Since Russia annexed Crimea in 2014, American companies have been prohibited from dealing with MMZ Avangard
\nWASHINGTON
\nSince Russia annexed Crimea in 2014, American companies have been prohibited from dealing with MMZ Avangard, a state-owned firm that makes missiles for one of Russia\u2019s most sophisticated weapons, the S-400 air-defence system.
\nIn a measure of Western concern about the S-400, the United States ejected Turkey, a NATO member, from a joint fighter jet program in 2019 after Ankara took delivery of the Russian system.
\nBut even as the United States was taking actions to blunt MMZ Avangard\u2019s business, a publicly traded American technology company, Extreme Networks, was providing MMZ Avangard with computer networking equipment for its office IT systems, according to emails and other business records seen by Reuters, as well as interviews with people familiar with the matter.
\nIn a statement to Reuters, Extreme said that based on information provided by the news agency it believed equipment \u201cmay have\u201d been sold to MMZ Avangard using a surrogate buyer. Extreme said the equipment was sold without its knowledge. It added, without providing evidence, that an intermediary in Russia was \u201ccomplicit\u201d in supplying its products via a front company to \u201cbad actors.\u201d Extreme said it is reporting its findings of these potential sales to US authorities.
\nUkraine has accused Russia of deploying missiles made by MMZ Avangard against ground targets since Russia launched what it terms its \u201cspecial operation\u201d on February 24. Ukrainian authorities said MMZ Avangard missiles killed at least thirty civilians in a gruesome attack against a convoy on the edge of the southern city of Zaporizhzhia last month. Neither Kremlin officials nor MMZ Avangard responded to questions for this article. MMZ Avangard\u2019s parent, Almaz-Antey, also didn\u2019t comment.
\nBetween 2017 and 2021, MMZ Avangard obtained over half a million dollars\u2019 worth of Extreme equipment for its IT systems, according to the business records reviewed by Reuters and the people familiar with the matter. The products included high-speed switches, an essential building block of corporate IT networks, and software.
\nThe records also show that the deals went through a seemingly innocuous corporation near Moscow, and despite two Extreme officials raising concerns, the sales went forward.
\nThat a Russian military company, identified as a threat by Washington, continued to acquire US computer hardware is a case study in how Western countries may have overestimated their ability to choke the Russian economy with export bans and trade sanctions. It also highlights how dependent Russia\u2019s military machine is on US high-tech equipment.
\nIn April, six weeks after Russia\u2019s invasion of Ukraine, an Extreme employee filed an internal complaint, seen by Reuters, alleging that the company was selling to various military manufacturers in Russia. \u201cExtreme equipment is used on Russian warships,\u201d the complaint said, \u201cin communications systems.\u201d
\nExtreme said in its statement that the allegations were brought by a disgruntled employee. An investigation by the firm had found nothing to corroborate any of the claims until Reuters brought \u201cnew facts\u201d to the company\u2019s attention this month. The company said it ceased operations in Russia in March, adding that it subsequently launched a process to dismiss the disgruntled employee for poor performance. It said it has no records of sales involving Russian warships.
\nExtreme, which trades on the NASDAQ exchange and is headquartered in Morrisville, North Carolina, has earned a solid reputation in the United States and is an official partner of the National Football League. The NFL declined to comment for this article.
\nA Reuters investigation in August found that while the United States and allies banned high-tech exports to Russia to try to cripple its defence industry, and many tech companies announced that they had halted exports to Russia, the flow of Western brand-name computer parts to Russian clients hasn\u2019t stopped.
\nThis account of how Extreme supplied MMZ Avangard and at least two other Russian military companies is based on interviews with three people familiar with the shipments as well as a review by Reuters of documents spanning five years to 2021. The documents include sales records and email exchanges between Extreme employees, customers and distributors. The shipments are reported here for the first time.
\nThe US Department of Commerce, which administers export restrictions, declined to comment for this story.
