Ministers are reviewing a decision to allow a British company to export hi-tech equipment to Armenia after the Guardian uncovered links to the Russian military supply chain.
Cygnet Texkimp, based in Cheshire, was weeks away from exporting two machines that produce carbon fibre “prepreg”, a lightweight material that can be used in a range of civil and military applications.
Whitehall officials told Cygnet last year that it did not require a special licence for the shipment, signalling that the government’s routine vetting process for exports had raised no concerns about how the equipment could be used and by whom.
But the trade minister, Chris Bryant, said he was putting the deal on ice, pending a review, over concerns that the machines could be deployed for military purposes. The material they produce can be used in the production of missiles and drones, crucial weapons in the war in Ukraine.
The decision comes after Liam Byrne, chair of the House of Commons business committee, wrote to Bryant to highlight a Guardian report outlining the links between Cygnet’s Armenian client, Rydena LLC, and the Russian military.
Rydena was established two years into the full-scale invasion of Ukraine by former executives of Umatex, a Kremlin-owned company that has emerged as one of the most important suppliers to Vladimir Putin’s war machine.
Experts have warned that the Rydena founders’ past involvement in the Kremlin’s military supply chain should raise concerns about whether Cygnet’s hardware could be used to supply carbon fibre to Russia, circumventing sanctions designed to turn the screw on Putin.
Rydena has previously denied that it does any business with Russia or with sanctioned entities, while both it and Cygnet have said the equipment will be used for civil applications.
Chris Bryant said the government had ‘reopened the licence application’ for Cygnet Texkimp’s export to Rydena. Photograph: Sophia Evans/The Observer
In a letter to Byrne, Bryant confirmed that the government is reconsidering its decision to permit the export to go ahead.
Bryant said: “We are currently reviewing an earlier determination that the export was not subject to licence as the goods were not considered to be controlled (a ‘No Licence Required’ decision).”
He added that the decision followed close consultation with Cygnet Texkimp, “as a result of which we have determined that some elements of the production equipment should be considered as subject to dual-use controls”.
Dual-use controls cover equipment that can be used for both civil and military applications, to prevent apparently innocent export contracts being used to disguise deals for equipment that can be used in war.
Cygnet said that it had consistently followed export rules and applied for a licence because it recognised that its “prepreg” machine could potentially be categorised as “dual use” but said that the government had told it that no licence was required.
Bryant said the Department for Business and Trade had “reopened the licence application, which will have to be assessed before any export is permitted. I can confirm that no export has yet taken place.”
Bryant signalled Cygnet Texkimp’s 50-year history in hi-tech manufacturing, with a long record of complying with export licences and a good relationship with the Export Control Joint Unit (ECJU). The unit brings together government departments and the intelligence services to hunt for red flags raised by potential export deals.
The government has so far declined to say whether the ECJU was aware of the Rydena executives’ past work for Umatex, which is disclosed on their profiles on the professional networking site LinkedIn.
“You can be assured that I will continue to take a close direct interest in this case,” Bryant said.
In a subsequent evidence session with Byrne’s business select committee on Wednesday, Bryant said the government was planning to strengthen export licensing laws to improve controls on goods being diverted to Russia.
A spokesperson for Cygnet Texkimp said: “At the outset of this order, we proactively engaged with the relevant UK authorities and voluntarily submitted an application for an export licence because we recognised that certain elements of the equipment, namely a prepreg machine, could potentially be categorised as ‘dual use’.
“We acknowledge the UK government’s decision to review its earlier guidance that a licence was not required. We will await the outcome of this process. Cygnet Texkimp has always operated in full compliance with UK export control regulations and remains committed to maintaining an open, constructive and transparent dialogue with the relevant authorities at all times.”
