In ‘False Transit’ Loophole, Russia’s War Machine Is Supplied Through Kazakh Companies and Belarusian Warehouses

On February 24, Russia’s full-scale war against Ukraine will enter its third gru­el­ing year, with no sign of ending.

Countries around the world have imposed sanc­tions intend­ed to crip­ple Russia’s abil­i­ty to wage war, but the flow of high-tech for­eign goods into the coun­try continues.

A new inves­ti­ga­tion by Buro Media, Verstka, and OCCRP expos­es one of the ways this is accom­plished — a scheme known as “false tran­sit” that takes advan­tage of lighter or non-exis­tent sanc­tions against two of Russia’s clos­est eco­nom­ic part­ners, Kazakhstan and Belarus.

Both coun­tries are mem­bers of the Eurasian Economic Union, a Russian-led trade bloc that inte­grates the economies of five for­mer Soviet republics , allow­ing goods to flow freely across nation­al bor­ders with no cus­toms checks.

As report­ed in pre­vi­ous inves­ti­ga­tions by OCCRP and Buro Media, sanc­tioned goods are known to flow to Russia through each of these coun­tries. But the scheme revealed in this inves­ti­ga­tion makes use of a major loop­hole that involves both at once.

In this case, a Kazakh com­pa­ny ordered high-tech semi­con­duc­tor pro­duc­tion equip­ment and oth­er goods from Europe and had them deliv­ered to a tem­po­rary Belarusian stor­age facil­i­ty. A let­ter obtained by reporters shows the Kazakh com­pa­ny issu­ing orders to the stor­age facil­i­ty to change the des­ti­na­tion of some ship­ments to Russia, avoid­ing hav­ing to route them through Central Asia.

In total, Russian cus­toms data shows, the scheme appeared to sup­ply near­ly $5.9 mil­lion worth of sanc­tioned high-tech goods to a group of Russian com­pa­nies with exten­sive mil­i­tary contracts.

Experts say the scheme under­scores the key role Belarus con­tin­ues to play in sup­ply­ing Russia’s war machine, with the dis­crep­an­cy in sanc­tions between the coun­tries cre­at­ing what one called “a severe hole in the sanc­tions net.”

Today the Belarus gap is large enough for an arma­da of trucks, cars and oth­er goods to pass from the West into Russia, and poten­tial­ly onwards to the bat­tle­fields in Ukraine.

– Aage Borchgrevink, senior advis­er to the Norwegian Helsinki Committee

“Many of the key war-rel­e­vant goods pass through Belarus, which is the key pass­way of European sanc­tioned goods besides that via Turkey,” said Erlend Björtvedt, founder and CEO of Corisk, a Norwegian risk advi­so­ry firm.

“The role of Belarus is total­ly dif­fer­ent from those of Kazakhstan or Kyrgyzstan,” he explained. “Belarus is a main phys­i­cal gate­way. The sanc­tioned goods … are rout­ed from Northern Europe via Belarus to cen­tral Russia.”

“Countries in Central Asia take a dif­fer­ent role,” he con­tin­ued. “Their trad­ing com­pa­nies act as mid­dle­men in the trade but the sanc­tioned goods are not actu­al­ly rout­ed phys­i­cal­ly via those countries.”

Based on trade data from Lithuania, Poland, and Germany in 2022 and 2023, Corisk esti­mates that about 10 bil­lion euros’ worth of goods end­ed up in Russia via Belarus — either export­ed direct­ly to Belarus and then resold, or sim­ply shipped through the country.

“It’s fair­ly obvi­ous that, in order to make the export con­trols effec­tive, the Belarus sanc­tions must mir­ror the Russia sanc­tions,” said Aage Borchgrevink, senior advis­er to the Norwegian Helsinki Committee.

“Today the Belarus gap is large enough for an arma­da of trucks, cars and oth­er goods to pass from the West into Russia, and poten­tial­ly onwards to the bat­tle­fields in Ukraine,” he said. “Harmonization of the sanc­tion regimes is also log­i­cal, in our view, as Belarus from the start has been Russia’s most impor­tant and depend­able ally: the plat­form from where the main attack against Kyiv was launched in 2022.”

