"The supply chain that keeps tech flowing to Russia", 13. December 2023

In March this year, a new firm appeared in Turkey’s corporate registry. Azu International Ltd Sti described itself as a wholesale trader of IT products, and a week later began shipping U.S. computer parts to Russia.

Business was brisk, Russian customs records show. The United States and the EU had recently restricted sales of sensitive technology to Russia because of its Feb. 24 invasion of Ukraine, and many Western tech companies had suspended all dealings with Moscow.

Co-founded by Gokturk Agvaz, a Turkish businessman, Azu International stepped in to help fill the supply gap. Over the next seven months, the company exported at least $20 million worth of components to Russia, including chips made by U.S. manufacturers, according to Russian customs records.

Azu International’s rapidly growing business didn’t come from a standing start, Reuters reporting shows: Agvaz manages a wholesaler of IT products in Germany called Smart Impex GmbH. Before the invasion, Russian custom records show that the German company shipped American and other products to a Moscow customer that recently has imported goods from Azu International.

Reached at his office near Cologne in October, Agvaz told Reuters that Smart Impex stopped exporting to Russia to comply with EU trade restrictions but sells to Turkey, a non-EU country that doesn’t enforce most of the West’s sanctions against Moscow. “We cannot export to Russia, we cannot sell to Russia, and that’s why we just sell to Turkey,” he said. Asked about Azu International’s sales to Russia, he replied, “This is a business secret of ours.”

Contacted again shortly before publication, Agvaz said Smart Impex “observes all export restrictions and manufacturer bans” and “has not circumvented Western sanctions against Russia.” He said he couldn’t answer questions about Azu International. Turkish corporate records show he sold his 50% interest in the Istanbul company on Nov. 30 to his co-founder, Huma Gulum Ulucan. She couldn’t be reached for comment.

Azu International is an example of how supply channels to Russia have remained open despite Western export restrictions and manufacturer bans. At least $2.6 billion of computer and other electronic components flowed into Russia in the seven months to Oct. 31, Russian customs records show. At least $777 million of these products were made by Western firms whose chips have been found in Russian weapons systems: America’s Intel Corp, Advanced Micro Devices Inc (AMD), Texas Instruments Inc and Analog Devices Inc., and Germany’s Infineon AG.

A joint investigation by Reuters and the Royal United Services Institute (RUSI), a London-based defense think tank, details for the first time the global supply chain that continues to feed Russia with Western computer components and other electronics. The investigation into this trade identified a galaxy of obscure importers and exporters, like Azu International, and found that shipments of semiconductors and other technology continue to arrive in Russia from Hong Kong, Turkey and other trading hubs. [...]

A spokesperson for Intel said the company is taking the findings “very seriously and we are looking into the matter.” The spokesperson said Intel adheres to all sanctions and export controls against Russia and “has a clear policy that its distributors and customers must comply with all export requirements and international laws as well.”

Similarly, a spokesperson for AMD said the firm “strictly complies” with all export regulations and has suspended sales and support for its products in Russia. “That includes requiring all AMD customers and authorized distributors” to stop selling AMD products into Russia.

Infineon, too, said that after the invasion, it “instructed all distribution partners globally to prevent deliveries and to implement robust measures that will prevent any diversion of Infineon products or services contrary to the sanctions.”

Texas Instruments said it has not shipped to Russia since the end of February. Analog Devices didn’t respond to requests for comment.

A spokesperson for the U.S. Department of Commerce said, “Since the start of the invasion, Russia’s access to semiconductors from all sources has been slashed by nearly 70 percent thanks to the actions of the unprecedented 38 nation coalition that has come together to respond to (Russian President Vladimir) Putin’s aggression. It is no surprise that Russia is working hard to circumvent controls.”

But the Reuters review of Russian customs data found that since the invasion, the declared value of semiconductor imports by Russia has, in fact, risen sharply. The spokesperson said the Commerce Department had analyzed different data and therefore couldn’t comment on Reuters findings. [...]