Siemens: Villain or victim in Crimean turbines scandal?
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.”
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)