UK Industry Still Selling to Russia

Trade data analysis shows that despite the invasion in Ukraine, British manufacturers continued to supply Russia’s key industrial equipment.

Many British industrial manufacturers cut off their business ties with Russia after the full-scale invasion began in February of last year. The government imposed what it called “sweeping” restrictions to what materials UK suppliers can export to Russia. It focused on areas where the Kremlin earns a lot of tax.

Data Desk, an investigative group, and trade data show that UK companies are still allowed to export important equipment for Russia’s mining and fossil fuel industries.

Hill & Smith, a FTSE 250 construction company, has assured investors for years that they have minimal exposure to Russia. The group’s accounts for the year ending December 2020 stated that the company had “no direct Russian suppliers or customers”.

However, export data show that Bergen Pipe Supports India Private Limited, one of the company’s Indian subsidiaries has continued to supply pipe supports – equipment used to support gas pipelines – to the Russian Arctic LNG 2 LLC. Import and export data show that this was a major part of the subsidiary’s export trade after the full-scale invading.

Arctic LNG 2 is the owner of extraction and export rights for a $21.3billion liquefied gas programme in the Arctic. The project is owned by Novatek, Russia’s second largest natural-gas provider .

The US Treasury placed Novatek on its sectoral sanctions list following the original Russian invasion of Ukraine, in 2014. The company does not face any UK or EU sanctions.

There are also other companies in the UK that appear to be providing equipment for Russia’s key extractives industries.

Dunlop Oil & Marine in Grimsby bills itself as a “world leader in design, manufacturing and supply of hoses to the oil, gas and dredging industry”. Continental, the German multinational automotive parts manufacturer, owns it. Export data shows that Dunlop supplied rubber oil hoses for the Caspian Pipeline Consortium.

The consortium is dominated by the Russian energy companies Lukoil, Transneft and ExxonMobil. The pipeline transports a mixture of Kazakh oil and Russian oil for export to the Russian Black Sea Port of Novorossiysk.

Export sanctions do not apply to the Caspian Pipeline project, as it is not owned by a majority Russian.

Ion Science is another supplier that was highlighted in the data. This small company, located in Fowlmere in Cambridgeshire, describes itself as being a leading manufacturer in gas detection equipment, and gas sensors. These are widely used in mining. Export data shows that the company was shipping “electronics for use in metallurgical industries” via Malta to Russia.

Continental’s spokesperson said that the company has, as of this May, divested most of its operations in Russia. However, in one instance the manufacturer was required to fulfill an existing contract with a customer that met all legal and sanction requirements at the time it was fulfilled. The company added that it is currently not exporting or importing any products from Russia to its customers.

Hill & Smith’s spokesman confirmed that the group “has never operated in Russia, does not have direct customer relationships there, and has never supplied materials to a sanctions entity.” The group’s Indian operations provided pipe supports under a 2019 contract to a French-listed subsidiary of TechnipFMC. This company then supplied the pipe support to the Arctic LNG 2 Project.

The Department for Business and Trade has said that it has significantly reduced the amount of UK goods exported to Russia.

Hill & Smith, a major UK listed company, is the latest to be questioned about its links to Russia following Moscow’s full-scale invasion in Ukraine.

The UK government claims that its sanctions against Russia are the “most severe ever imposed” on a major country. However, trade data shows that British companies are still able to export key industrial equipment there.

Companies listed on the stock exchange have taken radically different positions when it comes to doing business with Russia. Many listed companies rushed to sell their Russian operations after the war started, as they became unethical.

BP, a UK listed company with one of the largest investments in Russia, announced that it would quickly be selling its Russian Assets. However, this process is not yet complete.

Some people have been more reluctant to leave. According to a study by the Yale School of Management, published in the US last week, five major UK companies have continued doing business in Russia even after the war started. Four of these companies were involved in the energy, industrial or telecoms sector. Petrofac JKX, FS Mackenzie and JKX have all refused to join the boycott of corporates. Antal International is still actively recruiting for clients in Russia.

Petrofac has announced that it has recently withdrawn from Russia and asked Yale to remove itself from the list.

BT Group has 14 employees working in Russia and decided to keep its relationship with Rostelecom, the state-backed mobile operator, out of fear that if it retreated, people in the UK wouldn’t be able make calls to Russia. Unilever’s FTSE-listed brands, including Dove, Ben & Jerry’s, and Marmite have a lower ranking on the Yale list, but it has been widely criticized for remaining put. The campaign group Moral Rating Agency has accused Unilever of plunging in a “vortex” of immorality.

Last week, the company confirmed it would comply to Moscow’s conscription law. This means that its Russian employees could go to Ukraine and fight if they are called up.

Unilever’s CEO said that continuing to operate in Russia is the “least-bad” option for the firm. Hein Schmacher stated that abandoning the Russian business could result in its nationalisation, given the recent developments.

Working in a country where the military has bombed indiscriminately civilian targets may be hard to sell to any ESG committee.