All is fair in steel and war: Italian equipment used in making military armor continues to be supplied to Russia

At the end of 2023, Danieli Volga had 155 employees, and judging from its ads on the recruiting portal HeadHunter, the business is far from dying out. In the parent Italian company's 2023 financial report, dated Mar. 7, 2024, Danieli Volga continues to be listed among Danieli's “production centers.” On page 17 of the report, the Russian company is said to have received some form of advances for future projects.

The overall context is not lost on the authors of the report. An entire section on pages 24-25 deals with Russia's war in Ukraine. Danieli reports that the Russian production facility (obviously meaning Danieli Volga) has slowed down significantly and does business only with customers who are not subject to EU/U.S. sanctions. The report also states that the parent company is seeking to sell its Russian businesses to third parties and speaks of the “legal hurdles” that have resulted from the disruption of projects due to sanctions. The auditors are also worried about the prospects of debts of “certain Russian clients.”

In other words, the cautiously pessimistic Italian report does not quite match the Russian one.

Can Danieli sell its Russian assets?

There has been no shortage of cases in which a foreign company expresses a desire to withdraw capital from its Russian subsidiary but is not allowed to do so. The authorities can de facto nationalize a private business — in whole or in part — with the appearance of a legal procedure, or else by quite brazenly appointing their own “CEO.”

In the spring of 2024, Kommersant wrote that Danieli Volga could be taken over by Novorosmetall due to the parent company having lost a lawsuit in a Russian court. The legal action was initiated because of the European company’s failure — due to sanctions — to deliver a rolling mill. The plaintiff demanded a refund of the advance payment, but in a counterclaim, the Italian parent company Danieli demanded that Novorosmetall first repay its debt arising from an earlier delivery, along with the attendant penalties it had incurred. No record of such a foreclosure taking place could be found in the relevant registers or business press.

The Kommersant piece claims that it was the litigation that prevented the Italians from selling their Russian business, as the assets were seized. However, in August 2024, the judgment of the recovery of funds in favor of Novorosmetall was executed, and the advance payment was returned by Danieli Volga on behalf of the Italian parent company. After that, the seizure of the Italian company's assets was canceled.

In short, there is no indication in the court documents that the Russian subsidiary was taken away from the Italian parent company. Therefore, there appears to be no obstacle to Danieli selling its Russian plant.

Sanctions? China!

In 2023, according to Russian customs data, Danieli Volga imported into Russia $6.5 million worth of equipment parts and spares, including $3 million worth of parts produced by Danieli's facilities. The Italian company's Chinese subsidiary, Danieli Metallurgical Equipment and Service, tops the list of suppliers.

In 2024, Danieli Volga imported $4 million worth of equipment parts and spare parts, including $600,000 from Danieli Group companies, including the Austrian subsidiary Danieli Engineering and Services. A significant portion of the imported goods fall under the EU embargo — which is why they were imported via China. EU law, unlike U.S. law, does not have a “long arm,” resulting in a legal regime in which goods produced in China under the technology, license, and control of the Danieli Group are not subject to the embargo.

As a result, without formally violating European regulations, Danieli continues to profit from its cooperation with Russian metallurgists by using a Chinese company to help it circumvent sanctions.