Our Knowledge

14.Jul.2017

Violation of EU sanctions by Russia: Siemens sues over unauthorised shipment of power turbines to Crimea

In March this year, Siemens supplied four power turbines to Russia, despite concerns regarding their actual use. Since then, it has come to light that the turbines have been diverted to Russian-annexed Crimea, which Siemens claims is in breach of a contractual obligation not to violate international sanctions, which creates a prohibition on delivery of the equipment to Crimea. Siemens has decided to bring proceedings against Technopromexport after the company failed to return the turbines in question to their original destination, despite multiple requests to do so.

The international sanctions in question are EU restricting measures which constitute a response to the illegal annexation of Crimea by Russia in 2014. All 28 member states approved them and the measures have so far been renewed every 6 months. They include a wide range of diplomatic measures, visa bans, asset freezes and other economic restrictions. Some of the sanctions are aimed directly at Russia; others are more Crimea-specific. One of the measures prohibits export of the equipment used in energy sectors, such as power turbines, to Crimean companies or for use in Crimea. Thus, by diverting the Siemens turbines from the original destination in Taman to Crimea and trying to circumvent the sanctions, the Russian company breached international law, as well as its agreement with Siemens.

There is, however, a big question mark hanging over sanctions against Russia, as there is no official EU mechanism that could enforce them. The enforcement of restrictive measures lies with the member states and the member states only. On the other hand, looking at the statistics, it is clear that the measures have had some effect on the EU – Russia commercial relations. EU exports and direct investments in Russia fell significantly, as a large number of businesses are deterred by potential sanctions and damage to their reputation. Moreover, business in Russia may suffer another blow, as if what Siemens claims is true, it could further deter investors. Nevertheless, an enforcement mechanism could help rectify the status of the EU sanctions as an all bark and no bite measure.