As Russia continues to target Ukraine with missiles and other deadly weapons, Western countries have responded by imposing sanctions on Russia's military industry. In the latest round on Tuesday, the US imposed new sanctions on some arms manufacturers and executives at the center of what it said was Russian President Vladimir Putin's "war machine".
However, a Reuters survey of companies, executives and investors that support Russia's military sector shows that a significant number of players have not yet paid the price: About 14 heads of Russian arms companies and at least XNUMX military companies are not under sanctions from the United States (U.S. ), the European Union (EU) or the United Kingdom (UK).
In addition, these NATO allies have inconsistently applied sanctions against Russian arms manufacturers and tycoons, with some governments imposing penalties and others not, a Reuters investigation found.
Among the tycoons who have not been sanctioned is Alan Lushnikov, the largest shareholder of the Kalashnikov concern, the manufacturer of the famous AK-47 assault rifle. Lushnikov owns 75 percent of the company, according to the latest data seen by Reuters.
In 2014, when Russia invaded and annexed Crimea, the USA imposed sanctions on the company itself. This year, the EU and the UK imposed sanctions on the Kalashnikov concern.
This company accounts for 95 percent of Russian production of machine guns, sniper rifles, pistols and other hand-held firearms and 98 percent of hand-held machine guns, according to its website and in its latest annual report. It also manufactures the AK-12 assault rifle, an upgraded version of the AK-47, some of which Ukrainian soldiers seized from Russian forces. The Kalashnikov concern also makes missiles that can be fired from aircraft or land.
Lushnikov, a former Russian deputy transport minister, once worked for tycoon Gennady Timchenko, a longtime friend of Putin. The US imposed sanctions on Timchenko in 2014, naming him a member of the Kremlin's "inner circle".
The situation is the same with the Moscow arms manufacturer Almaz-Antey, which specializes in missiles and anti-aircraft systems. This company is under US, EU and UK sanctions, but CEO Jan Novikov has not been punished.
Almaz-Antej produces the "Kaliber" missiles that the Russian Ministry of Defense attributes to the destruction of Ukrainian military facilities. The ministry said last month that Russian forces fired long-range "caliber" missiles at a Ukrainian command post near the village of Shiroka Dacha in eastern Ukraine, killing more than 50 Ukrainian army generals and officers.
In response to Reuters' questions about Western sanctions against Russia, the Kremlin announced that "the consistency and logic of the introduction of sanctions, as well as the legality of the introduction of such restrictions, is a question that should be asked directly to the countries that introduced them."
President of Ukraine Volodymyr Zelensky says that the current Western sanctions against Russia "are not enough" because Russian troops are making progress in the offensive on the eastern Ukrainian regions of Luhansk and Donetsk.
The Ukrainian army is being outgunned by Russian artillery in places such as the industrial city of Severodonetsk, which it recently surrendered to Russian forces after weeks of intense fighting.
Thousands of Ukrainian soldiers and civilians died in the Russian invasion, but the exact number is unknown. The United Nations human rights office said Monday that 4.731 civilians have been killed in Ukraine since the invasion began on February 24, including more than 300 children, while 5.900 civilians have been injured. The agency said most of the casualties were caused by the use of "explosive weapons with a wide impact, including shelling by heavy artillery and multiple rocket systems, in both rocket and air strikes," and that the actual number of dead and wounded was likely far higher.
The West imposed sanctions on a large part of the Russian economy in order to punish Moscow, but for now, as Reuters points out, this has not curbed the Russian offensive. Like the bans on other Russian firms, the sanctions on arms companies are intended to prevent them from selling to foreign customers. These penalties limit their access to imported components and generally make the production of weapons more expensive and time-consuming. The imposition of sanctions on the people behind these companies goes one step further to make the effect personal. It allows Western countries to seize villas, yachts and other offshore assets of those who supply the Russian military, and limits where they can travel abroad, a Reuters special report said.
"You're showing that there is a cost to being an associate of the regime," said Max Bergman, a former State Department official during the Obama administration who worked on US arms transfers and protecting US military technology. “They feel it very personally. You're creating a disaffected class of people who are tied to the Kremlin," said Bergman, now director of the European program at the Center for Strategic and International Studies in Washington.
Ammunition manufacturers intact
Among other companies in the Russian military industry found by Reuters not to be under US, EU or EU sanctions is the Degtaryov plant, a facility 265 kilometers northeast of Moscow that makes machine guns, anti-tank and anti-aircraft weapons sold to the Russian military. Its armament includes Kalashnikov PKM and PKTM machine guns, as well as "Kord" rifles and machine guns, some of which are mounted on armored vehicles.
The specialized ammunition factory Klimovsk, south of Moscow, where "world-famous" bullets for pistols and Kalashnikov assault rifles are produced, as written on its website, was not punished either. The Novosibirsk ammunition factory is not on the list of sanctions either.
Reuters last month sought comment from sanctions officials in the UK, EU and US on the agency's findings that they had failed to punish a range of Russian military firms and tycoons fueling Putin's offensive.
The UK's Foreign, Commonwealth and Development Office, which imposes sanctions on Britain's behalf, said it could not comment on future sanctions. It added that London and its allies had imposed "the largest and harshest economic sanctions Russia has ever faced to help disable Putin's war machine". The European Commission and the US Treasury Department, in charge of sanctions against Brussels and Washington, declined to comment on the details of Reuters' findings. The US Treasury announced that the sanctions "have made it difficult for Russia to get what it needs to acquire and manufacture weapons."
The ministry announced a new round of sanctions on Tuesday that include eight arms companies and two executives on a list previously provided by Reuters.
