The companies have names like Olax Finance and Rikkon Holding. Their office, with a faded 704 on the door, appears unoccupied. No one answered during a visit last month. An ad for air-conditioning hung in the crack of the door.
Yet the companies are a crucial link in a chain connecting U.S. research laboratories to Chinese factories, Russian arms makers and the battlefields of Ukraine — and a sign that the U.S. government and tech giants cannot control where their technology goes.
Since Russia invaded Ukraine in 2022, nearly $4 billion of restricted chips have poured into Russia from more than 6,000 companies, including those at Hong Kong’s 135 Bonham Strand, according to a Times analysis of Russian customs data, corporate records, domain registrations and sanctions data. The analysis examined nearly 800,000 shipments of restricted electronic goods into Russia since mid-2021.
Even as the West sought to cut off access to semiconductors through trade restrictions, Russia established such a robust parallel supply chain that it imported almost the same number of critical chips in the last three months of 2023 than it did in the same period in 2021, according to the analysis of Russian customs data. The reliance on China for many of these chips also deepened, with transactions that were historically settled in U.S. dollars now increasingly executed in renminbi, according to the analysis. The ability of President Vladimir Putin of Russia to flout Western trade restrictions has been one of the failings of the U.S.-led response to the war in Ukraine. Rather than become economically isolated, Russia has emerged from more than two years of conflict emboldened in its attacks against Ukraine. Russia’s technology imports begin with U.S. chipmakers selling their products to international distributors. The chip companies are not legally required to track where their goods go from there. Russia has then turned to the international distributors — which are in Hong Kong, China, Turkey, India, Serbia and Singapore, according to the Times’ analysis — to maintain a steady supply of tech.
Some of the middleman companies are part of longtime networks of offshore firms owned by Russian businesspeople. At 135 Bonham Strand, four shell companies are owned by oligarchs linked to Russia’s military industrial base, according to the Times’ analysis.
The speed with which the shell companies have sprung into action has overwhelmed Western regulators. As soon as one supplier is ferreted out, new ones sprout in its place, sometimes with the same owner. Some of the companies operate in the United States’ backyard, including one Russia-linked firm fronted — apparently unwittingly — by a Latvian-Canadian retiree in a two-story house in a Toronto suburb.
A Commerce Department spokesperson did not directly address how Russia had flouted trade restrictions and said U.S. export controls meant that “Russia is increasingly unable to meet its heightened wartime demand in the face of shrinking supply and is paying more for what it does get.” A Treasury Department spokesperson said the agency had expanded its efforts to penalize those trading with Russia and supporting its war efforts.
Russia’s Ministry of Foreign Affairs didn’t respond to requests for comment.
China plays an essential role. As the world’s leading assembler of electronics, it imports huge numbers of Western components and turns them into consumer electronics. Chinese firms can easily channel those supplies to Russia, industry experts said.
In a statement, China’s Ministry of Foreign Affairs said it didn’t provide weapons or equipment to any party in the war in Ukraine.
With limited domestic manufacturing capacity, the United States has little option but to continue sending chips into China for manufacturing, packaging and assembly.
“In the first few weeks of the war, there really was something of an expectation that these were going to be crushing measures,” Emily Kilcrease, a senior fellow at the Center for a New American Security, said of the sanctions. But “we underestimated the difficulty of the U.S. to actually enforce in a market like that.”
The Russians of 135 Bonham Strand
In 2008, Alexey Chichenev, a Russian businessperson, took control of a company called Saril Overseas based in Hong Kong.
It was one entity in a growing portfolio of shell companies at 135 Bonham Strand, led by Chichenev, a Russian expatriate in Hong Kong, and his partner, Mikhail Vinogradov.
The firms at 135 Bonham Strand used byzantine offshore ownership structures that intersected with holding companies in the British Virgin Islands and Cyprus, according to corporate registration documents. Shares of the companies were transferred like baseball cards between Russian businesspeople with addresses in places like Vienna, Tel Aviv, Israel, and Paris, according to Hong Kong corporate registration records.
Two companies at 135 Bonham Strand, Rikkon and Midicon, were owned separately by Andrey Kozitsyn and Igor Kudryashkin, the former directors of the Ural Mining and Metallurgical Co., an industrial conglomerate in Russia, according to public records. The Ural Mining and Metallurgical Co. has ties to Putin, weapons manufacturing and Russian organized crime, according to the Treasury Department and publicly available documents.
In 2014, after Russia annexed Crimea, Kozitsyn and Kudryashkin transferred ownership of Rikkon and Midicon to Chichenev and Vinogradov. By 2022, Chichenev and Vinogradov controlled at least 11 companies at 135 Bonham Strand, according to Hong Kong’s corporate registry.
Only two of those companies, Kvantek and Superchip, sold chips to Russia before the war in Ukraine. But as restrictions and sanctions set in, more jumped into action, according to the Times’ analysis of Russian customs data.
At least one of the shell companies, Kvantek, has since shut down its website and appears to have ceased operations, according to the Times’ analysis.
In an interview at the door of his Hong Kong apartment, Chichenev said he did not know who was behind the companies and had forgotten how they were transferred to his name. “You see, it is a friend of my friend in Moscow, so they asked me to help them,” he said.
His 135 Bonham Strand companies were being shut down, he added. “At the moment, I just enjoy life,” he said. “But before, yes, we had several companies, but now everything is closed.”
Vinogradov did not respond to emailed questions. Colin Cohen, a lawyer based in Hong Kong whose firm, Boase Cohen & Collins, is listed as the secretary on many 135 Bonham Strand companies, declined to comment, citing client confidentiality.
The U.S. government remains at least a step behind. Since the war started, the Office of Foreign Asset Control, an agency in the Treasury Department that administers the U.S. sanctions program, has designated at least 4,234 Russian individuals and companies for economic restrictions, according to OpenSanctions, a sanctions data provider.
This article originally appeared in The New York Times.