The Illicit Flow of Technology to Russia Goes Through This Hong Kong Address
Defying sanctions, Russia has obtained nearly $4 billion in restricted chips since the war began in Ukraine. Many were shipped through a cluster of shell companies in Hong Kong.
By Aaron Krolik and Paul Mozur
Aaron Krolik and Paul Mozur spent more than a year investigating how restricted technology flows to the front lines of Russia’s war in Ukraine.
From a nondescript seventh-floor office at 135 Bonham Strand near Hong Kong’s financial district, at least four companies are operating with a shadowy mission: facilitating the illicit trade of Western technology to Russia.
Shell companies at that address have acquired millions of restricted chips and sensors for military technology companies in Russia, many of which have been placed under sanctions by the U.S. government, according to an examination by The New York Times.
The companies have names like Olax Finance and Rikkon Holding. Their office, with a faded 704 number on the door, appears unoccupied. No one answered during a visit last month. An ad for air-conditioning hung in the crack of the door.
Yet the companies are a crucial link in a chain connecting U.S. research laboratories to Chinese factories, Russian arms makers and the battlefields of Ukraine — and a sign that the U.S. government and tech giants cannot control where their technology goes.
Since Russia invaded Ukraine in 2022, nearly $4 billion of restricted chips have poured into Russia from more than 6,000 companies, including those at Hong Kong’s 135 Bonham Strand, according to a Times analysis of Russian customs data, corporate records, domain registrations and sanctions data. The analysis examined nearly 800,000 shipments of restricted electronic goods into Russia since mid-2021.
Even as the West sought to cut off access to semiconductors through trade restrictions, Russia established such a robust parallel supply chain that it imported almost the same number of critical chips in the last three months of 2023 that it did in the same period in 2021, according to the analysis of Russian customs data. The reliance on China for many of these chips also deepened, with transactions that were historically settled in U.S. dollars now increasingly executed in Renminbi, according to the analysis.
The Wartime Boom for U.S. Chips
The ability of President Vladimir V. Putin of Russia to flout Western trade restrictions has been one of the failings of the U.S.-led response to the war in Ukraine. Rather than become economically isolated, Russia has emerged from more than two years of conflict emboldened in its attacks against Ukraine.
Russia’s technology imports begin with U.S. chipmakers selling their products to international distributors. The chip companies are not legally required to track where their goods go from there. Russia has then turned to the international distributors — which are in Hong Kong, China, Turkey, India, Serbia and Singapore, according to The Times’s analysis — to maintain a steady supply of tech.
Some of the middlemen companies are part of longtime networks of offshore firms owned by Russian businessmen. At 135 Bonham Strand, four shell companies are owned by oligarchs linked to Russia’s military industrial base, according to The Times’s analysis.
The speed with which the shell companies have sprung into action has overwhelmed Western regulators. As soon as one supplier is ferreted out, new ones sprout in its place, sometimes with the same owner. Some of the companies operate in the United States’ backyard, including one Russia-linked firm fronted — apparently unwittingly — by a Latvian-Canadian retiree in a two-story house in a Toronto suburb.
A Commerce Department spokeswoman did not directly address how Russia had flouted trade restrictions and said U.S. export controls meant that “Russia is increasingly unable to meet its heightened wartime demand in the face of shrinking supply and is paying more for what it does get.” A Treasury Department spokeswoman said the agency had expanded its efforts to penalize those trading with Russia and supporting its war efforts.
Russia’s Ministry of Foreign Affairs didn’t respond to requests for comment.
China plays an essential role. As the world’s leading assembler of electronics, it imports huge numbers of Western components and turns them into consumer electronics. Chinese firms can easily channel those supplies to Russia, industry experts said.
In a statement, China’s Ministry of Foreign Affairs said it didn’t provide weapons or equipment to any party in the war in Ukraine. “What the United States should do is reflect on its responsibility for the Ukraine crisis rather than shirking responsibility to China,” the ministry said.
With limited domestic manufacturing capacity, the United States has little option but to continue sending chips into China for manufacturing, packaging and assembly.
“The tide has shifted,” said Elina Ribakova, an economist at the Peterson Institute for International Economics, a Washington think tank. “We have lost control of chip production.”
Western Chips in Russian Missiles
On July 8, a Russian missile tore into a children’s hospital in Kyiv, killing two and injuring 10, including seven children.
The Kh-101 long-range cruise missile fired into Kyiv was laden with electronics from American chipmakers that had been restricted by trade controls, according to Ukraine’s National Agency on Corruption Prevention.
One important chip in the Russian missiles was the Field Programmable Gate Array, or F.P.G.A., made by U.S. companies such as Advanced Micro Devices and Intel. The chip is used in fire alarms, internet modems, missiles and drones to process data at lightning speed and is banned for sale to Russia.
Since the war began, Russia has imported more than $390 million in F.P.G.A.s, according to Russian customs data. The shipments are just one sliver of the Kremlin’s efforts to sidestep sanctions and maintain supplies of critical technology.
