Since 2022, the United States has paid Russia $8 million: part of this money could go to finance the war in Ukraine

The US government has paid Russian companies more than $8 million to run its embassy in Moscow since the start of the war in Ukraine, an investigation has found. Newsweek.

Photo: iStock.com/Inna Polekhina

Shortly after the invasion of Ukraine began on February 24, 2022, Russia was subject to economic sanctions from the United States and its allies around the world. The US then seized about $300 billion in Russian Central Bank assets, as well as $30 billion in assets of officials close to President Vladimir Putin.

The embassy contracts have drawn criticism from campaign groups. Some say such deals help finance the Russian war machine.

“Even if these contracts are relatively small, I voted for the law prohibiting American investment in Russia. Providing jobs for their citizens does just that—funds Russia,” said Idaho Republican Congressman Russa Fulcher.

Can the use of Russian workers and resources be justified at the cost of maintaining a diplomatic presence in the country? Newsweek conducted a whole investigation.

Significant income for Russia

The US government awarded 41 contracts worth $8 to 054 Russian companies, according to a Newsweek analysis of procurement data.
The three contracts value potential ongoing work, meaning total funding to Russian companies since the start of the war in Ukraine could rise to $13.

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Companies provide services such as landscaping, painting, management consulting, maintenance, transportation and cleaning. The contracts Newsweek reviewed were awarded after Russia's invasion of Ukraine, although the United States had been recruiting Russian companies to work at its embassy since before the war.

Forty contracts were awarded by the State Department and one by the Department of Agriculture.

One contract worth $26, concluded from March 847 to September 2022, was signed with Russia's second largest telecommunications company VimpelCom. She came under Canadian sanctions in July 2023.

The company, known under the Beeline commercial services brand, was sold by its previous owner, the Dutch company VEON, in November 2022 and became fully owned by Russian management in October 202.

A U.S. government spokesman said the agency is conducting due diligence to ensure contracts are not linked to sanctioned individuals.

A statement on the War & Sanctions group's website states that VimpelCom is a significant source of income for the government of the Russian Federation. The company “supports actions aimed at violent change, the overthrow of the constitutional order, the seizure of state power, changing the boundaries of the territory or state border of Ukraine, encroaching on the territorial integrity and inviolability of Ukraine. This undermines democratic processes in Ukraine and threatens its peace, stability, security, sovereignty and independence.”

The Leave Russia group criticized the company for its alleged ties to the Kremlin.

“VimpelCom actively cooperates with the Russian government, as Russian officials themselves say. In particular, it helped establish communications in Ukrainian territories occupied since February 24, 2022, providing national roaming services. And at the request of the government. "VimpelCom openly demonstrates support for Russia's geopolitical aggressive policies," says a statement on the Leave Russia website.

Although the company is not subject to international sanctions, its president, Alexander Pankov, has ties to the Russian Federation, according to the OpenSanctions sanctions database.

According to Russian sources, he previously held government positions in Russia, including at the Federal Agency for Government Communications and Information and the Ministry of the Russian Federation for Communications and Informatization.

A State Department spokesman said all diplomatic missions in foreign countries rely on local companies to provide essential services. Meanwhile, another US government official said that these contracts are practical because it is difficult to attract contractors from the US or third countries to Russia. However, they acknowledged that there will always be security risks associated with such contracts.

Business deals are heavily disguised

Some experts have expressed concerns about the contracts. Although the contracts, with the exception of VimpelCom, are not directly related to companies subject to sanctions, there are experts who believe that it is difficult to guarantee this 100%.

Robert Barrington, professor of anti-corruption practice at the Center for the Study of Corruption at the University of Sussex in Britain, said those sanctioned use a network of anonymous offshore companies to hide their ownership.

Therefore, it is very difficult to answer the question whether companies with which the United States has entered into a contract can be subject to sanctions, he clarified.

"Oligarchs' business operations are often highly disguised through a network of shell companies and anonymous owners," Barrington noted.

Meanwhile, any injection into the Russian economy stimulates it and, therefore, helps Putin.

