As their yacht bobbed on the Mediterranean in July 2021, Marc Rocchi snapped a picture of the slightly doughy Russian man in baggy swimming trunks, dozing with his head propped against the helm.
The French businessman would later say that he only knew the Russian by his first name, Maxim. But he knew the purchases Maxim had been making for years had been essential to the survival of Ommic, a French microchip manufacturer of which Rocchi was then director-general.
Desperate to keep the flow of chips moving, just a few months earlier Rocchi had flown to Greece to hand-deliver Maxim a shipment of 230 microchips — €45,000 worth. Maxim had, at one point, offered Rocchi “cash and women”. But Rocchi said he declined — he needed Maxim’s business to keep Ommic afloat.
Rocchi always knew his business partner was buying microchips on behalf of a Russian state enterprise, and that Maxim used a network of intermediaries to get them out of France and into Russia.
And he also knew Maxim was working on behalf of Istok, which Rocchi described as a state research body. Istok is in fact a state-owned technology company that makes electronic warfare systems for the Russian military.
Today, Ommic has closed and Rocchi is awaiting trial in France, having been indicted in March. He denies charges of sending secrets to a foreign power that could harm the national interest, exporting dual-use goods to Russia, and submitting false documents.
According to sources familiar with the investigation, Rocchi has previously argued to police that the goods and information sent by Ommic were not subject to controls, disputed that sensitive information was ever sent abroad and said that other people were responsible for any false documents. He has declined to comment to the Financial Times.
The photograph was a rare slip in what appears to be a decades-long Russian intelligence operation.
The man pictured, Maxim Ermakov, has been sanctioned by the US and UK governments in the past fortnight as part of a major crackdown on the networks that Moscow’s intelligence services use to procure advanced western technology for President Vladimir Putin’s war machine. He did not respond to a request to comment.
This rare account of the activities of such a network illustrates how difficult it is for western governments to tackle Russian state smuggling operations, and prevent western technology from being used by Russian industry and the military.
Specialist microchips, such as the high-performance gallium nitride and gallium arsenide-integrated circuit boards that Ommic made, are vital to Russian defence manufacturers such as Istok. According to Le Parisien, a senior French defence official told investigators that the chips were a “sensitive, strategic technology”.
Conscious that its own manufacturing capacity has lagged behind the west and Asia’s ever since the first chips were invented in the late 1950s, Russia has instead turned to acquiring foreign components.
And with regulations prohibiting the export of much “dual-use” technology — parts that have civilian and military applications — Moscow’s strategy has “usually meant smuggling”, according to Chris Miller, a professor at Tufts University’s Fletcher School.
“The Russian government made a decision several decades ago that it was going to rely on smuggled technology for some of its most sensitive defence applications because it would be simply too expensive to produce it domestically and it would be militarily inconceivable to go without it,” says Miller, author of a history of the global battle over microchips. “And so the choice was made just to rely on the cutting edge of commercial capabilities smuggled into Russia.”
After Putin invaded Ukraine last year, the prevalence of drones and other surveillance equipment on the battlefield has made electronic warfare ever more essential.
And as the west redoubles its efforts to keep key components out of Russia’s hands, people such as Ermakov are looking for ways to stay a step ahead.
Ermakov’s role is one that has traditionally been taken by Russian intelligence service officers — a legacy of the way that Soviet spies built networks to circumvent export controls.
His multi-faceted network has had presences in Ireland, France, Dubai, Germany, Singapore, China, Turkey, Greece and Serbia, with some parts of it dating back to the 1990s. When the network had suspicions about the safety of one route, they switched to others.
“As we can see from DOJ indictments targeting Russian networks, the Russians understand the export controls and the regulations — they know what’s legal, they know what’s not legal,” says Thomas Krueger, former director of strategic trade and non-proliferation at the US National Security Council. “They are very good at using distribution networks to set up front companies.”
And even though the Ermakov network has been identified, it is still active today and is still buying equipment to support Russia’s war in Ukraine.
“It certainly didn’t start with Ukraine,” Krueger adds. “Russian intelligence plays a huge role in getting this sort of technology. They always have. This is what the Russians do.”
The Irish connection
Scientific espionage has long been a core mission for Russia’s intelligence agencies. The first Soviet nuclear weapons were built using information stolen by agents who penetrated the Manhattan Project in the 1940s.
