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.”