UPDATE: Siemens to terminate power equipment export deal with Russia firms

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MOSCOW/BERLIN, Jul 21 (PRIME) -- Siemens will terminate licensing deals to sell power equipment to Russian firms after receiving “credible information” that four gas turbines that were to be installed in the south of the country were “locally modified and illegally moved to Crimea… constituting a blatant breach of Siemens' delivery contracts, trust and E.U. regulations,” it said in on Friday.

“Siemens has initiated the termination process of a license agreement with Russian companies in the area of equipment supply for combined-cycle power stations,” the statement read.

The company continues to “pursue criminal charges” against individuals at its local customer, Russia’s Technopromexport, and legal actions aimed at halting any other deliveries to Crimea “and ensure that any equipment that has already been dispatched is returned to its original destination, Taman,” Siemens said.

Siemens will also terminate its participation in Russia’s Interautomatika, in which it owns 45.7%. Reuters previously reported that Interautomatika was among the contractors installing Siemens’ turbines in Crimea.

The company also said it will temporary suspend power equipment supplies to Russian state firms under existing contracts until it implements additional control regime aimed to ensure that future movements of equipment takes place only after Siemens has confirmed that the equipment can be installed at the final and contractually-agreed destination. “This will include Siemens controlled delivery and installation on the foundation by Siemens personnel. New business engagements in gas turbine power generation equipment in Russia will be solely executed by its majority-owned SGTT joint venture and its wholly-owned subsidiary, OOO Siemens, Moscow,” the company said.

Technopromexport said previously that it bought four turbine kits on a secondary market and Russian plants and engineering companies upgraded them. Industry and Trade Minister Denis Manturov said on July 11 that all the four turbines were produced in Russia with foreign parts.

Vadim Belik, Crimea’s minister of fuel and energy, said that the situation does not lie within the competence of the Crimean authorities and they will decline to comment.

Siemens spokesman Philipp Encz told PRIME that financial damage of the company from suspension of power equipment supplies to Russia is not large. “We are still assessing the damage but it seems to be insignificant,” he said.

He also said that the company is scrutinizing its other Russian partners and own facilities in the world for compliance with the sanctions. “We are working hard to check all our partners in Russia, as well as Siemens facilities around the world to ensure that nothing is delivered in violation of export control restrictions,” he said.

Vladimir Gutenev, first deputy chairman of an economic policy, industry, innovative development and entrepreneurship committee at parliament’s lower house State Duma, told PRIME that Siemens’ decision will create short-term inconveniences for local companies, but will help Russia to promote the imports substitution program.

“Siemens’ products are undoubtedly good and of a high quality. But they don’t have a monopoly on technologies, and we have a vast amount of offers from other countries, including states in Southeast Asia. I think that we will use this event…which provides us with the possibility for a direct imports substitution. We have competences for that,” he said.

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