Siemens AG scrambled to reverse a transaction with a Russian partner to try to save face after gas turbines from one of the biggest German investors in Russia’s economy turned up in the annexed region of Crimea, flouting European Union sanctions.
At least two of four turbines manufactured by Siemens for Technopromexport JSC for an electricity project in Taman, south-west Russia, were moved to Crimea “against our will,” the Munich-based company said in a statement Tuesday. Siemens will initiate criminal charges against the individuals involved and push for a reversal of the deal, it said.
After years of cozying up to President Vladimir Putin and cementing Siemens’s position as one of the largest German investors in Russia, the maker of trains, health-care equipment and power plants is finding how commercial relations can be soured by political tension. Any transaction going against international rules could undermine the reputation of a company that less than a decade ago was immersed in the biggest bribery scandal in German history.
Foreign companies and a number of Russian businesses with an international presence have pulled out of Crimea since its annexation by Putin’s regime in 2014. Relations between Russia and its European counterparts were further worsened after the occupation by the subsequent conflict in neighboring Ukraine, which was exacerbated by Russia-supporting insurgents.
“Implementation and enforcement of EU restrictive measures rest with the member states,” Maja Kocijancic, a spokeswoman at the European Commission, the 28-nation EU’s executive arm in Brussels, said in an emailed statement on Tuesday. “The commission is in touch with the German competent authorities on this particular case.”
Russian-made turbines assembled from Russian components are being installed in Crimea, Kremlin spokesman Dmitry Peskov said Monday. “It’s the responsibility of companies to comply with sanctions law that’s in place,” German Economy Ministry spokeswoman Beate Baron said by email. Both declined to comment on the specifics of the case.
Siemens said it’s still working out what other actions can be taken. Under former Chief Executive Officer Peter Loescher, the company increased the number of manufacturing sites in Russia, adding a plant in Voronezh, south of Moscow, that makes high-voltage circuit breakers needed to update the power grid. Siemens has operated in Russia for more than 160 years and has partnerships with state companies including Russian Railways JSC and Gazprom PJSC, according to its website.
Siemens shares fell 0.2% to 120.80 euros as of 1:52 p.m. in Frankfurt, valuing the company at 102 billion euros (US$116 billion).
Russian state company Rostec said it bought four turbines for Crimean power stations on the secondary market and updated them in local facilities to fit local technical specifications. Rostec declined to comment on Siemens’ accusations regarding alleged misuse of its turbines meant to be used in the Krasnodar region.
“This development constitutes a clear breach of Siemens’ delivery contracts, which clearly forbid our customer from making deliveries to Crimea,” the company said in the statement.
By Andrew Noël, Ilya Khrennikov and Alice Baghdjian