American businesses are not permitted to do business with MMZ Avangard, a state-owned company that manufactures missiles for one of Russia's most advanced weapons, the S-400 air-defense system, since Russia annexed Crimea in 2014.


In response to concerns from the West regarding the S-400, the US withdrew NATO member Turkey from a joint fighter jet program in 2019 after Ankara received the Russian system.

However, according to emails and other business records seen by Reuters and interviews with people familiar with the situation, Extreme Networks (EXTR.O), a publicly traded American technology company, was giving MMZ Avangard computer networking equipment for its office IT systems while the United States was taking steps to stifle the company's operations.

According to information provided to Reuters, Extreme stated that it thought equipment "may have" been sold to MMZ Avangard by means of a fictitious purchaser. Extreme claimed that it was unaware of the equipment's sale. Without providing proof, it added that a middleman in Russia was "complicit" in supplying its goods through a front.the business to "bad actors." Extreme stated that it will inform American authorities of its findings regarding these potential sales.

Since the start of what Russia calls its "special operation" on February 24, Ukraine has accused Russia of using MMZ Avangard-made missiles against ground targets. According to Ukrainian authorities, a convoy was brutally attacked last month on the outskirts of the southern city of Zaporizhzhia, and MMZ Avangard missiles claimed at least thirty innocent lives. Inquiries for this article were not answered by MMZ Avangard or Kremlin representatives. Almaz-Antey, MMZ Avangard's parent, likewise declined to comment.

MMZ Avangard purchased Extreme equipment for its IT systems worth more than $500,000 between 2017 and 2021, according to the company records examined by Reuters and the people familiar with the situation. High-speed switches, a crucial component of corporate IT networks, and software were among the available goods.

Records also reveal that despite two Extreme officials voicing concerns, the sales went through a seemingly innocent corporation close to Moscow.

A case study of how Western nations may have overestimated their capacity to choke the Russian economy with export bans and trade sanctions is the Russian military company that Washington identified as a threat but continued to purchase U.S. computer hardware. Additionally, it emphasizes how reliantRussian military hardware is based on cutting-edge US technology.

Six weeks after Russia invaded Ukraine in April, an Extreme employee allegedly filed an internal complaint, seen by Reuters, alleging that the business was doing business with various Russian military manufacturers. The complaint claimed that Russian warships' communications systems used "extreme equipment."

Extreme claimed in its statement that a disgruntled employee had made the accusations. Before Reuters brought "new facts" to the company's attention this month, an investigation by the company had turned up nothing to support any of the claims. The business stated that it stopped doing business in Russia in March and that it then started a procedure to fire the disgruntled worker for subpar work. It declared that it is unaware of any sales involving Russian warships.

While the United States and its allies banned high-tech exports to Russia in an effort to cripple its defense industry, and many tech companies announced they had stopped exporting to Russia, a Reuters investigation in August found that the flow of Western brand-name computer parts to Russian clients has continued.

This account of how Extreme supplied MMZ Avangard and at least two other Russian military firms is based on interviews with three people who were familiar with the shipments as well as a review of documents by Reuters that covered the five years up to 2021. The documents include emails between Extreme employees, clients, and distributors as well as sales records. Here is the first mention of the shipments.

Export restrictions are managed by the U.S. Department of Commerce, which declined to comment for this article.

"IT WAS NECESSARY TO USE COVER"


Russian businesses, including those in the military, essentially have no choice but to purchase foreign equipment in order to create the computer networks required for modern commerce. Russia produces very little networking hardware domestically.

Extreme is a newcomer to the computer networking market. It was founded in 1996. It reported $1.1 billion in revenue last year versus $50 billion for Cisco Systems.

However, Alex Henderson, a network and security analyst at Needham and Company in New York, claims that the smaller firm is a "meaningful competitor." According to contracting records, the U.S. military and NASA both use Extreme hardware and support, and the company has established a strong marketing reputation.

Extreme lists illustrious clients in Russia as well, including the federal pension fund, Lomonosov Moscow State University, and the ministry of health.

However, documents obtained by Reuters show that in addition to MMZ Avangard, other buyers of Extreme equipment included a significant Russian military shipbuilder and a cutting-edge defense electronics manufacturer.

