Witch Hunt or Reality: Illegal High-Tech Exports to Russia

By Khatuna Mshvidobadze

Copyright © 2012 Potomac Institute for Policy Studies

On October 3, the US District Court for the Eastern District of New York unsealed an indictment against Alexander Fishenko and ten others alleging illegal export of high-tech microelectronics to Russian military and intelligence organizations.  It was a stark reminder that Moscow is out to steal American technology by whatever means possible—human, cyber or good old-fashioned theft.

“The microelectronics shipped to Russia,” says an FBI press release, “included analog-to-digital converters, static random access memory chips, microcontrollers, and microprocessors. These commodities have applications and are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems, and detonation triggers. Russia does not produce many of these sophisticated goods domestically.”

Russian media sources helpfully add that the imported electronic components could be installed on Russian anti-ship missiles and the MiG-35 multirole fighter, now under development.

From 2002 to 2012, the FBI alleges, Fishenko’s Houston-based Arc Electronics Inc. exported $50 million of such goods to Russia.

American authorities were able to arrest only eight of the defendants, the remaining three having fled the country.  All eleven are employees of Arc Electronics, which Fishenko owns with his wife, Viktoria Klebanova, also among the defendants.  Fishenko also owns Moscow-based Apex System LLC, a certified supplier of military equipment to the Russian government.  Fishenko and Klebanova are naturalized US citizens who hold dual Russian citizenship.

According to Aleksandr Zakharov, Russian Consul General in Houston, in addition to Fishenko and Klebanova, one other defendant holds dual US-Russian citizenship.  Another is a Russian citizen and the others are citizens of Azerbaijan, Kazakhstan and Ukraine.

The defendants are charged with violations of the International Emergency Economic Powers Act and the Arms Export Control Act, wire fraud and obstruction of justice.  Fishenko is additionally charged with money laundering and acting as an unregistered foreign agent.

Another interesting detail supplied by the Russian press is that although US authorities say that Fishenko denied having served in the Soviet military, he in fact served in Soviet military intelligence in Berlin in the 1980s.

Naturally, Russia denies the American charges.  Deputy Prime Minister Dmitry Rogozin, who oversees the defense industry, said that none of the defendants is involved in the supply of classified microelectronics for the Russian military-industrial complex.  “I have only one explanation regarding this,” said Rogozin, “the Americans have finally realized that everything we do in the frame of the arms program is very serious.  Once this was understood, it bothered the Americans, so they began a witch hunt.”

Far from hunting witches, this case suggests that America may be too relaxed.  According to the FBI press release, Arc Electronics was able to acquire the sensitive equipment by falsifying end-use and export documents, posing as a manufacturer of traffic signals and getting Apex System, Fishenko’s Moscow-based company, to remove pictures of military equipment from its website.

This episode affords a good opportunity to recall the reality underscored in an October 2011 report of the US National Counterintelligence Executive:

“Motivated by Russia’s high dependence on natural resources, the need to diversify its economy, and the belief that the global economic system is tilted toward US and other Western interests at the expense of Russia, Moscow’s highly capable intelligence services are using HUMINT, cyber, and other operations to collect economic information and technology to support Russia’s economic development and security.”

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Cyber Personnel Wanted: Apply to the Russian MoD

By Khatuna Mshvidobadze

Copyright © 2012 Potomac Institute for Policy Studies

The Russian Ministry of Defense appears to be openly recruiting cyber experts for both defensive and offensive roles.  It is yet unclear whether this indicates resolution of a cyber turf battle among Russian government agencies, particularly between the MoD and the Federal Security Service, the FSB.

On October 7, the Russian MoD announced a tender for research in the field of information security.  The competition is open to postgraduate students, research, innovation and manufacturing teams, as well as other citizens of the Russian Federation “with the potential and internal motivation to solve large-scale scientific and engineering problems for the benefit of the Russian armed forces.”

Among the subjects of interest mentioned in the announcement are “methods and means of bypassing anti-virus software and firewalls and protection of networks and operating systems.”

Valery Yashchenko, Deputy Director of the Moscow State University Institute of Information Security, told Kommersant newspaper, “This would be elements of cyber weaponry… they can be used for both defensive and offensive purposes.”

An unnamed source in the Russian military told Kommersant, “With the current size of the armed forces we cannot do without the use of high-tech.  This will increase the effectiveness of the troops as well as implement tasks that previously required considerable resources.”  The same source also noted that the Russian Defense Ministry began actively to pursue the matter in January, after Chief of General Staff Nikolai Makarov announced the necessity of readiness for cyber war.  Since then, the source continued, the General Staff’s Scientific and Technical Council meets regularly with General Staff specialized units—Radio-Electronic Warfare Forces and the 8th Directorate, responsible for encryption.

This revelation is all the more interesting in light of research presented at the 2011 NATO CyCon in Tallinn by Keir Giles of the Oxford Conflict Studies Research Centre.  At the time, Giles presented indications that a Russian military cyber capability may have been growing in the Radio Electronic Troops.

In the same paper, Giles also presented indications that the Russian military’s interest in information warfare was creating friction with the FSB.  Back then, the MoD frequently mentioned the phrase “infrastructure protection,” sometimes neglecting to place the adjective “military” before it.  This intra-governmental squabble may account for the apparent lack of follow-up to Deputy Prime Minister Dmitry Rogozin’s March 21 statement that Russia was considering a cyber security command.

However, in September, the Security Council of the Russian Federation released a document assigning critical infrastructure protection to the FSB.  If that move also resolved the internecine dispute and cleared the way for at least some MoD involvement in cyber offense, we may soon learn of a military cyber command or other cyber-related administrative developments.  Otherwise, expect to see articles from FSB officials and persons close to the FSB challenging the MoD’s latest move.