How Russia’s economic lobby in the European Union works

Cанкції для російської сталі USCC

Since Russia’s full-scale invasion of Ukraine, 27 EU states have imposed 13 rounds of sanctions on Russia. Since then, restrictions have been imposed on trade in oil, coal, timber, and many other resources.

However, a serious loophole in the sanctions regime remains: European industry continues to buy raw materials classified as “critical” or “strategic”, such as metals, in massive quantities. Sales through the following four companies owned by Russian oligarchs alone – RUSAL (Sweden and Ireland), Norilsk Nickel (Finland), NLMK (Belgium, Denmark, Italy, France), and VSMPO-AVISMA (Germany) brought in more than $20 billion to the Russian budget in 2022. This is equivalent to more than 6,500 Iskander-M ballistic missiles or 400 Su-34 bombers, which Russia uses daily to bomb Ukrainian cities near the frontline and border.

Information on lobbying to circumvent sanctions at the state level also seriously hits the EU’s sanctions policy. In particular, the media recently reported that French President Emmanuel Macron made “significant efforts” to get Canada to exempt Airbus and other aerospace companies from sanctions against Russian titanium. That situation sets a dangerous precedent.

What’s wrong with Russian titanium

The Russian corporation VSMPO-AVISMA is the major producer and exporter of titanium to Europe. Receiving funds from sales in the West, the corporation is also strategic for the Russian military-industrial complex. In particular, it supplies titanium for the production of SU and TU bombers, patrol ships and submarines from which Russia launches Kalibr cruise missiles, as well as for the production of Bulava and Topol-M ballistic and intercontinental ballistic missiles, which the Kremlin uses to threaten the world. VSMPO-AVISMA titanium products are also purchased by the Kalashnikov arms manufacturer.

VSMPO-Tirus GmbH. Photo: official website of the company

One of the co-owners of this titanium corporation (25% of shares and one controlling share) is the Russian state-owned company Rostec, which is under EU and US sanctions for working for the Russian military-industrial complex and is, in fact, a manufacturer of T-90 Proryv tanks and Lancet UAVs. Another owner is the Russian oligarch Mikhail Shelkov (66.42% of shares).

In 2022, Russian titanium was removed from the proposals for inclusion in the sanctions lists at the last moment. This decision was blocked by France and other EU member states due to the dependence of the largest manufacturer of commercial jetliners Airbus. Thus, due to the absence of sanctions restrictions, AVSМА is able to conduct trade and economic activities with European companies directly, purchasing the necessary equipment and resources for its work. This equipment may be also used for the Russian military-industrial complex.

AVISMA’s operations in the EU

AVISMA carries out its main activities in the EU through its German subsidiary VSMPO-Tirus GmbH, based in Frankfurt. In 2022 alone, it sold 15,000 tons of Russian titanium to the EU for $370 million, and in 2023 – at least $345 million (the exact figures are not publicly available).

According to the Washington Post, the largest buyers were companies from Germany, France, the United States and the United Kingdom. Boeing and Airbus were among the main customers until 2022. In March 2022, Boeing announced that it was abandoning the Russian titanium.

In December 2022, Airbus also promised to abandon Russian titanium. However, according to customs data analyzed by Disclose and Investigate Europe (IE), between February 24, 2022, and March 14, 2023, Airbus purchased $22.8 million worth of Russian titanium. This is four times more than in the previous 13 months.

In addition, companies can buy metal through intermediaries or purchase finished products from Russian titanium. For example, French engine and landing gear manufacturer Safran and the British company Rolls-Royce, which produces engines for Airbus and Boeing, announced in 2022 that they would stop purchasing Russian titanium, but imports continued throughout 2022 and 2023.

In April 2024, Reuters also reported that despite the sanctions imposed on AVISMA, the Canadian government allowed Airbus to use titanium from Russia in the production of aircraft. That could be a bad example for European countries, which would weaken sanctions policy.

NLMK Euro is a group of companies owned by Russian oligarch Vladimir Lisin. Photo: open source

Russian lobby in the EU

Moscow uses the EU’s dependence on Russian raw materials to influence sanctions policy. In November 2023, for instance, Russian-affiliated companies of the NLMK group (with plants in Belgium, Denmark, France and Italy) and the Vitkovice Steel company (Czech Republic) lobbied for the easing of sanctions on steel imports from Russia.

As such, in the 12th sanctions package adopted in December 2023, the EU extended quotas on Russian steel slabs (metal billets) for another four years. The extension of the quotas does not force European producers to look for ways to diversify their raw material supplies, but instead allows them to continue to be part of Russia’s “metallurgical pool” and remain dependent on Moscow.

Interestingly, the Czech Republic and Belgium, the countries that lobbied for the decision at the EU level, are connected through their presence or commercial ties with the aforementioned Russian steel mill NLMK, owned by Russian oligarch Vladimir Lisin. In April 2024, NLMK reported a 25.8% increase in net profit for 2023, up to RUB 209.37 billion (USD 3.22 billion).

Furthermore, the extension of quotas at the EU level was also influenced by Czech steelmakers who put pressure on the authorities. In November 2023, the OS KOVO steelworkers’ union organized a massive strike involving about 1 million people. By “coincidence,” the head of the union, Roman Durcho, is a member of the Supervisory Board of Vítkovice Steel, the largest quota lobbyist. Vitkovice Steel was previously owned by the Evraz holding company of Russian oligarch Roman Abramovich. In 2014, Vítkovice Steel was bought by a group of companies registered in Cyprus. According to the investigation, they are owned by the Russian state investment bank Vnesheconombank (VEB), which was sanctioned by the European Union due to Russia’s full-scale invasion of Ukraine.

In 2022, the Czech Financial Analysis Office (Úřad pro finanční analýzu, FAÚ) blocked Vítkovice Steel’s assets. Nevertheless, the company’s management denies any connection with Moscow, and as of May 2024, it continues to operate.

Of course, Moscow’s profits from the sale of titanium and steel are not the billions that Russia earns from the sale of liquefied natural gas or other metals. However, this is yet another possible lever for the Kremlin to exert political pressure on entire sectors of global industry and beyond. As in the case of bribing European politicians from Germany, France, Poland, Belgium, the Netherlands, and Hungary to influence EU elections and spread narratives Moscow needs, Russia uses its affiliated corporations to influence European governments. This creates a dual situation: European partners provide Ukraine with financial and other assistance to repel Russian aggression, often in the millions of euros, while at the same time, by buying Russian raw materials and extending quotas, they are supporting Russia’s ability to continue this aggressive war. This fact not only negates the aid itself but also does not contribute to ending the war.

The article was published on Ukrainska Pravda

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