Russia finds a thousand ways to bypass trade embargoes. Not only does it use loopholes to continue placing its oil in international markets, but also to access strategic products, which in theory are prohibited. Moscow, through India, can purchase high-performance processors from Nvidia and AMD that are specialized in artificial intelligence. The great fear is that Putin will use them for military developments.
Shreya Life Sciences She is a pharmacist from India. Located in an office building in one of the most feverish neighborhoods of Bombay, it would pass for any Indian company that operates in international markets acquiring all types of products. However, it just so happens that this discreet pharmaceutical company is part of a lucrative high-tech business with Russia. According to Bloomberg News, Shreya exported 1,111 units of Dell’s most advanced servers to Russia between April and August of this year.
The servers, known as PowerEdge XE9680contain high-end processors optimized for artificial intelligence manufactured by Nvidia or AMDaccording to Dell’s own website. The machines carry Nvidia’s famous H100 chips, megaprocessors to support AI languages.
The problem is that the servers and chips are on a list of restricted items by the United States and the European Union in order to “attack sensitive sectors of the Russian military industrial complex“. The shipments are worth $300 million, according to the firms ImportGenius and NBD, cited by Bloomberg, and are destined for two Russian companies, Main Chain and IS LLC. The Indian pharmaceutical company Shreya Life Sciences has been in business since September 2022. , importing AI technology to Russia and, best of all, legally.
A dangerous double use
India, along with China, have become Russia’s largest technology suppliers and highlights the black holes of sanctions imposed by Western allies. Ukrainian President Volodymyr Zelenskiy’s chief of staff, Andriy Yermak, has recently denounced that Russia continues to receive components used for intelligence and electronic warfare systems despite Western sanctions.
The Kremlin is using a scheme involving false transit, allowing the supply of sanctioned goods from EU countries, intended for Central Asia and the Caucasus region. Intermediary companies are used to obtain Western dual-use electronic components.
— Andriy Yermak (@AndriyYermak) October 21, 2024
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India is just one link in the trade routes that Russia uses to avoid Western blockades. Trade data suggests that Malaysia is in fact the origin of Dell’s processors. Malaysian Prime Minister Anwar Ibrahim met President Vladimir Putin in Russia in September and praised the “huge potential” to improve regional trade relations, including through advanced technologies. Import documents for at least 834 PowerEdge XE9680 units destined for Russia indicated their country of origin was Malaysia.
Technology companies themselves are required to comply with sanctions regulations and monitor sales of sensitive products. In a statement, Dell stated that it had stopped selling and offering service or support for products in Russia in February 2022immediately following its full-scale invasion of Ukraine, and maintains “a strict trade compliance program.” Nvidia and AMD said they work with partners to ensure sales “fully” comply with export controls and take appropriate action if any violations are identified.
A legal matter
Doing business with Russia is not illegal in India, as Prime Minister Narendra Modi’s government is not part of the multiple rounds of sanctions imposed on Moscow by the United States and the European Union. New Delhi, which has long depended on Russia for its military equipment, stepped in to buy its crude when European countries cut oil imports because of the war, and is signaling that it will continue to do so as long as Moscow offers deeper discounts than others. producers. During an October 22 meeting with Putin on the sidelines of the BRICS summit, Modi referred to our “close and deepening” relations.
That role has put India on the radar of Western governments. US and EU officials have traveled to India in recent months as part of efforts to encourage the government to act to stop the shipments.according to people familiar with the trips. The visits come amid signs of growing exasperation with India over its role in procuring war goods from Russia.
Bloomberg has previously reported that the vast majority of restricted products enter Russia through re-exports from third countries, such as China, Türkiye and the United Arab Emirates. Some of these transactions often involve subsidiaries and subcontractors that are almost invisible to Western companies, as well as networks of intermediaries that source from them.
The company was founded in Moscow in 1995 by Sujit Kumar Singhjust when Russia was on the verge of an economic crisis, and offered opportunities to enterprising people capable of overcoming the chaos of those years.
Records from the Ministry of Corporate Affairs database show that Shreya began its journey as a pharmaceutical medicines marketing and distribution company, and over time acquired several companies to set up its own manufacturing plants for generic medicines such as insulin, antibiotics, antimalarial and gastrointestinal medications. In fact, between January 2022 and August 2024, it sold pharmaceutical products worth $22 million to Russia, official data show. Russia is listed on the company’s website as the first of six major markets for its international exports.
Shreya’s History
That dependence on Russia has proven to be a liability in the past. Shreya began to see a drop in operating income in 2014 and 2015, coinciding with Putin’s annexation of Crimea, which led to sanctions and a collapse of the ruble. Because Shreya depended on sales of her drugs to Russian clients and her own Moscow-based entity, Shreya Life Sciences, The company began to record losses.
In March 2015, the drugmaker defaulted on bank loans worth 1.9 billion rupees ($23 million). In the following years, Shreya returned to profitability, but the biggest lifeline for the Indian company came in the form of the state-owned Promsvyazbank PJSC in Moscow. The head of the bank is Peter Fradkov, son of the former head of Russia’s Foreign Intelligence Service, Mikhail Fradkov. Both the bank and Fradkov Jr. are subject to international sanctions.
Between 2011 and 2013, Shreya borrowed $86 million from the Russian bank, in the form of a foreign currency loan mortgaged on shares owned by Sujit Kumar Singh. The money was used to invest in equity shares of Shreya Life Sciences in Moscow, which in turn used the money to pay for the import of pharmaceutical products from the Indian entity. The loan helped keep the company afloat, as the pharmaceutical company sold a significant amount of its products to its own subsidiary.
Shreya’s first record of non-medical exports during the period examined by Bloomberg appeared in September 2022, when it shipped a variety of computer hardware to Russia worth $755,333. The recipient was Lanprint, a Russian trading company that was later added to the list of companies sanctioned by the United States, in September 2023. It sold equipment to another company, Silkway, which was sanctioned the same month. Shreya stopped dealing with both companies two months before they were sanctioned and began selling to Main Chain, which is not on the US list of sanctioned entities.
Shreya’s exports to Main Chain and IS increased in April this year, when it increased sales of the Dell PowerEdge XE9680 to an average price of $260,000. These servers are included in HS code 847150, part of the list of dual-use products that aims to stop Russian weapons systems used against Ukraine. The list, drawn up by the EU together with the United States, the United Kingdom and Japan, is based in part on technology identified on the battlefield.
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