Powering the Anschluss. How Siemens turbines ended up in Crimea despite sanctions

The two alleged Siemens turbines in the port of Sevastopol. Photo: vk.com/tmpfm2, 29 June 2017

The two alleged Siemens turbines in the port of Sevastopol. Photo: vk.com/tmpfm2, 29 June 2017 

Crimea

On 5 July 2017, Reuters wrote, citing three of its own sources with knowledge of the delivery, that two turbines of the German technology company Siemens were delivered to occupied Crimea. One of Reuters‘ sources told the outlet that two of the turbines of the SGT5-2000 type, produced only by Siemens and its subsidiaries, had been delivered from Russia by sea to Crimea and were destined for use in a power plant in the Crimean city of Sevastopol, where preparatory work at the plant was under way. Another source said that the turbines had come in from the Taman peninsula in southern Russia.

However, photos of objects looking similar to turbines had surfaced a week earlier, on 29 June 2017, on the “Construction, Trucks, and Machinery” page in the Russian social network VKontakte, which covers construction news in Crimea.

  • Photo: vk.com/tmpfm2, 29 June 2017
    Photo: vk.com/tmpfm2, 29 June 2017
  • Photo: vk.com/tmpfm2, 29 June 2017
    Photo: vk.com/tmpfm2, 29 June 2017
  • Photo: vk.com/tmpfm2, 29 June 2017
    Photo: vk.com/tmpfm2, 29 June 2017

In a video uploaded on an eponymous youtube channel (below), the narrator informs that the turbines are destined for the Sevastopol electricity generating plant and were unloaded to the Kamyshov Bay.

The covered objects unloaded at Kamyshov Bay are similar to the Simens SGT5-2000E turbine:

Comparison of objects unloaded at Kamyshov bay and the Siemens turbine. Image: fb.com/Borislav Bereza

Comparison of objects unloaded at Kamyshov Bay and the Siemens SGT-2000E turbine. Image: fb.com/Borislav Bereza

Following Russia’s occupation of Crimea, in August 2014 the EU adopted sanctions which prohibit specifically “to sell, supply, transfer or export equipment and technology related to the creation of infrastructure in the sectors of transport, telecommunications and energy as well as regards the exploitation of oil, gas and mineral resources.”

In an official statement on 6 June 2017,  Siemens refuted Reuters’ allegations, stating that they have “no reason to believe that the gas turbines mentioned in the news articles are destined for Crimea” and that they didn’t have a contract with JSC Technopromexport, the Russian company which is building two power plants in Crimea, to supply equipment for their construction.

Later, it issued another statement where it said it will investigate whether the turbines indeed ended up in Crimea and that if that is the case, this is a “clear violation of contractual agreements.” Siemens said that it alerted its customers, i.e. Technopromexport, that its equipment can’t be used in Crimea, and claimed it won’t do any servicing work for the turbines.

In its turn, Technopromexport, part of the corporate empire of Rostec, a Russian monopoly in the fields of military and industrial technologies, issued a statement the same day where it claimed that the turbines they supplied were purchased on the “secondary market” and modernized with the help of Russian factories and engineering companies to make them correspond to the demands of the initial project, ria.ru reported. In the statement, Technopromexport informed that earlier it planned to procure class E gas turbines produced by the Iranian MAPNA company for the energy plant in Crimea, but in the end failed to reach an agreement.

“Siemens is not involved, we’re saying that we have a secondary market of turbines, we bought them and remade them. We’re not ready to say what turbines these are, but they are modernized to such an extent that calling them the turbines of the producer is impossible,” a representative of the company told life.ru.

However, talking to the local Sevastopol outlet sevastopol.su, representatives of Technopromexport confirmed that the turbines did come from Siemens. Russia had paid [EUR 166.7 mn – Ed.] for the SGT5–2000E turbines. “The violations of the sanctions regime could have created trouble for Siemens, but representatives of Technopromexport talking to ForPost [name of sevastopol.su – Ed.] stressed that this won’t happen because we’re talking about equipment which was modernized in Russia.”

Four turbines are needed for the construction of two gas power plants in Sevastopol and Simferopol, each with the capacity of 470 MW. They will function on gas which will be supplied through a gas pipeline laid through the Kerch Strait. Russian authorities say that 1350 MW is needed to fully provide the occupied peninsula with electricity. Right now, Crimea produces 400 MW.

A long story of Siemens, Crimea, and sanctions

The story with Siemens and Crimea started long ago. After Russia annexed Crimea in 2014, the occupiers faced the problem of providing for the energy needs of the population of the peninsula, 90% of which came from the Zaporizhzhia power plant. In 2014, Russia announced a plan to lay energy cables under the Kerch Strait to transfer electricity from the Taman peninsula. But the capacity of the ones laid by a Chinese cable company soon thereafter wasn’t enough to solve Crimea’s energy problems.

