Russian organizations acquire Microsoft software

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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, expose limitations in the way foreign governments and firms enforce US sanctions imposed on Russia over its annexation of the Crimean Peninsula in 2014.

Some users gave Microsoft fictitious data about their identity, claimed people involved in the transactions, 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.

There is no evidence that Microsoft sold products directly to entities affected by the sanctions, Reuters said.

Software produced by Microsoft on display at a store in Simferopol, Crimea. /Reuters Photo

“Microsoft has a strong commitment to complying with legal requirements and we have been looking into this matter in recent weeks,” a representative for the company said in an email.

People involved in five of the transactions confirmed that the software had been acquired.

A Reuters review of the database found state entities in Russia and Crimea that are subject to sanctions acquired more than 5,000 Microsoft products worth around 60 million rubles (1.03 million US dollars).

The sum is relatively small but such software is vital for many firms and organizations in Russia and Crimea to operate.

The database doesn't include private companies, so the scale of the problem could be much larger.

Among entities hit by sanctions that acquired Microsoft products was Almaz-Antey, the 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 the aircraft out of the sky.

A checkpoint of the "Morye" shipyard in the settlement of Primorskiy near Feodosia, Crimea. /Reuters Photo

Other Microsoft buyers 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 also 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.

A health spa owned by the Russian defense ministry in the settlement of Partenit, Crimea. /Reuters Photo

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 re-selling 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.

Source(s): Reuters