Machinery used to manufacture Russian armaments is being imported into Russia despite sanctions. However, to properly function, machines require components, as well as “brains” — which must also be imported. Without the manufacturer’s key, the machine cannot start, and without the software, it cannot operate. So, if imports are banned, how are these systems entering the country?
How Russia operates Western machinery
A machine is activated using an activation key, which is issued by the manufacturer after the sale and delivery of the product. Due to sanctions, Western firms cut ties with Russian clients, meaning munitions factories cannot legally obtain machinery or keys. Meanwhile, certain machines are equipped with GPS trackers, which enable manufacturers to know the location of their products. So, how can sanctions be circumvented under these conditions? One option is purchasing a machine without a GPS (or disabling it), and using the machine in, say, China, at least on paper.
An IStories journalist posing as a client contacted the Russian company Dalkos, which advertised services for supplying imported machinery on social media. A Dalkos employee explained that they make “fictitious sales” of equipment from the manufacturer to a “neighboring country”: “We provide these documents to the manufacturer. They check everything and give us feedback. They either believe us, allowing us to resolve our [Russian] customer’s problem… or they don’t believe us, and we respond that we couldn’t [buy the machine].” After the company in the “neighboring country” contacts the Western manufacturer, the latter sends the machine’s specifications, indicating whether GPS tracking is installed or not. “If we know that location tracking is installed, enabling them to see that it’s going to Russia — hence meaning we won’t be able to activate it — we’ll just tell you upfront that we can’t deliver the equipment,” the supplier explained. If everything goes smoothly, the machine along with the keys will be purchased by an intermediary company, and then Dalkos will import it into Russia and activate it at the client’s facility.
If a problem occurs with the machine’s computer system, the client should inform Dalkos, which will pass the information to the intermediary under whom the order was registered, and they will contact the manufacturer. The Russian enterprise should not seek customer support from the manufacturer directly: “You will simply compromise the legitimacy of our legal entity, which presents itself as an organization not connected to the Russian Federation in any way.”
The Dalkos website indicates that the company supplies equipment from multiple Western firms, including Schaublin, DMG MORI, and Kovosvit MAS. According to customs data from 2023, Dalkos received goods worth 188 million rubles ($2,120,000) from Estonia through the Tallinn-based company SPE (coincidentally belonging to the co-owners of Dalkos, Alexander Pushkov and Konstantin Kalinov) — with a UAE company acting as the intermediary party.The imported goods included components produced by the German machine tool manufacturer Trumpf.
The Dalkos employee stated that the company has “skilled guys” who manage to successfully circumvent sanctions: “We must import and help enterprises in these difficult times somehow.” According to him, in 2023, the company imported equipment and components worth 4.5 billion rubles ($50 million), and this year has signed contracts worth 12.5 billion rubles ($141 million). According to SPARK, the company’s revenue reached approximately 4.4 billion rubles (almost $50 million) in 2023.
During these “difficult times,” Dalkos assists enterprises in Russia’s military-industrial complex. IStories analyzed the company’s financial documents and found that, in 2023, its clients included the Dubna Machine-Building Plant (drones), Uralvagonzavod (tanks), and the Obukhov State Plant (air defense).
What if a machine is required but it has built-in GPS? According to the Dalkos employee, the company’s “multi-billionaire” clients have found technical specialists who can disable GPS trackers. This topic is widely discussed on machinery chat forums. Our journalist tracked down a company that offers machine modernization services, promising to disable a GPS for between half a million to a million rubles ($5600 - $11,200).
How Russia uses Western software
Humans communicate with machines via a computer. Designing a part requires Computer-Aided Design (CAD) software; to manufacture it, Computer-Aided Manufacturing (CAM) software is required, and so forth. These and other programs are integrated in a special digital environment, not dissimilar to how we install individual applications on iOS or Android operating systems. The environment in question is called PLM — Product Lifecycle Management, which refers to the strategic process of managing the lifecycle of a product from design and production to decommissioning. Nowadays, systems simply cannot function without PLM.
In Russia, the PLM market is dominated by Siemens (Germany), PTC (USA), and Dassault (France). Naturally, all these companies were linked to the military-industrial complex (for example, here and here) and now, formally at least, comply with sanctions. The IStories journalist, under the guise of a client, spoke with several Russian PLM suppliers.