The Russian government then considered two options for Crimea: to build many small-capacity power plants produced by Rostec, or buy powerful Siemens turbines. Despite sanctions, they chose the second option, the Russian outlets Vedomosti and Kommersant reported, although this was not declared officially. Thus, in the same 2014, Russia decided to build two new power plants – in Sevastopol and Simferopol – and the engineering company Technopromexport was selected as the prime contractor for their construction. They were projected to be used with specifically the SGT5-2000E Siemens turbines.

However, there was a joint German-Russian plant opening up which could produce the necessary equipment. Belonging to Siemens Gas Turbines Technology, a joint company with 65% of shares belonging to Siemens and 35% to Power Machines, a Russian company effectively owned by billionaire Alexei Mordashov, a close friend of Putin, it was placed in operation on 18 June 2015 near St. Petersburg with the goal of producing and servicing turbine units.

Apparently, the Kremlin believed that sanctions can be circumvented because the manufacturer of the gas turbines is a joint venture where one of the participants is a Russian private entity (Mordashov), rather than the Russian government.

In August 2015, Technopromexport announced biddings for the supply of turbines, generators, and auxiliary equipment for four power stations with a capacity of 235 megawatts (corresponding precisely with the nameplate capacity of the Siemens SGT5-2000E) for the construction of some power plant in Taman near the village of Raevska. It was never built: the contest for its construction, announced only in the summer of 2016, was terminated “due to the absence of bids” on 1 July 2016. Moreover, four turbines weren’t needed for the supposed plant, its project documentation reveals.

Meanwhile, the power stations in Crimea with parameters that were just right for the installation of four SGT5-2000E turbines were being actively constructed.

crimea

Ihor Maskalevych, a journalist writing for ZN.ua, opines that Russia chose to carry out this gamble with the sanctioned turbines because they placed their bet on the EU lifting its sanctions against Russia by the time the turbines would be ready. But as that didn’t happen (the latest Crimea-related sanctions were extended by the EU until January 2018), the need for more sophisticated strategies appeared. The chosen strategy, he writes, was to artificially cause the bankruptcy of Technopromexport, in the result of which its property, including the four turbines it purchased, could be resold. And the new customer could, possibly, not be obliged to uphold the customer agreement with Siemens, which excluded the possibility to use the turbines in occupied Crimea (in April 2017, Technopromesksport was indeed declared bankrupt).

In September 2016, Technopromeksport unexpectedly announced that it was selling all four gas turbines it purchased in 2015 for Taman. The equipment was not sold due to the absence of bidders. At that time, the company explained the decision to sell the turbines with its bad financial situation which made it impossible to take part in the contest to build the plant in Taman. But the sources of Kommersant.ru said Technopromeksport‘s desire to sell the turbines was explained more by the idea to use them in Crimea, which would de-jure allow Siemens to avoid violating the sanctions regime.

Publicly, Technopromeksport denied that possibility. Siemens told DW that Technopromeksport confirmed in a written statement that the turbines will be used in a power plant near Raevska village in Taman in October 2016, where there is still no sign of construction of a power plant.

Media attention to the Crimean turbines case flared in July 2015, when the Russian newspaper Vedomosti first published an article about the deal where Siemens signed a contract to sell the turbines for the plant in Taman.

In November 2016, Technopromeksport announced that the Siemens Gas Turbines Technology was preventing the shipment of a part of the gas turbine equipment destined for Taman without which the turbines won’t be able to work. Technopromeksport resorted to the police to procure the equipment.

On 27 December 2016, Rostec‘s General Director Sergei Chemezov announced that Technopromeksport was extending the projected completion date for the construction of the power plants in occupied Crimea till 2018 due to the delays with the shipment of Siemens turbines.

In March 2017, Reuters wrote that Siemens shipped the four gas turbines which were according to the contract designated for the construction of a power plant in Taman, where construction works still haven’t started. The news agency wrote that Russia may try to install the equipment in the power stations under construction in occupied Crimea.

Russian public procurement documents confirm they’re Siemens

The Russian outlet Kommersant reported on 1516 June 2017 that Techpromeksport was obliged to conduct the state purchase of the gas turbines for the Crimean power plants on electronic trading platforms. On 2 June, the company put the purchase up to be checked for correspondence to the technical regulations of the Customs Union by declaring a set of four “gas turbine modules of the Technopromeksport-180 series,” produced presumably by the company itself.

However, Technopromeksport is an engineering company with no machine-building assets. It turned out that “Technopromeksport-180” was a codename for the gas turbine SGT-2000E and generator SGen5–100A, both produced by Siemens.

This information was confirmed by a tender of Technopromeksport to develop technical documents for the plants. The tender identified the model of gas turbine planned for installation as “SGT-2000E” and the generators that work with the turbines as “SGen5-100A.”

Not Siemens anymore?

