Decision to allow UK exports to Armenian firm under review over Russian links | Trade policy

Ministers are reviewing a decision to allow a British company to export high-tech equipment to Armenia after the Guardian newspaper revealed links to the Russian military supply chain.

Cheshire-based Cygnet Texkimp was weeks away from exporting two machines producing “prepreg” carbon fibre, a lightweight material that can be used in a variety of civil and military applications.

Whitehall officials told Cygnet last year that shipments did not require a special license, signaling that the government’s routine review process for exports raised no concerns about how the equipment could be used and by whom.

However, Trade Minister Chris Bryant said he was suspending the deal and awaiting review due to concerns that the machines could be used for military purposes. The material they produce can be used in the production of missiles and unmanned aerial vehicles, which are important weapons in the war in Ukraine.

The decision came after Liam Byrne, chairman of the House of Commons business committee, wrote to Bryant highlighting a Guardian report outlining links between Cygnet’s Armenian customer Rydena LLC and the Russian military.

Rydena was founded two years after the full-scale invasion of Ukraine by former executives of Umatex, a Kremlin-owned company that became one of the key suppliers of Vladimir Putin’s war machine.

Experts have warned that Rydena founders’ past involvement in the Kremlin’s military supply chain would raise concerns about whether Cygnet’s hardware could be used to supply carbon fiber to Russia, bypassing sanctions designed to turn Putin against Putin.

Rydena has previously denied doing any business with Russia or sanctioned entities, and both it and Cygnet have said the equipment would be used for civilian applications.

In a letter to ByrneBryant confirmed the government was reconsidering its decision to allow exports to continue.

Bryant said: “We are currently reviewing an earlier determination that exports were not subject to licensing because the goods were not considered to be subject to control (the ‘No License Required’ decision).”

He added that the decision was taken after close consultation with Cygnet Texkimp and as a result we determined that some elements of the production equipment should be considered subject to dual-use controls.

Dual-use controls cover equipment that may be used in both civilian and military applications to prevent seemingly innocent export contracts from being used to conceal agreements for equipment that could be used in combat.

Cygnet said it had consistently complied with export rules and applied for a license because it realized its “prepreg” machine could potentially be classified as “dual use”, but the government told it no license was required.

Bryant said the Department of Commerce and Trade “has reopened the license application, which must be evaluated before any exports are allowed. I can confirm that no exports have occurred yet.”

Bryant signaled Cygnet Texkimp’s 50-year history in high-tech manufacturing, its long track record of complying with export licenses and a good relationship with the Export Control Joint Unit (ECJU). The unit brings together government agencies and intelligence services to identify red flags raised by potential export deals.

The government has so far refused to say whether the ECJU was aware of Rydena executives’ past work for Umatex, which was disclosed on their profiles on professional networking site LinkedIn.

“Rest assured that I will continue to be directly involved in this case,” Bryant said.

At an evidence hearing with Byrne’s business select committee on Wednesday, Bryant said the government planned to strengthen export licensing laws to improve checks on goods destined for Russia.

A spokesperson for Cygnet Texkimp said: “At the outset of this order, we proactively contacted the relevant UK authorities and voluntarily applied for an export license because we recognized that certain elements of the equipment, namely a preliminary machine, could potentially be classed as ‘dual use’.

“We accept the UK government’s decision to review its previous guidance that a license is not required. We will await the outcome of this process. Cygnet Texkimp has always operated in full compliance with UK export control regulations and is committed to maintaining an open, constructive and transparent dialogue with the relevant authorities at all times.”