\n\u201cIt was necessary to use cover\u201d
\nRussian companies, including those in the military sector, have virtually no choice but to buy foreign equipment to build the computer networks necessary for modern-day business. Russia has very limited domestic production of networking equipment.
\nFounded in 1996, Extreme is a junior player in the computer networking industry. Last year, it posted revenue of $1.1 billion, compared with $50 billion for Cisco Systems.
\nStill, the smaller company is a \u201cmeaningful competitor,\u201d according to Alex Henderson, a network and security analyst at Needham and Company in New York. The US military as well as NASA use Extreme hardware and support, according to contracting records, and the company has built up a substantial marketing profile.
\nIn Russia, as well, Extreme lists prestigious customers, such as the Ministry of Health, the federal pension fund and Lomonosov Moscow State University.
\nBut according to documents seen by Reuters, other buyers of Extreme equipment included not just MMZ Avangard but a major Russian military shipbuilding company and a high-tech defence electronics manufacturer.
\nOne of the documents shows that in the four years ending 2020, Russian customers purchased $41.5 million worth of equipment. Reuters couldn\u2019t determine Extreme\u2019s total sales to sanctioned or military firms because it wasn\u2019t clear if transactions other than those involving MMZ Avangard had been recorded undercover names.
\nIn its statement to Reuters, Extreme said it doesn\u2019t report country-specific revenue.
\nIn Russia, Extreme maintained contacts with its customers in order to help design complex networks that expand over time, according to two of the people familiar with the matter. Each customer or potential buyer had its own account manager at the company and was listed on internal sales records. Actual sales, though, were done through authorized intermediaries.
\nExtreme, in its statement to Reuters, said it rarely provided direct installation services. It said it had no such contracts with DEMZ or MMZ Avangard.
\nIn its statement, Extreme said it has a \u201cfirm policy\u201d not to work with sanctioned entities, but added it isn\u2019t always notified of the end customer, especially when its products are sold through so-called \u201cstocking\u201d distributors that hold an inventory.<\/p>\n
Extreme named one of those distributors as RRC and said it believed RRC was \u201ccomplicit\u201d in the scheme to supply MMZ Avangard. RRC and its Cyprus parent, BD Enterprise Networking didn\u2019t respond to messages from Reuters seeking comment.<\/p>\n
For Russian military companies, Extreme equipment had a strong selling point, the three people familiar with the shipments said: Unlike larger rivals, Extreme doesn\u2019t require service subscriptions and frequent software updates. \u201cIt is absolutely autonomous,\u201d one of the people said of the equipment. \u201cIt works without a license and you don\u2019t even need to be connected to the internet.\u201d This means, another person said, that \u201cyou don\u2019t need to fear that your system will go dark because someone in the US decided to disconnect you.\u201d<\/p>\n
Extreme said that the \u201cautonomous model\u201d is not unique to the company, but acknowledged it has become relatively rare.<\/p>\n
It was no secret in Russia that MMZ Avangard used Extreme equipment. In late 2019, the missile manufacturer issued a tender through Russia\u2019s online public procurement platform, saying it needed spare parts for the Extreme computer networks it possessed. Extreme didn\u2019t dispute this but said it wouldn\u2019t necessarily be aware of such a tender.<\/p>\n
A few months before, in the summer of 2019, an intermediary had contacted Extreme\u2019s representative office in Russia, asking for advice on a network upgrade for the missile company, the documents show. \u201cWe are working on a solution for the customer, MMZ Avangard,\u201d an employee of the intermediary wrote in a June 28, 2019, email to an Extreme system engineer. \u201cI was told that I could seek your help.\u201d
\n As soon as its equipment arrived in Moscow, Extreme dispatched a staff engineer to MMZ Avangard\u2019s offices to help ensure a smooth installation, one of the people familiar with the shipments said.<\/p>\n