According to one of the documents, Russian customers spent $41.5 million on equipment over the four years ending in 2020. Because it was unclear whether transactions other than those involving MMZ Avangard had been recorded under cover names, Reuters was unable to determine the total amount of sales made by Extreme to sanctioned or military companies.

Extreme claimed in a statement to Reuters that it does not disclose country-specific revenue.

According to two of the people familiar with the situation, Extreme kept in touch with its clients in Russia to assist in the design of intricate networks that grow over time. Each client or prospective client was given a dedicated account manager at the business and was noted on internal sales records. But authorized middlemen were used for the actual sales.

In a statement to Reuters, Extreme claimed that it infrequently offered direct installation services. It claimed that neither DEMZ nor MMZ Avangard had any such contracts with it.

Extreme claimed in its statement that it has a "firm policy" against working with sanctioned organizations, but added that sometimes it is unaware of the final consumer, particularly when its goods are sold through so-called "stocking" distributors who maintain an inventory.

One of those distributors was identified by Extreme as RRC, and the company claimed that RRC was "complicit" in the plan to supply MMZ Avangard. Reuters sent messages to RRC and its parent company in Cyprus, BD Enterprise Networking, seeking comment.

According to the three people familiar with the shipments, Extreme equipment had a strong selling point for Russian military firms: unlike larger rivals, Extreme doesn't require service subscriptions and frequent software updates. One of the people described the apparatus as "completely autonomous." You don't even need to be connected to the internet for it to function without a license. Consequently, "you don't need to fear that your system will go dark because someone in the U.S. decided to disconnect you," another person said.

Although the "autonomous model" is not exclusive to Extreme, the company acknowledged that it has become relatively uncommon.

The fact that MMZ Avangard utilized Extreme gear was well known in Russia. The missile manufacturer advertised a tender through Russia's online system for public procurement, stating that it required replacement parts for the Extreme computer networks it owned. While Extreme didn't contest this, it did claim that it might not have known about the tender.

The documents reveal that a few months prior, in the summer of 2019, an intermediary had gotten in touch with Extreme's representative office in Russia to seek guidance on a network upgrade for the missile company. In an email sent to an Extreme system engineer on June 28, 2019, an employee of the intermediary stated, "We are working on a solution for the customer, MMZ Avangard." "I was told I could ask for your assistance,"

According to one of the people familiar with the shipments, Extreme sent a staff engineer to MMZ Avangard's offices as soon as its equipment got to Moscow to ensure a smooth installation.

Extreme claimed that it had no records of any of its employees setting up equipment at MMZ Avangard in a statement to Reuters.

The name of the missile manufacturer didn't show up on Extreme's books when it came to processing MMZ Avangard's purchase orders. According to emails, sales records, three people with knowledge of the situation, and those sources, Extreme's Moscow employees instead recorded the orders as coming from a business known as OOO DEMZ.

One of the people with knowledge of the shipments claimed that it was necessary to use a cover because the Russian company is blacklisted in the United States. Since the U.S. Treasury Department designated MMZ Avangard's parent company, Almaz-Antey, as a "blocked" entity in July 2014, doing business with MMZ Avangard has been prohibited for U.S. businesses. For this story, the Treasury declined to comment.

According to emails and other documents seen by Reuters, MMZ Avangard started purchasing goods from Extreme in December 2017 and was listed under the DEMZ cover in all of the company's business records as of that time. According to Reuters, the most recent transaction involving the DEMZ cover took place in September 2021. The records reveal that Extreme shipped products overall.worth this way around $645k during that time.

According to Extreme's statement, the company now thinks that a "front company" may have been used to purchase some of its equipment. Extreme confirmed that $645,000 worth of product purchases were listed on the DEMZ account.

A small business called DEMZ is located in Dmitrov, which is 50 miles north of Moscow. Vladimir Markov is listed as the general director in Russian corporate records. When contacted by phone, Markov reported that DEMZ, a manufacturer of tools for railcar maintenance, completely stopped production in 2016. The executive claimed he was unaware of either Extreme or DEMZ purchasing equipment from Extreme for either itself or on behalf of others.