Later, as the Soviet Union concluded it had no chance of catching up with western microchip production, the program expanded further. Hundreds of intelligence officers — whose division came to be known as “Line X” — were stationed around the world looking for ways to steal parts and technology for Soviet industry.
By the late 1980s, the first shoots of capitalism in Russia began opening avenues for Soviet enterprises to acquire western technology on the open market — and for western businessmen to sell it to Moscow.
The appeal of the Russian market led Denis Sugrue, an Irishman who ran a company making electronic test equipment, to make a first visit to the Soviet Union in the spring of 1989.
Through his brother Eoin, who had introduced him to some Russians he had met at a Moscow exhibition, Sugrue toured a state-run microelectronics facility with hopes of striking a deal to develop products together.
The Irishman was led into a wood-panelled room to meet the company’s director, who sat behind an imposing desk with eight different-coloured telephones.
After thrashing out a deal, the director asked him if he would like “a little refreshment”, Sugrue later recalled in his self-published memoir. “I accepted . . . thinking of coffee and perhaps a biscuit.”
Instead, he was taken to a table laden with plates of Russian delicacies. “In front of each seat stood a bottle of vodka,” Sugrue wrote. “The bottle of vodka in front of me emptied over the afternoon [ . . . ] it was well into the evening before lunch was over.”
What Sugrue experienced working in electronics manufacturing in Russia illustrated to him why the Line X operations had been needed. “Working with Soviet components was trying and eventually we gave up and used only Western parts,” he wrote. “One problem was simply getting the components.”
Sugrue, who did not respond to a request for comment, started renting a flat in Moscow in 1992 and married a Kyrgyz woman as the brothers grew their business, Amideon Systems.
The cold war was over, but certain items remained under strict controls in the west and could not be freely sent into Russia. Sugrue learned that first-hand in 2005, when the FBI arrested him at Los Angeles airport on suspicion of procuring technology for testing radio frequencies for the Russian government.
Within a few months, however, the case fell apart and Sugrue was released after paying a fine for a customs labelling violation. In his memoir, The Russians Are Coming, Sugrue said he was able to demonstrate that he had sought to check the device did not need an export licence, while the buyer was also a civilian agency, not a military one.
His work “was not a ‘Russian intelligence operation’, merely the lawful work of a . . . tiny Irish company”, Sugrue lamented. “The FBI had copious quantities of ‘egg on its face’.” The memoir ends by ruefully noting that “there has never been an official apology from the US government . . . for alleging that I was a Russian spy”.
Sugrue’s book was not widely read. Only half a dozen readers listed its Russian translation on Bookmate, an online reading app popular in Russia. The only one who finished it was a reader using the handle “Monar4”: Maxim Ermakov.
Moving the chips
At the time of his arrest in 2005, Denis Sugrue was almost certainly already on Ermakov’s radar.
That same year, his brother Eoin had co-authored an academic paper with Ermakov about “recent developments in lightning test standards for aircraft and avionics”. The two men served together on the committee of an industry symposium in 2007, 2008 and 2009.
It is unclear when their business relationship began. But by 2013, customs records show Ermakov and the Sugrues were in business together for Istok, the Russian defence manufacturer.
Set up in 1943 to develop radar components for the Soviet army, Istok today makes jammers to block satellite signals and recently worked to improve the accuracy of Glonass, Russia’s version of GPS. It is part of Rostec, Russia’s sprawling defence industry conglomerate, whose longtime chief executive Sergei Chemezov served in the KGB in Dresden alongside Putin.
Istok itself is run under the direction of military officials. Leaked Russian databases show that Alexander Vyalov, Istok’s head of logistics and procurement, declared in official forms that he had worked for the 22nd Central Research Institute, a military technology institution of the Russian defence ministry.
Ermakov’s role is less clear. He has no public link to Istok. His work history shows him moving from one small company to another, building a network of contacts in the field of electronics.
But a leaked Russian police database reveals that, during the pandemic, Ermakov told the police that he worked at Istok. Paperwork from inside Istok, seen by the FT, also shows that Ermakov’s key contact at the company was Vyalov.
What work Ermakov does appears to be lucrative. An Instagram account that appears to belong to his wife suggests his family enjoy skiing holidays in Austria and beach getaways from Portugal to the Maldives. It features a link to a lifestyle magazine write-up about their home, redecorated after they combined two adjacent apartments.
According to sources with knowledge of the French probe, investigators seemed especially interested in Rocchi’s knowledge of Ermakov’s actual job and his understanding of the SVR, Russia’s foreign intelligence agency. Rocchi claimed ignorance.
