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