Siemens: Vil­lain or vic­tim in Crimean tur­bines scan­dal?

Kyiv Post - - Business - BY VERONIKA MELKOZEROVA MELKOZEROVA@KYIVPOST.COM

Af­ter Rus­sia shipped four Siemens gas tur­bines in July to Krem­linoc­cu­pied Crimea, where such trade is banned by the West, the Mu­nich, Ger­many-based global engi­neer­ing gi­ant claimed it had been de­ceived.

It launched a law­suit in Moscow against Tech­noPromEx­port, the Rus­sian com­pany that bought the ma­chines.

But amid the scan­dal, ex­perts claimed Siemens’ out­rage might just be a sham — a way to ward off be­ing held to ac­count for break­ing in­ter­na­tional sanc­tions im­posed on Rus­sia in 2014 fol­low­ing the Krem­lin’s in­va­sion and an­nex­a­tion of Ukraine’s Crimea.

Siemens said it would re­con­sider all of its con­tracts in Rus­sia af­ter tur­bines it sold in 2015 for a power sta­tion on the Ta­man Penin­sula in south­ern Rus­sia, just across the Kerch Strait from Crimea, were in­stead sent to Crimea. Siemens said this was a bla­tant breach of its de­liv­ery con­tracts, trust and Euro­pean Union reg­u­la­tions.

How­ever, en­ergy ex­pert Mykhailo Gon­char, pres­i­dent of the Cen­tre for Global Stud­ies Strat­egy XXI, told the Kyiv Post on Sept. 25 that Rus­sia’s in­ten­tion to send the Siemens tur­bines to Crimea was known in 2015.

In­deed, Rus­sian news­pa­per Ve­do­mosti re­ported on June 30, 2015, that Siemens Gas Tur­bine Tech­nolo­gies LLC, a St. Peters­burg branch, would pro­vide the gas tur­bines for a new power sta­tion in Crimea, us­ing the al­leged new power sta­tion in Ta­man as a smoke­screen.

Get­ting away with it?

“Both sides were in­volved and must bear re­spon­si­bil­ity for this de­liv­ery. For now, only the Rus­sian side has been for­mally pun­ished,” Gon­char said, re­fer­ring to a Euro­pean Com­mis­sion de­ci­sion in Au­gust to sanc­tion three Rus­sian in­di­vid­u­als and three com­pa­nies in­volved in the de­liv­ery of the tur­bines to Crimea.

If the com­mis­sion found no grounds to pun­ish Siemens, that would be a sig­nal to many other com­pa­nies seek­ing to evade eco- nomic sanc­tions Gon­char said.

“They’re all wait­ing. If Siemens gets away with it, they’ll see that you can al­ways keep trad­ing with Rus­sian of­fi­cials or com­pa­nies on the sanc­tions list, and if you’re busted, just put all the blame on the Rus­sians,” Gon­char said. against Rus­sia,

How­ever, Ger­man Am­bas­sador to Ukraine Ernst Re­ichel told the Kyiv Post on Sept. 25 that it was not fair to con­sider the Siemens case as proof that the in­ter­na­tional sanc­tions pol­icy is flawed.

Re­ichel said that sanc­tions are clearly de­fined in scope and for­bid do­ing busi­ness in cer­tain re­stricted areas, such as Crimea.

“It’s not a ques­tion of whether the govern­ment ap­proves or likes what a com­pany does — that is their de­ci­sion, that is the way the free mar­ket econ­omy works,” Re­ichel said with re­spect to trade in un­sanc­tioned areas of Rus­sia.

“As for Siemens and this par­tic­u­lar deal with the tur­bines: Siemens had it ex­pressly writ­ten in the con­tract that it signed with the Rus­sian com­pany that the tur­bines were not to be trans­ferred to Crimea,” he said. Siemens was “cheated… They’ve learned their les­son from this, and they’ve re­duced their busi­ness en­gage­ment in Rus­sia fol­low­ing this incident.”

The am­bas­sador said he is not wor­ried other com­pa­nies will fol­low the ex­am­ple of Siemens, as the com­pany “has taken tremen­dous dam­age from this story, and they’re up­set about it.”

Siemens re­acts

Mean­while, in Septem­ber, Moscow Ar­bi­trage Court post­poned its hear­ings of the Siemens case for a third time, un­til Oct. 16, at the re­quest of Tech­noPromEx­port.

Wol­fram Trost, a Siemens spokes- man, told the Kyiv Post by e-mail on Sept. 22 that af­ter Siemens dis­cov­ered that the tur­bines it built for the Ta­man power sta­tion had been mod­i­fied in Rus­sia for use in a power sta­tion in Crimea, the Ger­man com­pany took four de­ci­sive steps in re­sponse.

Ac­cord­ing to Trost, Siemens will fully di­vest its mi­nor­ity in­ter­est in the Rus­sian com­pany In­ter­automatika, which of­fers prod­ucts and ser­vices for power plants. Siemens has also started to can­cel agree­ments with Rus­sian com­pa­nies that build Siemens power sta­tion equip­ment un­der li­cense.

“Siemens will also halt power gen­er­a­tion equip­ment de­liv­er­ies un­der ex­ist­ing con­tracts to state-con­trolled cus­tomers in Rus­sia for the time be­ing,” Trost wrote. “In the mean­time, Siemens is im­ple­ment­ing an ad­di­tional con­trol regime that by far ex­ceeds le­gal re­quire­ments.”

The con­trols are in­tended to en­sure that Siemens’ fu­ture de­liv­er­ies to Rus­sia will only be dis­patched af­ter the com­pany gets con­fir­ma­tion that the equip­ment will be in­stalled only at the fi­nal, con­trac­tu­ally-agreed des­ti­na­tion, Trost wrote.

Siemens has also started an in­ter­nal in­ves­ti­ga­tion into all of its units and rel­e­vant part­ners in Rus­sia, and will re­view all po­ten­tial col­lab­o­ra­tion be­tween its sub­sidiaries and other en­ti­ties around the world with re­gard to de­liv­er­ies to Rus­sia, Trost wrote.

Siemens AG cor­po­ra­tion em­ploy­ees in­sert a tur­bine ro­tor to the gas tur­bine SGT5-400F in a Siemens man­u­fac­tur­ing plant in Ber­lin. (Siemens AG)

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