European Defence Firms Could Lose $1 billion From Rostec Sanctions

EU sanctions against Russian defence enterprise Rostec could lead to a loss of US$1 billion in the short term.

This is owing to the use of European components in Rostec products exported to third countries, a Rostec statement said detailing the impact of fresh economic sanctions imposed against Russia last week.

“Undoubtedly, cooperation between Russian and European industries is much broader and deeper than between anyone else. Yet those who impose sanctions should understand that such cooperation is double-sided. Both sides will suffer as a result of a breakdown,” Rostec said in a statement.  

The sanctions can essentially be divided into several categories. 

The first category includes concerns Machine Engineering Technologies, Kalashnikov, Sirius, holdings High Precision Systems (“Vysokotochnye Kompleksy”) Stankoinstrument, RT-Chemcomposite, Tula Arms Plant (JSC "Tulsky Oruzheiny Zavod") and NPO Basalt. The sanctions will not have an impact on state defense order production, because no European components are used in military production, it said.

The second category includes sanctions against Oboronprom. This holding has not sought and does not seek loans from European banks and other foreign financial institutions. Bond issues of Oboronprom are purchased by Russian banks (in particular, VTB).

As a result, a new round of sanctions will have no impact on the holding's current business activities, the statement added.  

Sanctions against the Director General of Rostec, Sergei Chemezov, apply to his property and accounts opened in European banks. All Mr. Chemezov’s property and funds are held in Russia. In this regard, the EU sanctions will not have a significant impact. 

The imposed sanctions will encourage the expansion of import substitution programs and will accelerate the process of developing and implementing new domestic technologies. Rostec has all the necessary intellectual and financial resources to address these issues, the statement concluded.