An employee at Yekaterinburg-based PLM Ural — a long-time supplier of Siemens PLM — said that they still have licenses available: “We have a pool of perpetual licenses that we’re ready to sell. The only problem is that they can’t receive the latest software updates. I think they’re from 2021 or 2022.” According to him, these versions will function for another 10-15 years, but if problems occur, the company’s own specialists will resolve them. “They [Siemens employees] can’t disable it [PLM] because the file works completely autonomously. They don’t have access. Such closed-loop PLM solutions are installed in many defense enterprises,” stated the PLM Ural employee.
A Russian PLM specialist confirmed to IStories that this is exactly how it works. Additionally, according to him, PLM distributors can unlawfully reuse the same license across several factories if their manufacturing processes are unconnected. The possibility of such a scheme was confirmed by another specialist.
The Dassault Systemes website continues to reference its Moscow office. Our journalist contacted the establishment before being redirected to the Russian IT company, IGA Technologies. A company employee recommended the purchase of a PLM 3Dexperience system. According to him, their firm has a partner in the Netherlands who can access the software, “because we are an official partner of Dassault.” However, the Russian client does not purchase the software program per se: “From a documentation standpoint, it’s processed as a service provision. But it isn’t a software purchase. We don’t sell any software because it is, in fact, pirated.” “This is a well-established practice,” — the employee clarified — “I have more than ten clients currently using the system. We started doing this after the sanctions were imposed, which caused issues with license keys. And we had deals that were approved and paid for before the sanctions were introduced… but they couldn’t deliver the keys to us.”
IStories identified Dassault’s partner in the Netherlands — Slik Solutions (formerly IGA Technologies) — via their website. It is primarily owned by the Russian company Implementa (per the company’s own disclosure in 2022), while a third of Implementa is owned by IGA Technologies (according to current data from the Russian company register).
“We can still contact technical support in the West for various issues, and they actually respond,” revealed an employee at IGA Technologies. However, according to him, this is not a particularly sought after service, since PLM works so faultlessly on servers that the need to source an upgrade is unlikely: “The system is so effective that it could automate the whole of Roscosmos for ten years without interruption.”
According to IGA Technologies’ financial documents for 2023 acquired by IStories, its clients include the NL Dukhov All-Russian Scientific Research Institute of Automatics (nuclear munitions), the Raduga State Machine-Building Design Bureau (missiles), the Rubin Central Design Bureau for Marine Engineering (submarines), and the Kirov Plant Mayak (anti-aircraft missiles).
PLM from the American software giant PTC is sold in Russia by Productive Technological Systems (PTS), whose clients include enterprises in the military-industrial complex. A PTS employee reassured us that if critical problems arise that cannot be resolved by the Russian contractors’ technical support team, their company will contact the manufacturer: “We have access to PTC’s technical support, and we can contact them if necessary. Generally, we support all the systems ourselves because we understand how they work.”
PTS’ financial documents indicate that its clients included the MNPK Avionika (missiles and bombs), the NL Dukhov All-Russian Research Institute of Automatics (nuclear munitions), and the Central Scientific Research Institute of Chemistry and Mechanics (munitions).
Responses without answers
IStories attempted to contact all the companies mentioned in this article.
Trumpf was the only manufacturer to respond with a generic statement reminiscent of those given by other large Western manufacturers. Trumpf asserts that they comply with all sanctions and officially exited Russia in April 2024, but it cannot speak for its buyers, who may buy or resell products anywhere. For instance, the Estonian company SPE has not received goods directly from Trumpf since 2018, but nothing prevents it from trading through other dealers. The same is true of Dalkos, which has been a client since 2016.
PLM Ural replied that it stopped selling licensed Siemens PLM software in 2022.
So far, no one else has responded.
So this boils down to, these products are more expensive now that sanctions are in place, because middlemen are needed to circumvent the sanctions.
That translates to sanctions working exactly as intended right? It doesn’t matter if they still get the product as long as it’s costing them a lot more than it would before sanctions.
I don’t think they work as intended. Most middlemen are still Russian, thus this money circulates inside the economy propping it even further. That’s why the Russian economy is on the rise and the German one is in decline.