A case study in sanctions evasion: advanced machine tools for the Russian war machine
By Andrew Fink, Ph.D., Senior Russia Analyst, Exovera
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The Galika network is a Russian-Swiss group that has facilitated the import of advanced European machine tools, especially computer numerical control (CNC) machines, for the Soviet/Russian defense industry since the late 1980s. CNC machines are essential parts of the Russian weapons manufacturing base, but surprisingly, the Russian weapons industry is very dependent on imported CNC machines. Without these imported CNC machines, Russia cannot produce jet engines, missiles, possibly even basic Kalashnikov automatic rifles.
The Soviet machine tool industry collapsed almost entirely along with the USSR itself, but for decades, the Galika network made sure that the Russian weapons industry could continue making world-class weaponry. Until recently, the Russian-language website for Galika AG (the Swiss parent company of the Galika network) boasted about its clients in Russia’s military-industrial base. These included Russia primary tank maker Uralvagonzavod, UEC Saturn – a major producer of military jet engines for Russia and China, the makers of Russia’s iconic Kalashnikov family of assault rifles, and many other Russian weapons companies. Galika’s work with the Russian defense industry was featured in a PBS report in 2023.
Views of an imported CNC machine operating at the Tula Arms Plant, one of Russia’s largest small arms manufacturers, from a local Russian news report. Notice how they have covered up the CNC machine’s logo with a piece of paper.
Recognizing the evident dependency of Russian weapons manufacturers on imported CNC machines, in December 2023, the director of the U.S. Treasury’s Office of Foreign Assets Control (OFAC), Bradley T. Smith, determined that pursuant to Section 11(a)(ii) of Executive Order (E.O.) 14024, the U.S. could impose sanctions on any foreign financial institution that in any way facilitated the transfer of CNC machines to Russia, along with several other important industrial inputs. By February 2024, some Russian parts of the Galika network were sanctioned – specifically, the companies Galika TSTS, Galika SKD, Galika Met, and Galika Service.
Unfortunately, part of the Galika network has already been reconstituted, though this time its focus is on importing from Asia, rather than Europe. In its shift towards Asia, the Galika network has used several tricks to stay in business, all of which are observable in publicly available information: starting a new (unsanctioned) daughter company, gutting an existing company and using it for sanctions evasion, and finally, it appears, inventing a fictional Chinese company.
Making a new company: Galika Service and “GLK”
After the sanctions hit, the Swiss parent company of the Galika network Galika AG of Volketswil, Switzerland, went into liquidation and as of March 2024, was under investigation by the Swiss Federal Prosecutors office. However, in September 2023, even before any part of the Galika network had been sanctioned by the U.S. – although possibly around the time that Galika associates detected incoming sanctions – two official owners of the Russian company Galika Service formed a new company named simply “GLK”. The founders may have chosen this consonant-only version of Galika’s name not only for typographic reasons: there are at least 28 other Russian companies also named “GLK”, so this one can just blend into this crowd.
When the U.S. sanctioned Galika Service along with other Russian parts of the Galika network in February 2024, it did not sanction this new company GLK. Sure enough, one can see that GLK immediately started importing equipment just as soon as Galika Service stopped, though at a reduced rate.
Imports by Galika Service and GLK to Russia, in presumed USD
GLK’s website (registered in July 2023 by Galika Service) shares the same logo and style as Galika Service’s website, and even directs customer calls to the same Russian telephone numbers.
On its website, GLK describes itself as the “successor of the competencies of the international, trading company GALIKA (Switzerland)” and claims several Russian military equipment manufacturing firms as customers, such as Kalashnikov (the famous maker of automatic rifles), UEC-Saturn (which makes jet engines for Russian and Chinese military jet aircraft), and Rosatom (which produces Russian nuclear weapons).
GLK’s website even shows a photo of their booth from a Russian conference, with Galika Service and GLK presented as the same company.
The Galika Service brand is also still alive in the Chinese market, if a promotional video is any indication.
This new video appears to be intended for a Chinese audience; specifically, an audience of Chinese exporters/producers of advanced machine tools. The video highlights Galika’s expertise in maintenance and the relationships it has with Russian customers, as well as its “logistics prowess”, which is probably code for an ability to evade sanctions.
This part of the Galika network is continuing its lucrative trade in CNC machines to the Russian weapons industry. However, instead of running European machine tools into Russia, it is switching to Asian machine tools, and possibly also European machine tools manufactured in or transferred via Asia.
