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After Crimea Scandal, Siemens Retreats From Russian Energy

After Crimea Scandal, Siemens Retreats From Russian Energy
By announcing that it would halt deliveries of power equipment to Russian state-controlled customers and review supplies to Russian subsidiaries, Germany's Siemens moved to distance itself from a Crimean sanctions scandal.
Confirming a series of Reuters reports over the past weeks, the industrial group said that it had delivered four gas turbines year ago for a project in southern Russia and the company believes all of the four turbines had been moved to Crimea without letting the company know. The company said that it now had credible evidence for the same.
Reiterating that the turbines had been locally modified and illegally moved to Crimea against its will and in breach of contractual agreements, Siemens said it had not yet uncovered any indication of sanctions violations on its part as of Friday.
Since Russia annexed the Black Sea peninsula in 2014, Crimea is subject to EU sanctions on energy equipment. The region has been promised to be provided with stable energy supply by Russian President Vladimir Putin.
"This development constitutes a blatant breach of Siemens' delivery contracts, trust and EU regulations," Siemens said.
"Based on the advanced state of ongoing investigations, Siemens has not uncovered any indications of possible violations of export control regulations. Nevertheless, Siemens will again take immediate and decisive action if it discovers any further indications of such activities."
The company has already suspend its two representatives on Interautomatika’s (IA)supervisory board, which, sources have said, was involved in the installation and commissioning of the turbines in Crimea, and Siemens said it would now divest its minority stake in joint venture IA.
It said that it was reviewing potential cooperation between its subsidiaries and other entities around the world regarding deliveries to Russia and had reviewed its licensing agreements with Russian companies associated with the matter.
In Russia, where its primary activities are supplying energy equipment and rail technology, the Munich-based multinational Siemens has been active for 170 years.
As the Russian economy struggled with the falling oil price and the impact of sanctions, its business there has slowed in recent years. About 2 percent of its total, Siemens made sales of 1.2 billion euros ($1.4 billion) in Russia last year.
Siemens said in the future it will only be dispatched once Siemens has confirmed it can be installed at the final and contractually agreed destination and it would put in place additional controls to ensure that energy equipment.
Siemens battled a worldwide bribery scandal a decade ago and Siemens spokesman Wolfram Trost said the Crimean affair had not sparked a wider review of compliance at Siemens. The scandal resulted in a then-record $1.6 billion fine from the U.S. Justice Department.
Siemens it is taking legal action against state-owned Technopromexport (TPE) intended to return the turbines to their original destination of Taman in southern Russia and to stop further deliveries to Crimea and the company has renewed its offer to buy back the turbines and cancel the original contract with Technopromexport.
There were no immediate comments available from Technopromexport which is now building the new Crimean power plants.
Interautomatika also did not comment on the incident. 

Christopher J. Mitchell

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