US Targets Russian Export Control Evasion Scheme With Denial Order, Indictment
The Bureau of Industry and Security issued a temporary denial order last week against three people and four companies for their involvement in a scheme to illegally procure more than $225,000 worth of U.S. electronics components for Russia’s military. One of the individuals, Russian-German national Arthur Petrov, was arrested Aug. 26 in Cyprus and charged by DOJ with violating export controls and smuggling controlled goods from the U.S.
Matthew Olsen, DOJ’s assistant attorney general for national security, said the people and companies were trying to ship the type of electronics components Russia’s military needs for its war against Ukraine. “The Justice Department will not tolerate efforts to circumvent our export control laws to fuel the Russian war machine and those who try will find no refuge from U.S. justice,” Olsen said.
The TDO and indictment were announced by the Commerce and DOJ-led Disruptive Technology Strike Force, the second enforcement action by the group, which in May indicted six people for trying to illegally send sensitive items to Russia, Iran and China (see 2305160086).
Along with Petrov, the denial order targets Russian nationals Zhanna Soldatenkova and Ruslan Almetov. The companies are Cyprus-based Astrafteros Technokosmos, Latvian distributor Ultra Trade Service, Russian supplier Electrocom VPK and Tajikistan shell company Juzhoi Electronic. BIS said Petrov operates Astrafteros and works for Electrocom VPK; Almetov operates Juzhoi Electronic and is the general director of Electrocom; and Soldatenkova works for Electrocom.
BIS said the violations began after Russia’s invasion of Ukraine last year, when Petrov, Almetov and Soldatenkova worked to procure “large quantities” of American-made and export-controlled microelectronics for Electrocom, a Russian supplier of “critical electronics components” to the country’s military. Those components have “significant military applications,” the agency said, and include parts that have been recovered in Russian military hardware in Ukraine, such as in guided missiles, drones and “electronic warfare and communications devices.”
The items included 16-bit flash microcontrollers and digital signal processors controlled for anti-terrorism reasons under Export Control Classification Number 3A991.a.2. Also sent were integrated circuits controlled for anti-terrorism reasons under ECCN 3A991.b.1.a.
A joint BIS-FBI investigation showed Petrov used Astrafteros to buy the microelectronics from U.S. exporters by telling them that the items would be used for fire security systems for companies in Cyprus, Latvia or Tajikistan. Petrov instead helped deliver the goods to Electrocom in Russia, BIS said. DOJ said Petrov knew the shipments were illegal, adding the U.S. distributors provided him with invoices that “expressly noted” the microcontrollers and integrated circuits were subject to export controls.
Petrov, Soldatenkova and Almetov tried to hide the shipments through shell companies and other “deceptive means,” the agency said, including by first shipping the parts to Ultra Trade Service in Latvia or to Juzhoi in Tajikistan. Soldatenkova and Almetov then shipped the items to Electrocom, sometimes through another third country, including Lithuania.
Petrov specifically told U.S. exporters that Astrafteros was a “fabless manufacturer” in the “fire security systems sphere,” the denial order said, but instead used the company as a “pass-through freight-forwarder” on behalf of Electrocom. BIS said Petrov, Soldatenkova, Almetov and their companies never applied for an export license.
All three people and four companies will be subject to the denial order for 180 days from Aug. 28. The order may be renewed.
DOJ charged Petrov, who is awaiting extradition in Cyprus, with a range of export control violations, smuggling, wire fraud and money laundering offenses. He faces a maximum five-year prison sentence for one count of conspiracy to defraud the U.S.; a 20-year sentence for one count of conspiracy to violate the Export Control Reform Act; a 20-year sentence for each of the three counts of violating ECRA; a five-year sentence for one count of conspiracy to smuggle goods from the U.S.; a 10-year sentence for each of the three counts of smuggling goods from the U.S.; a 20-year sentence for one count of conspiracy to commit wire fraud; and another 20-year sentence for one count of conspiracy to commit money laundering.