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How Cisco turns a blind eye to the presence of "grey" products in Russia

Friday, 05 August 2022, 17:30

Russia is totally and completely dependent on foreign technologies. Although the Minister of Industry and Trade of the russian federation, Denys Manturov, calls for driving out imported machinery and equipment from the russian market, in reality, they cannot be replaced. 

Therefore, putin recently legalized the import of goods into the russian federation without the intellectual property owner's permission - the so-called "parallel import", but in fact, smuggling. russia agrees to pay triple the price for equipment from European manufacturers and import it illegally, just to keep access to technology.

And here we have the question, how will foreign companies react to this step? Will they turn a blind eye to it or do their best to close the loopholes used by russia? Unfortunately, for now, the technology giant Cisco is inclining toward the first option, but we (the whole civilized world that stands against the aggressor) would like the company to take decisive steps finally.

Cisco's influence on russia is enormous. The company develops, manufactures and sells networking hardware, software, telecommunications equipment and other high-tech services and products. Today, almost all russian state institutions, large banks, telecommunications operators, metallurgical, aviation and machine-building companies work on Cisco equipment. It is known that Cisco's clients are VTB Bank, Sberbank, Alfa-Bank, Rostelecom, Gazprom, PJSC Moscow Exchange, Central Bank of the russian federation, and Rosatom.

This customer list makes Cisco not just an important but a critically important company for russia. Without its hardware and software, russian public, industrial and banking sectors could face turbulence that would lead to significant financial losses or even complete collapse.

On March 4, 2022, Cisco announced the suspension of all business operations in russia and belarus due to a full-scale war waged by russia with the assistance of belarus against Ukraine.

Cisco's statement meant that starting on March 3, the company will stop cooperation with partners and distributors in russia. That is, they will no longer be able to receive Cisco products through authorized channels. However, this is where the loophole is. Cisco cannot control the illegal import of its products into the russian federation. But the demand for it hasn't fallen since the announcements about the company's withdrawal from the market. This is not surprising: Cisco was actually a monopoly in this market. So the flow of equipment to russia hasn't stopped. Only now, it is sold not by Cisco but by various russian companies.

On June 23, Cisco made another statement. This time it was about a complete shutdown of the business instead of a suspension of business operations. The company also said it will communicate directly with customers, partners and suppliers "to resolve financial issues, including refunds for prepaid services and software, to the extent permitted by applicable laws and regulations.

But russian companies and government bodies continue to buy Cisco licenses even now - and, in particular, explicitly announce tenders for purchasing Cisco equipment. Clients can buy licenses for Cisco equipment, for example, through intermediaries and for cryptocurrency. Organizers of these schemes promise "complete confidentiality" and "absence of consequences in the russian legal field" to their clients.

In some cases, pirated licenses are sold explicitly. And back in June russians boasted that they could still buy Cisco equipment through a dealer. Companies ready to provide support for "grey" Cisco equipment have also appeared on the market - in particular, they offer the UnLic service to russian customers. Or russians can service it themselves - you can already find a publication on the operation of hacked Cisco equipment on the Internet.

Thus, "grey" or, as it is called in russia, "parallel" import of Cisco equipment in the russian federation has increased several times over the past few months.

Cisco closed its academy in the russian federation as part of the suspension of business activity in the country. Meanwhile, russia-friendly Armenia recently announced the launch of a joint project with the russian federation. The Armenian Academy "ARMKIBERSEC" with the support of the training center "Specialist" at the Bauman State Technical University of russia offers training on authorized courses and Cisco Systems certification. Training will be in russian and will be available online. In other words, Armenia will teach russian specialists online how to work with Cisco equipment. It is an original way to bypass the restrictions associated with the suspension of the Cisco Academy in russia.

Yes, Cisco formally did everything to distance itself from doing business in russia. But in reality, the company's compliance procedures do not prevent russian companies from illegally gaining access to Cisco equipment and solutions. Does it mean that the company tolerates this kind of business behavior? Or just poor compliance?

If Cisco does not consider the "grey" import of its products as a presence in the russian market, contrary to statements about withdrawal, then it is very sad. If the issue of "grey" supplies is raised in the company, then we expect specific legal actions from it. In particular, the Cisco company can address Ukrainian lawmakers and representatives of the public sector, whom we communicate with, and who actively work on the sanctions policy. We are open to dialogue.

So if Cisco wants to have no business with a terrorist country, that decision must be supported with more decisive actions.

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