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26/08/2016

Brussels blesses merger between Daimler and Russian military vehicle producer

Europe's East

Brussels blesses merger between Daimler and Russian military vehicle producer

Kamaz 63969 Typhoon mine-resistant infantry transport.

[Wikimedia]

Under the EU Merger Regulation, the European Commission has approved the creation of a joint venture by Daimler AG, of Germany, and Kamaz OJSC, of Russia, a producer of trucks, but also of a large variety of armoured vehicles, some of which are in use in the Ukraine conflict.

According to the Commission press release, Daimler is active in the development, manufacture and distribution of automotive products (mainly passenger cars, trucks, vans and buses), while Kamaz is active in the production of trucks, trailers, tractors, chassis, engines, power units, and armoured vehicles.

The joint venture will be active in the production of light and heavy trucks, and in the welding and painting of truck cabins. The Commission’s investigation found that the proposed acquisition will not raise any competition concerns, because the joint venture will only be active in Russia and Belarus. The EX executive examined the operation under the simplified merger review procedure.

EurActiv asked the Commission to comment to what extent the merger is compatible with the sanctions adopted by the EU vis-a-vis Russia, in the context of the annexation of Crimea and the Ukraine crisis.

These restrictive measures include an embargo on the import and export of arms and related material from/to Russia, covering all items on the EU common military list. Upon initial examination, it appears that many armoured vehicles are in use by pro-Russian forces in the eastern Ukraine conflict.

EurActiv also asked is it possible that the Commission services responsible for competition didn’t notice that Kamaz is a firm primarily dealing with military equipment. A catalogue of some of the military production of Kamaz can be seen here. No answer was received by the time of the publication of this article.

It appears that in spite of the restrictive measures, Russia is bragging that not a single major joint project with Western partners has been suspended over the EU sanctions, as Rostec Corporation’s general director Sergei Chemezov was recently quoted as saying by the website Russia beyond the Headline.

“None of the projects launched earlier has been halted,” he told reporters in Abu Dhabi on Monday, citing as an example the project to manufacture AgustaWestland Italian helicopters which continues in Russia.

On the contrary, he said, the project will be expanded and the production of a new helicopter is to be launched for use in offshore operations.

Chemezov also said that AvtoVAZ continues cooperating with Renault-Nissan and Kamaz with Daimler.

The first media to report about the assumed discrepancy between the Daimler-Kamaz merger and the EU sanctions was Bulgarian website ClubZ.bg.  

Positions

EurActiv asked Edgars Rink?vi?sthe Minister of Foreign Affairs of Latvia, to comment on the merger. Latvia holds the EU rotating presidency.

“You may imagine that the Commission most probably doesn’t have any reason not to approve the merger,” Rink?vi?s said. But he added that was “not imaginable” how such deals could take place, when Russia had annexed Crimea, and when there was evidence of some Russian military personnel being directly involved in the war in eastern Ukraine.

“Let’s not forget, we are 28, there are different interests," he added, still expressing optimism that the EU was able to “find a common denominator after very very long and sometimes very painful discussions”.

Rink?vi?s said that the EU will stay united on further sanctions against Russia, if necessary. The decision for such sanctions would be taken in his words “within days” to review the status of the Minsk agreement, which for the time being he said was not implemented.

In this context, he said a “one hundred percent ban” on any military procurement or dual-use technologies being provided to the Russian Federation should be put in place.

He added that last year, in his capacity as Latvian minister, together with other colleagues, he had pleaded in the Foreign Affairs Council that EU sanctions should cover any military technology.

A Commission spokesperson sent EurActiv the following written comment 20 hours after the question was asked:

“The merger clearance granted by the Commission in this case relates solely to a joint venture between Daimler and Kamaz active for the production of light-duty and heavy-duty trucks in Russia and Belarus."

  • "Merger analysis is based on the merits of the proposed transaction and is independent from political influence."
  • "The Commission only has jurisdiction to assess the effects that the transaction would have in the activities of the parties within the EEA."

Another EU official provided EurActiv the following explanation:

“There is a prohibition on the export of dual use goods and technology for military use in Russia or to Russian military end-users.

There is not a prohibition on the formation of mergers or joint ventures by EU entities where the merged entity operates in Russia and is active in the area of dual use goods and technology for military use or to Russian military end-users.  However, any merger or joint venture will be subject to the prohibitions contained in the EU's restrictive measures.  The creation of a merger does not affect the prohibition on the export of dual use goods and technology.  Any EU person or entity remains subject to the prohibitions and will have to conduct their business subject to the prohibitions contained in the restrictive measures.”

 

Further Reading