The Kremlin has long understood its reliance on Western technology to be a vulnerability. In 2020, Russia tried to kick-start domestic chip production with a plan to bolster electronics manufacturing over the next decade. Those efforts largely failed.
Instead, Russia cultivated relationships with large U.S. semiconductor manufacturers, importing chips from companies such as Intel and electronics distributors like DigiKey. When Russia invaded Ukraine in February 2022, those ties were upended. The U.S. government swiftly announced sweeping restrictions to hamper Russia’s ability to acquire crucial technologies.
“Russia’s access to cutting-edge U.S. and partner country technology will halt,” Thea D. Rozman Kendler, an assistant secretary of commerce, said at the time.
Western companies soon exited Russia. Their products did not.
Russia speedily reoriented supply chains, seeking out friendly countries and ports willing to service its ships. Transshipment hubs popped up in Turkey, the United Arab Emirates and Morocco. The U.S. government has imposed sanctions on companies and individuals in those countries.
China emerged as the dominant chip supplier to Russia. According to the Semiconductor Industry Alliance, 29 percent of all semiconductors pass through China.
Texas Instruments, which makes chips found in the Shahed and Lancet drones — two of Russia’s deadliest military-grade drones — has a chip assembly and testing factory in the central Chinese city of Chengdu. Micron Technology, another U.S. chipmaker, fabricates chips in Xi’an. F.P.G.A.s flow in huge numbers to Chinese manufacturers, which put them in products that are sold globally.
In emailed responses, AMD, Texas Instruments, Micron and Intel said they opposed the use of their technology by Russia and that they complied with U.S. export controls.
“In the first few weeks of the war, there really was something of an expectation that these were going to be crushing measures,” Emily Kilcrease, a senior fellow at the Center for a New American Security, said of the sanctions. But “we underestimated the difficulty of the U.S. to actually enforce in a market like that.”
The Russians of 135 Bonham Strand
In 2008, Alexey Chichenev, a Russian businessman, took control of a company called Saril Overseas based in Hong Kong.
It was one entity in a growing portfolio of shell companies at 135 Bonham Strand, led by Mr. Chichenev, a Russian expatriate in Hong Kong, and his partner, Mikhail Vinogradov.
Over the next decade, the pair began managing nearly a dozen shell companies with names like Syssoft and Toren Limited, which worked in international property development and trade, according to news releases and the companies’ websites. One Bonham Strand firm, Olax Finance, said it had helped finance a water purification project with Costner Industries Venezuela, a company owned by the actor Kevin Costner. Mr. Costner’s publicist did not respond to requests for comment.
The firms at 135 Bonham Strand used byzantine offshore ownership structures that intersected with holding companies in the British Virgin Islands and Cyprus, according to corporate registration documents. Shares of the companies were transferred like baseball cards between Russian businessmen with addresses in places like Vienna, Tel Aviv and Paris, according to Hong Kong corporate registration records.
Two companies at 135 Bonham Strand, Rikkon and Midicon, were owned separately by Andrey Kozitsyn and Igor Kudryashkin, the former directors of the Ural Mining and Metallurgical Company, an industrial conglomerate in Russia, according to public records. The Ural Mining and Metallurgical Company has ties to Mr. Putin, weapons manufacturing and Russian organized crime, according to the Treasury Department and publicly available documents.
The Ural Mining and Metallurgical Company did not respond to a request for comment. It’s unclear whether Mr. Kozitsyn and Mr. Kudryashkin are still affiliated with the company, and they could not be reached.
In 2014, after Russia annexed Crimea, Mr. Kozitsyn and Mr. Kudryashkin transferred ownership of Rikkon and Midicon to Mr. Chichenev and Mr. Vinogradov. By 2022, Mr. Chichenev and Mr. Vinogradov controlled at least 11 companies at 135 Bonham Strand, according to Hong Kong’s corporate registry.
Only two of those companies, Kvantek and Superchip, sold chips to Russia before the war in Ukraine. But as restrictions and sanctions set in, more jumped into action, according to The Times’s analysis of Russian customs data.
One Business Address; a Growing Web of Supply Lines
$4.1 million
$2.8 million
$1.4 million
$4 million
$7 million
$4 million
$11.8 million
$1.3 million
Saril Overseas, for one, had no record of exports to Russia until six months after the war began. Its first shipment, in July 2022, was a batch of F.P.G.A.s valued at $95,000 and made by AMD.
Saril Overseas later expanded its trade to several Russian companies. By this year, it had sold nearly $9 million of restricted semiconductors, according to the analysis of Russian customs data.
At least one of the shell companies, Kvantek, has since shut down its website and appears to have ceased operations, according to The Times’s analysis.
In an interview at the door of his Hong Kong apartment, Mr. Chichenev said he did not know who was behind the companies and had forgotten how they were transferred to his name. “You see, it is a friend of my friend in Moscow, so they asked me to help them,” he said.
Mr. Chichenev said he was contacted because he lived in Hong Kong, working as the director of a separate company. He said he was not a tech expert and simply helped get chips from the United States and Taiwan to China.
