The Alabuga Special Economic Zone (SEZ), an entity overseeing an industrial campus in Russia’s Tatarstan region, operates a drone plant under contract with the Russian military to manufacture Iranian-designed Shahed-136 unmanned aerial vehicles (UAVs) for use in Russia’s war against Ukraine. Although it has been heavily sanctioned, the Alabuga SEZ has been able to establish and expand production by functioning as the central node connecting various entities in Russia, Iran, and overseas, with the support of the Russian government.

As of September 2024, Russia had launched approximately 8,060 Shahed drones against Ukraine, according to the Ukrainian Ministry of Foreign Affairs.^[1] These drones, used in tandem with missiles, have strained Ukrainian air defenses and threaten to outpace Ukraine’s ability to repair critical infrastructure damaged in Russian strikes,^[2] especially if their rate of production continues to increase.

Set Up and Ongoing Operation

The origins of the drone enterprise at the Alabuga SEZ trace back to at least November 2022, when the Washington Post reported that Tehran and Moscow had secretly agreed to establish a plant for assembling Iranian drones on Russian soil.^[3] The agreement was initially akin to a franchise model. Under it, Iran shipped complete, but disassembled drones to the SEZ to be assembled on site, where they were renamed “Geran-2”. Following a training period and capacity build-up, the SEZ would begin to produce the drones’ airframes domestically while still relying on Iranian components and technical assistance. Ultimately, the Alabuga SEZ would localize as much of the production as possible, relying largely on Russian capacity and expertise, with limited imports of key components.^[4]

In June 2023, the White House released a satellite photograph confirming the facility’s location in the Yelabuga region of Tatarstan, which is linked to the Caspian Sea by the Volga River system.^[5] Drone production was underway by that time.^[6] By December 2023, with production increasingly visible, the United States and European Union began sanctioning entities connected to Alabuga SEZ.

Despite sanctions, the Alabuga plant appears to be well ahead of schedule in meeting its contract to supply the Russian military with 6,000 drones by September 2025. The Institute for Science and International Security assessed that, as of April 2024, the plant had supplied a cumulative total of around 4,500 drones. The Institute also estimates that Alabuga is now capable of producing airframes and most components indigenously, leading to an average production rate of almost 20 drones per working day for a five-day work week, doubling the contract rate of 10 drones per day. Were that rate to continue, the plant’s cumulative production could exceed 11,000 drones by next September.^[7]

Wreckage of a Shahed-136 UAV with a Mado engine in Kyiv. Credit: Kyiv City State Administration

Sanctions

Most of the sanctions imposed on entities connected to the Alabuga plant were imposed well after the plant was operational.

The United States imposed a far-reaching export ban on several Russia-based companies related to the plant in December 2023 by adding them to the U.S. Department of Commerce’s Entity List and subjecting them to its Russia/Belarus-Military End User and Procurement Foreign Direct Product (FDP) rule, which requires a license for exports, reexports, or transfers of certain foreign-produced items to those entities in addition to the usual license requirement for the export of U.S. goods.^[8] The U.S. Department of the Treasury then added Alabuga-related companies and individuals to the Specially Designated Nationals and Blocked Persons (SDN) List in February 2024, thereby imposing an asset freeze on them. Since then, the United States has continued to impose asset freezes on additional individuals and entities connected to the plant, including individuals facilitating trade, foreign suppliers, and front companies. Those entities are also subject to U.S. secondary sanctions, meaning that non-U.S. entities or financial institutions transacting with the sanctioned entities could themselves be sanctioned and lose access to the U.S. financial system.^[9]

The European Union also imposed an asset freeze on several Alabuga-related companies in December 2023 and imposed an export ban on a similar, though not identical, list of companies in February 2024.^[10] In February 2024, the United Kingdom added the Alabuga SEZ to its Consolidated List of entities subject to an asset freeze,^[11] while Japan implemented an export ban against several companies in June 2024.^[12] Sanctions have primarily targeted resident companies of the Alabuga SEZ and their personnel.

Key Relationships

The drone plant’s establishment and ongoing production have been made possible by the coordinated efforts of a web of entities, at the center of which is the Alabuga SEZ. The key relationships include: the government-to-government relationship between Moscow and Tehran; the connections between the Alabuga SEZ, its residents in the special economic zone, and the Russian government; those residents’ relationship with front companies and suppliers abroad; and the relationship that has developed between the Alabuga SEZ and Iranian companies capable of supplying components that Russia cannot itself produce or procure.

