Russia is scouring China for second-hand machine tools using mysterious buyer networks, while the Kremlin races to secure vital equipment to boost weapons production.
Moscow’s secret strategy for obtaining precision machines, uncovered by researchers, attempts to avoid increasingly restrictive Western sanctions and export controls that aim to delay production for the military.
The operations, carried out through opaque corporate networks, exploit a stockpile of old high-end machine tools made by Western companies that remained in China after decades of sales to local factories.
The Center for Advanced Defense Studies (C4ADS), a Washington-based think tank that has identified parallel trade, said the complex procurement arrangements suggest that Moscow’s claims that high-precision tools would be produced in Russia were probably “exaggerated”.
Allen Maggard, the C4ADS analyst who led the machine tool report, said Russian arms makers are “scrambling to expand their production capabilities using whatever they can get.”
One supply network, identified by C4ADS and verified by the Financial Times, is based on a Moscow-based company called AMG, a Russian military supplier that the United States placed under sanctions last year.
Since Russia’s invasion of Ukraine in 2022, AMG has increased its imports of numerically controlled (CNC) tools made by Tsugami, a Japanese manufacturer of high-end machine tools based in Tokyo. CNC tools are essential to defense industrial work because they enable high-precision, high-speed automated metal handling and milling.
Public documents show that AMG held contracts to obtain machine tools for Kometa, a company that develops weapons systems for Russia, including ballistic missile defense systems, jet weapons and missile systems , according to the sanctions lists.
Tsugami machines have been identified as being used at various military installations. Sergei Shoigu, then Russian defense minister, was shown on state television in March in front of what appears to be a Tsugami machine at a factory in Altai, which makes parts for cruise missiles.
Customs documents show AMG purchased approximately $600,000 worth of Tsugami equipment in 2021 from an official Japanese supplier. Purchases then increased after the invasion to reach $50 million in 2023, with the entire increase coming from two obscure middlemen.
The first Amegino provider is a US-sanctioned provider based in the United Arab Emirates, whose website was initially hosted on servers in Russia. Its owner is Andrey Mironov, according to Diligencia, a business intelligence company; no further details are available about Mironov’s background.
The second is ELE Technology, which fraudulently presents itself as “a division of Gray Machinery Company”, an American distributor of machine tools.
ELE’s website – which appears to come from the real Gray Machinery website – claims it has a warehouse in Illinois and offers lifts from Chicago’s O’Hare Airport to potential customers. The site claims that Glenn and Jared Gray, two experienced American CNC traders, are members of their team.
But ELE Technology is actually based 7,800 miles away in Shenzhen, China. Glenn Gray, whose full biography and image is published on the ELE website, told the FT he knew nothing about the company.
Records on the website and old advertising materials suggest that ELE is run by a Chinese electronics trader called Benson Zeng. Zeng did not respond to requests for comment.
Tsugami told the FT he had not supplied any goods directly to ELE. According to ELE’s website, it is currently selling two used Tsugami machines, manufactured in 2001 and 2005.
“We are seeing decades-old machine tools being imported into Russia,” Maggard said. “This demonstrates a lack of compliance in the second-hand market, not to mention that manufacturers are unlikely to care where their products go after they are sold.
“Just because a machining center is twenty or three decades old doesn’t mean it’s incapable of producing simple components for weapons.”
The two companies play different roles in supply operations in Russia. Amegino is a broker that commissions Chinese suppliers like ELE to ship goods to Russia from China. The two worked together: documents secured by C4ADS show that Amegino arranged for ELE to ship $2.7 million worth of goods to Russia in early 2023.
Tsugami has been relying on the Chinese market for about 20 years. A person connected to the company estimates that there are more than 100,000 Tsugami machines in China out of 200,000 worldwide. This is a pool that Moscow has been targeting since official Tsugami machine sellers withdrew from Russia in 2022.
“Before the pandemic, Tsugami had tried to take advantage of China’s national strategy to become a manufacturing powerhouse,” said an investment security analyst who inspected its facilities in China. In 2023, more than 60% of Tsugami sales took place in China.
But the volume of machinery in China is not just an export control problem posed by Tsugami. Customs records show that another Russian company, UMIC, purchased $2.9 million worth of machine tools and parts manufactured in countries including Israel, Japan, Korea, Germany, Sweden and Switzerland. In all cases, the equipment was shipped from China and purchased in yuan through trading partners based in China.
Unlike AMG, UMIC has not been sanctioned by the United States. UMIC owner Yulia Karpova shares a last name and phone number with Evgeny Karpov, the owner of AMG.
She appeared at Russian shows promoting AMG materials joining the AMG-UMIC stands. In May 2022, after Japan tightened its export controls, she was photographed with AMG brochures advertising the Tsugami product line that AMG claimed it could obtain.
UMIC and AMG did not respond to comment.
Japan’s Commerce Ministry said it was working with G7 partners to strengthen measures to counter sanctions evasion. “While many countries are struggling to deal with second-hand products, Japan is gathering various information, including on circumvention companies,” the ministry said. “We would add them to the list of sanctioned entities if necessary.”