Russia Gets Cisco Goods Despite Ban

"Weeks after latest sanctions on Russia, tech giant Cisco Systems Inc. stopped all sales of its hardware into Russia, and Washington issued a series of broad sanctions against the country, including restricting the sale of Cisco equipment.

That same gear is still easy to find at a range of retailers in Moscow. It is being supplied by a network of third-party vendors in places like Turkey and East Asia that have sprung up without Cisco's authorization and are largely out of reach of American enforcement.

The U.S. has chided countries that supply Russia with gear that is cushioning the blow of Western sanctions. But Western goods -- while greatly curtailed -- are still pouring into the country, too.

Tracking how Cisco products still make it into the country helps take measure of the difficulty in isolating Russia economically.

From March to November, Russia imported $12.4 billion worth of goods subject to sanctions or export bans from the West, including the sort of telecommunications equipment that Cisco provides, according to an analysis of customs data from 31 countries by Brussels-based think tank Bruegel.

From August to late December, $27.5 million worth of Cisco equipment was exported to Russia, according to Russian customs data collected and sold by a China-based data provider and reviewed by The Wall Street Journal. Information about some Cisco suppliers and buyers named in the data were cross-checked using a second database of custom records provided by C4ADS, a Washington-based nonprofit that specializes in identifying national-security threats.

"Anything that gets through does matter," said Tom Keatinge, the director of the Centre for Financial Crime and Security Studies at the Royal United Services Institute, a U.K. think tank. "The challenge that the West has in 2023 is how to get third countries that don't have sanctions regimes . . . to stop this."

A Cisco spokeswoman said the company stopped doing business in Russia in March and began winding down its operations there in late June. It has discontinued business with all Cisco partners and distributors in Russia and Belarus.

The spokeswoman said that any Cisco gear currently in Russia is counterfeit or had been shipped there by third-party middlemen without Cisco's permission. The company would take action against any sales it discovers by its authorized partners into Russia, she said.

Cisco says its brand protection team tries to crack down on such transactions around the world by looking for unusual order-booking activities, combing through open-source intelligence and cooperating with customs officials.

"Combating gray-market operations is a challenge facing the entire technology industry," the spokeswoman said.

Cisco is one of hundreds of Western firms that supplied products to Russian customers before stopping abruptly after the sanctions. Exporters now need a license from the U.S. government to sell Cisco components into Russia. Those are granted in very limited circumstances, such as for humanitarian purposes.

The U.S. can prosecute foreign companies and individuals that sell American products subject to export controls. But many of these entities are largely out of reach of any real enforcement action, particularly if they have no business presence in the U.S.

Turkey and China have both said they aren't a party to Western sanctions and allow companies to sell goods into Russia.

Moscow, meanwhile, has listed Cisco gear among certain sanctioned Western products that it allows middlemen to bring into Russia -- a system called "parallel imports." Other items on Russia's list include Lexus and BMW cars, Lego sets and Apple products.

Cisco orders included in the Chinese-compiled customs data include purchases of network switches, communication cords, routers and general computer parts. They include big purchases, including a $2.6 million order, and small ones, like one for $13.58.

CompTek, a Moscow-based IT equipment distributor, says on its website that it maintains a large warehouse of Cisco equipment and offers a full selection of the company's gear online. "Surprisingly, we still have Cisco equipment in stock," the website said in June, while advertising a sale.

A CompTek sales manager, reached on the phone this month, said Cisco gear was "still coming in," but availability depended on the individual product. A spokesperson for CompTek couldn't be reached for comment.

Cisco said a distribution agreement with CompTek was terminated in March.

According to the customs database reviewed by the Journal, CompTek bought some of its Cisco products from Hong Kong-based Pixel Devices Ltd. and RBW Lab Co., a Thai IT distributor. Pixel Devices said it can't disclose details of sales to customers but that it isn't in a commercial relationship with CompTek. RBW didn't reply to requests for comment." [1]

1. Russia Gets Cisco Goods Despite Ban
MacDonald, Alistair; Vtorygina, Kate.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 15 Feb 2023: B.1.