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By James Pomfret and Michael Martina
HONG KONG/WASHINGTON (Reuters) – Semiconductors and different restricted items shipped by means of China and Hong Kong to gasoline Russia’s conflict effort fell by a fifth this 12 months beforehand undisclosed U.S. Commerce Division knowledge exhibits, however Hong Kong stays a world sanctions evasion hotspot.
Transshipments by means of Hong Kong of Widespread Excessive Precedence Gadgets (CHPL) — superior parts together with microelectronics deemed by the U.S. and European Union as probably for use for Russia’s conflict in Ukraine — fell 28% between January and Might, a U.S. Commerce Division official informed Reuters.
For a similar interval, transshipments of these gadgets by means of mainland China, excluding Hong Kong, fell 19%, the official mentioned.
Reuters is reporting the beforehand undisclosed numbers for the primary time.
Requested about transshipment of dual-use items by means of China into Russia, the Commerce Division referred Reuters to earlier statements outlining its efforts to “limit Russia’s entry to the applied sciences and different gadgets that it must maintain its brutal conflict towards Ukraine.”
Each Hong Kong and China are seen by the U.S. authorities as key international nodes for Russia to supply supplies for its army, together with semiconductors and drone elements.
“I feel there’s some trigger for being not less than optimistic that we’ve got been in a position to decelerate a few of this commerce,” the official mentioned, however added: “China remains to be our primary concern.”
The US and its allies have accused China of supporting Russia’s conflict in Ukraine, partially by exporting elements and tools wanted by Moscow’s weapons makers.
The U.S. State Division and Treasury imposed a number of rounds of sanctions on entities around the globe with alleged business hyperlinks to Russia’s army, together with shell corporations in Hong Kong that had been diverting semiconductors.
The official, who spoke on situation of anonymity, mentioned the dip in illicit flows was the results of a number of elements, together with aggressive enforcement by U.S. authorities, in addition to engagement with corporations whose merchandise are being transshipped.
“We’re speaking to any firm whose gadgets are displaying up on the battlefield,” the official mentioned, with out giving names.
The official declined to share the total knowledge set with Reuters, citing the necessity to defend the division’s entry to the data. “What I can say is we’ve got confidence within the supply associated to imports into Russia.”
The Hong Kong authorities didn’t reply to questions from Reuters concerning the transshipment of products into Russia, however mentioned it “doesn’t implement, nor do we’ve got the authorized authority to take motion on, unilateral sanctions imposed by different nations.”
It added, nonetheless, that it was “implementing vigorously” sanctions imposed by the United Nations Safety Council, pursuant to the directions of China’s Overseas Ministry, together with these with regard to North Korea.
China’s Customs Administration and Overseas Ministry gave no response to Reuters’ requests for remark.
There was no response to Reuters’ questions from the Russian embassy in Washington.
A separate customs dataset from C4ADS, a Washington-based international safety non-profit, confirmed that over 200 Hong Kong-registered companies shipped almost $2 billion value of products to Russian consumers between August and December 2023.
The info, outlined in an upcoming report by The Committee for Freedom in Hong Kong Basis (CFHK) and reviewed by Reuters, confirmed $750 million value of CHPL gadgets — starting from high-end chips by Nvidia (NASDAQ:) and France’s Vectrawave, to lower-end chips from Texas Devices (NASDAQ:) and Intel (NASDAQ:) — have been shipped through Hong Kong between August and December 2023.
A few of these restricted items have been shipped to sanctioned Russian companies, CFHK mentioned.
Nvidia mentioned in a response to Reuters questions that it halted gross sales to Russia in March 2022 and requires its clients to adjust to all relevant U.S. legal guidelines.
Texas Devices informed Reuters it “strongly opposes” using its chips in Russian army tools and the illicit diversion of its merchandise to Russia.
Intel mentioned it operates in strict accordance with U.S. export laws and sanctions and holds suppliers and distributors accountable to the identical requirements.
Vectrawave didn’t reply to a request for remark.
“Our analysis has highlighted quite a few cases the place Hong Kong-based corporations have facilitated the switch of delicate applied sciences and commodities, undermining worldwide safety and stability,” mentioned Samuel Bickett, a lawyer and writer of the CFHK report.
HIGH-END CHIPS
The 2023 customs knowledge from C4ADS confirmed that two of the Nvidia shipments, value $1.58 million and $1.21 million, have been shipped to a Moscow-based agency named “Lotos” by a consignor referred to as Malachor Electronics with a secretarial handle in an opulent workplace constructing in Hong Kong’s central enterprise district.
The director of Malachor, Colin Stevenson, who has a listed United Kingdom handle, couldn’t be reached for remark.
Between August and December final 12 months, a complete of $17.6 million value of Nvidia items have been shipped into Russia by Hong Kong consignors after being traded in nations together with China, Taiwan, Turkey, Thailand, Serbia and the United Arab Emirates, in response to customs data reviewed by Reuters.
Consignments included “Jetson TX2” Edge AI programs, that are among the many parts utilized in drones the Ukraine authorities has found on the battlefield.
“Pre-owned Jetsons can be found by means of many second-hand channels. Though we can not observe merchandise after they’re bought, if we decide that any buyer is violating U.S. export controls, we’ll take acceptable motion,” mentioned John Rizzo, an Nvidia spokesperson.
Rizzo didn’t give particulars concerning the shipments to Lotos.
Different high-end consignments included two shipments value $1 million every of semiconductors from Vectrawave that have been labelled as microprocessors. Vectrawave is a maker of specialized semiconductors for high-tech communication and protection programs together with radar.
The convenience of establishing and registering new companies in Hong Kong has led to a proliferation of transport and logistics companies and different intermediaries which have additionally facilitated restricted commerce and financial flows with Iran and North Korea, in response to the CFHK report and an examination of Hong Kong corporations registry filings by Reuters. A few of these have been sanctioned by U.S. authorities.
Reuters discovered shuttered workplaces on visits to industrial buildings in Hong Kong near the town’s Kwai Chung container port for consigners named in customs data and company filings. One agency, Align (NASDAQ:) Buying and selling, the consigner for the Vectrawave chips, had an handle that was a mouldy room stacked with a whole lot of Hong Kong corporations registry letters.
Li Yanqing, a Chinese language director for Align, had a listed handle in Jiujiang in southern China and couldn’t be reached.
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