De­spite ban, Rus­sian firms buy Mi­crosoft prod­ucts

No proof com­pany sold soft­ware di­rectly to them


MOSCOW (Reuters) – Soft­ware pro­duced by Mi­crosoft has been ac­quired by state or­ga­ni­za­tions and firms in Rus­sia and Crimea de­spite sanc­tions bar­ring US-based com­pa­nies from do­ing busi­ness with them, of­fi­cial doc­u­ments show.

The ac­qui­si­tions, reg­is­tered on the Rus­sian state pro­cure­ment data­base, show the lim­i­ta­tions in the way for­eign gov­ern­ments and firms en­force the US sanc­tions, im­posed on Rus­sia over its an­nex­a­tion of the Crimea penin­sula from Ukraine in 2014.

Some of the users gave Mi­crosoft fic­ti­tious data about their iden­tity, peo­ple in­volved in the trans­ac­tions told Reuters, ex­ploit­ing a gap in the US com­pany’s abil­ity to keep its prod­ucts out of their hands.

The prod­ucts in each case were sold via third par­ties and Reuters has no ev­i­dence that Mi­crosoft sold prod­ucts di­rectly to en­ti­ties hit by the sanc­tions.

“Mi­crosoft has a strong com­mit­ment to com­ply­ing with le­gal re­quire­ments and we have been look­ing into this mat­ter in re­cent weeks,” a Mi­crosoft rep­re­sen­ta­tive said in an emailed re­sponse to ques­tions from Reuters.

“We have ro­bust trade com­pli­ance pro­cesses around the world to help en­sure that our part­ners com­ply with all con­di­tions in­clud­ing im­me­di­ate halt­ing of sus­pected im­proper sales by part­ners, and strong mea­sures to try to pre­vent banned cus­tomers from ac­cess­ing and us­ing our prod­ucts and ser­vices.”

All state or­ga­ni­za­tions and state firms are obliged to dis­close pur­chases they make on the pro­cure­ment data­base. Peo­ple in­volved in five of the trans­ac­tions con­firmed to Reuters the soft­ware had been ac­quired.

The Reuters re­view of the data­base found state en­ti­ties in Rus­sia and Crimea that are sub­ject to sanc­tions have ac­quired more than 5,000 Mi­crosoft prod­ucts worth about 60 mil­lion rubles ($1.03m.).

The sum is rel­a­tively small but such soft­ware is vi­tal for many firms and or­ga­ni­za­tions in Rus­sia and Crimea to op­er­ate. The data­base also does not in­clude pri­vate com­pa­nies, so the scale of the prob­lem could be much big­ger.

Among en­ti­ties hit by sanc­tions that ac­quired Mi­crosoft prod­ucts was Al­maz-Antey, man­u­fac­turer of the BUK sur­face-to-air mis­sile. Dutch prose­cu­tors say a BUK mis­sile brought down a Malaysian Air­lines pas­sen­ger jet over eastern Ukraine in July 2014, though Rus­sia de­nies its forces shot down the plane.

Other Mi­crosoft buy­ers, the data­base shows, in­clude Glav­go­s­ex­per­tiza, a state de­sign agency in­volved in work on a new bridge from Rus­sia to Crimea and the “Krym” health spa in Crimea owned by Rus­sia’s De­fense Min­istry.

The arms man­u­fac­turer, Al­maz-Antey, did not re­spond to a re­quest for com­ment. The De­fense Min­istry’s health spa in Crimea de­clined to com­ment. Glav­go­s­ex­per­tiza said “the com­pany op­er­ates within the Rus­sian le­gal frame­work.”

One set of US sanc­tions pro­hibits the ex­port by a US en­tity of any goods, ser­vices or tech­nol­ogy to Crimea.

Other sanc­tions bar US firms from car­ry­ing out trans­ac­tions with com­pa­nies or in­di­vid­u­als on a list of “spe­cially des­ig­nated na­tion­als” deemed by Wash­ing­ton to be linked to the Rus­sian gov­ern­ment and its ac­tiv­i­ties in Ukraine.

Mi­crosoft did not di­rectly re­spond to de­tailed ques­tions about spe­cific users of its prod­ucts and the com­pli­ance pro­ce­dures it has in place.

The prod­ucts ac­quired by or­ga­ni­za­tions hit by sanc­tions in­clude “Open Li­cense Pro­gram” ser­vices, where the user must pro­vide Mi­crosoft with the com­pany’s full name and ad­dress.

Al­maz-Antey, Glav­go­s­ex­per­tiza and the De­fense Min­istry spa ac­quired “Open Li­cense Pro­gram” prod­ucts, the data­base showed.

Af­ter the sanc­tions were in­tro­duced, Mi­crosoft took steps to pre­vent en­ti­ties hit by sanc­tions ac­quir­ing its prod­ucts, ac­cord­ing to five sources in­volved in the soft­ware re­selling trade and a former Mi­crosoft em­ployee in Rus­sia.

But peo­ple in­volved in trans­ac­tions say ways can be found to cir­cum­vent ob­sta­cles.

The “Mo­rye” ship­yard, based in Crimea, bought 150 Win­dows Server, SQL Server and Of­fice li­censes in June 2016 from OOO Web-Po­tok, a firm reg­is­tered in Moscow, the pro­cure­ment data­base shows. All the prod­ucts were “Open Li­cense Pro­gram” ser­vices.

The ship­yard fell un­der the gen­eral pro­hi­bi­tion on trans­ac­tions by US firms with en­ti­ties in Crimea and is now on the “spe­cial des­ig­nated na­tion­als” list.

“If we bought di­rectly from Mi­crosoft, there would be sanc­tions,” a ship­yard em­ployee, speak­ing on con­di­tion of anonymity be­cause of the sen­si­tiv­ity of the is­sue, said by tele­phone. “But there were no prob­lems with [buy­ing third-party from] Rus­sian firms.”

The ship­yard de­clined to com­ment. Reuters called tele­phone num­bers listed for the sup­plier, OOO Web-Po­tok, but the peo­ple who an­swered said they worked for a dif­fer­ent com­pany.

An­other way to cir­cum­vent the re­stric­tions on Crimea-based en­ti­ties is for the user, when reg­is­ter­ing the prod­uct with Mi­crosoft, not to pro­vide a Crimean ad­dress, three peo­ple in­volved in the trade said.

They said ad­dresses in Rus­sia’s Krasnodar re­gion, across the Kerch Strait from Crimea, were com­monly used in­stead.

A sup­plier who worked with a com­pany on the US “spe­cially des­ig­nated na­tion­als” list said a sup­plier and a client could cir­cum­vent re­stric­tions by reg­is­ter­ing Mi­crosoft prod­ucts to a sub­sidiary or par­ent com­pany of the end user.

A MI­CROSOFT re­tail store is seen in a shop­ping mall in San Diego.

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