The Secret Path of Prague: How a Russian Billionaire Circumvents Sanctions Against Russia

A new investigation by Radio Free Europe/Radio Liberty reveals how Russia circumvents Western sanctions and how wealthy Russians are increasing their fortunes under these conditions. The 'Systema' research section of Radio Free Europe/Radio Liberty has uncovered a complex network with representatives based in Prague, Czech Republic, and Istanbul, Turkey, which, under the guise of producing and exporting cosmetics and beauty products, is responsible for circumventing sanctions and sending goods to Russia that have been banned by Western countries. According to the report, all clues lead to a Russian billionaire whose assets have tripled during the years of Russia's war against Ukraine, despite being on the European Union's blacklist. Vladimir Putin has repeatedly emphasized that 'sanctions are beneficial for Russia' because, in his view, the extensive restrictions from the West make the economy more resilient, trade routes more flexible, and production self-sufficient. However, multiple reports indicate that inflation and the depreciation of the ruble have reduced the welfare of most Russian citizens, and investment restrictions along with unprecedented interest rate hikes by the Central Bank have brought many Russian traders to the brink of bankruptcy. Nevertheless, these conditions have made some oligarchs wealthier. According to the Russian research section of Radio Free Europe/Radio Liberty, Andrei Kuzitsyn, the founder and former director of the 'Ural Mining and Metallurgical Company,' is one of these 'fortunate' individuals whose assets have increased from $1.9 billion to $4.4 billion during approximately three years of Russia's war against Ukraine, according to Forbes. This is despite Kuzitsyn being on the EU sanctions list for two years, forcing him to sell his shares and transfer other assets to other legal and natural persons. The 'Systema' report suggests that these transfers were merely on paper, and Kuzitsyn still plays a major role in the activities of his companies. One of these companies is 'Melsitek,' which was officially registered 12 years ago in the city of Dzerzhinsk. The 'Melsitek' website offers various equipment for body shaping, hair removal, and cosmetic surgery. However, according to the investigative section of Radio Free Europe/Radio Liberty, based on an interview with Anatoly Stepanov, the technical director of this company, the equipment produced at 'Melsitek' is used in machine engineering and even in Russia's military industries. More importantly, a vast network of representatives of this company helps import military or dual-use goods that have been banned from export to Russia by Western countries. Half an hour's drive from Prague, the capital of the Czech Republic, there is an industrial complex consisting of several short buildings. The factory's logo is printed on a regular sheet of paper and stuck to the empty guard booth. Conversations in Russian can be heard from behind the wall. This factory is called 'Astrum LT' and until two years ago belonged to 'Melsitek,' directly exporting its products to Russia. The factory presents itself on its website as a producer of laser systems and claims to be 'one of the leading companies in the production of laser systems with semiconductor technology.' According to Radio Free Europe/Radio Liberty, after the start of Russia's war against Ukraine and the imposition of Western sanctions, which included banning the export of laser and semiconductor technology to Russia, 'Astrum LT' has seemingly cut its ties with Russia and has become 'more European.' However, according to this report, the factory is still under the control of the Russian company 'Melsitek,' and its manager, Dmitry Stepanov, coincidentally shares the same residence as Anatoly Stepanov, the technical director of 'Melsitek.' Furthermore, Konstantin Lavroshin, a lawyer introduced as a representative of 'Astrum LT' who became a citizen of the Czech Republic two years ago, has long been in business with 'Melsitek,' and according to his Instagram account, he is a fan of the Russian hockey team, interested in the sights of Moscow and St. Petersburg, and even owns a commemorative coin minted on the occasion of the annexation of Crimea to Russia. According to the new investigative report, Lavroshin has been working for two years to create a vast network of companies that ultimately cooperate with 'Melsitek.' Branches of this network are located in Belgrade, Bishkek, Istanbul, and even Vilnius, the capital of Lithuania, which is a staunch supporter of Ukraine. Customs statistics reviewed by investigative journalists indicate that 'Melsitek' offices have purchased various motors, pumps, lenses, switches, and laser equipment from companies in Germany, Switzerland, Italy, Spain, the Czech Republic, the United States, as well as China and the Philippines, and sent them to Russia. Of the 222 types of goods worth hundreds of thousands of dollars that have been sent to Russia with the help of 'Melsitek' representatives over the past two and a half years, 151 types are under EU sanctions. Investigative journalists' attempts to visit 'Melsitek' representatives have shown that all of them exist only on paper. Phone and written inquiries from journalists about the activities of these companies have gone unanswered. Despite the rhetoric of self-sufficiency, Anatoly Stepanov, the technical director of 'Melsitek,' claimed in an interview in 2022 that with the exit of 'Western competitors' from the Russian market due to sanctions, there would be no competition left for 'Melsitek' products. He elaborated that 'Melsitek' is not harmed by sanctions because it has achieved self-sufficiency and that 'Russian manufacturers do not need foreign parts and equipment that are banned from being sent to Russia under sanctions.' It is unclear whether Mr. Stepanov has fulfilled his promise to replace the products of Western competitors in Russia, but it is clear that 'Melsitek,' with the help of Anatoly Lavroshin, a citizen of the Czech Republic, has managed to create a bridge for the regular import of Western equipment by circumventing sanctions. According to customs statistics obtained by investigative journalists, 'Melsitek,' which had imports worth $2.2 million in the five years before the war, imported Western equipment worth $3.7 million in 2023 alone, and while the Czech Republic was the main partner of 'Melsitek' before the war, in 2023, Turkey, Kyrgyzstan, and China have taken its place; one-third of the company's total turnover is money paid for imports from these three countries. The building of Astrum in Kyrgyzstan bears little resemblance to a company or factory building. Why is 'Melsitek' buying lasers? According to the investigative section of Radio Free Europe/Radio Liberty, since 2023, when 'Melsitek's' imports suddenly peaked, the Institute of Practical Physics of the Russian Academy of Sciences has become one of its top customers. This research institute is under sanctions from the United States, Canada, the European Union, and Switzerland due to its scientific and practical activities, which include the production of weapons and military equipment in Russia. These findings highlight the challenges faced by the U.S. and Europe in limiting the access of the Russian military industries to Western technology. The methods that 'Melsitek' has chosen to continue importing sanctioned goods to Russia are not unique to this company. Numerous reports have been published about companies that exist only on paper but guarantee the transfer of Western parts and technology to Russia. Ilya Shumanov, the head of the Russian branch of the NGO 'Transparency International,' told reporters that companies established especially in Turkey and Central Asia are used for façade international trade, but they are engaged in transferring goods to Russia, not to the countries where they are registered. However, the involvement of legal and natural persons from Western countries in such activities can have severe consequences for them, as penalties have been imposed in EU countries for those who assist in circumventing sanctions. Recently, Czech authorities announced that they are investigating the activities of some individuals who have violated sanctions against Russia or assisted in circumventing them within the framework of 45 legal cases. The German company 'Infineon' has informed the investigative section of Radio Free Europe/Radio Liberty that it is investigating 'Melsitek's' imports. Other companies whose products have reached Russia with the help of 'Melsitek' have not responded to journalists' inquiries.