A Key Supplier

Russia’s mil­i­tary is sup­port­ed by a vast array of pri­vate com­pa­nies. Among these is the Ostec Group, a con­glom­er­ate that sup­ports high-tech indus­tri­al pro­duc­tion. Ostec does not pro­duce weapons itself, instead pro­vid­ing the equip­ment and set­ting up facil­i­ties oth­er con­trac­tors need to mul­ti­ply the military’s arsenal.

Its clients include sev­er­al major Russian mil­i­tary con­trac­tors. Ostec pro­vid­ed for­eign-made tech­nolo­gies and tech­ni­cal ser­vices to the devel­op­er and pro­duc­er of the Tochka‑U and Iskander‑M mis­sile sys­tems. The con­glom­er­ate is also a sup­pli­er and con­trac­tor of the Ryazan Radio Plant, owned by Rostec, a major defense con­glom­er­ate and one of the largest sup­pli­ers of radio com­mu­ni­ca­tions equip­ment to the Russian mil­i­tary-indus­tri­al complex.

It has also won ten­ders from the Moscow-based Central Scientific Research Institute of Chemistry and Mechanics, which pro­duces aer­i­al bombs being dropped in Ukraine and was sanc­tioned in 2020 by the U.S. for devel­op­ing tech­nol­o­gy that enabled a major mal­ware attack.

Leaked Russian cus­toms data shows that, before the full-scale war began in February 2022, Ostec was able to import prod­ucts man­u­fac­tured all over the world. It sourced many of them from sup­pli­ers across Europe, includ­ing Portugal, Slovenia, Belgium, and espe­cial­ly Germany.

Immediately after the inva­sion, many inter­na­tion­al com­pa­nies cut their ties with Russia vol­un­tar­i­ly, before any sanc­tions were imposed. Within weeks, all of Ostec’s European part­ners ceased their ship­ments to the com­pa­ny — except one.

This sup­pli­er, key for Ostec even before the war, was a com­pa­ny called Inter-Trans LLC.

Though locat­ed in the Polish city of Siedlce and con­trolled by a German logis­tics firm called BMA Spedition GmbH , Inter-Trans was major­i­ty-owned by a Belarusian busi­ness­man named Evgueni Kostiouk.

Over the course of 2022, Inter-Trans sup­plied Ostec with at least $24 mil­lion in goods — or about half of Ostec’s total imports for the year, as reflect­ed in the leaked cus­toms data. This appears to include all of the goods deliv­ered to Ostec from Europe fol­low­ing the inva­sion, includ­ing sol­vents and paint thin­ners, cen­trifuges for prod­uct test­ing, and opti­cal devices.

Among the ship­ments was over $4.7 mil­lion worth of semi­con­duc­tor and microchip pro­duc­tion equipment.

In February 2023, a full year after the inva­sion, European sanc­tions were final­ly imposed on these items, and Inter-Trans’ deliv­er­ies to Ostec dried up as well.

A per­son answer­ing the tele­phone num­ber of BMA Spedition, which owns Inter-Trans, said the com­pa­ny had done noth­ing wrong. “One of the sup­pli­ers was set [on the sanc­tions list],” said the man, who intro­duced him­self at dif­fer­ent times as both a man­ag­er and an ex-man­ag­er. “We were also because we were in the sup­ply chain as a trans­port com­pa­ny. That’s all.”

‘Send it to Ostec’

By the time European sanc­tions were imposed, an alter­nate route for Ostec had already been set up, based in Kazakhstan but with ties to Kostiouk, the Belarusian busi­ness­man behind Inter-Trans.

The Kazakhstan con­nec­tion appears to date back to 2014, when a Russian firm owned by Kostiouk , Mirtrans, estab­lished a daugh­ter com­pa­ny in Kazakhstan, KBR-Trans LLP.

In May 2022, three months after the war start­ed, the long­time direc­tor of KBR-Trans, Zhanat Ibraev, co-found­ed a new Kazakh firm with the same pre­fix, KBR-Technologies LLP, which quick­ly start­ed mak­ing ship­ments to Ostec of the same kinds of high-tech goods pre­vi­ous­ly sup­plied by Inter-Trans.

Among them were six ship­ments of semi­con­duc­tor pro­duc­tion equip­ment, large­ly made in South Korea, that became the first exam­ple jour­nal­ists could find of the Kazakh com­pa­ny send­ing goods through Belarus.

