(Bloomberg) — Occupying the top three floors of an unremarkable office building in northern Mumbai, there’s little to distinguish Shreya Life Sciences from the many other commercial businesses that keep the Andheri neighborhood of India’s largest metropolis humming throughout the day.
But this inconspicuous pharmaceutical company is part of a lucrative trade in leading-edge technology to Russia that has the US and its European allies worried at India’s burgeoning role as an intermediary in the sales.
A Bloomberg News analysis of data compiled by trade-tracking firms ImportGenius and NBD shows that Shreya exported 1,111 units of Dell Technologies Inc.’s most-advanced servers to Russia in April-August of this year.
The servers, known as PowerEdge XE9680, contain high-end processors optimized for artificial intelligence made by Nvidia Corp. or Advanced Micro Devices Inc., according to Dell’s website. Specification data available for 998 shipped servers show they were equipped with Nvidia’s H100 chips.
The servers — and the chips they contain — are on a list of items restricted by the US and the European Union “to target sensitive sectors in Russia’s military industrial complex.” Yet the shipments, worth $300 million and imported by two Russian trading companies, Main Chain Ltd. and I.S LLC, were just the latest in a series of advanced technology exports Shreya made perfectly legally to Russia since September 2022, the data showed.
Shreya did not respond to multiple requests for comment, and no one was available to do so during two visits to its office.
Andriy Yermak, Ukrainian President Volodymyr Zelenskiy’s chief of staff, complained in a post on X that Russia is still receiving components used for electronic intelligence and warfare systems despite western sanctions. “No one should profit from the lives of Ukrainians,” he said Oct. 7.
While India is the point of transshipment, trade data suggest that Malaysia is in fact the origin. Malaysian Prime Minister Anwar Ibrahim met with President Vladimir Putin in Russia in September, and hailed the “enormous potential” to enhance regional trade relations, including through advanced technologies.
Shipping documents of at least 834 PowerEdge XE9680 units destined for Russia showed their country of origin as Malaysia. Indian import data for March-August 2024 reveals that 1,407 of the same Dell units were imported to India from Malaysia. Neither Malaysia’s Investment, Trade and Industry Ministry nor the Prime Minister’s Office responded to an email seeking comments.
The tech companies themselves are obligated to follow sanctions rules and monitor any sales of sensitive products. In a statement, Dell said that it had ceased selling and offering services or support for products in Russia in February 2022, immediately following its full-scale invasion of Ukraine, and maintains “a strict trade compliance program.” Nvidia and AMD said that they work with partners to ensure that sales are in “full compliance” with export controls, and take appropriate action if any violations are identified.
Doing business with Russia is not illegal in India since Prime Minister Narendra Modi’s government is not party to the multiple rounds of US and EU sanctions imposed on Moscow. Long dependent upon Russia for military equipment, New Delhi stepped in to buy its crude as European countries cut off oil imports over the war — and is signaling that it will continue to do so for as long as Moscow gives bigger discounts than other producers. During an Oct. 22 meeting with Putin on the sidelines of the BRICS summit, Modi referred to “our close and deepening” relations.
That role has put India on the radar of western governments. US and EU officials have traveled to India in recent months as part of efforts to encourage the government to act to stop the shipments, according to people familiar with the trips. The visits come amid signs of mounting exasperation with India for its role procuring goods for Russia’s war.
US Deputy Treasury Secretary Wally Adeyemo sent a letter to the Confederation of Indian Industry this summer warning that foreign financial institutions trading with Russia’s military industrial base risked being sanctioned. Despite the Biden administration’s efforts to keep Modi’s government onside in its competition with China, New Delhi has shown little engagement with the US concerns, a senior US official said.
Transshipment of battlefield products via India has ramped up since December of last year, according to David O’Sullivan, the EU’s chief sanctions official. In a briefing to reporters, he attributed the increase to “the huge volume of rupees” Russia has accrued from selling oil, rather than Indian policy. The EU has already sanctioned a few entities based in India.
India has looked into US allegations and taken action as needed after Washington flagged that some Indian companies were supplying dual-use technology to Russia, said people familiar with the government’s stance, asking not to be named discussing sensitive matters of diplomacy. That matter is now closed, the people said, adding that Shreya Life Sciences did not feature on the list.
A spokesperson for India’s Trade Ministry didn’t respond to an email seeking comment. The Ministry of External Affairs declined to comment.
India’s exports of controlled and dual-use goods and technologies are in full compliance with its national laws and regulations and its international obligations on non-proliferation, said a senior Indian official who asked not be named because of the sensitivity of the issue. Bloomberg has previously reported that the vast majority of restricted goods enter Russia via re-exports from third countries such as China, Turkey and the United Arab Emirates. Some of those trades involve often unwitting subsidiaries and subcontractors of western firms as well as networks of intermediaries who source from them.
Information on those companies involved is rare — and the paper trail leading to Shreya is what makes the drugmaker stand out.
The company was founded in Moscow in 1995 by Sujit Kumar Singh just as Russia was on the verge of economic breakdown, offering opportunities for enterprising individuals able to navigate the chaos of those years. Singh, the company’s CEO, was unavailable for comment despite email, telephone and text requests sent to Shreya.