In its statement to Reuters, Extreme said it had no records of an Extreme employee installing equipment at MMZ Avangard.<\/p>\n
When it came to processing MMZ Avangard\u2019s purchasing orders, the missile maker\u2019s name didn\u2019t appear on Extreme\u2019s books. Instead, Extreme\u2019s Moscow employees recorded the orders as having been placed by a company called OOO DEMZ, according to emails and sales records, as well as three people familiar with the matter.<\/p>\n
\u201cIt was necessary to use a cover because the Russian company is blacklisted in the US,\u201d one of the people familiar with the shipments said. It has been illegal for US companies to do business with MMZ Avangard since July 2014, when the US Treasury Department listed its parent company, Almaz-Antey, as a \u201cblocked\u201d entity. The Treasury declined to comment on this story.<\/p>\n
MMZ Avangard began buying products from Extreme in December 2017 and was disguised under the DEMZ cover in Extreme business records from that date, according to emails and other documents seen by Reuters. The most recent transaction using the DEMZ cover that Reuters identified was in September 2021. In total, the records show that Extreme shipped goods worth about $645,000 in this way during that period.<\/p>\n
Extreme, in its statement, said it now believes that its equipment may have been acquired through a \u201cfront company.\u201d Extreme confirmed that the DEMZ account listed product purchases for approximately $645,000.<\/p>\n
DEMZ is a small company based in Dmitrov, a city 50 miles north of Moscow. Russian corporate records list Vladimir Markov as its general director. Reached by phone, Markov said that DEMZ, which made tools for railcar maintenance, ceased all operations in 2016. The executive said he had never heard of Extreme or of DEMZ buying Extreme equipment for itself or on behalf of others.<\/p>\n
The apparent ruse was a shallow one. Purported executives for DEMZ, listed in the Extreme customer records seen by Reuters, were actually employees of the missile maker who had provided their MMZ Avangard email addresses. They even included the Avangard email addresses when they applied for access to an Extreme customer service portal. One of these people declined to comment. The other couldn\u2019t be reached. Some of the documents also listed mmza.ru – MMZ Avangard\u2019s domain name – as DEMZ\u2019s purported web address.<\/p>\n
On the last day of 2019, as a \u201cDEMZ\u201d order was winding through Extreme\u2019s approval system, an Extreme sales manager working in North Carolina emailed RRC, the Russian distributor, with a question about the domain name: \u201cCan you tell me what the relationship is between DEMZ and mmza.ru?\u201d An employee of the distributor responded that mmza.ru was \u201cthe customer\u2019s\u201d domain. The employee didn\u2019t elaborate. A subsequent message indicates that the sale went through.<\/p>\n
Extreme, in its statement, did not address questions about MMZ Avangard staff registering for access to online support, and an Extreme sales manager raising questions about the web domain.<\/p>\n
Nearly a year later, dealing with another set of \u201cDEMZ\u201d orders, an employee from Extreme\u2019s in-house compliance desk in Ireland spotted the mmza.ru domain in the sales paperwork and researched it. \u201cThis link,\u201d the compliance team employee said in a November 11, 2020, email, \u201cgoes directly to https:\/\/mmzavangard.ru\/ which is a defence contractor seemingly [sic] to specialize in ground to air missile systems, we need to further review before we can make a decision.\u201d<\/p>\n
Extreme, in its statement, also did not address questions about this email.<\/p>\n","protected":false},"excerpt":{"rendered":"
Since Russia annexed Crimea in 2014, American companies have been prohibited from dealing with MMZ Avangard WASHINGTON Since Russia annexed Crimea in 2014, American companies have been prohibited from dealing with MMZ Avangard, a state-owned firm that makes missiles for one of Russia\u2019s most sophisticated weapons, the S-400 air-defence system. In a measure of Western […]<\/p>\n","protected":false},"author":2,"featured_media":289091,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":{"0":"post-289061","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-world"},"yoast_head":"\n