Russian military-industrial complex continued receiving German machine tools after the outbreak of the war

German-Japanese company DMG Mori, one of the world’s largest machine tool manufacturers, which announced its withdrawal from Russia after the outbreak of the war, continues to support the Russian military-industrial complex, as Agentstvo has found out. The company managed to keep its business in Russia despite the sanctions thanks to nominees and a Russian manager whose family publicly condemned the war.

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How did DMG Mori end up in Russia? The company opened a machine tool manufacturing plant in Ulyanovsk in 2015, with Secretary of the Security Council Nikolai Patrushev and German Ambassador Rüdiger von Fritsch attending the opening ceremony.

• Despite the fact that the EU sanctions had by then banned the supply of equipment and technologies for Russia’s military-industrial complex, State Corporation Rostec, in particular its subsidiaries United Aircraft Corporation and United Engine Corporation (which produce engines for missiles and military aircraft, as well as Su, MiG and Il planes), was cited as the customer for the Ulyanovsk plant.
• This plant was important to Russia because Russian companies do not produce modern machine tools in the required quantities. The Expert magazine named the Ulyanovsk plant of the German-Japanese concern as Russia’s leading machine tool manufacturer in 2022.

How did DMG Mori manage to stay in Russia? Almost immediately after the full-scale war broke out in Ukraine, on 14 March 2022, the company announced its withdrawal from Russia and the shutdown of its machine tool manufacturing plant in Ulyanovsk. However, Agentstvo discovered that none of this actually happened.

• As can be observed in Russia’s Unified State Register of Legal Entities, both of DMG Mori’s Russian legal entities — OOO DMG Mori RUS and OOO Ulyanovsk Machine Tool Manufacturing Plant — continue to operate in Russia without any change of ownership. Both companies still generate revenue, although it has decreased by 50% in 2022. The companies also have personnel, with 92 total employees as of the end of 2022. Both companies are now managed by Andrey Sokolov, who is also an employee at the head office of DMG Mori in Germany.
• Agentstvo’s source close to the Russian management of the company confirms that it continued its operations after the start of the war and started assembling at least 200 machine tools — the components for them were at the factory at the time the shutdown was announced.
• The fact that after March 2022 Russian legal entities started receiving components and machine tools through Asia also suggests that the company continued its operations. According to the ImportGenius customs declarations database, since March 2022, the Ulyanovsk plant has received $261,000 worth of components from Indian companies, and DMG Mori RUS purchased $195,000 worth of machine tools of unknown origin from a Chinese company.

How does DMG Mori sell machine tools to military plants? Agentstvo has established the exact way DMG Mori now sells its machine tools — it is not done directly, but rather through companies related to it. The companies in question are OOO Service Pro and OOO Service Plus, certified partners of DMG Mori. Both are linked to Sokolov. Until August 2023, OOO Service Pro owned 1% of OOO PARS, the remaining 99% of which is owned by Natalia Sokolova, Andrey Sokolov’s wife. According to the documents available to Agentstvo, in 2022 Natalia Sokolova was also receiving salary OOO Service Pro. Agentstvo also has testimonies and documents confirming that the actual management of the companies is handled by Sokolov. Another company engaged in machine tool sales, OOO DM Technologies, was established by Rustam Alyautdinov, former sales director of OOO DMG Mori Rus.

• Agentstvo studied the financial statements of all three companies and discovered that they are indeed actively selling DMG Mori machine tools to the Russian military-industrial complex and companies under Western sanctions. Here’s how it works:
• Shortly after the outbreak of the war, in June 2022, Service Pro signed a RUB 962 million contract for equipment supply and commissioning work with AO Finval Energo. Finval Energo’s customers are military-industrial plants that are part of Rostec: AO Chernyshev Moscow Machine Building Plant, AO Stankotech, Ufa Engine Production Association, and AO Aircraft Repair Plant No. 218. In August 2022, AO Finval Energo received the final payment for the supply of the CTX gamma 1250 machine tool to AO Chernyshev Moscow Machine Building Plant, and in December it received payment for the DMC 635 V ecoline machine tool, which was supplied to AO ODK-Star.
• In 2022, Service Pro was engaged in the maintenance and repair of machine tools that had already been installed at military plants. The plants in question were those of state corporations Rostec, Tactical Missiles Corporation, and Almaz-Antey. The financial statements also show that Service Pro purchased equipment worth RUB 21 million from the Chinese company that supplied a machine tool to DMG Mori RUS.
• Also in 2022, Dm Technologies bought machine tools worth RUB 520 million from DMG Mori RUS. It sold part of them to Service Pro for RUB 314 million, and the rest to OOO MPI-Volna for RUB 209 million. By that time, this company was already sanctioned by the EU and Japan. The exact reasons for the sanctions were not given, but MPI-Volna, which has also been sanctioned, was involved in supplying equipment to PAO Yakovlev (formerly known as PAO Irkut) and the Main Military Construction Directorate No. 12.

Position of the company and its management. Formally, the family of the head of DMG Mori’s Russian legal entities condemns the war. In 2022 Natalia and Andrei Sokolov received Israeli citizenship, changed their surname to Goldman and have been living in Berlin since the summer of 2022. In February 2023, Natalia Goldman gave an interview to the German newspaper Tagesspiegel, where she said that she and her husband held oppositional views, the war was a shock for them and she begged her husband not to participate in the protests in March 2022. Despite this, Andrei Sokolov-Goldman continues to run the Ulyanovsk Machine Tool Manufacturing Plant and DMG Mori RUS. Natalia Sokolova-Goldman, in turn, owns a stake in OOO Fisher Spindle Technology, which repairs the DMG machine tools installed at military plants.

• Speaking to Agentstvo, Andrey Sokolov confirmed that he had left Russia for Germany and currently works in the German office of DMG Mori, but refused to answer further questions, citing corporate rules. Rustam Alyautdinov, owner and director of DM Technologies, as well as Alexandra Yakovleva, director and formal owner of Service Pro, ignored Agentstvo’s inquiries.
• DMG Mori did not answer Agentstvo’s questions. But back in the spring of 2023, the company claimed to the Financial Times that its machines had been stolen, making it clear that they had nothing to do with the continuation of production. At the same time, the company also stated that it was developing a system to track and remotely disable the machine tools should they begin to be used for weapons production.
• On 20 September 2023, Ukrainian authorities put DMG Mori on the list of «international sponsors of war» for continuing to work in Russia and bolstering the country’s military potential.
• Agentstvo’s source close to the Russian management of the company claims that the management of the German-Japanese corporation DMG Mori is aware of the situation both with the supply of machine tools before February 2022 and with the continuation of sales and service after the company officially announced its withdrawal from Russia.

Context. Alexander Presanti, a British lawyer and Global Diligence partner, told Agentstvo that the mere fact that DMG Mori continued to operate in Russia after February 2022 is not a violation. «The key question is: what were they doing? — The lawyer continues. — If DMG Mori RUS remains under DMG Mori’s control and continues to import goods and technology for military end-use, then the German DMG Mori is in breach of the regulations. Furthermore, if DMG Mori RUS directly or indirectly sells its products to organisations that are subject to EU sanctions, this is also a violation of Regulation 269/2014».

• Violating sanctions is a criminal offence in Germany. A person found guilty of doing so can face between 3 and 10 years in prison and a fine of up to €500,000. A company found guilty of such activity can be fined up to €10 million.

Authors: Mikhail Maglov, Andrey Zatirko

Fact Checking: Ekaterina Reznikova