iFact Investigation Unveils Georgia’s Role in Circumventing Russia Sanctions

iFact, a local media outlet focused on investigative journalism, has unveiled through its investigation and analysis of trade statistics that Georgia is involved in maintaining Russia’s military supply chain despite international sanctions. According to iFact’s investigation, key items such as drones, computer processors, GPS devices, and memory cards, which have been banned from export to Russia since December 2022, are reaching Russia through Georgia.

Despite sanctions, dual-use items continue to flow through a network of companies exploiting legal loopholes and logistical routes. In response to the findings, iFact approached the Georgian Revenue Service for an interview to discuss their enforcement efforts and the loopholes uncovered. Unfortunately, the Revenue Service declined the interview request and provided only a general written statement that lacked substantive details on its strategies to address this critical issue.

The information is obtained by iFact and was first published on https://ifact.ge

Uncovering the Routes (Experiment #1)

In an experiment on May 21, the iFact team posed as customers who wanted to ship 30 drones from Tbilisi to the Russian city of Samara. When they contacted the transport company “Kairo Logistics,” an operator named Evgeni assured them of delivery via Azerbaijan or Iran with a 100 percent guarantee, telling them: ““I give you a 100% guarantee and assure you that your cargo will reach its destination.”

The price quoted by the operator Evgeni for the transportation of 30 drones was RUB 500,000 (about USD 5815), 20 times higher than the regular rate, indicating that bribes were involved. This was confirmed by Evgeni: “It’s a sanctioned cargo. You understand yourselves; you need to communicate with positions using envelopes.” The transport company only required an invoice and an electronic signature on the contract. After obtaining sufficient information, the iFact team suspended the experiment.

Before publishing the article, the iFact team contacted “Kairo Logistics” again, saying they were journalists. The same operator, Evgeni, who had previously introduced himself as the company’s manager, told them within seconds that he was just an intern and redirected them to a manager named Alex Bagatov. Bagatov admitted to falsifying certificates of origin in order to evade sanctions.

“Kairo Logistics,” which operates under the legal name LLC Service-Multi, is a company registered in Moscow in 2018. The company claims to have extensive experience in the transportation of sanctioned goods through Turkey to Azerbaijan.

Integrated Circuits Experiment (Experiment #2)

In another experiment, iFact pretended to try to send 60 Intel processors and 30 HDD memory cards to Russia. They reached a company LLC “Cargo Rapido”, which agreed to transport the sanctioned goods.

According to the “Cargo Rapido” operator named Natalia whom the iFact team contacted, the goods would be transported unofficially, without export declarations, for a 10 percent “insurance” fee. She also assured them that everything would be done off the books, knowing the risks of transporting sanctioned goods. The “Cargo Rapido” route is Tbilisi-Vladikavkaz [North Ossetia region of Russia]-Samara.

The company was registered in 2020 in Georgia. Its director and owner is a Russian citizen named Taimuraz Tokazov. The company’s building is located in the center of Tbilisi, where iFact journalists went to ask Tokazov questions. After they disclosed that they are journalists, he became confused, refused the interview and left.

The Data Speaks Volumes

iFact’s investigation, based on the analysis of official data, revealed a significant increase in the export of dual-use items from Georgia to neighboring countries and Central Asia. Some of these countries send these products to Russia openly, others allegedly unofficially.

According to the Georgia Revenue Service, dual-use items are products that can be used for both civilian and military purposes, as well as for the manufacture of biological, chemical or nuclear weapons, or explosives containing nuclear material.

iFact identified five products whose exports to neighboring Azerbaijan, Armenia, and Central Asian countries have increased significantly since 2023.