In an article for the Economic Times published in 2002, Singh wrote of Shreya’s initial role in developing a marketing and distribution network at a time when “after the collapse of the Soviet Union the pharmaceutical market was practically reduced to zero.” He also expressed hopes that a visit to India by Putin the same year would “impart a new impetus and greater depth and content to Indo-Russian relations.”
Records from the Ministry of Corporate Affairs database show that Shreya began life as a distribution and marketing company of pharmaceutical drugs, over time acquiring several companies to create its own manufacturing plants for generic drugs like insulin, antibiotics, anti-malaria and gastrointestinal medicines. Indeed, between January 2022 and August 2024, it sold $22 million worth of pharmaceutical products to Russia, trade data shows. Russia is listed on the company website as the first among six major markets for its international exports.
That dependence on Russia has proven to be a liability in the past. Shreya began seeing a dip in operating revenues in 2014-15 coinciding with Putin’s annexation of Crimea that led to sanctions and a collapse in the ruble, according to rating agency Crisil. As Shreya relied on sales of its drugs to Russian clients and to its own entity based in Moscow, Shreya Life Sciences LLC, the company began bleeding losses.
The drugmaker defaulted on 1.9 billion rupees ($23 million) of bank loans in March 2015. While its bankers — including the State Bank of India and the LIC Housing Finance Ltd. — restructured its debt, the Bank of India Ltd. filed a suit against the company under the bankruptcy law in 2019, only to later withdraw the petition after the matter was settled out of court.
Shreya returned to profitability in the following years. But the biggest lifeline for the Indian concern came from state-owned Promsvyazbank PJSC in Moscow. The bank’s head is Peter Fradkov, son of the former chief of Russia’s Foreign Intelligence Service, Mikhail Fradkov. Both the bank and Fradkov junior are subject to international sanctions.
Between 2011 and 2013, Shreya borrowed $86 million from the Russian bank, in the form of a foreign currency loan which was mortgaged against shares owned by Sujit Kumar Singh. The money was used to invest in equity shares of Shreya Life Sciences LLC in Moscow, which in turn used the money to pay for the import of pharmaceutical products from the Indian entity. The loan effectively helped keep the company afloat as the drugmaker sold a significant amount of its products to its own subsidiary.
Later, in 2018, as other financial institutions grew wary of tightening western sanctions, Russia turned the lender into the key funder of its defense industry. Throughout that time, the bank seems to have allowed Shreya to defer its repayments consistently, as cash flow payments toward its borrowings were a fraction of what was due. As of 2022-23, the company had 7.6 billion rupees in borrowings of which 85% is owed to Promsvyazbank. An email to the bank seeking comment went unanswered.
Meantime, local drug inspectors found deficiencies in insulin injections manufactured by Shreya in 2019, while its products were found to be “not of standard quality” most recently in April by the Central Drug Laboratory in Kolkata.
It’s against this backdrop that Shreya began branching out into technology shipments.
The first record of non-medical exports by Shreya during the period examined by Bloomberg appeared in September 2022, when it shipped an assortment of computer hardware to Russia worth $755,333. The recipient was Lanprint Ltd., a Russian trading company which was later added to the US sanctioned company list, in September 2023. It sold equipment to another company, Silkway LLC, which was sanctioned the same month.
Shreya stopped dealing with both companies two months before they were sanctioned and started selling to Main Chain, which is not on the US list of sanctioned entities.
Main Chain was registered as a company in Russia on Jan. 25, 2023, with Anastasia Obukhova its general director. She is listed on a Russian business portal as holding the same post for two previous companies, a tourism agency and a tour operator, both of which were liquidated. Each had declared capital of 10,000 rubles (about $130-$200), so Main Chain is a considerable step up. The company states on its website that it “imports and wholesales computer equipment from various foreign manufacturers.” An email and calls to Main Chain went unanswered.
Shreya’s exports to Main Chain and I. S surged in April this year, when it ramped up sales of Dell’s PowerEdge XE9680 at an average price of $260,000. These servers come under HS code 847150, part of the dual-use goods list that aims to curb the Russian weapons systems used against Ukraine. The list, drawn up by the EU in conjunction with the US, the UK and Japan, is based partly on tech identified on the battlefield.
Shipping documents show the imports were ordered from Malaysia by Dell International Services India Private Ltd., a Dell subsidiary, and the supplier was recorded as Dell Global BV (Singapore Branch), another subsidiary.
Dell said it requires distributors and resellers “to follow all applicable global regulations and export controls,” and invests in tools and resources to help prevent and detect potential product diversion. “If a partner is not adhering to these obligations, we take swift and appropriate action, up to and including termination of our relationship,” the company said.
Main Chain sourced technology products from a second Indian company, Hayers Infotech Private Limited. Together, Shreya and Hayers Infotech exported $434 million worth of high-tech goods to Russia since February 2022.
Hayers Infotech is registered at the same Mumbai address as Shreya Life Sciences. A discrete plaque at the top floor of Shreya’s offices bears the name, Hayers Infotech Pvt Ltd.
— With assistance from Alberto Nardelli, Anthony Halpin, Brody Ford, Ian King, Mackenzie Hawkins, Sudhi Ranjan Sen, Niki Koswanage, and Anisah Shukry
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
