EXTRANCHECK: POST-SHIPMENT VERIFICATION: S-

UNCLAS MOSCOW 012936

SIPDIS

USDOC FOR 532/OEA/DMUSLU/MHAMES
USDOC FOR 3150/USFCS/OIO/CEENIS/MCOSTA
USDOC FOR 532/OEE/MO'BRIEN
SIPDIS

E.O. 12958: N/A
TAGS: BEXP ETRD ETTC RS
SUBJECT: EXTRANCHECK: POST-SHIPMENT VERIFICATION: S-
TERRA CSP, ZELENOGRAD, RUSSIA, LICENSE NO: D357313

REFTEL: USDOC 06043


1. Unauthorized disclosure of the information provided
below is prohibited by Section 12C of the Export
Administration Act.


2. Reftel requested a post-shipment verification to
determine the legitimacy and reliability of the end-
user, S-Terra, Zelenograd, Moscow, Russia. The company
was listed on BIS license number: D357313 as the
ultimate consignee of encryption, technology for the
development of VPN software for Cisco's 2800/3800
series routers, ECCN: 5E002. These commodities are
controlled for national security reasons. The exporter
is Cisco Systems, Inc., 170 West Tasman Drive, San
Jose, CA 95134-1706.


3. On November 24, 2006, Export Control Attache Donald
Pearce and FSN Natalya Shipitsina conducted the
requested post-shipment verification with S-Terra,
Zelenograd, MGIET Bldg.10, Moscow, Russia. The export
control team met with Sergey Ryabko, General Director
and Vasiliy Shirokov, Deputy General Director.


4. S-Terra is a network security integrator founded in

2003. The company traces it's roots to a 1992
independent commercial start-up called Elvis Plus,
which was financed by western investment into Russian
by Sun Microsystems. In 1998 Elvis Plus launched
TrustWorks Systems b.v., a multinational with partners
in Europe and the United States. In 2002 Trustworks
reorganized, creating S-Terra to handle network
security integration in the Russian market. The
company employs 30 at its Zelenograd headquarters.


5. S-Terra provides localization of Virtual Private
Network (VPN) systems for end users in Russia. GOR
regulations require VPN systems to use GOST, a
standardized symmetric key block cipher. S-Terra has
developed an interface that provides a gateway for
incoming DES or Triple-DES encrypted traffic to be
converted to GOST, allowing for global VPN connections
for end users in Russia.


6. The company only does business in Russia, to "avoid
problems" encountered with the export of crypto-
enabled products from Russia. Elvis Plus was once
under investigation by the GOR Federal Agency for
Government Communications and Information (Russian
acronym FAPSI) and Federal Security Service (Russian
acronym FSB) regarding their TrustWorks product line.
Elvis Plus developed a Single Key for Internet
Protocol (SKIP) security solution for the Solaris and
Windows operating systems. TrustWorks was building
the communications packages for the VPN systems in
Russia with no encryption and exporting them to
Netherlands, where they would be fitted with DES
encryption and then paired with U.S. origin hardware.
Though no laws were violated, the investigation and
subsequent audits led the company to cancel the
project. It was clear to Mr. Ryabko that to be
profitable, the VPN systems had to be "localized;"
meaning hardware built outside of Russia had to be
refitted to meet Russian specifications within Russia.
NOTE: It was this incident that lead to the
reorganization described in paragraph 4 END NOTE.


7. The technology described in reftel is being
incorporated into the S-Terra NME-RVPN; an Internet
Protocol secure VPN module built for the Cisco ISR
28xx and 38xx series routers. The team was shown two
modules currently under testing with the system in
place. There are an additional two modules in a
testing cycle, and ten additional being developed and
tested for Cisco Systems in a beta-test cycle. The
target is to complete 50 modules over the next quarter
for distribution via the OCS Company, a Cisco Systems
authorized distributor. Ten employees of the company
work in the Technology Engineering section where the
technology is being used, four engineers, one
consolidation engineer, three testers and two support
personnel. No other employees or organizations are
authorized to utilize the technology. Mr. Ryabko is
very familiar with U.S. export control laws. When
asked about the license conditions, Mr. Ryabko stated
that he signed an end-user statement, and then recited
from memory the main conditions of the license.


8. Recommendations: Post recommends S-Terra,
Zelenograd, Moscow, Russia as reliable recipients of
sensitive U.S. origin commodities.
(FCS MOSCOW/SBOZEK/DPEARCE)
BURNS