Media: Owners of EU microprocessor plant shipped chips to Russia despite sanctions
Businessmen that own a plant in Latvia shipped microchips used to build drones to Russia despite Western sanctions in the wake of the Kremlin’s invasion of Ukraine, according to a new investigation by The Buro, an OCCRP partner organization.
When Russian troops poured over the border with Ukraine in early 2022, SMD Baltic, a Latvia-based microchip firm with a plant in the city of Daugavpils, publicly condemned the invasion and stated that it would no longer take orders from Russian or Belarussian firms.
But in fact its Belarussian owners, Siarhei Khvalko, Maksim Bohush, Siarhei Sayavets, and Latvian citizen Dmitrijs Radkevičs, reportedly continued to export Western-made chips to Russia using a secretive network of companies, according to The Buro’s most recent investigation.
Prior to the invasion of Ukraine, the SMD Baltic plant shipped around half of its products, which included microchips and was worth almost $1.2 million in 2021, to a single Russian firm called Novaya Elektronnaya Kompaniya (NEK) and owned by the same three Belarusian businessmen.
By the time the EU and U.S. banned the sale of microchips to Russia in late 2022, NEK had devised new supply chains through Kazakhstan, Turkey, and China. The Russian firm imported $1.3 million worth of electronic components into Russia in 2023, among them chips made by U.S. firms — therefore subject to U.S. sanctions — Intel, Texas Instruments, and Analog Devices.
"Any goods with U.S. inputs (production machinery, intellectual property, components, etc.) falls under U.S. export controls no matter where they are manufactured," Benjamin Hilgenstock, a senior economist at the Kyiv School of Economics and a member of the international working group on sanctions against Russia, told The Buro.
Texas Instruments and Analog Devices told the outlet that they did not do business with the company mentioned above, which supplied American chips to Russia.
In late 2023, the trio of businessmen sold NEK to Vitaly Privolnev, who had managed the firm since 2016. The Buro believes that the Privolnev is likely a front for the three original owners.
Through another firm registered in Minsk, called SkyGlobal, Khvalko reportedly supplied Russia with 230,000 Western made parts, worth $1.5 million. The recipient, a company called Bulat, is controlled by two U.S. sanctioned entities: Rostelecom and the Elvees Research and Production Center.
In 2021, SMD BY, another company owned by Khvalko, Bohush, Radkevičs and SMD Baltic manager Pāvels Levins, opened a manufacturing facility in a Belarussian business park to supply the Eurasian Economic Union with electronic circuit boards.
After renaming itself “Micromount” three months after the start of Russia’s invasion of Ukraine, the firm began selling semiconductors to Russian firm Kontraktika which is owned by an associate of theirs, Vital Khatsuk.
Khatsuk formerly worked for Alsochip, a Belarussian company owned by Khvalko and Bohush.
The Buro’s investigation also revealed that since 2023, one of Micromount’s biggest customers has been Geoscan, a Russian technology conglomerate based in St Petersburg, to which it sold over $1 million dollars worth of components.
The United States sanctioned Geoscan for its role in producing drones for the Kremlin’s war effort. Innopraktika, a fund managed by Vladimir Putin’s youngest daughter, Katerina Tikhonova, owns a 10% stake in the group.
Micromount also sold electronic components to Reglab, part of the Prosoft-Sistemy group. Before the war, the latter enjoyed a close relationship with Uralvagonzavod, the world’s biggest tank manufacturer.
When The Buro presented to Khvalko, he told them that “[w]e don’t work with anything related to war. This is our principled position.”
Although violating sanctions by shipping Western chips to Russia, Khvalko and his partners are thought to have made at least $2.5 million and the revenues of SkyGlobal and Micromount increased by factors of 70 and 12, respectively.
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