Interactive Network Map

Credit: Wisconsin Project

Russian and Iranian Government Collaboration

The Russian and Iranian governments both played key roles in establishing the drone plant at Alabuga. The governments worked to organize an exchange of knowledge through visits and collaboration between key companies and set up the initial venture at the Alabuga SEZ, which itself is owned by the government of the Republic of Tatarstan,^[13] a Russian region.

Initial funding was the crucial contribution from the Russian government. Moscow reportedly paid Tehran $1.7 billion USD, partially in the form of gold bars.^[14] According to the European Union, the deal involved financing from the Russian state-owned VTB Banking Group.^[15]

Iran provided the expertise. In January 2023, Tehran reportedly sent a high-level delegation to the SEZ led by Abdollah Mehrabi, head of the Islamic Revolutionary Guard Corps (IRGC) Aerospace Force Research and Self-Sufficiency Jihad Organization, and Ghassem Damavandian, the chief executive of Iran’s Qods Aviation Industries.^[16] Mehrabi is also a minority shareholder of Oje Parvaz Mado Nafar Company (Mado Company), a private Iranian firm that supplies engines for Shahed-series one-way attack drones.^[17] In March 2023, the SEZ reportedly sent employees and students from the Alabuga Polytechnic University, a nearby Russian technical university, to Iran to receive training on the production of airframes.^[18]

Alabuga SEZ’s Relationships with the Russian Government and its Residents

Russian economic zones, or industrial clusters, are designed to implement projects within specific industries. Their purpose is established by the Russian government, and their resident companies receive special tax treatment and other privileges.^[19] As a result, the zones can attract businesses to their campuses to support a central project, and their governing bodies can, de facto, induce or direct the businesses already operating there to support that project. Therefore, while the Alabuga SEZ itself holds the contract for the drone plant with the Russian military, multiple companies located in the SEZ are involved in the scheme as producers of the drones or key components or as importers working to obtain components from Iran. For example, Alabuga SEZ resident LLC Drake is “contracted to receive UAV parts, components, and raw materials from Iran for use in Iranian-designed, Russian-manufactured UAVs,” according to the U.S. Department of the Treasury.^[20]

Albatros LLC, a drone manufacturer which became a resident of the SEZ in January 2023, is another example of a resident business that supports the Shahed drone plant.^[21] According to the U.S. Department of the Treasury, Albatros LLC joined the project to expand its own and the plant’s manufacturing capability.^[22] The company was already producing the Albatross M5 reconnaissance drone for the Russian military,^[23] and its equipment and expertise likely helped the SEZ in its production of Shahed-136s.

Albatros LLC also brought its ties to the broader Russian drone industry, which connected the SEZ to a network of companies capable of producing and sourcing key UAV components. Its director, Aleksei Vadimovich Florov, is also the director of JSC Geomir, a company that develops drones and information and navigation technologies.^[24] Geomir was also a co-founder of a now-defunct entity known as the Noncommercial Partnership for Unmanned Systems.^[25] The partnership’s other founders went on to have significant involvement in the Russian military drone industries. One of them was Aleksandr Zakharov, who is the owner and reported chief engineer at Zala Aero Group, which is responsible for the development of the Lancet loitering munition drone.^[26]

Other entities operating within or near the SEZ campus contribute additional assets that the SEZ can direct to support drone production. For example, JSC Akonit Alabuga and JSC Akonit Ural produce components that can be used in industrial production lines.^[27] The Alabuga Polytechnic University has furnished labor for the plant by requiring students to participate in the assembly of airframes. It has also recruited foreign students for that purpose.^[28]

The Alabuga SEZ is not limited to what it produces within its own campus, however. For instance, state-controlled companies JSC Scientific Research Institute of Applied Chemistry, JSC Scientific Production Association Bazalt, and JSC State Scientific Research Institute of Mechanical Engineering n.a. I.M. Bakhirev reportedly supply warheads for the Shahed-136 to the plant.^[29] All three companies are established holders of Russian defense contracts^[30] and have been sanctioned by the United States for their roles in supporting the Russian military.^[31]

A map of Russia and Iran indicating the location of the Alabuga SEZ and several of the entities that support its drone production. Credit: Wisconsin Project

Foreign Procurement

Beginning in the summer of 2023, imports of materials and drone components from China, Japan, and the West were supporting Alabuga’s production capacity. While Alabuga is able to produce airframes and other components independently, it still largely depends on imports of electronics and machine tools to maintain the ongoing operation of its industrial facilities and to manufacture the drones. According to the Institute for Science and International Security, the drone plant imports electronic components, connectors, GPS, inertial navigation systems (INS), field programmable gate arrays (FPGAs), accelerometers, and other subcomponents.^[32]