• Radio Navigation Equipment (Satellite/GPS Devices): Exports increased by 213 percent in 2023. These sanctioned products were exported from Georgia to Azerbaijan for a total value of $304,520. These devices, which can be used for GPS navigation, were found in downed Russian aircraft in Ukraine.
• Integrated Circuits, Controllers (Computer Processors and Joysticks): In 2023, Georgia exported USD 261,580 worth of integrated circuits to other countries, the highest value on record and a 36 percent increase from 2021. Integrated circuits were exported to Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan, Malta, the Netherlands, Turkey, and Ukraine. Of these nine countries, at least two, Kyrgyzstan and Armenia, are certain to send integrated circuits to Russia, according to the UN International Trade Database. These circuits are essential for military equipment.
• Digital Data Processing Blocks (Internet Modems, Routers): Georgia exported digital data processing blocks to 15 countries in Europe, Asia, and Africa in 2023. Among these countries, Armenia and Kyrgyzstan are notable destinations. Armenia received USD 3 million worth of these products from Georgia in 2023, a dramatic increase from previous years, while Kyrgyzstan received USD 225,760 worth of these products in the same year. Notably, there was no prior history of trade in these products with Kyrgyzstan. These blocks are essential to advanced military electronics.
• Uzbekistan is a completely new market. Georgia never had a history of trading integrated circuits with Uzbekistan, but in 2023, it exported integrated circuits worth $US36,720 there for the first time. iFact states that although the comtradeplus.un.org database does not show that Uzbekistan and Azerbaijan sent sanctioned products to Russia in 2023, it is possible that some countries did not provide their statistics honestly and on time. Therefore, we cannot be certain that the dual-use items sent from Georgia to Uzbekistan and Azerbaijan ultimately reached Russia.
• Devices for Receiving, Transmitting and Converting Sound, Image or Other Data (Tape Recorders, Microphones, Mixing Consoles): Exports from Georgia increased by 34 percent in 2023 compared to 2021. These products were exported to 30 countries, including Kazakhstan and Azerbaijan, with the sharp increase in exports to these two countries. Kazakhstan and Azerbaijan have increased their exports to Russia since the start of the war in Ukraine.
• Television, Digital, and Recording Video Cameras

Household Appliances Sent to Russia Ending up in the War

iFact spoke with military industry veterans, former and current military personnel, former senior defense officials, and an international economic sanctions analyst.

According to the publication all agree that parts useful for weapons can be found in items we use every day, such as laptops or smartphones.

Since the full-scale invasion of Ukraine, Georgia’s exports of refrigerators, dishwashers, and washing machines have increased significantly to the following countries: Russia, Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, and Uzbekistan.

In 2023, washing machines worth US$286,660 and dishwashers worth US$41,390 were directly exported from Georgia to Russia.

How Georgian Companies Assist Russia

The investigation traces of concrete Georgian companies participate in sanctions’ evasion. Among those is the Georgian company “Elektromek-BT” which was assisting Lithuanian transportation company “Delamode Baltics” in allegedly transporting sanctioned cargo to Russia through Georgia. The company’s director and owner is Mari Sarapiani, and its official primary activity is listed as construction.

According to the investigation, from July to October 2023, this company participated 365 times in the transportation of $24 million worth of sanctioned dual-use items to Russia. Sometimes they transported the cargo themselves, while other times they assisted others. The products included ball and cylindrical roller bearings, electronic equipment, plugs, sockets and other items.

Legal Loopholes

The export of dual-use items from Georgia requires a permit from the Revenue Service. However, enforcement is inconsistent, allowing sanctioned goods to pass through. The Georgian Revenue Service claims to have tightened controls, but iFact’s findings and official statistics suggest otherwise.

Proposed Solution

The U.S. State Department and the European Union have identified Georgia as a key player in sanctions evasion. To combat this, iFact’s recommends adopting measures similar to those taken by Lithuania, described in the report, which has imposed national sanctions and tightened export restrictions to prevent sanctioned goods from reaching Russia.

The investigation quotes a political risk and sanctions analyst Maximilian Hess from the British Foreign Policy Research Institute and author of the book “Economic War,” which deals with the Ukraine war and sanctions against Russia.: “At the very least, if the government sincerely claims to enforce sanctions and does not want to become a violator country, the best way would be to publish a separate list of high-priority battlefield items and issue additional restrictions on their export. Practically, this means requiring exporters to clarify the final destination of the cargo. This is necessary to avoid the prohibited goods from reaching Russia through Georgia.”

Also Read:

• 07/03/2024 – RFE/RL Report on Georgia Re-Exporting “Dual-Use” Products for Russia Stirs Controversy
• 02/03/2024 – Revenue Service Demands U.S. Clarification on Sanctions Evasion Allegation