“Russia must be punished for its invasion of Ukraine. Continuing to operate in Russia undermines the effect of sanctions, since this business helps stimulate the Russian economy. This indirectly helps Russia finance its war. This sends a message to Russian companies that they can do whatever they want because the West will continue to do business with them,” said Mark Temnitsky, a Ukrainian-American journalist and fellow at the Atlantic Council’s Eurasia Center.

“Any additional income that Russian firms and workers receive as a result of these contracts helps stabilize the Russian economy. And because firms and workers pay taxes, this also helps the Russian government finance the war,” explained Michael A. Witt, professor of international business and strategy at the Royal Business School in the UK.

However, he added that the money may well be well spent by analyzing the benefits that a diplomatic presence in Russia brings.

Meanwhile, Michael Allen, a former special assistant to the president and senior director of the National Security Council, as well as staff director of the House Intelligence Committee, said that the activities in Russia set a bad example for private companies still operating in the Russian Federation. According to the Yale School of Management's Executive Leadership Institute (CELI), since the war began, more than 1000 companies have publicly announced that they are reducing their operations in Russia to varying degrees.

In addition to the economic implications of these contracts, procurement arrangements have renewed concerns about the ability of Russian US embassy personnel to spy on America.

Eavesdropping systems built into the embassy

Construction of the US Embassy began in 1979 with the help of Russian workers. But in 1982, security experts discovered that the building was riddled with eavesdropping systems built into its structure. In 1989, when spy devices were again discovered at the embassy, ​​the government decided that the building should be demolished and rebuilt from scratch. The $240 million embassy building was reopened in 2000.

Congressman Fulcher expressed concern about renewed spying and said the embassy renovation "wasted tax money and time."

Allen said the US would not hire Russian employees unless absolutely necessary, but added that "they are going to put bugs everywhere."

“It seems to me from the beginning that this is a counterintelligence problem,” he said.

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Steve Myers, formerly of the US State Department's International Economic Policy Advisory Committee, warned: "Expect the Russians to spy on our embassy to the maximum extent possible." But he added that the United States has developed “very effective processes and countermeasures to protect classified communications and information.” A US government spokesman said the US had learned lessons from the problems of the 1980s.

“We need to hire American contractors and use this as an opportunity to create American jobs to run the American embassy,” Fulcher concluded. “I understand good relations, but in this case we should not reward the economy of a country that behaves badly. In addition, we are mired in debt, which is growing every day. We don’t have the resources to pour money into other countries, especially Russia.”

Temnitsky rejected the idea of ​​continuing business as usual and proposed curtailing diplomatic relations with Russia because of the war.
“The reduction of diplomatic relations with countries is not a new phenomenon,” he said. — Countries can withdraw embassy staff from countries they consider unsafe. Countries can also reduce diplomatic relations with adversaries.”

“In the case of Russia's invasion of Ukraine, the Russian Federation has clearly shown that it is not interested in ending the war. Russia is not interested in negotiating an end to the war. How can diplomacy with Russia continue in this case if it is not interested in diplomatic action?” - he argued.

Taxpayer money to support embassies

Despite the controversy, Newsweek spoke with experts who agreed with the US State Department's assertion that these contracts are routine and inevitable.

“First, the US State Department regularly contracts with local companies and individuals for support around the world. It is not practical to hire American contractors for most services, even with the enormous increase in costs required,” Myers explained.

“The Russian government is not going to allow American workers to be imported to do tasks that locals can do. Every country does this. From time to time, skirmishes occur between countries over such issues. But inciting such minor conflicts is not in the interests of any country,” he is convinced.

“Taxpayer money to support embassies is essential to pursuing an effective foreign policy. This is the constitutional prerogative of the president. Without people on the ground who understand the thinking of host country leaders, we cannot hope to develop a sound foreign policy,” he added.

Tyler Kustra, associate professor of politics and international relations at the University of Nottingham in the UK, agreed. He said that while Putin may benefit from the investment as money flows into the Russian economy, "the amounts are so small and the potential intelligence so valuable that the latter outweighs the former."

David Lewis, a professor in the department of social and political science at the University of Exeter in the UK, said the contracts ensure the normal functioning of the embassy and are "a tiny cost in the grand scheme of things."

Meanwhile, the United States is not the only one who enters into contracts with Russian companies. For example, the UK continues to hire them to work in its embassies.

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