Neither the Kremlin nor the SVR responded to requests for comment.
A hole in the budget
When Istok started a run of orders for Ommic amplifier chips in 2013, the French company was in a poor state, according to former staff.
A judge would later note that the company, with 95 employees and revenues of about €15mn a year, had hefty running costs and costly premises.
Ommic had a longstanding relationship with Istok, going back as far as 2004. The chipmaker had previously obtained licences to allow technical collaboration. Having them buy a significant number of chips was a potential godsend for Ommic. But it would quickly become a problem: in 2014, Putin annexed Crimea from Ukraine.
In response, the US and EU ramped up sanctions and export controls designed to limit Russia’s defence industry — restrictions that affected many of Ommic’s products. Obtaining a licence for moving sensitive goods to Istok would be difficult (Ommic would be refused one in 2017).
So the invasion blew “a hole in the budget” at Ommic, one employee says. Ommic could not afford to lose its Russian clients. Its core business was lossmaking, but the sales to Istok were profitable, driving Rocchi in deeper with the Russians even as rules tightened around dual-use exports.
Istok, furthermore, was still keen for the microchips made by the French company. In early 2015, Istok signed a contract with a seemingly independent company called Fly Bridge to secure the flow of chips from Ommic. Fly Bridge then approached Amideon Systems, the company founded by the Sugrue brothers, who bought the chips and shipped them to Russia via an Amideon subsidiary in the United Arab Emirates.
By 2018, the Amideon companies had shipped $4.6mn of Ommic chips to Fly Bridge. Rocchi would later explain to investigators: “Istok paid Fly Bridge, which in turn paid Amideon, which in turn settled the invoice to Ommic.”
The whole process was an Ermakov operation. He was the chief executive of Fly Bridge before he moved on in 2014, in the process severing any obvious paperwork links between him and the network.
But Fly Bridge’s co-owner and eventual sole owner was Anna Luzhanskaya. She has previously used another surname, “Ermakova,” which suggests she is a relative of Ermakov. She did not respond to a request for comment.
The company, furthermore, seems to exist solely to perform tasks for Istok. Russian public records show it has won 23 tenders, all for work involving Istok. And it sourced all of its imports from Ermakov’s Irish contacts at Amideon Systems.
An effect of using these extra companies to move the chips was to disguise the ultimate buyer of the goods and make it harder for western governments to track them.
Rocchi, however, was always fully aware of who he was dealing with. In 2015, he wrote a letter to Istok that reveals that he has had a clear relationship with Ermakov — not Amideon Systems, the company name that appeared on the invoices. In it, he referred to Fly Bridge as “our official partner in Moscow”.
There is also no question that Rocchi did not know Fly Bridge was a front for Istok; Rocchi worked closely and directly with the company. He even made several visits to their premises, a rare opportunity for a foreigner. Colleagues told the police he had chips “in his pocket” during trips to Russia. At some point after 2015, Ommic received a delegation of visitors from Istok at their plant in France. The then-CEO of Istok was among them.
Customs records show Ommic chips passing from France to Russia via the Irish company for the last time in 2018. But Rocchi told investigators that Amideon continued to be involved until 2021. The disappearance from the records was simply the result of the increasing complexity of the operation.
From 2018, goods started to take more circuitous routes. Some Ommic chips were sent to Russia through China (part of this process was known as “Project Sichuan North”).
More complex routing complicates enforcement. The FT has traced 75 chips sent to Istok via India. Customs documentation filed in India suggests that both the final destination country and the sensitivity of the goods was hidden from officials as it left Europe.
European countries often struggle to enforce Russian sanctions violations and export controls compared with the vigorous policing done by the US, according to current and former western security officials.
Though the EU’s list of prohibited dual-use items applies across the bloc, member states are individually responsible for policing violations — creating 27 potential gaps for Russian intelligence to exploit.
Some are disinclined to do so because of the large trading relationship many of the bloc’s members had with Russia before the Ukraine invasion.
“Member states aren’t necessarily comfortable using export controls as a punitive measure because it’s the one policy tool that backfires on their industries. You’re basically restricting your own companies from making money,” Krueger says.
Others simply lack the resources to keep up, he adds. “The US shows up with this huge army that takes up half the room at one end of the table. And then you have one or two people from the other country — you start saying, who’s doing all the enforcing? And they have two or three other people,” Krueger says. “You just don’t have the same capacity.”
