Exclusive: How EU firms
skirt sanctions to do business in Crimea
Send a link to a friend
[September 21, 2016]
By Anton Zverev, Gleb Stolyarov and Olga Sichkar
SIMFEROPOL, Crimea/MOSCOW (Reuters) -
Products for sale in the Crimean stores of two European retailers
are being shipped there from Russia via a ferry and port that are
subject to EU sanctions, people involved in the transportation said,
suggesting companies are finding ways around the punitive economic
regime facing Moscow since 2014.
Products carrying the brands of Germany's Metro AG and Auchan [AUCH.UL]
of France are visibly for sale on the shelves of the retailers'
People involved in transporting the goods say they arrived via a
ferry that serves the Crimean port of Kerch. European companies are
banned from doing business with the ferry and the port under EU
sanctions imposed on Russia after it annexed Crimea from Ukraine.
Both retailers said they were not violating the sanctions because
the stores are operated by their Russian subsidiaries, which are not
subject to the EU sanctions.
A representative of the Kerch port referred questions about Metro
and Auchan to the ferry operator, saying the port only controls
shipping, not cargo. A representative of the ferry operator said it
does not have contracts with Metro or Auchan and does not know if
they use the ferry.
Legal experts said the transfer of goods to Crimea may fall in a
gray area of the sanctions regime because the relationship between
parent companies and sub-contractors is often hard to define.
In emailed comments in response to questions, Metro and Auchan did
not contest that their goods were being shipped via the Kerch ferry
and port to their subsidiaries' stores in Crimea.
A spokesman for Metro said Metro stores in Crimea are operated by
independent Russian entities and staff that are not subject to EU
He said Metro is "fully aware of and complies with the EU laws and
regulations, and, in this particular case, the applicable
A spokesman for Auchan, which operates one store in Crimea, said the
company always operates within the rules that are in force,
including European Union decisions.
Asked about the activities of the EU retailers in Crimea, an EU
official, who spoke on condition of anonymity, said: "This is
against the spirit of the sanctions. But in the absence of a trade
embargo, there is always a fine line between compliance and
A European Commission spokeswoman, Maja Kocijancic, asked if
Brussels was worried about whether the sanctions were being
respected, said implementing sanctions was the responsibility of EU
The French government had no immediate comment. Germany's Economy
Ministry said it could not comment on specifics, but that violators
of EU sanctions face penalties. It said in cases involving a German
firm, it was up to the German Customs Investigation bureau to asses
if sanctions have been breached. The bureau declined to comment.
The EU sanctions on Russia do not bar European firms and citizens
from doing business in Crimea. They do restrict some new investments
and dealings with certain designated people and entities such as the
Kerch ferry company - the main transport link between Russia and
Crimea - and the port of Kerch.
According to several transport companies providing services to
Auchan and Metro, as well as sources in the two retailers' Russian
units, and a western food company, trucking firms load up at the
retailers' distribution centers in Russia.
[to top of second column]
The goods then cross to Crimea on the ferry, then trucks disembark at Kerch,
then deliver the goods to the Metro and Auchan stores in Crimea.
Reuters has no evidence of any payment from Metro or Auchan to the sanctioned
The goods are transported by sub-contractors, and the stores in Crimea are
operated by Russian-registered units of Metro and Auchan, not by the parent
companies. The Russian units are not subject to EU sanctions.
"In general, EU-based parent companies can be held liable if they have
instructed their local unit to act in violation of the sanctions," said Artem
Zhavoronkov, partner at law firm Dentons.
The two Metro stores in Crimea are operated by Metro Group entities incorporated
under Russian law - Retail Property 5 (RP5) and Retail Property 6 (RP6).
Aleksey Kormilicyn, CEO at Metro Group's RP6, said by email RP6 was using
logistics firms to arrange transportation of goods to Crimea and they were
"instructed not to use any sanctioned entity when supplying goods."
He did not reply to an emailed question on how the unit ensures the
sub-contractors comply with that instruction.
Metro Group is not involved in "local operational details" concerning the
stores, according to the spokesman for the group. Metro said most products in
its Crimean stores, including Metro branded goods, were sourced from Russian
But when a Reuters reporter visited the Metro store in Simferopol, Crimea, in
August, she saw on the shelves Italian rice, EU-origin chocolate, pastry, and
packaged groceries, all imported into Russia by Metro's Russian unit registered
in Moscow, according to their labels. A source at Metro Group Logistic, the
retailer's Russian logistics unit, who spoke to Reuters on condition of
anonymity, said Metro contracts third-party transport companies to truck goods
from its distribution centers in southern Russia via the ferry to Crimea. This
arrangement was confirmed by sources at a Metro supplier and at one of the
transport companies involved, Transcargo.
Auchan has similar arrangements for supplying some of the goods to its Crimea
store, according to transportation companies and a source in Auchan Russia.
On the shelves at Auchan's store in Simferopol when a Reuters reporter visited
were fruit and vegetable conserve, chocolate, coffee, ketchup, olive oil,
crackers and frozen pizza - all carrying the in-house Auchan-BIO brand.
The Auchan spokesman said the store is operated by Auchan Retail Russia, the
firm's Russian unit.
The company did not respond to detailed questions from Reuters about the store's
(Additional reporting by Maria Kiselyova, Olesya Astakhova, Lidia Kelly,
Anastasia Teterevleva in MOSCOW, Matthias Inverardi in DUESSELDORF, Gabriela
Baczynska and Robin Emmott in BRUSSELS, Rene Wagner in BERLIN, and John Irish
and Leigh Thomas in PARIS; Writing by Maria Kiselyova; Editing by Christian Lowe
and Giles Elgood)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.