The Russian outlet rbc.ru, citing two of its own sources, wrote that the other two turbines will be shipped to the peninsula in the next month. The ones which were delivered already are not really Siemens anymore. They were produced by the St. Petersburg factory but partially redesigned on the factories of Rostec. “The degree of modernization is so large that the production can’t carry the name of the producer anymore, it’s another product,” another source close to a participant of the project told.

In particular, the turbines had their automatization changed with the help of the Russian company Interavtomatika, where Siemens controls 45.7% of shares, another source told rbc.ru. Yet another source close to Technopromeksport opined that a turbine can have a minimum amount of details changed, and it will still be a Siemens machine. There was no serious “modernization” done, but this is being said in order to protect Siemens which could be accused of violating sanctions, the source explained.

The turbines will be able to be installed without Siemens, rbc.ru wrote, as this turbine was installed many times in Russia before. Rostec will service the turbines.

Access to turbines will be cut off

Rbc.ru also reports that the Russian Ministry of Energy will limit the access of foreign producers to data about the usage of their equipment in Russia. First of all, this concerns the work of gas turbines. If earlier foreign producers could have received direct access to data about the work of a turbine, the raw data will now be collected in Russian centers and will be sent abroad only after being processed.

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  • zorbatheturk

    Funny how RuSSian billionaires all seem to be friends of the Putinator. As for the turbines, they can be ordered by a Panamanian company, paid for from a Cayman Islands bank account, and shipped to the Black Sea on a Liberian freighter owned by a Lichtenstein trust, captained by a Greek, crewed by Filipinos, and with a Croatian engineer. What sanctions?

    • Turtler

      A fair point, but it’s worth pointing:

      The sanctions prevent you from just openly shipping the schiesse straight from Germany to Russia on a German or Russian ship. As such they may not be able to keep the equipment from actually getting there, but they CAN make you jump through hoops, take the “scenic” route, and generally make it cost more.

      Which is a good thing. The more Putin and his fixers have to pay finding workarounds and ways to bypass the sanctions the less they’ll have to wage war.

      That’s got to be a positive for Ukraine, even if not as much as we’d like.

      • Tony

        Thing is, multi national mega corps are very sensitive about image and it can be risky to use loopholes to violate the spirit of a law.
        Siemens knew what they were getting into and they had ample time to stop it, they didn’t.
        Now it’s time to show them how expensive a bad public image can be.
        If you people don’t like a world where mega corps will ultimately do business with foreign terrorists and dictators for profit then it’s time to punish said mega Corps until they understand that they have a social responsibility and that they need to work for public trust which means maintaining even the spirit of the laws.

        • Turtler

          “Thing is, multi national mega corps are very sensitive about image and
          it can be risky to use loopholes to violate the spirit of a law.”

          A good point, and and another thing in favor of the sanctions. It makes it objectively harder and more byzantine to get the goods even if everything falls your way, and it makes it less likely things will fall your way as corporations and other business entities try and avoid even the appearence of impropriety.

          That’s why I entioend that to Zorba, gto show that the sanctions aren’t meaningless even if they aren’t as suffocatingly airtight and Putin deserves.

          “Siemens knew what they were getting into and they had ample time to stop it, they didn’t.”

          Indeed. And I suppose I shouldn’t have expected anything better, given Siemans.

          “Now it’s time to show them how expensive a bad public image can be.”

          Here here!

          I rarely purchase anything from them anyway, now it’s time to remove even that.

          “If
          you people don’t like a world where mega corps will ultimately do
          business with foreign terrorists and dictators for profit then it’s time
          to punish said mega Corps until they understand that they have a social
          responsibility and that they need to work for public trust which means
          maintaining even the spirit of the laws.”

          Here here!

    • RedSquareMaidan

      The EU should immediately add another year to the sanctions, cancel Nord Stream 2 and boycott World Cup 2018

  • Tony

    I like how Siemens now claims that they are getting serious about investigating this. Yea right! Ukraine has been telling Siemens this for almost 2 years now. Siemens had ample opportunity to take it serious and it’s not like they didn’t really know what was going on.
    Here’s the thing Siemens, public trust is difficult to build but easy to break, and being a mega Corp, you know this.
    Oh well time for another lesson on corporate governance, let it be known that Siemens plays rough with the law, that they hold their home country’s laws in contempt as an obstacle to profit. Boycott them if you find this behavior unacceptable. Push legal punishment if you work for government.

  • Screwdriver

    Russia will always find a way to go around sanctions. Worst case scenario they would buy through 3rd countries like Belarus. So it is really funny to see those efforts of okrainian radicals, it is just wasted time. :-)

    • Tony

      If they buy through 3rd countries, then they have to pay more as the 3rd country also wants something for it’s troubles. Ukraine and the west has already succeeded at making it more expensive &difficult for Russia, now to tighten the screws.