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How Russia bypasses sanctions and buys foreign equipment for Crimea

Author : News organization EurasiaNet

Source : 112 Ukraine

Despite the US and EU sanctions, Russia is looking for ways to import the necessary equipment to Crimea - Siemens turbines for power plants or MAN generators for ships construction
18:20, 23 February 2018

 Read the original text at EurasiaNet.

112 Agency

Generators for a ship under construction

In January 2017, the Finnish company Wärtsilä, which produces equipment for maritime transport and energy, has refused to supply diesel generators to Zaliv shipyard, located in Kerch, Crimea. The supply of equipment "will not correspond to the existing sanctions regime," the representative of Wärtsilä explained.

Generators are needed for the construction of a rescue vessel worth 50 mln USD. Since 2015, Zaliv shipyard has been building it in terms of the Federal Target Program of Crimea and Sevastopol. After the refusal of the Finnish manufacturer, the generators of MAN Diesel & Turbo (the structure of the German concern MAN) were reportedly delivered. This time, apparently, the purchase was made not directly, but through some intermediary organization. The representative of MAN denied the sale of the generators to the Kerch plant but did not rule out that Zaliv shipyard could buy them from other organizations that previously ordered this equipment for themselves.

Related: Since 2014, Russia detains 456 Ukrainians in occupied Crimea

Siemens turbines for the Crimean thermal power plants

Another large supply of equipment to Crimea, bypassing the sanctions, was connected with the construction of two thermal power plants in Sevastopol and Simferopol. In 2015, Technopromexport, a subsidiary of the state Rostek Corporation, responsible for the construction of the Crimean thermal power plants, held a tender for the purchase of four steam turbine units for 76 million USD. The place of delivery of equipment was Taman (Krasnodar). They will also build a thermal power plant, but it requires two turbines only.

St. Petersburg company Power Machines became the winner of the competition for the turbines supply, but in fact, they were produced at the Siemens Gas Turbine Technology Plant in St. Petersburg (a joint venture between Siemens and Power Machines). In December 2016, this plant has stopped supplying equipment because of media reports that the equipment is probably intended for the Crimean thermal power plants. By this time, Technopromexport has received four turbines, with the exception of the additional equipment necessary for their operation.

Related: EU extends sanctions for annexation of Crimea for six months, - Jozwiak

In the summer of 2017, Siemens has officially announced that at least two of the four turbines, supplied for the TPP in Taman, were "transported to Crimea against the will of the company." Now the parties settle the scores in the court. In addition to the international scandal, the situation was also affected by the leadership of Power Machines. The company's CEO Roman Filippov was in the spotlight of FSB officers: he was reportedly suspected of leaking information that the turbines, delivered to Taman, were in fact intended for Crimean infrastructure. A week after this information became public, Filippov has lost his post. As reported by the "Power Machines", Filippov left the company "by agreement of the parties."

Electric cable from Russia to Crimea

Judging from the available information, the Russian authorities used a similar scheme to conduct contests for the laying of an underwater cable between Russia and Crimea (the so-called energy bridge in the Kerch Strait). But this situation was not highlighted by the media, as it is still not known whether foreign equipment or services of foreign companies were used in the construction. The episode thus does not disclose violations of the sanctions regime but allows to partly reveal how the Russian authorities attempt to hide the details of their work from unwanted readers and reduce the risk of imposing new sanctions (for specific companies, for example).

Center for Engineering and Management of the construction of a unified energy system has carried out the procurement (the largest owner of electricity in Russia). The first purchase worth 200 million USD was related to the supply of an electrical cable to the port of Novorossiysk (Krasnodar), the second with a size of 105 million USD was related to the laying of this cable.

 

Related: Feb.26 to be officially recognized in Ukraine as Day of Crimea’s opposition to Russian occupation

None of the purchases contains any references to Crimea in its documents. According to the technical task of the competition for construction works, a cable of 14.3 km in length should be laid through a strait without a name between a certain western peninsula and the eastern peninsula. It is not indicated to what continents are they attached. However, the connection between these purchases and Crimea is indicated by the names of the two settlements that are found in the technical task. According to the document, the cable should be laid from the Ilyich village to the settlement of Glazovka. Ilyich is situated on the eastern coast of the Kerch Strait, Krasnodar, Russia, and the village of Glazovka is on the west coast of Crimea.

Dutch equipment for the Crimean bridge

If the laying of the energy bridge in Crimea was not publicized in the context of sanctions against Russia, the construction of an automobile-railway bridge in the Kerch Strait has attracted the public attention. In the autumn of 2017, the Dutch newspaper De Gelderlander reported that despite the sanctions, the company Bijlard Hydrauliek (Netherlands) has produced a hydraulic cylinder for the hammer, with which piles for the bridge supports are blocked at the bottom of the strait, and another Dutch firm, Dematec Equipment, has put this equipment together. The hydraulic hammer has been in Taman since 2016, after which it was used for the construction of the Crimean bridge, according to the newspaper.

Related: Four Russian actors listed in Myrotvorets database after performing in Crimea

Both companies denied the violation of the sanctions regime. Director of Dematec Equipment Van den Heuvel, in particular, stated that the construction took place on the territory of Russia, not Crimea. Although, according to the Dutch media, in the spring of 2016, Heuvel has personally visited Crimea, where he observed the installation of a hammer.

Japanese cars, Swiss concentrates, and German tomographs

There are many other examples of how foreign products enter Crimea, bypassing the sanctions. For example, at the end of 2014, the FSB Agency for the Crimea and Sevastopol and the Prosecutor's Office of the Republic of Crimea purchased armored cars built in Nizhny Novgorod based on the Japanese car Toyota Land Cruiser 200 (which follows from the database of the Supreme Arbitration Court). Cars came to Russia from Sweden, the document says. It was not reported (they could be produced both in Japan and in Europe) about their previous place. However, Japan did not explicitly prohibit its companies from cooperating with Russia and Crimea, but it did introduce certain sanctions against persons related to the Crimea and Donbas.

Some wine producers in Crimea buy raw materials in Switzerland, which fully contributed to the EU sanctions (Swiss business is not allowed to cooperate with the Crimean enterprises). According to data from the official website of the system of federal arbitration courts of the Russian Federation, in 2015, Crimean wine and cognac factory "Bakhchisaray" has signed a contract worth $ 3 million with the Swiss company Origin Global Distribution Inc for the supply of wine material and concentrated grape juice in the period 2015-2020.

At the end of 2016, Crimean firm Invest-Alko (engaged in the cultivation of grapes and the production of wine products) purchased a Wagner IPS-Drive machine for planting grapple (manufactured by Wagner Germany). In addition, a radio modem Satelline Easy is launched on this machine, it is manufactured by Satel (Finland). The technology was purchased not directly from the manufacturers, but from the mediator in Bulgaria, apparently to bypass the sanctions.

Related: Klimkin discusses investigation of delivery of gas turbines to Crimea with Siemens CEO

The St. Petersburg company "Keleans Medikal" in 2017 was engaged in equipping the Yalta City Hospital No. 1 with medical equipment, its website says. According to the data of the arbitration court, equipment worth 2.8 million euros was purchased from the Russian company Siemens Healthcare, which is the official supplier of Siemens products to Russia. The equipment was delivered to Russia from Germany and then moved to Yalta.

If you have enough time and patience, a lot of similar examples could be found in the database of the Supreme Arbitration Court. The behavior of Russian state structures and Crimean business demonstrate the failure of the policy of import substitution declared by the Kremlin and the absence of Russian counterparts, and the ability to bypass Western sanctions.

Aleksandr Alikin

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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