• Russia is expanding arms production by buying secondhand tools via China to evade sanctions.
• A new report sheds light on how the Kremlin is circumventing Western restrictions.
• There's a lack of compliance in the secondhand market, the lead researcher told the FT.

Russia is rushing to expand its arms production by buying secondhand machine tools from China through covert networks to get around Western sanctions.

A report from Washington-based nonprofit think-tank The Center for Advanced Defense Studies, or C4ADS, said that Russia's arms manufacturers were "scrambling to expand their production capabilities using whatever they can get."

And Russian defense industry analyst and lead researcher Allen Maggard told the Financial Times that the decades-old machine tools Russia is importing are still effective.

"Just because a machining center is two or three decades old doesn't mean that it's incapable of producing simple components for weapons," he said.

"This speaks to a lack of compliance in the second-hand market, not to mention that manufacturers are unlikely to care about where their products end up after being sold," he added.

Getting around sanctions

Since it launched its full-scale invasion of Ukraine in February 2022, Russia has had to find the supplies needed to keep its war machine going.

One of Russia's greatest vulnerabilities is its reliance on foreign technologies, including machine tools that automate the manufacture of precision-guided munitions and aircraft parts, among other key defense equipment, the researchers wrote in the report.

Faced with restrictive sanctions and export controls, the Kremlin has turned to complicated arrangements with opaque companies that act as middlemen.

Many Russian military suppliers have been placed under sanctions by the US. However, they are finding workarounds.

One supplier, AMG, increased its buying of high-end defense equipment made by a Japanese company, Tsugami, from $600,000 in 2021 to $50 million in 2023, according to customs documents.

In 2023 more than 60% of Tsugami sales were to China.

The rise from AMG has come through two middlemen, according to the report: Amegino, a US-sanctioned company based in the UAE and owned by Andrey Mironov, and ELE Technology, a company based in China that fraudulently claims to be part of US company Gray Machinery.

Glenn Gray, the president of Gray Machinery, told the FT he'd never heard of the company.

Tsugami also told the publication that it hasn't sold any products directly to ELE.

Documents seen by C4ADS show that Amegino and ELE have worked together to procure goods for Russia, according to the report, with Amegino acting as a broker, commissioning Chinese companies such as ELE to ship goods to Russia.

C4ADS found other similar cases including a Russian company, UMIC — not sanctioned by the US but thought to be owned by the wife of the owner of AMG — acquiring machine tools made in various countries around the world, but all bought in yuan through Chinese traders and shipped from China.

UMIC and ELE did not immediately reply to Business Insider's request for comment.

• A record 128,000 millionaires are expected to move countries in 2024, according to a new report.
• Data from Henley & Partners shows the UAE has the largest predicted inflow of millionaires.
• This is the third year the UAE, dubbed a "wealth magnet" by the firm, topped the list.

Millionaires are choosing one place above all to move to, according to a new report: the United Arab Emirates.

According to data from the latest report by Henley & Partners, a firm that advises the wealthy on where to move to protect and grow their assets, 6,700 millionaires are projected to move to the UAE this year.

That's nearly double the inflow to the US, which had the second-highest expected migration of millionaires, at 3,800.

The US, however, still has the largest overall population of millionaires, followed by China, it said. The UAE came in 14th.

The annual wealth report suggested that a record-breaking 128,000 millionaires, defined as individuals with liquid investable assets over $1 million, are expected to move countries this year.

The firm dubbed 2024 a "watershed moment in the global migration of wealth."

The firm's calculations are based on millionaire migration data from the first six months of 2024, rounded to the nearest 100, supplied by wealth intelligence firm New World Wealth.

China is actually on track to lose the greatest number of millionaires in 2024, with 15,200 high-net-worth individuals, or HNWIs, expected to leave the country, it said.

This is a 10% increase from last year, it added, when China also had the highest outflow of millionaires.

The UK is predicted to see the second-highest expatriation of millionaires in 2024, it said, with 9,500 likely to leave. This is double the 4,200 who left the UK last year.

The UK, particularly London, is feeling a steep reversal in its status as a hub for the ultrawealthy. Policy changes targeting the ultrawealthy ahead of elections this summer are to blame, according to Hannah White, director of the UK think tank Insitute for Government, per the report's press release.

According to the release, the UAE has positioned itself as a global "wealth magnet" thanks to its nonexistent income tax, "golden" visas, and luxury lifestyle.

This is the third year in a row that the Emirates has landed the top spot on the list.

Dubai, the UAE's luxurious epicenter, has seen a boom in real-estate investment, with luxury apartment complexes due to be completed in 2024 and 2025 selling out in just one day.

Attracting and retaining HNWIs is an important strategy in geopolitical relations.

Dominic Volek, the head of private clients at Henley & Partners, said millionaire migration could inject capital and talent into the host nations as a "debt-free source of funding for governments," per the report.

• Billionaire Elon Musk spoke to WPP CEO Mark Read in an interview at Cannes Lions on Wednesday.
• On the topic of the future of AI, Musk reminded the audience he cofounded OpenAI as a nonprofit. 
• He said he named the company after "open source," and made a dig at the direction it has taken.

Elon Musk reminded the audience at Cannes Lions on Wednesday that he was the person to name OpenAI as he made a jab at the direction the company has taken since then.

Musk took to the festival stage as a guest speaker in an interview with WPP CEO Mark Read, where he discussed technical innovation.

During the conversation, Read breached the topic of AI and the future of tech.

Musk, who cofounded OpenAI in 2015 but reportedly left the company three years later, has often traded barbs over the future of AI with OpenAI's current CEO, Sam Altman.

He even filed a lawsuit against the company, accusing them of betraying the firm's founding principles, which he has recently dropped.

On the topic of OpenAI, Musk told Read he had started the company, in part to offset Google.

"It was very much a unipolar world where Google was completely dominant in AI," he said.

Musk added that the company was "formed with a lot of good intentions." He said, "The 'open' in OpenAI was meant to stand for 'open source,'" adding, "I named it."

This isn't the first time Musk has alluded to his role in christening the AI company responsible for ChatGPT. In a post on X in 2023, he made a similar comment.

Musk reiterated his ongoing qualms with OpenAI with a final dig: "Now it's closed-source for maximum-profit AI, which is different from what was intended. I don't know how it got there."

This aligns with Musk's remarks about his displeasure with the current direction of OpenAI, which was founded as a nonprofit.

It shed that status in 2019, to operate as a "capped-profit" company to "raise investment capital and attract employees," per a company blog post at the time.

The company announced a partnership with Microsoft the same year, which initially invested $1 billion into OpenAI.

After launching publicly in November 2022, ChatGPT attracted 100 million users in just two months. Microsoft then increased its investment, reportedly pouring a further $10 billion into the AI firm.

Musk's pessimism about AI is largely directed at its development as a "for-profit" industry. He has been outspoken about the safety issues related to AI in the hands of corporate, for-profit entities. In 2020, Musk said he feared Google's Deepmind could one day effectively take over the world.

But Musk's discussion with Read suggested his opinion could be shifting. He told the executive: "In the positive scenario, the AI will be doing its best to make you happy. So that might work out pretty well."