shipments into Russia are to be expected. Kevin Wolf, a partner at the law firm Akin Gump who oversaw export controls during the Obama administration, said the restrictions “can never block everything,” but that the rules were still significantly degrading Russia’s capabilities.He added that the scope of the new rules still exceed current methods of tracking and enforcement in other allied countries. Until the invasion of Ukraine, trade in aircraft parts was mostly unrestricted by the United States and other countries, except to Iran, Cuba, North Korea and Syria.“It’s improving,” Mr. Wolf said, “but it’s still way, way behind.”Compared with other countries that mostly limit their scrutiny to goods crossing their own borders, the United States is unparalleled in its attempt to police commerce around the world.In the past three years, the United States has imposed new technology restrictions for Russia, China and Iran that apply extraterritorially: Products made in the United States, or in foreign countries with the help of American components or technology, are subject to U.S. rules even when changing hands on the other side of the world.Both the United States and the European Union have been ramping up penalties for companies that violate sanctions, and dispatching officials to countries like Kazakhstan to try to persuade them to clamp down on shipments to Russia through their territory. The U.S. government has nine export control officers stationed in Istanbul, Beijing and other locations to trace shipments of sensitive products, and it is setting up three more offices.But providing parts can be a lucrative business. James Disalvatore, an associate director at Kharon, a data and analytics firm that has been monitoring Russia’s efforts to bypass sanctions, said the value of some aircraft parts imported by Russian airlines since the invasion had risen fourfold or more.“I don’t think there’s any secret what’s going on,” said Gary Stanley, a trade compliance expert who advises businesses in aerospace and other industries. “How long have we had Cuban sanctions? How long have we had North Korean sanctions? How long have we had Iranian sanctions? It never seems to put these folks out of business.” More