The net tightens
Despite the increasing complexity of the operation, French customs authorities became suspicious of Ommic: in January 2021, a package was intercepted. According to Ommic’s paperwork and the documents shipped with the items, the microchips were not high-end and did not meet the criteria for being considered a dual-use good.
After testing, however, the French authorities concluded that the company was downplaying the chips’ true capabilities. These items — intended to be sent to Russia via China — were of much higher specification than the company was claiming. Even after investigators were closing in, customs officers intercepted similar consignments being sent to Russia via Italy.
A parcel with falsified documentation was also intercepted by the police in July 2021 en route to Lithuania, and was sent under the false name “Roman Koshovyy”. The parcel was, in addition, sent from the address of Rocchi’s daughter and son-in-law. (Rocchi had given his son-in-law €30,000 shortly before, but he said this was unrelated and intended to be money for their house.)
All of this, Rocchi said, was to fulfil orders ostensibly from Amideon. The subterfuge and falsification had been organised by Maxim.
Ommic itself is now shut. In March 2023, the French government seized the companies’ shares. Ommic’s relationship to China — via a large Chinese shareholder — had been a particular concern to the French authorities.
Once the investigation was under way into the company, they discovered a reason for the financial weakness that drove Ommic to need Russian support: it had been losing money selling chips at below-market rates to Chinese buyers.
Officials oversaw the sale of Ommic’s key assets to Macom, an American chipmaker.
This part of Ermakov’s network has ceased operating; the Amideon companies have also ceased trading. But Ermakov seems to have pulled off quite a coup.
Sources with knowledge of the French investigation say that police believe that more than 13,500 chips were sent to Russia using falsified customs documents in 2021 alone. The French authorities found invoices for a total of 34,000 chips, worth €4.5mn.
Investigators also found invoices for €6.6mn of payments which, they believe, related to shared research on sensitive gallium nitride technology between 2015 and 2021. Rocchi previously denied to police that this is what the invoices, which were passed through Fly Bridge and Amideon, were for.
Still active
In the early days of the invasion of Ukraine last year, while western countries dramatically ramped up sanctions against Russia’s defence industry, Ermakov hit the slopes.
He posed for professionally shot photos and a video while on a skiing holiday in Sochi, posted on the Instagram account that appears to belong to his wife.
The war meant operations such as Ermakov’s faced greater scrutiny from western governments than ever before. At the same time, Russia’s defence industry needed high-tech components such as Ommic’s microchips more than ever — and getting them had never been more difficult.
But Istok — and Ermakov — are still active.
Since the full-scale invasion of Ukraine, Istok has revealed it is producing novel equipment for the Russian military, such as a brand new “internet of things” system for managing weaponry inventories.
Public records show the company has been working on renovating some of its buildings — including setting up “production rooms”. And it has been using fresh branches of the Ermakov network to source supplies that would be useful for that effort.
Since the outset of the war, Istok has imported $8.5mn of materials via a subsidiary of Fly Bridge. This company, Citi, has been importing specialist equipment used for the dust and static-free environment required for high-end electronics work: specialist static-proof floor panels, air filters, air conditioners and ducting.
Most of this equipment is listed as having been made in Serbia — by a local company co-owned by Fly Bridge. But some has been declared as having been brought into Serbia from Germany, and then on to Russia.
The fundamental problem for sanctions enforcement is that fighting a buying network is like wrestling a hydra. Network architects like Ermakov can use disposable companies. By the time networks are identified, their parts can be disposed of and new fronts established.
“It’s always been something of a whack-a-mole game for western intelligence services,” Miller says. “Whenever one network is shut down, you have to presume a new one gets set up. So the question is how much technology — at what scale, at what speed — can new networks bring into Russia?”
The networks can also build permanent bases in third countries with less onerous sanctions regimes, such as Serbia, the UAE or China. Most countries lack the US’s resources, ability or willingness to chase down export control breaches beyond their own borders.
Enforcers also cannot act before the smuggling network has acted. By the time the buyers have done enough to be spotted, the smugglers have already successfully moved goods.
The sanctioning of Ermakov will make his task more difficult; travel will now be harder and he will need to find new mechanisms for moving goods. Banks, insurers and transit companies now know his name.
This may be a significant disruption, but the wider network has been getting better at evasion. It is more likely to go deeper underground than give up on its essential role of smuggling technology for the Russian war machine.
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