A let­ter of instruc­tion obtained by jour­nal­ists shows how it appears to have worked. In the let­ter, the direc­tor of KBR-Technologies informs the ship­ping com­pa­ny that the recip­i­ent of three ship­ments, appar­ent­ly from that July , had changed. The new recip­i­ent would be Tefida, a com­pa­ny based in Belarus.

The let­ter also spec­i­fies what would hap­pen next: “KBR Technologies LLP autho­rizes the pri­vate enter­prise Tefida to pos­sess the car­go on the ter­ri­to­ry of the Republic of Belarus and place it under the cus­toms pro­ce­dure of a cus­toms ware­house, and send it to Ostec Integra LLC of the Russian Federation.”

The let­ter does not explic­it­ly indi­cate what the three ship­ments con­tained. But cus­toms data con­firms that the six ship­ments of semi­con­duc­tor pro­duc­tion equip­ment ordered by KBR-Technologies that sum­mer did indeed arrive in Russia in August 2022 — shipped from Tefida.

This equip­ment was only worth around $716,000, but the fol­low­ing year the same sup­ply route would grow in importance.

On February 22, 2023, three days before the EU announced a ban on send­ing any semi­con­duc­tor and microchip pro­duc­tion equip­ment to Russia, Tefida’s ship­ments of exact­ly the same prod­ucts on behalf of KBR-Technologies start­ed ramp­ing up. Over just three months, Ostec received almost $8.6 mil­lion worth of imports sent through Belarus by Tefida.

Tefida is owned by Belarusian cit­i­zen Maryna Kosmach; its direc­tor is her broth­er Alexander Shibko. When con­tact­ed by jour­nal­ists, Shibko denied any involve­ment in sanc­tions eva­sion, although he acknowl­edged that the goods had moved through his company’s warehouse.

“We didn’t sup­ply any­thing,” Shibko told Buro Media. “I didn’t sign any way­bills for any­thing sanc­tioned. They also cleared cus­toms them­selves. We were sim­ply a tem­po­rary stor­age warehouse.”

The co-own­er of KBR-Technologies, Zhanat Ibraev, declined to com­ment, and the com­pa­ny did not respond to emailed ques­tions. Ostec offi­cials also did not respond to requests for comment.

In May 2023, the U.S. Treasury sanc­tioned Ostec Group, their sup­pli­er Kostiouk, and his com­pa­nies Inter-Trans and BMA Spedition, pro­hibit­ing any­one from doing busi­ness with them. Shortly after that, ship­ments from Kostiouk’s com­pa­nies stopped being sent direct­ly to the Ostec Group.

However, between April and August Tefida sup­plied about $2.5 mil­lion worth of high-tech equip­ment on behalf of KBR-Technologies to anoth­er Russian com­pa­ny, FabCenter LLC, which is tied to the Ostec Group through shared cur­rent and for­mer owners.

Reporters have found no evi­dence that Kostiouk and his com­pa­nies are still sup­ply­ing Russian mil­i­tary con­trac­tors today. But sim­i­lar schemes, oper­at­ed by indi­vid­u­als who have not come to the atten­tion of any sanc­tion­ing author­i­ties, are like­ly still in oper­a­tion, experts say.

The con­tin­ued flow of sanc­tioned high-tech equip­ment into Russia might be bad news for Ukraine — but it also sug­gests that Russia is hav­ing trou­ble man­u­fac­tur­ing these goods on its own.

“A sig­nif­i­cant share of the Russian imports of these goods still ulti­mate­ly comes from Western com­pa­nies,” said Benjamin Hilgenstock, a senior econ­o­mist at the Kyiv School of Economics. “That’s good news and bad news at the same time. The good news is that Russia has not sub­sti­tut­ed them or been able to sub­sti­tute them. … The bad news is obvi­ous­ly, well, if Russia is still buy­ing these things then our export con­trol enforce­ment is fac­ing seri­ous challenges.”

“These com­pa­nies need to prop­er­ly con­trol their sup­ply chains,” he added. “They say they can’t, but we think that that’s a cheap excuse, and ulti­mate­ly it’s a ques­tion of incen­tive.”

Original inves­ti­ga­tion arti­cle fol­low the link: OCCRP