Siemens Cuts Russia Presence After Turbines End Up in Crimea -- Update

By Ulrike Dauer Features Dow Jones Newswires

Siemens AG on Friday announced measures to reduce its presence in Russia, including its exit from joint venture Interautomatika, after four gas turbines delivered by one of the German company's Russian partners for a power plant project turned up in Russian-occupied Crimea, possibly violating European Union sanctions.

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The EU imposed sanctions on Russia after its annexation of the Black Sea peninsula from Ukraine in March 2014.

Siemens said it hasn't uncovered any indication that export-control regulations were violated in the matter. But it said it had received credible information that all four gas turbines that the German engineering company delivered last summer for the Taman power plant project in southern Russia have since been diverted to Crimea.

The Moscow office of the joint venture Interautomatika did not immediately respond to requests for comment.

The redirection constituted a "blatant breach of Siemens' delivery contracts, trust and EU regulations," Siemens said.

Siemens said it would take several steps to ensure better control of its deliveries to customers in Russia.

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As one measure, Siemens will sell its minority stake in Interautomatika, which offers products and services for power plant instruments and control systems.

Siemens holds a 46% minority stake in Interautomatika, 17% is held by Siemens' customer Technopromexport and the remaining 37% is held by Russian power research institute VTI.

Technopromexport bought the gas turbines from Siemens and commissioned Interautomatika with instrumentation and control of the power plant in Taman.

Technopromexport declined to comment on the matter. A press representative for VTI could not be immediately reached.

Siemens has said it repeatedly sought assurances from Technopromexport that the turbines would be installed in Taman as agreed, only to find out they ended up in Crimea.

Last week, the German government, which is responsible for determining whether the shipment violated EU sanctions, called on Siemens to explain how the turbines got diverted to Crimea.

Siemens has sued Technopromexport, a unit of state-owned Rostec State Corp., in Moscow. The legal action aims to stop delivery of other Siemens equipment that might be destined for Crimea and ensure that equipment already dispatched there is returned to Taman, the original destination.

Siemens said it would also replace or suspend two Siemens employees representing the German company on Interautomatika's supervisory board, with immediate effect, while investigating the matter.

As another measure to prevent any shipping or services that could violate export-control regulation, Siemens said it has initiated steps to end a license agreement with Russian companies involved in equipment supply for combined-cycle power stations.

Siemens said it is reviewing all potential collaboration between its subsidiaries and other entities around the world as regards deliveries to Russia.

It will halt delivering power-generation equipment to state-controlled clients in Russia under existing contracts for now, Siemens said.

Siemens renewed its offer to buy back the turbines that were sent to Crimea and cancel the contract with Technopromexport.

Write to Ulrike Dauer at ulrike.dauer@wsj.com

(END) Dow Jones Newswires

July 21, 2017 10:36 ET (14:36 GMT)