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Controversial Presence of UK’s Smiths Group in Russia Raises Questions

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A recent Financial Times exposé reveals a startling disconnect between Western rhetoric and reality. Despite bold declarations of divestment in the wake of Russia’s unprovoked invasion of Ukraine, major Western corporations continue to operate within Russian borders. This list includes heavyweights like BP and TotalEnergies, each holding nearly 20% stakes in Russia’s largest oil producer Rosneft and leading LNG producer Novatek, as well as consumer giants P&G, Unilever, Reckitt, PepsiCo and hundreds more.

Some companies, like BP, find themselves ensnared, while others are deterred by the threat of nationalization, a fate that befell Denmark’s Carlsberg. The “temporary transfer” of assets under Russian control, as experienced by Finland’s Fortum and Germany’s Uniper, also looms large. Moreover, the prospect of selling assets built over three decades at a 90% discount, as dictated by Russian authorities, is a bitter pill many are unwilling to swallow.

However, the ongoing operations of certain firms in Russia within sensitive sectors, raise grave concerns and critical questions. Notably, nearly two and a half years post-invasion, the British engineering conglomerate with over a century of history Smiths Group plc, listed on the London Stock Exchange, continues its involvement in Russia’s energy sector.

Caption: Smiths Group website

Documents from the Russian register of legal entities dated May 30, 2024, reveal that Smiths Group plc, via its subsidiary John Crane UK, retains a 50% stake in John Crane Iskra LLC. This Russian firm produces specialized parts for engines and compressors, serving clients such as state-owned gas producer Gazprom, Russia’s largest independent oil producer Lukoil, and numerous other industry players, many of which are subject to UK, EU, and US sanctions. John Crane Iskra LLC is registered in Perm, Russia, at the same address as the EU sanctioned JSC Research and Production Association “ISKRA”, a major designer, manufacturer, and supplier of equipment for the fuel and energy sector.

In 2023, ISKRA’s revenues surged nearly 30%, exceeding $70 million, a sharp increase amid Russia’s invasion of Ukraine. John Crane Iskra LLC, a vital contractor for ISKRA, saw its revenues more than double from $10 million to $22 million.

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This financial growth has significant implications. The taxes paid by John Crane Iskra LLC, which is 50% owned by Smiths Group, obviously contribute to the Russian budget, supporting military activities in Ukraine.

In simple terms, it seems that a British company is not only continuing its operations in Russian energy sector – a key enabler of Russia’s military buildup and brutal aggression against Ukraine, – but also financing the war in Ukraine through its subsidiary’s tax payments.

Such cases as continued operations of Smiths Group in Russia call for a closer examination of the effectiveness of international sanctions.

Editor’s update

A company spokesperson said: 

“We wholeheartedly reject the misleading insinuations made by EU Reporter about John Crane. At the commencement of the war in Ukraine and, as has been stated publicly, we confirmed that we had suspended all sales to Russia and that our interests in Russia had been fully written down. This continues to be the case, and John Crane receives nothing from this joint venture. Further, we sought (on various fronts) and continue to seek an exit from the John Crane Iskra joint venture. Our ability to achieve this is dependent on Russian government approval and therefore outside of our control. Therefore, whilst we still are currently unable to formally exit the joint venture, we have neither ongoing involvement nor influence on its operations, and any implication that we are actively involved in Russia’s energy sector and therefore financing the war in Ukraine is categorically false.”

https://www.eureporter.co/wp-content/uploads/2024/06/Document.pdf

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