China Skirts Curbs on Drone Parts --- Obscure firms ship dual-use goods to Russia and Iran, defying U.S. controls

“On March 5, as the U.S. and Israeli militaries hammered Iranian targets and Tehran launched attacks at Tel Aviv and Persian Gulf countries that host U.S. bases, an email blast emanated from a server located in China.

 

"We are deeply shocked and outraged by the aggression against Iran, and our hearts are with you," read the message from Xiamen Victory Technology. The company offered to sell German-designed engines used to power one-way attack drones.

 

The U.S. has prohibited the sale of those engines, known as the Limbach L550, to Iran and Russia. It has been an important component in Iran's Shahed-136 exploding drone, a version of which Russia also has been using extensively in Ukraine. Victory Technology featured an image of a Shahed-style drone on its website's product page, alongside the slogan "Innovating Aviation Engine Solutions."

 

The open wartime marketing by a small, obscure Chinese company points to a growing source of frustration for Washington: Its struggle to staunch the flow of so-called dual-use goods -- items with both civilian and military uses -- to adversaries.

 

Chinese companies are shipping hundreds of containers filled with such goods to Russia and Iran, according to Chinese customs data. Items on the packing lists range from engines to computer chips, fiber-optic cables and gyroscopes. For a time, Chinese exporters intentionally mislabeled some shipments to skirt U.S. and European sanctions, but in many instances they no longer bother, said former senior Treasury Department officials and weapons analysts.

 

The expanding trade marks one of the biggest challenges for U.S. nonproliferation officials in the era of drone warfare. Low-tech and disposable, drones are made almost entirely of common parts that easily enter and exit the swirl of global trade undetected.

 

China exacerbates the challenge. The U.S.'s biggest rival has long served as a clearinghouse for U.S. and European-made components that could be diverted to drone factories in Iran and Russia, the former Treasury officials said. Increasingly, they say, those components are being made inside China itself, often by small factories that don't fear Western sanctions.

 

The email pitch from Victory Technology landed, apparently by accident, in the inbox of Iran Watch, part of the Wisconsin Project on Nuclear Arms Control that tracks Iranian weapons-proliferation networks. The group shared it with The Wall Street Journal.

 

"They're out there actively trying to sell Limbach L550 engines to Iran -- and doing it pretty brazenly," said John Caves, a Wisconsin Project researcher.

 

The sender of the email, who identified himself as Kristoff Chen, said the company began selling engines this year and hasn't exported any to Iran or Russia. He didn't comment on why he sent the email to Iran Watch.

 

The Shahed, Iran's main attack drone, is one of the U.S.'s biggest worries. It can fly up to 1,000 miles with an explosive warhead and costs $20,000 to $50,000 to produce, analysts estimate, making it essentially a cheaper alternative to cruise missiles.

 

The drones have proven effective at overwhelming or evading air defenses and striking targets. The U.S. recently developed its own copycat.

 

Early versions of the Shahed used in Ukraine were filled with microelectronics, servomotors to enable precise motion control, and other key parts manufactured in the U.S. and Europe, according to teardowns of drones recovered in Ukraine and the Middle East.

 

Investigations by the Treasury Department found virtually all of the U.S. and European parts were being diverted through authorized distributors to retailers in mainland China or Hong Kong, which would then ship the parts to Iran or Russia. Typically they were paid for via shell companies that are easy to set up in Hong Kong and help obscure the ultimate destination of the components.

 

China's Foreign Ministry said it has enforced restrictions on exports of dual-use items "in accordance with its own laws and regulations and its international obligations."

 

Much of the recent trade in dual-use goods to Iran and Russia is driven by small, nimble Chinese companies that see an opportunity to capitalize on war-driven demand. Such firms rarely deal in dollars and have little to fear from U.S. sanctions.

 

In the case of Victory Technology, the company's website appeared online in late January, when the U.S. started building up military assets in the Mideast to confront Iran. The address listed on the website is registered to Xiamen Weituo Keli, a hardware manufacturer established in 2016, that lists business interests spanning tea and tobacco production, kitchenware and industrial design.

 

Weituo Keli is controlled by Chen Shuixuan, a professor of engineering at Xiamen University of Technology. He owns or co-owns more than 100 patents related to vending-machine design and the use of lasers for cleaning industrial surfaces.

 

In his response to the Journal, Victory Technology's Kristoff Chen said the company was focused on selling its engines domestically for civilian drone uses. "They are not used in attack drones," he wrote. "We kindly ask you do not make any false reports."

 

The Victory Technology website is available in English, German, Russian and several other languages, but not Chinese. It features the L550 engine prominently in photos and a promotional video.

 

The U.S. imposed sanctions on another local company, Xiamen Limbach, in late 2024 for supplying the L550 to Russia for use in Shahed-type drones. The European Union also imposed sanctions on Xiamen Limbach at about the same time for sharing engine designs with entities involved in producing Shaheds. Its Chinese parent company also controls the German firm that originally developed the engine.

 

Xiamen Limbach didn't respond to requests for comment.

 

The U.S. can't fully stop the trade, so its aim is to raise costs for Iran and Russia as much as possible, said current and former officials.

 

Forcing them to rely on lower quality Chinese parts is part of that effort, said Kerri Bitsoff, a former assistant director at OFAC who worked on nonproliferation.

 

The question is how American adversaries weigh trade-offs when wars increasingly favor quantity over quality.

 

"You have to do the cost analysis," Bitsoff said. "Would I rather have 100 drones that can fly for two hours, than 50 that can go for 20?"” [1]

 

1. World News: China Skirts Curbs on Drone Parts --- Obscure firms ship dual-use goods to Russia and Iran, defying U.S. controls. Chin, Josh; Austin Ramzy.  Wall Street Journal, Eastern edition; New York, N.Y.. 06 May 2026: A9.