Rosatom Ties to Crimea Disclosed, Testing Sanctions Climate
On July 14, the Russian press reported that Rosatom‘s 2015 annual report disclosed that the company had been contracted to supply automatic power control systems to the Sevastopol and Simferopol power stations in Crimea that are being constructed by Rostec. Additionally, in May of this year, Rosatom‘s subsidiary FSUE CNIIA (All-Russia Research Institute of Automatics) won a contract to supply equipment for power stations in Russia‘s Kuban that is likely to be used to supply electricity to Crimea.
This business was viewed as a surprise, due to the caution that bigger Russian companies have taken in establishing ties to Crimea and the risk that it creates of attracting Western sanctions. Both the U.S. and the EU levied sanctions against Russian companies operating in Crimea in 2014, prompting careful maneuvering by Moscow to limit the exposure to the peninsula by entities that have a presence in the international markets. Until this move by Rosatom‘s subsidiary, the primary companies operating in the peninsula were those who had already been sanctioned, including Rostec and its subsidiary Technopromexport. Rosatom has not been a target to date.
Officials within Rosatom have observed publicly (in response to this news emanating from the Russian press) that they do not believe any risk of sanctions exists, although the business establishes an interesting milestone in determining the interest of the international community to continue pressing Russia on these business ties. This disclosure comes at a time when Russia appears increasingly hopeful of having existing sanctions walked back and likely more committed to demonstrating that business links with Crimea will only increase.
On July 1, the EU voted to extend sanctions on Russia for an additional six months. The decision, however, was met with some opposition from a number of member states (including Hungary, Greece, Slovakia and hesitation from Italy).
As of this writing, news of Rosatom‘s activities in Crimea has only been reported on in the Russian press. With Putin‘s tight grip over Russian media, it is noteworthy that such a story would emerge involving one of its largest and most powerful state-owned firms. It may represent an effort to test the waters of Western resolve, involving a company that is integrated into the power industries of countries in the EU, NATO and elsewhere, when it comes to the existing sanctions regime and overall acceptance of the status quo in Crimea.