South Korean firm YG-1 supplies metal-cutting equipment to Russia’s defense industry — and to two plants producing nuclear weapons

RU

The South Korean company YG-1 has been confirmed as a supplier of metal-cutting equipment to Russia, which is actively being utilized by Russian defense manufacturers. Since the onset of Russia’s full-scale invasion of Ukraine, the turnover of the company's Russian branch has doubled, while its net profit has increased sixfold. An investigation by The Insider has also found that the company's products have been purchased by two Russian factories involved in the production of nuclear weapons.

YG-1 in Russia and in the world

YG-1 is a leading global manufacturer of metal-cutting equipment. Founded in South Korea in 1981, the company has risen to become one of the top five in its industry. With 18 factories and a presence in 75 countries, YG-1 produces a wide range of tools for metal processing, including drills, end mills, and taps. These tools, capable of machining a range of metals from aluminum to titanium, are essential for the aerospace and missile industries. — Russian defense plants are active users of YG-1's products.

In Russia, YG-1 operates through its subsidiary, YG One Rus LLC (ООО «Уай Джи Уан Рус»), which is wholly owned by the parent company YG-1 Co Ltd. This Russian branch is a major importer of metal-cutting tools, sourcing them directly from the Korean manufacturer as well as from YG-1's subsidiaries in Italy, India, and Turkey. According to customs data from ImportGenius, between 2022 and 2023, YG One Rus LLC imported a combined 93.7 tons of equipment valued at $68.99 million from a range of YG-1 affiliates, including: YG-1 Co Ltd, YG1 Kesici Takimlar San. Ve Tic. Ltd. Sti, YG1 Italy Srl, and YG Cutting Tools Corporation Pvt. Ltd.

The growth of the company’s business has coincided with the increase in Russian military production that began after the start of Russia’s 2022 full-scale invasion of Ukraine.. Financial statements show that YG One Rus saw a surge in revenue from 626.8 million rubles ($7.37 million) in 2022 to 1.365 billion ($16.05 million) in 2023. Year-on-year, the value of its inventories rose from 181.6 million rubles ($2.1 million) to 446.9 million ($5.25 million), while net profit increased nearly sixfold, from 39.7 million rubles (approximately $467,000) to 235.1 million ($2.765 million).

YG-1’s Russian clients

Earlier this month, The Insider published an investigation into DM Technologies — a firm founded by the descendants of DMG Mori Rus, the Russian subsidiary of the German machine-tool holding DMG Mori.

Until 2022, DMG Mori Rus supplied machine tools to over thirty defense plants in Russia. With the outbreak of war, former managers leveraged their old contacts in the defense sector to create DM Technologies, a company involved in the wholesale distribution of machine tools. Initially sourcing from the Ulyanovsk Machine-Tool Plant, they later made the switch to Chinese enterprises. YG One Rus turned out to be a close partner of the new firm. While DM Technologies is involved in the sale of new machine tools, YG One Rus is engaged in their outfitting, offering DM Technologies' customers a 30% discount compared to market prices.

YG One Rus CEO Pavel Belikov openly flaunts his cooperation with the Russian authorities. In an interview from 2021, he details how he learned the subtleties of circumventing sanctions controls during his work as CEO of KP-EMAG (КП-EMAG) — a joint venture between Russia’s Krasny Proletary (lit. “Red Proletarian”) plant and the German machine tool manufacturer EMAG.

In the interview, Belikov was quoted as saying: “Shortly before the sanctions were imposed [in 2014], I brought several machine tools to Russia for a well-known Urals customer. Due to the circumstances, we were forced to participate in a tender through an intermediary company. We won, shipped the machines to the customers, but as a result, we had big problems with BAFA (the German Federal Office of Economics and Export Control).”

Belikov now combines his position as CEO of YG One Rus with his position as chairman of the board of Russia’s National Union of Producers and Suppliers of Metalworking Equipment and Tools (NSPOIM; «Национальный союз производителей и поставщиков оборудования и инструмента для металлообработки», or «НСПОИМ»).

This NGO aims to consult and collaborate with relevant ministries and agencies, drawing government attention to the development of the metalworking industry in Russia. NSPOIM assists its members in securing contracts with Russian plants. For instance, on September 28-29, 2023, NSPOIM delegates visited ODK-Perm Motors JSC (АО «ОДК-Пермские моторы»), a producer of gas turbine aircraft engines for both civil airliners and IL-76 military transport aircraft.

Contracts with nuclear weapons manufacturers

But the most notable buyers of the South Korean technology turned out to be two nuclear weapons factories. During 2022 and 2023, the Elektrokhimpribor Combine (ФГУП Комбинат «Электрохимприбор») purchased fifteen types of YG-1 drills and seven types of taps.

Established in 1947 in Lesnoy (then known as Sverdlovsk-45), the Elektrokhimpribor Combine is one of Russia’s oldest producers of nuclear weapons, manufacturing uranium-235 isotopes since its inception and atomic bombs since 1951.

In 2022 and 2023, FSUE Mayak Production Association (FSUE Mayak PA; ФГУП Производственное объединение «Маяк») purchased three types of taps and one type of cutter made by YG-1.