The Galika Network takes over Maunder Maschinen Rus
There is another company that the Galika Network is using to circumvent sanctions, though in this case, it is an older company that was re-purposed, rather than a company purpose-built for sanctions evasion: Maunder Mashinen Rus, a.k.a. Maunder Mashinen. This company was founded in 2021 and its full name, with the “Rus” at the end, implies the existence of another “Maunder Mashinen”, possibly based in Germany. “Maunder Mashinen” sounds similar to “BAUER Maschinen”, a German company that is a subsidiary of the Bauer group, which specializes in heavy-duty mining and drilling equipment, and which also has a Russian subsidiary, Bauer Mashinen Russland. However, as far as can be determined, there is no “Maunder Machinen” in Germany, Switzerland, or Austria.
Maunder Maschinen Rus was founded in 2021, but in March 2023, shortly after the U.S. sanctioned the Russian Galika network, Roman Anatolyevich Ershov, the general director of Galika SKD became a part-owner of Maunder Mashinen Rus. Earlier on its website, Maunder Maschinen Rus had claimed Galika as a partner, but they have become more subtle since the U.S. Treasury sanctioned parts of the Galika network. On its current “about the company” page, it shows a photo of Galika’s Moscow HQ, along with the claim that “Our team is the team of a well-known Swiss company that began its activities in the days of the USSR—in 1986”.
Galika’s Moscow HQ
The image on Maunder Machinen Rus’ website
Other than this, Maunder Mashinen Rus’ current website has no mention of Galika at all, but sometimes they still slip in other venues. In a job posting from February 2024 for a sales position, Maunder Maschinen stated very explicitly that “the team of the company is the team of the well-known Swiss company GALIKA.”
Most troublingly, Maunder Machinen Rus still offers advanced CNC machine tools made by the Swiss company Georg Fischer (GF) on its public website. In addition to offering machines made by GF, Maunder Machinen Rus appears to have also gone along with the Galika network’s shift to Asia, offering CNC machines made by the South Korean companies Nexturn and DMC. If Maunder Machinen Rus is actually still importing these advanced machine tools, then it could mean serious trouble for GF, Nexturn, DMC or whoever is re-selling these advanced tools to Maunder Machinen Rus.
It appears that, like with GLK, the Galika network is using Maunder Machinen Rus to continue its business supplying and servicing advanced machine tools to Russian industry. Because of OFAC’s December 2023 determination, any financial firm that facilitates the sale of these CNC machines to Russia could find itself sanctioned. This could mean serious trouble for the global operations of GF, Nexturn, DMC, or any other firm whose wares end up in the Galika network’s warehouses, potentially making them radioactive for banks to get near if they want to keep their ability to trade in U.S. dollars. Because of the great financial and business risk, it is unlikely that GF, Nexturn, or DMC are complicit in this trade, or if they are, that they realize that they are in serious danger of sanctions.
“Katsumi” – a fictional Chinese company
The Galika network appears to be pioneering a novel method of avoiding potential sanctions for supplying CNC machines to Russia: creating a fictional Chinese firm.
On its public website, Maunder Machinen Rus has begun offering CNC machines made by a Chinese firm “Katsumi” to its customers. Maunder Machinen Rus’ YouTube page even features a promotional video from Katsumi, featuring its factory floor and praising its high standards.
However, “Katsumi” does not exist. Katsumi appears to be a made-up brand to disguise the Galika Network’s sale of CNC machines made by the Chinese company Zhejiang Ligang Machine Tool Co. (LGNCL). In fact, that promotional video for “Katsumi” is just an edited version of a promotional video for LGNCL, skipping or cropping times where LGNCL’s logo is clearly visible. The “Katsumi” CNC machines offered on Maunder Machinen Rus’ website are obviously LGNCL machine tools when you see them side by side; however there is a “Katsumi” logo, probably photoshopped, instead of an LGNCL logo.
Screenshots of the “Katsumi”/LGNCL videos. Notice how the LGNCL logo is cropped out of the “Katsumi” version.
This kind of camouflage does not stand up to any serious scrutiny, but with Western analysts of the Russian weapons industry stretched thin with little time, this could be enough for LGNCL to avoid sanctions, even if Maunder Machinen Rus comes under scrutiny.
In early January 2025, Ukrainian analyst Vadim Labas pointed out something similar in part of Russia’s drone supply chain — a Chinese company named KST Digital Technology Limited exports its wares to Russia for use in weapons, via a totally fictitious Chinese company “Kaiffeng Zhendaqian Technology Co., Ltd.”. It also re-brands its goods as Taiwanese.
The ongoing story of the Galika network highlights the need for a constantly updating and rigorous approach to identifying sanctions evasion, if sanctions targeted at industry are to be effective. It also demonstrates the importance of Asian sources in supplying the tools that Russia needs to keep its war machine going. In the case of advanced machine tools, some crucial chokepoints might be found not in China itself, but with the companies that continue to export to and cooperate with Chinese companies that are known to work with Russia.
