A self-described Russian smuggler operating in China received a unique request from Kalashnikov Concern, the renowned maker of the AK-47 rifle. Kalashnikov Concern needed electrical parts for drones, which had proven highly effective against Ukrainian armor.
However, due to U.S. efforts to restrict such deals and even Chinese banks becoming wary of sanctions, the smuggler, Andrey Zverev, faced challenges in fulfilling the order.
To overcome these hurdles, Zverev turned to Tether, a cryptocurrency, to transfer millions of dollars from Kalashnikov Concern to its supplier.
Zverev later offered similar services in a Telegram chat, emphasizing the use of crypto for transactions. Tether, known for its anonymity and claimed backing by the U.S. dollar, has emerged as a favored method in such transactions, as it is challenging for authorities to trace.
Tether has become a crucial tool for Russian companies, helping them navigate around Western sanctions to procure dual-use goods for military purposes.
Despite U.S. Treasury Department efforts to block transactions involving stablecoins like Tether, its popularity persists, with transactions totaling over $10 trillion in 2023.
Zverev, once an economics student in Russia, turned to smuggling and crypto operations in China. He utilized Tether extensively due to its anonymity and ease of use.
His preferred platform, Garantex, was later blacklisted by the U.S. but continued operations, showcasing the challenges of enforcing sanctions.
Amid Western sanctions, Russian importers sought alternative payment methods. Sergey Mendeleev, another key figure, launched Exved to facilitate payments using Tether.
The "shadow trade" using Tether was estimated to reach $10 billion monthly, aiding Russian companies in acquiring goods despite sanctions.
Zverev's role in supplying Kalashnikov with drone components exemplifies the use of Tether in circumventing sanctions.
The transactions, facilitated through Hong Kong-based distributors, were made opaque using Tether, complicating efforts to trace and block them. Tether's role in Russian trade highlights the challenges faced by Western nations in enforcing sanctions effectively.