The first facility of the Russian nuclear industry, Mayak PA is located in the Chelyabinsk Region and comprises seven plants and ten nuclear reactors, and it remains a key producer of weapons-grade plutonium. On February 12, 2024, LLC NPO Centrotech (ООО НПО «Центротех»), a manufacturer of centrifuges for uranium enrichment and a subsidiary of the Rosatom State Corporation, announced that it would be monitoring prices for the supply of YG-1 tools, including inserts, milling cutters, and 13 types of drills.

Aside from the companies listed above, YG-1 tools were acquired by the following firms after Russia invaded Ukraine:

• JSC “Scientific Production Center of Automatics and Instrument Building Named After Academician N.A. Pilyugin” (which produces missile control systems, including those intended for the Topol-M intercontinental ballistic missile)
• FGUP Production Association “Oktyabr” (which produces radio navigation systems and radio altimeters for airplanes and helicopters)
• JSC OKB Fakel (which produces engines for spacecraft)
• S.P. Korolev Rocket and Space Corporation (RSC) Energia (which produces rocket and space equipment)
• JSC “Marine Underwater Arms - Hydropribor” (which manufactures torpedoes and sea mines)
• Russian State Scientific Center for Robotics and Technical Cybernetics (which produces space, land and sea-based robotic complexes).

The supplier data for these contracts has been removed from Russia’s unified public procurement information system, making it impossible to determine from public records whether the supplies were made directly by YG-One Rus or through third parties.

Tool production in Russia

Aside from importing South Korean equipment, YG-1 is also involved in the production of metal-cutting products in Russia itself. In 2018, Minicut, a specialized cutting tool production facility, was established in the town of Verkhnyaya Salda in Russia’s Sverdlovsk Region, within the Titanium Valley («Титановая долина») special economic zone.

Minicut International, a Canadian manufacturer of metal-cutting tools, is a subsidiary of YG-1 CANADA INC. Photos of the Russian factory feature the Minicut Tooling Manufacturing logo. Minicut's key specialties include tools for machining both titanium and high-strength steel, which are crucial for the aerospace industry.

The entrepreneurs Sergei Ushakov and Mikhail Zaitsev are the owners of the OOO PTP Instrumentalnaya Kompaniya (ООО ПТП «Инструментальная компания», lit. “JSC PTP Tool Company”) plant in Verkhnyaya Salda. At the same time, Ushakov and Zaitsev each own 15% in LLC Minicut Tool Manufacturing (ООО «Инструментальное производство Миникат»). The majority share of 70% share of this company is owned by none other than YG-1 Co Ltd.

Russia’s domestic production of such tools remains smaller than its volume of imports. However, like imports, domestic production has significantly increased over the course of the war.

From 2022-2023, LLC PTP Instrumentalnaya Kompaniya's revenue rose from 78.1 million rubles ($926,000) to 256.4 million ($3.02 million), while LLC Minicut Tool Manufacturing's revenue grew from 55.9 million rubles ($660,000) to 99.1 million ($1.17 million).

The buyers of Minicut tools largely overlap with those of YG-1 equipment and include entities within the Russian military-industrial complex. For instance, on August 4, 2023, the aforementioned Elektrokhimpribor Combine announced it would be enacting a price monitoring procedure for the supply of Minicut cutters.

Following the publication of the Russian version of this news item, The Insider received a response from the Korean office of YG-1 regarding the company's operations in Russia.

YG-1’s representatives claim that the profit growth of their Russian subsidiary is due to the overall growth of the Russian economy, explaining that their products are general-purpose tools that are used across various industries and are not specifically designed for any single sector. They add that the firm has not made sales to arms manufacturers.

But such wording does not describe the situation in full. The growth rate of YG-1's Russian business significantly exceeds Russia’s overall economic growth. In fact, it aligns much more closely with the country’s increase in military spending.

YG-1 produces highly specialized tools for processing different types of metals such as titanium, high-alloy steel, and nickel alloys, which are used in specific industrial sectors. While there is no publicly available data confirming that YG One Rus directly supplies defense plants, its partners are key suppliers to the Russian military-industrial complex.

For instance, ATM Group LLC («ООО АТМ Групп»), one of YG-1’s official dealers, as indicated on its website, has previously secured contracts with defense contractors, including: the Tactical Missile Armament Corporation, a major missile manufacturer; the Salyut Machine-Building Association, which makes engines for the Su-24 and Su-27 jet fighters; and Vympel NPO, best known for its air-to-air missiles.

It’s not only South Korea

Russia is a key military ally of North Korea, and increased cooperation between the two nations poses a significant threat to South Korea. A report by the Royal United Services Institute (RUSI), published on July 17, 2024, reveals that much of North Korea's missile technology originates from Russia. For instance, the KN-23 (Hwasong-11Ga) solid-fuel ballistic missile, adopted by North Korea in 2018, closely resembles the Russian Iskander-M. This missile is manufactured using Russian raw materials, including steel grades 12Kh2NVFA, 19Kh2NVFA, 21Kh2NVFA, 23Kh2NVFA, and tungsten steel.

In February 2024, The Insider published an investigation into another metal-cutting tool manufacturer, the German company Gühring KG. After Russia invaded Ukraine, the Russian subsidiary of the German holding company formally became independent, but continued to receive production components from Germany via Turkey.