“It was out of my control,” he said. “I just made payments to the U.S. or Taiwan.”
His 135 Bonham Strand companies were being shut down, he added. “At the moment, I just enjoy life,” he said. “But before, yes, we had several companies, but now everything is closed.”
Mr. Vinogradov did not respond to emailed questions. Colin Cohen, a lawyer based in Hong Kong whose firm, Boase Cohen & Collins, is listed as the secretary on many 135 Bonham Strand companies, declined to comment, citing client confidentiality.
One beneficiary of the continued tech flows was Staut, a Russian military electronics supplier. In July 2023, the Treasury Department imposed restrictions on Staut to cut it off from U.S. technology.
That posed a problem for the 135 Bonham Strand companies, which had sold over $21 million in restricted chips to Staut. Yet within months, several Bonham Strand firms had shifted their shipments from Staut to two new companies, Chipdevice and Leningrad Microwaves.
While appearing independent on paper, Chipdevice and Leningrad Microwaves shared ownership with Staut and another Russian military electronics supplier, Fregat, according to Russian corporate records and domain registrations. Chipdevice and Leningrad Microwaves have received over $17 million in restricted chips since the war began.
By late last year, the United States had placed Chipdevice and Fregat under sanctions. Leningrad Microwaves remains unaffected. Last month, the Treasury Department also designated Mr. Chichenev and several of the 135 Bonham Strand firms for economic sanctions. It has not take action against Mr. Vinogradov.
Still, the U.S. government remains at least a step behind. Since the war started, the Office of Foreign Asset Control, an agency in the Treasury Department that administers the U.S. sanctions program, has designated at least 4,234 Russian individuals and companies for economic restrictions, according to OpenSanctions, a sanctions data provider.
A Retiree’s Suburban Home
On the porch of his house in a leafy Toronto suburb, Edward Poberezkin, a 67-year-old Latvian-Canadian retiree, recently recounted his connection to a company that had shipped restricted technology to Russia.
A decade ago, Mr. Poberezkin said, a businessman from Russia paid him a nominal fee to register as an “agent for service” for Alburton Enterprises, a company based in the British Virgin Islands. The registration made Mr. Poberezkin and his home the designated addressee and address for official documents for Alburton’s Canadian headquarters.
When a Times reporter visited with questions about Alburton this month, Mr. Poberezkin said he was “very surprised.” The company has shipped more than $9 million in restricted technology to Russia since early 2022, according to The Times’s analysis of Russian customs data.
Mr. Poberezkin, who is Alburton’s only publicly listed director, said he had not heard from the company or received any mail related to it in nine years.
“I do not have any contact with the Russian government,” he said, adding that he did not know how his name or address were being used and did not know Alburton’s work. He said he intended to remove himself as the company’s Canadian representative.
While Mr. Poberezkin’s story couldn’t be independently verified, it was characteristic of Russian efforts to pull in businesspeople — some of whom may be unwitting and who often have a background linked to Russia — to sidestep sanctions, experts said. That Russia-related businesses dared to do it in a major city of a U.S. ally illustrated how unabashed their evasions could be.
A Canada Border Services Agency spokesman said it could not provide details about Alburton’s operations.
Alburton has other international links. In 2019, it shipped thousands of pounds of electrical cables to Russia through Levitus Trading, a company in the British Virgin Islands, according to the analysis of Russian customs data. Levitus was once the sole owner of Olax, a company now owned by Mr. Chichenev at a familiar address: 135 Bonham Strand in Hong Kong.
Reporting was contributed by Adam Satariano, Tiffany May, Alexandra Stevenson and Vjosa Isai.
Methodology
To calculate Russia’s imports of restricted chips, The New York Times analyzed Russian customs data from a company that gathers global trade information from governments worldwide. The company asked not to be named in order to preserve its access to sensitive trade data from Russia and other countries.
The Times verified the customs data through interviews with experts, crosschecks against other data providers and interviews with companies included in the data.
The Times specifically looked at data on electronic goods that fell within an international trade classification denoted by the numbers 8542.3. That category includes chips that the U.S. Commerce Department has designated as sensitive goods. The United States restricted those products from Russia in 2022 after the war in Ukraine began.
The Times analyzed all Russian imports of such goods between July 1, 2021, and Jan. 4, 2024. Each trade record included the name of the importer, the exporter, the brand of chip, its value and its number of units. That information was used to calculate aggregates. Shipment values were calculated based on the exchange rate at the date of trade.
To discern whether any of the exporters had been placed under sanctions by the United States, The Times compared the Russian customs data with U.S. Treasury sanctions designations using information from Open Sanctions, a sanctions data provider.
The Times reviewed hundreds of corporate filings from Hong Kong and Ontario, as well as public records compiled by commercial services, to determine the owners of the shell companies. The Times also reviewed documents from the Panama Papers, a collection of leaked financial documents published by the International Consortium of Investigative Journalists.
Paul Mozur is the global technology correspondent for The Times, based in Taipei. Previously he wrote about technology and politics in Asia from Hong Kong, Shanghai and Seoul. More about Paul Mozur