Siemens Selling Russian Venture after Crimea Turbine Scandal

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--German engineering giant Siemens AG (NYSE:SI) (Munich, Germany) has announced that it will sell off its stake in a Russian joint venture after discovering that four gas turbines it sold for a power plant project in southern Russia had been secretly moved to a project in the contested Crimea region in Ukraine.

Russia annexed the region in 2014, which led the European Union (EU) to impose sanctions preventing the export of technology to the region. Siemens said that it had evidence that the turbines had been modified and moved to the Crimea region. Siemens announced that it will sell its minority stake in joint venture company Interautomatika, which it created with its Russian partner Technopromexport (TPE) (Moscow, Russia). Siemens also is taking legal action against employees of TPE and has offered to buy back the turbines.

"Siemens has received credible information that despite all recent and previous efforts all four gas turbines that were delivered in the summer of 2016 for the project in Taman, Southern Russia, have since been locally modified and illegally moved to Crimea against clear contractual agreements," the company said in a statement. "This development constitutes a blatant breach of Siemens' delivery contracts, trust and EU regulations."

It added: "Siemens continues to pursue criminal charges against the responsible individuals at our customer, TPE, as well as legal actions that are intended to halt any other deliveries to Crimea and ensure that any equipment that has already been dispatched is returned to its original destination," the statement added. "Siemens also renewed its offer to buy back the equipment and annul the original contract."

In March this year, Siemens delivered four turbines for a gas-fired power plant on the Taman Peninsula, located on Russian soil near the Ukraine border and the Crimea region. Each turbine is rated at 187 megawatts (MW). At the time, there were media reports that TPE had plans to use them for a plant in Crimea. Head of energy and gas production at Siemens Russia, Nikolay Rotmistrov, told Reuters at the time: "Under the contract terms, Taman is the site for these turbines. Taman is part of the Russian Federation. We are not violating sanctions."

Siemens's distancing itself from the deal comes in the same week that the United States proposed strengthening sanctions against Russia for meddling in its recent presidential elections, a move which the EU has claimed will damage its energy security.

"The U.S. bill could have unintended unilateral affects that impact the EU's energy security interests," said Jean-Claude Juncker, the European Commission President. "This is why the Commission concluded today that if our concerns are not taken into account sufficiently, we stand ready to act appropriately within a matter of days."

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