In recent months, the Biden administration’s sanctions taskmasters at the State and Treasury Departments have clearly gone into overdrive, designating new targets/entities at least weekly. With armed conflicts continuing if not expanding in both Eastern Europe and the Middle East, the use of sanctions is not unexpected, but the volume of new directives coming out of Washington is nonetheless impressive.
Zeroing in on Chinese drone producers supporting Russia
On October 17, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned three entities and one individual for their involvement in the development and production of Russia’s Garpiya (Harpy) series long-range attack unmanned aerial vehicles (UAV).
The Garpiya has been deployed by Russia in its invasion of Ukraine since 2023, destroying critical infrastructure and producing mass casualties. Designed and developed by People’s Republic of China (PRC)-based experts, the Garpiya is produced at PRC-based factories in collaboration with Russian defense firms before transferring the assembled drones to Russia for use in its war against Ukraine.
These private companies and individuals engaged in the development and production of military equipment for a U.S.-sanctioned Russian defense firm for use by the Russian military in Ukraine. While the United States previously imposed sanctions on Chinese entities providing critical inputs to Russia’s military-industrial base, these are the first U.S. sanctions imposed on PRC entities directly developing and producing complete weapons systems in partnership with Russian firms.
“Russia increasingly relies on the expertise of foreign professionals and the import of sophisticated technologies to sustain its weapons program and advance its military campaign against Ukraine,” said Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence Bradley T. Smith when announcing the new U.S. sanctions. “We will continue to disrupt the networks that enable Russia’s acquisition and use of these advanced weapons.”
These sanctions were ordered pursuant to Executive Order (E.O.) 14024, which targets Russia’s harmful foreign activities.
Details of PRC production of military drones for Russia
Previously sanctioned (designated) Joint Stock Company Izhevsk Electromechanical Plant Kupol (AO IEMZ Kupol), a subsidiary of U.S.-designated Russian state-owned weapons company JSC Aeropspace Defense Concern Almaz-Antey (Almaz-Antey), coordinates the production of the Garpiya series UAVs at factories in China before transferring the weapons to Russia. Xiamen Limbach Aircraft Engine Co., Ltd. (Limbach), based in the PRC, produces the L550E engine for implementation into the Garpiya.
Redlepus Vector Industry Shenzhen Co Ltd (Redlepus), which also operates out of the PRC, has worked in collaboration with the U.S.-designated Russian defense firm TSK Vektor OOO (TSK Vektor), which serves as an intermediary between AO IEMZ Kupol and the PRC-based suppliers for Russia’s Garpiya project. In addition, TSK Vektor has imported numerous shipments from Redlepus into Russia since the beginning of 2024, including electronic and mechanical components with UAV applications such as aircraft engines, parts of automatic data processing machines, and electrical components. Redlepus was previously involved in an effort with AO IEMZ Kupol and TSK Vektor to establish a joint drone research and production center.
Russian national Artem Mikhailovich Yamshchikov (Yamshchikov) is the General Director and beneficial owner of TSK Vektor, which assists with procurement on behalf of AO IEMZ Kupol and Almaz-Antey in the development and production effort of one-way attack (aka kamikaze) UAVs. Yamshchikov has directed procurement activities on behalf of TSK Vektor, including the procurement of sensitive UAV components for the Garpiya series one-way attack UAV program. Yamshchikov also directs and owns Russia-based Limited Liability Company Trading House Vector (TD Vector).
AO IEMZ Kupol, a leading Russian defense firm that produces anti-aircraft defense equipment used by Russia’s Ministry of Defense, was designated pursuant to E.O. 14024 on December 12, 2023, for operating or having operated in the defense and related materiel sector of the Russian Federation economy. TSK Vektor was designated pursuant to E.O. 14024 on December 12, 2023, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of AO IEMZ Kupol. AO IEMZ Kupol’s parent company, Almaz-Antey, was designated pursuant to E.O. 13661 on July 16, 2014, and pursuant to E.O. 14024 on January 26, 2023.
Redlepus, Limbach, and Yamshchikov are being designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy. TD Vector is being designated pursuant to E.O. 14024 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Yamshchikov.
The fine print – sanctions rules
As a result of the new OFAC action, all property and interests in property of the persons above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.
Non-U.S. persons are also prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as from engaging in conduct that evades U.S. sanctions. In addition, foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base run the risk of being sanctioned by OFAC.