Commercially-available trade data supports this assessment, as several entities sanctioned for their connection to or location within the SEZ have dozens or hundreds of instances of trade with countries outside of Russia in 2023 and 2024, chiefly China, Turkey, and a number of Western countries.^[33] In 2023, companies within the SEZ imported items that appear on the Common High Priority List or are items controlled by the European Union and the United States due to their use in Iranian unmanned aerial vehicles (UAVs) employed by Russia against Ukraine. Those imports of controlled items included aircraft engines (HS Code 8407.10), ball bearings (HS Code 8482.10), cameras (HS Code 8525.89), automatic data processing units (HS Codes 8471.50 and 8471.80), and telephone sets (HS Code 8517.62).^[34] Other commonly imported items included machine tools, auditory equipment, motors and engines, metal articles, tubes, and other tools.^[35] Two China-based companies, Herbin Bin-AU Technology Development and Trading Co., Ltd and Hunan Erus Commercial and Trading Co., Ltd., have each traded with multiple Alabuga-related entities.^[36]

Investigative press reports have indicated that the SEZ may also obtain machinery and industrial equipment through trade. According to the Washington Post, the Alabuga SEZ was approached with an offer to source computer numerical control (CNC) machine tools and other instruments needed for precision manufacturing from I Machine Technology LLC, a Russia-based importer that has shared key company officials with I Machine Tools, a Taiwanese manufacturer and trader.^[37] I Machine Technology LLC has reportedly been a long-time customer of the Taiwanese firm and may in fact be its Russia-based branch.^[38] Commercially-available trade data shows that I Machine Technology LLC has imported machine tools and equipment directly from its Taiwanese counterpart, but relied increasingly on the transshipment of goods through China and Turkey as sanctions tightened in 2023.^[39]

Company-level Iranian Support

The Alabuga SEZ has established direct connections with Iranian companies by building on relationships begun during the Iranian delegation’s initial visit to the plant. For example, the Alabuga team reportedly requested a meeting with officials of Mado Company, the Iranian producer of drone engines in which delegation member Abdollah Mehrabi is a shareholder.^[40] The SEZ received detailed documents on the MD550 engine that powers the Shahed-136, which strongly suggests Russian interest in producing a local copy to further indigenize production.^[41]

Ongoing Iranian support has reportedly also taken the form of access to Iran’s network of suppliers, notably those based in China, Hong Kong, and the United Arab Emirates.^[42] For example, Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) facilitated the supply of UAV parts, models, and ground stations to the Alabuga SEZ through United Arab Emirates-based Generation Trading FZE, according to the U.S. Department of the Treasury in February 2024.^[43]

Conclusion

In June 2023, as the existence of the Alabuga drone plant became public knowledge in the West, Russian president Vladimir Putin announced that the Russian government would implement a national project for developing UAVs. According to his plan, various regions across Russia would establish “one-stop shops” for designing, testing, and producing drones.^[44] The Alabuga SEZ may be only one of several such enterprises, though it likely serves to illustrate how those enterprises are established and continue to function.

In particular, the Alabuga model indicates that the Russian national project for military UAV development and mass production can be successful when furnished with foreign assistance and a supply network, and if development work outpaces sanctions. To effectively hinder the success of this model, two types of action are likely necessary. First, diplomacy to deter or disincentivize countries that enable (either actively or passively) the operation of such collaborations with Russia and to alert countries that are being exploited by those projects’ supply networks. Second, tracing the networks of company-to-company and company-to-government relationships that sustain the Alabuga project model in order to implement a rigorous know-your-customer approach to exports of crucial Western-origin items.

An opportunity to proactively take these countermeasures has recently come to light. In October 2024, the U.S. Department of the Treasury identified a network of entities and an individual involved in the production of the Russian “Garpiya” long-range attack UAV,^[45] which reportedly “closely resembles the Shahed.”^[46] According to the Department of the Treasury, the Garpiya is designed and produced in China in coordination with Russia-based JSC Izhevsk Electromechanical Plant Kupol (IEMZ Kupol), a subsidiary of arms manufacturer Almaz-Antey Concern.^[47] Although it is not fully analogous to the Alabuga drone enterprise, the limited information available about the Garpiya enterprise indicates that it relies on similar patterns of relationships between companies, governments, and individuals within and outside of Russia.