‘Business as usual’ How some E.U. companies are sending Russia parts for warships, sanctions be damned

Several E.U. companies have been finding ways to bypass sanctions and supply parts to Russian military shipyards, a new report from BBC Russian finds. Using subsidiaries and intermediaries in third countries, the companies have been putting their business ties above international bans. Some companies say they don’t know where the parts end up, while others claim the components are for “civilian ships.” However, E.U.-manufactured equipment has found its way onto ships used to attack Ukraine.

Russian military shipyards, which are under international sanctions, are obtaining parts for repairs and shipbuilding from E.U. countries with the help of European firms, according to BBC News Russian’s findings. Some of these European companies' subsidiaries are jointly owned by Russian shipyards that are not only under sanctions, but also build ships used in Moscow’s invasion of Ukraine.

St. Petersburg shipbuilding company Severnaya Verf and Zelenodolsk Shipyard in Tatarstan are both under sanctions (Zelenodolsk Shipyard was sanctioned even before start of the the full-scale war in Ukraine). Yet, they continue to receive components from European countries through Croatian, Italian, and Latvian companies.

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Customs data mentions the Croatian company Adria Winch, which supplies deck equipment for civilian ships and military vessels. The former head of Adria Winch, Milivoj Peruzovic, told journalists that the company has been operating in Russia for more than 20 years: it started out working with Severnaya Verf before expanding its connections across the country. Peruzovic added that Adria Winch didn’t stop working with Russian companies after the E.U. imposed sanctions in response to Moscow’s illegal annexation of Crimea in 2014. “Those sanctions now seem simply laughable,” he told BBC News Russian.

In 2016, under Russia’s “import substitution program,” Zelenodolsk Shipyard and Adria Winch established a joint venture called Adria Winch Zelenodolsk that, according to BBC News Russian, regularly supplies European parts to the Russian plant. Ak Bars Holding, which includes Zelenodolsk Shipyard, owns 51 percent of the company, while Adria Winch owns the remaining 49 percent. The Croatian Adria Winch also owns Adria Winch in Moscow, which likewise supplies the Zelenodolsk Shipyard.

Customs data reviewed by journalists shows that Adria Winch sends supplies to Zelenodolsk Shipyard through its Russian subsidiaries. Peruzovic confirmed that after Russia’s full-scale invasion of Ukraine, Adria Winch ceased direct deliveries to Russian shipyards. “Adria Winch Zelenodolsk mainly sold equipment to the Zelenodolsk Shipyard, but not exclusively,” Peruzovic explained. “As far as I know, they also sold equipment to Admiralty Shipyards. After the sanctions, we stopped sending deliveries directly to shipyards, and sales went through Adria Winch Zelenodolsk. But we didn’t know who the ultimate recipient of the equipment was.”

According to Peruzovic, the Croatian company also made deliveries to Russia through intermediaries in third countries, including Turkey and China, bypassing sanctions. “That was our decision — to continue working [with partners in Russia]. Because sanctions are sanctions, but business goes on as usual. And this continued until we sold the company,” he explained.

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As journalists discovered from the project numbers listed in customs declarations, European spare parts were designated for Russian Navy and security agency ships. For instance, in May 2022, Adria Winch supplied parts from its own production, as well as parts produced by Finnish and German manufacturers, for a Project 23120 support vessel. These types of ships are built at the Severnaya Verf shipyard in St. Petersburg. One of them, the Vsevolod Bobrov, took part in the battle for Snake Island.

According to Adria Winch’s report for 2022, Russia became one of the company’s main buyers. In that year, the Croatian company supplied equipment to Russia worth more than 700,000 euros ($745,000) — 21 percent of the total volume of Adria Winch’s operations. At the end of 2023, another Croatian company, Global Offshore Engineering, bought Adria Winch. Peruzovic said the new owners decided to halt deliveries to Russia due to potential risks, but they continue to honor commitments to the subsidiary Adria Winch Zelenodolsk. From February 2022 to July 2023, companies associated with Adria Winch or its subsidiaries in Russia supplied parts worth 1.2 million dollars to Russian shipyards that build military ships.

The Italian company MELCAL, which specializes in the production of ship cranes, also continues to supply parts for Russian Navy ships. As BBC News Russian discovered, the company supplied cranes and associated spare parts for Russia’s Project 20360M armament support ships. These ships are designed to transport and load ammunition onto ships and submarines while they are at sea. Currently, two such vessels are under construction in Russia — the Gennady Dmitriyev (for the Black Sea Fleet) and the Vladimir Pyalov (for the Baltic Fleet).

Journalists report that Russia’s Kronstadt Engineering Company, which actively sources components from abroad, has become the main customer for parts for these ships. Turkish, Chinese, and Hong Kong companies also supplied MELCAL equipment to Russian intermediary companies, including parts for the nuclear-powered ships Fyodor Ushakov and Yevgeny Primakov. In total, from October 2022 to July 2023, Russian companies spent $255,000 on MELCAL equipment.

Companies associated with the Russian military also purchase goods from the Latvian company Marine Systems, according to BBC News Russian. In 2022, Latvian media reported that Marine Systems was sending Russia European equipment for Navy ships. At the time, Igor Smolin was said to be the owner of the company. Journalists found that Smolin is no longer in Latvia and has divested his assets there (with Evelina Smolina now the owner of Marine Systems). But Igor Smolin continues to control a Russian company with the exact same name, only written in Cyrillic script. The Russian “Marine Systems” procures ship components from Germany, Japan, and the U.S. In 2023, it showed record profits of 11 million rubles ($116,800) — compared to one million ($10,600) in 2022.

In 2023, the Latvian company Marine Systems continued deliveries to Russia, writing in customs declarations that the spare parts were intended for civilian ships. However, as BBC News Russian noted, the company’s partners remained unchanged. And previously, these partners imported components for military ships.