Germany Questions Siemens on Equipment That Made It to Crimea

By William Boston in London and William Wilkes in Frankfurt Features Dow Jones Newswires

The German government on Wednesday called on Siemens AG, one of the country's biggest corporations, to explain how gas turbines it had sold for use at a Russian power plant got diverted to Crimea, possibly violating European Union sanctions in the wake of Russia's annexation of the Black Sea peninsula from Ukraine.

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Siemens filed a lawsuit in Moscow this week against Technopromexport, a subsidiary of Russia's state-owned Rostec State Corp, after learning from what it called reliable sources that two turbines it had sold to Technopromexport for a power plant to be built in Taman, southern Russia, were instead shipped to Russian-occupied Crimea.

The German government, which under the EU is now responsible for determining whether the shipment violates sanctions, said it was closely following efforts to determine what happened and said it expected fast answers from the company.

"It is above all now up to Siemens," Steffen Seibert, the government spokesman, told reporters on Wednesday. He said the government was discussing how to react in the face of "completely unacceptable" actions.

Siemens declined to comment on Mr. Seibert's remarks.

The EU imposed sanctions on Russia after its annexation of Crimea in March 2014. An EU spokeswoman said individual member states are responsible for enforcing sanctions, but that EU officials were in touch with German authorities about the Siemens case.

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"The transaction itself is not in violation of any sanctions," a Siemens spokesman said, adding that the terms of the contract with Technopromexport included clauses prohibiting delivery of the turbines to any third parties without the express permission of Siemens, a standard provision to prevent circumventing sanctions.

The company said it received the contract for four turbines in March 2015 for use in a power station to be built in Taman. The turbines were delivered as agreed with the buyer to a warehouse in St. Petersburg in June 2016, the company said.

Weeks later, Siemens began to doubt that Technopromexport was abiding by the contract, a spokesman said. By September, Siemens had indications that the turbines had not arrived in Taman. Evidence cited by the company included a lack of activity at the site where the power plant was supposedly under construction. Siemens says it believes the turbines were delivered instead to the port of Sebastopol.

Media reports first raised these suspicions two years ago, but Siemens said at the time, "we have no reason to believe that the gas turbines mentioned in the news articles are destined for Crimea."

Siemens said it had repeatedly sought assurances from Technopromexport that the turbines would be installed as agreed. On Monday, Siemens had said it believed that the equipment had been diverted.

"Siemens has received information from reliable sources that at least two of the four gas turbine sets... have been moved to Crimea against our will," it said in a statement that day.

Technopromexport didn't respond to a request for comment.

After Siemen's statement on Monday, Kremlin spokesman Dmitry Peskov declined to comment on the reports on the supply of Siemens gas turbines to Crimea, saying, "We do not deal with turbines in the presidential administration," the news agency TASS reported.

German companies have long opposed economic sanctions against Russia for its annexation of Crimea. Siemens, which has done business in Russia since 1853, maintained close ties with Russian President Vladimir Putin even after the annexation sparked a political conflict with the West.

Stephen Szabo, executive director of the trans-Atlantic Academy think tank, said the apparent end-run around the EU's sanctions to provide power for Russia-occupied Crimea was a "slap in the face" for Chancellor Angela Merkel, a staunch opponent of Russia's expansionist policies in Eastern Europe. "For Putin, it's another sign the West is tolerating the annexation of Crimea."

Zeke Turner and Nathan Hodge contributed to this article.

Write to William Boston at william.boston@wsj.com and William Wilkes at william.wilkes@wsj.com

The German government on Wednesday called on Siemens AG, one of the country's biggest corporations, to explain how gas turbines it had sold for use at a Russian power plant got diverted to Crimea, possibly violating European Union sanctions in the wake of Russia's annexation of the Black Sea peninsula from Ukraine.

Siemens filed a lawsuit in Moscow this week against Technopromexport, a subsidiary of Russia's state-owned Rostec State Corp, after learning from what it called reliable sources that two turbines it had sold to Technopromexport for a power plant to be built in Taman, southern Russia, were instead shipped to Russian-occupied Crimea.

The German government, which under the EU is now responsible for determining whether the shipment violates sanctions, said it was closely following efforts to determine what happened and said it expected fast answers from the company.

"It is above all now up to Siemens," Steffen Seibert, the government spokesman, told reporters on Wednesday. He said the government was discussing how to react in the face of "completely unacceptable" actions.

Siemens declined to comment on Mr. Seibert's remarks.

The EU imposed sanctions on Russia after its annexation of Crimea in March 2014. An EU spokeswoman said individual member states are responsible for enforcing sanctions, but that EU officials were in touch with German authorities about the Siemens case.

"The transaction itself is not in violation of any sanctions," a Siemens spokesman said, adding that the terms of the contract with Technopromexport included clauses prohibiting delivery of the turbines to any third parties without the express permission of Siemens, a standard provision to prevent circumventing sanctions.

The company said it received the contract for four turbines in March 2015 for use in a power station to be built in Taman. The turbines were delivered as agreed with the buyer to a warehouse in St. Petersburg in August 2016, the company said.

Weeks later, Siemens began to doubt that Technopromexport was abiding by the contract, a spokesman said. By September, Siemens had indications that the turbines had not arrived in Taman. Evidence cited by the company included a lack of activity at the site where the power plant was supposedly under construction. Siemens says it believes the turbines were delivered instead to the port of Sebastopol.

Media reports first raised these suspicions two years ago, but Siemens said at the time, "we have no reason to believe that the gas turbines mentioned in the news articles are destined for Crimea."

Siemens said it had repeatedly sought assurances from Technopromexport that the turbines would be installed as agreed. On Monday, Siemens had said it believed that the equipment had been diverted.

"Siemens has received information from reliable sources that at least two of the four gas turbine sets... have been moved to Crimea against our will," it said in a statement that day.

Technopromexport didn't respond to a request for comment.

After Siemen's statement on Monday, Kremlin spokesman Dmitry Peskov declined to comment on the reports on the supply of Siemens gas turbines to Crimea, saying, "We do not deal with turbines in the presidential administration," the news agency TASS reported.

German companies have long opposed economic sanctions against Russia for its annexation of Crimea. Siemens, which has done business in Russia since 1853, maintained close ties with Russian President Vladimir Putin even after the annexation sparked a political conflict with the West.

Stephen Szabo, executive director of the trans-Atlantic Academy think tank, said the apparent end-run around the EU's sanctions to provide power for Russia-occupied Crimea was a "slap in the face" for Chancellor Angela Merkel, a staunch opponent of Russia's expansionist policies in Eastern Europe. "For Putin, it's another sign the West is tolerating the annexation of Crimea."

Zeke Turner and Nathan Hodge contributed to this article.

Write to William Boston at william.boston@wsj.com and William Wilkes at william.wilkes@wsj.com

Corrections & Amplifications

This story was corrected July 13, 2017 at 2:06 p.m. ET because it incorrectly stated in the seventh paragraph that the turbines were delivered in June 2016. The delivery date was August 2016.

Siemens AG said it delivered gas turbines to a Russian customer in August 2016. Because of erroneous information supplied by Siemens, "Germany Questions Siemens on Equipment That Made It to Crimea," at 1:55 p.m. ET on Wednesday, incorrectly stated in the seventh paragraph that the turbines were delivered in June 2016. (July 13)

(END) Dow Jones Newswires

July 13, 2017 14:16 ET (18:16 GMT)