Poor man’s lend-lease: Russia continues to import U.S. microchips needed for missile navigation and Internet censorship despite sanctions

Deep Internet filtering, which allows censors to recognize and block VPNs or specific applications like YouTube or Telegram, is most effective when implemented on FPGAs. FPGAs are also critical for solving certain math problems, like finding Dedekind numbers.

While calculating the eighth Dedekind number on a regular laptop takes eight minutes, calculating the ninth would take several hundred thousand years. However, using a supercomputer equipped with FPGAs — the Noctua 2 supercomputer at the University of Paderborn — the problem was solved in five months. Although this is a remarkable achievement, it is unlikely that modern Russia is investing in the search for Dedekind numbers.

How export controls and trade embargoes (don't) work

The Insider received information into how the sale of complex and expensive microchips is managed by a foreign company with no ties to Russia or military technology. For its equipment, the company required high-performance FPGAs made by Altera, costing $4,000 or more per unit. Sometimes, they ordered just one or two chips, and at other times, up to a hundred. Even when purchasing a few FPGAs, a committee of two or three people would visit the customer's location to conduct a thorough inspection — all in compliance with the Know Your Customer (KYC) procedure.

The manufacturer also requires a letter from the buyer indicating the final recipient of the product. However, since inaccurate information is often provided in these letters, in-person inspections are necessary. A special license is also required for exporting such goods from the U.S.

The inspectors insist that it is strictly prohibited to import chips into Russia, whether in their “naked” form or contained in equipment transferred to the Russian side along with the technology and usage rights. However, if equipment is imported into Russia without transferring ownership to a Russian entity (say, by bringing in a personal laptop that does not become government property), and the individual is not granted access to the technology underlying the FPGA, such shipments might be allowed to “pass.”

Suppliers of equipment and electronics for the Russian defense industry have long known that specifying a firm in the EU or China as the final recipient is often enough for American manufacturers to approve the shipment. This quasi-legal scheme worked particularly well up until the start of Russia's full-scale invasion of Ukraine in 2022. For instance, from at least 2000 to 2014, Pavel Flider, an immigrant naturalized in the U.S., purchased dual-use electronics — including Xilinx FPGAs — from U.S. companies and resold them to Russia through European intermediary firms. Regulators occasionally investigated his company's activities, but they were usually satisfied with Flider's explanation that his goods were not destined for Russia. In reality, the chips were going to Russian defense companies, a fact that became known after Flider was detained and his San Francisco home was searched in 2015. Flider eventually struck a deal with the investigators, turned over the other participants in the chip smuggling scheme to the authorities, and was handed a large fine.