The executive targeted by the new round of sanctions, Vladimir Artyakov, has played a key role in Russia's military industry for decades and is the number two man at Rostek, the military-industrial giant with hundreds of subsidiaries employing more than half a million people, according to the firm's website and annual reports. Artyakov is also the head of at least five Russian arms companies, including Russian Helicopters, which makes several lines of military helicopters, including the Ka-52 Alligator, some of which were shot down in Ukraine. He was not punished by the EU and the UK.
Rostek has been under US sanctions since 2014. On Tuesday, it was again targeted by the US, which imposed sanctions on more than 40 Rostek subsidiaries. Among those punished is the Avtomatika concern, a company linked to cyber warfare. It is on a list of Russian military firms that Reuters submitted to the Ministry of Finance last month seeking an explanation as to why the companies were not sanctioned.
Reuters' list of companies sanctioned by the Finance Ministry this week includes PJSC Tupolev, a maker of fighter jets such as the Tu-22M3 bomber. Ukraine's military said the bombers were responsible for a rocket attack on a crowded shopping mall in the central Ukrainian city of Kremenchuk on Monday that killed at least 18 people and wounded around 60.
PJSC Tupoljev and another firm on Reuters' list, JSC VNII Signal, are not on the EU or UK sanctions list. JSC VNII Signal is a manufacturer of mechanical and navigation systems that power Russian tanks and some of the country's most advanced missile systems.
Company leaders went unpunished
Meanwhile, executives of numerous Russian arms companies have largely avoided sanctions from Western authorities.
Nearly three months after a U-point ballistic missile hit a train station in the eastern Ukrainian city of Kramatorsk on April 8, executives associated with the company that makes the missiles have yet to pay the price. The attack killed more than 50 people, including children, and injured more than 100.
KBM is the primary manufacturer of U-point missiles, according to the US Army's Worldwide Military Equipment Database. Neither Washington, nor Brussels, nor London sanctioned Sergey Pitikov, the executive director of KBM.
These three Western allies also spared Alexander Denisov, CEO of High Precision Systems, KBM's parent company. Denisov's firm oversees the production of a wide range of missiles, artillery, grenade launchers and machine guns used by Russian troops.
Reuters writes that the US and the EU have imposed sanctions on that company, but the UK has not. The US punished KBM, but the EU and the UK did not. He adds that Europe and the US have not coordinated sanctions even against the manufacturers of prohibited weapons.
Since the beginning of Russia's invasion, Western governments and human rights groups have criticized its use of cluster munitions - small bombs that scatter and explode over an area the size of a block of flats when fired. A 2008 international treaty prohibits their use or production under any circumstances because of the devastating consequences for civilians.
On March 24, Russia used the Uragan missile system to launch cluster bombs in Kharkiv, killing eight civilians and wounding 15, according to the UN human rights office and Ukrainian officials.
"Uragan" is produced by the Russian company Splav, whose systems are sold abroad, including India. That company was sanctioned by the US, but not by the UK or the EU. Its executive director Aleksandar Smirnov completely avoided sanctions.
On June 10, the European Commission announced that efforts are being made to harmonize sanctions lists among allies "as far as legally possible" in order to achieve "the maximum cumulative effect of sanctions with all our like-minded people." In cases of non-compliance, people and companies not currently on the EU's sanctions list may be added later if there is sufficient evidence, the statement reported by Reuters said.
Relations with the West
One of the highest-profile Russian companies that has avoided Western sanctions is VSMPO-Avisma, the world's largest supplier of titanium, and it is 25 percent owned by Rostek. It supplies the Russian defense industry, but its clients include large Western aerospace companies.
Headquartered in the central Russian city of Verkhnyaya Salda, VSMPO-Avisma has subsidiaries with facilities in the US, Switzerland and the UK, as well as sales and distribution staff in the US, Europe and Asia, according to its website and annual reports. Reuters writes that this is undoubtedly a factor that allowed the company to avoid punishment.
The vice-president of VSMPO-Avisma and the majority shareholder, Russian billionaire Mikhail Shelkov, whom "Forbes" ranked this year as the 59th richest person in Russia, was also not punished.
According to the British agency, VSMPO-Avisma has long-term contracts to supply titanium to United Aircraft Corp, a subsidiary of Rostek that oversees the production of Russian fighter jets such as the Su-34 that was shot down in Ukraine. The US, EU and UK have imposed sanctions on United Aircraft.
VSMPO-Avisma also sells to Europe's Airbus and supplied US giant Boeing until March, when the Virginia-based company said it had stopped buying titanium from Russia. Boeing responded to a Reuters query that since 2014 it has been working to diversify its sources of titanium around the world and that it currently has enough supplies to produce aircraft.
Airbus did not respond to specific questions about its relationship with VSMPO-Avism, but said that potential sanctions on Russian titanium would cause a lot of damage to the entire European aviation industry, and would cause little damage to Russia, because those sales are only a small part of that country's total exports.
According to the company's latest annual report, foreign sales in 2020 accounted for about two-thirds of VSMPO-Avisma's $1,25 billion in revenue, according to Reuters.
That puts Western officials in a difficult position, says Richard Connolly, director of the Eastern Advisory Group, a British consulting firm that advises governments and businesses on the Russian economy and its military industry. Imposing sanctions on VSMPO-Avismi would reduce its lucrative exports, but would also force major players in global aviation to switch suppliers or risk sanctions themselves. "It's the classic problem with sanctions: If you want to hurt somebody, you're going to hurt yourself," Connolly said.
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