The pretended trick was a lame one. According to the Extreme customer records obtained by Reuters, executives for DEMZ who were listed as such were actually company workers who had given their MMZ Avangard email addresses. They applied for access to an Extreme customer service portal using the Avangard email addresses, too. One of them opted not to respond. The other was out of reach. In some of the documents, DEMZ's alleged website address was also listed as mmza.ru, the domain name of MMZ Avangard.

The Russian distributor RRC received an email from an Extreme sales manager in North Carolina on December 31 asking about the domain name as a "DEMZ" order was processing through Extreme's approval system:"Can you explain to me how DEMZ and mmza.ru are related?" In response, a distributor employee said that the domain mmza.ru belonged to "the customer". The worker made no further comment. A later message confirms that the sale was successful.

When MMZ Avangard employees requested access to online support and an Extreme sales manager raised concerns about the website domain, Extreme did not respond in its statement.

An employee from Extreme's internal compliance desk in Ireland noticed the mmza.ru domain in the sales paperwork almost a year later while working with another batch of "DEMZ" orders and looked into it. In an email sent on November 11, 2020, a member of the compliance team stated, "This link goes directly to https://mmzavangard.ru/ which is a defense contractor seemingly [sic] to specialize in ground to air missile systems, we need to further review before we can make a decision."

Extreme also avoided addressing concerns about this email in its statement.

"GOOD NEWS"


The employee of Extreme Compliance gave the Russia office instructions to have "DEMZ," the alleged client, complete a form attesting there was no end-user from the military, that the equipment would not be resold for any military use, and that it would not be transferred to any company that had been sanctioned.

A two-page letter obtained by Reuters less than a week after the Extreme compliance employee's message attested that the end-user was not sanctioned and would not use Extreme's equipment in a manner prohibited by U.S. law. The document was sent to Extreme's compliance desk, according to one of the people familiar with the situation, and it had an illegible signature and a blue "DEMZ" stamp.

According to the alleged self-declaration, DEMZ had no involvement with sophisticated missiles. The phrase should have read "components for the Metalworking of Country Houses." According to former director general Markov, DEMZ never produced such components and was out of business at the time of the letter.

On November 25, the North Carolina manager emailed, "Just heard back from our supply team for the DEMZ orders with some good news."

The sales might succeed.

The regional director for Northern and Eastern Europe for Extreme, based in Vienna, wrote, "Thank you.

Reuters was informed by U.S. export control experts that self-declarations can be helpful in determining the legitimacy of a client. James Fuller, a former special agent with the U.S. Department of Commerce, said that when a red flag is discovered, "you stop or put on hold the transaction." "You don't suggest a way to give out more false information or a way around it," she said.

The request for and receipt of the self-declaration by Extreme's internal compliance officer were both confirmed in the company's statement to Reuters. "Other screening processes to check for red flags," the company continued,

SHIPBUILDING


According to business documents seen by Reuters and the people familiar with the situation, Extreme provided IT equipment to other military companies in Russia.

The United Shipbuilding Corp. was one of them. The company is headquartered in St. Petersburg and runs numerous Russian shipyards that produce everything from mine sweepers to frigates. United Shipbuilding has been listed by the U.S. Treasury since July 2014 as a "blocked" entity, similar to MMZ Avangard.

Concern Morinformsystem-Agat, a company that produces radar and other military electronics systems, was another. According to the documents, which include a public tender from July 2020, and one of the people with knowledge of the situation, Agat was utilizing Extreme equipment for some of its systems, which were later installed on United Shipbuilding warships.

According to Extreme, it is not known that it ever sold goods to United Shipbuilding or Agat. Requests for comment from the Russian businesses were not answered.

In email exchanges, United Shipbuilding is identified as a customer of Extreme. An intermediary got in touch with Extreme's Moscow office in April 2020 to submit the design for updating United Shipbuilding's data center.

The following day, an Extreme engineer with a base in Russia replied, highlighting a few components that could be eliminated from the suggested design.

The Extreme engineer stated in the email that everything was correct aside from that.

(Maurice Tamman from New York contributed additional reporting.)

((Reporting from David Gauthier-Villars in Istanbul and Aram Roston in Washington; edited by Janet McBride))