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Siemens sues Russian state firm over turbines imbroglio

Reuters  |  MUNICH/MOSCOW 

By Alexander Hübner and Gleb Stolyarov

MUNICH/MOSCOW (Reuters) - filed a lawsuit against a Russian state firm on Tuesday after two gas turbines it sold for use in turned up in Crimea, a region subject to sanctions on energy technology.

A source familiar with the matter told earlier on Tuesday that was rethinking some of its business connections in because of the episode, in which it said its Russian customer had acted in bad faith.

Siemens, Germany and the European Union are under pressure to show they take potential sanctions-busting seriously after disclosed that had moved the turbines to and that a firm part-owned by had been hired to help install them.

annexed the Black Sea peninsula from in 2014, a move the European Union denounced as a breach of international law. It then imposed sanctions on which ban firms such as from selling energy technology to

Moscow needs the turbines for two Crimean power plants the Kremlin wants to get up and running to fulfil a promise, made by President Vladimir Putin, to ensure a stable power supply for the region's residents. used to rely on the Ukrainian power grid but is now dependent on for electricity.

The German industrial group originally supplied four turbines for a project in Russia, but said on Monday that at least two of them had been moved to without its knowledge and against its will.

filed the lawsuit, which court documents show was brought in the Moscow city arbitration court, against Russian state firm Technopromexport which originally bought them for use in a power station in Taman, southern

Technopromexport is also building two power stations in for which the Siemens-made turbines are intended, according to three sources close to the project.

Technopromexport did not immediately reply to a request for comment. Power Machines, a Russian partner in Gas Turbine Technologies LLC, a St Petersburg-based joint venture in which has a majority stake, declined to comment.

ZAO Interautomatika, another Russian joint venture which sources have told was involved in the installation and commissioning of the turbines in Crimea, did not respond to a request for comment.

said on Monday that Interautomatika had confirmed in writing Siemens' insistence that all relevant activities with respect to be immediately terminated.

RELATIONS TO RUSSIA

The source familiar with the matter told earlier on Tuesday, referring to the turbines scandal: "We have to think what this means for our relations to "

The source asked not to be named because of the delicacy of the matter. "We can't simply go back to business as usual."

"One has to keep a cool head but act responsibly," the person said on Tuesday. "There must be a certain effect on particular connections."

A spokesman for declined to comment.

Germany's ambassador to Moscow said that will have seriously hurt its prospects for investment if it is confirmed that the Siemens-made turbines have been delivered to Crimea, the Interfax agency reported.

had said on Monday it would press criminal charges over the moving of its turbines from to Crimea, and would seek to have them returned to Taman, their original destination.

"insists categorically on full compliance with all export control restrictions for itself and also at its partners and customers. In addition, is evaluating what additional actions are possible," it said.

An spokesman said that implementation and enforcement of the sanctions was a matter for the bloc's member states.

"The (European) Commission is in touch with the German competent authorities on this particular case," he said.

The German Committee on Eastern European Economic Relations, which represents German industry in the area, defended

"The sanctions restrictions were strictly followed by the German side," the committee's head, Michael Harms, told "No German company can afford to be suspected of evading the requirements of the sanctions. is doing everything to make sure that the restrictions are respected."

made about 1.2 billion euros ($1.4 billion) in sales in last year, roughly 2 percent of its total revenue. It is active there primarily in energy and transportation and has said it indirectly employs 48,000 people in the country.

Chief Executive Joe Kaeser met President Vladimir Putin several times in his first year after becoming CEO in 2013, and attracted wide criticism for a visit just after Russia's 2014 annexation of

At the time, he reaffirmed his commitment to Russia, where has been present for almost 170 years and has invested about a billion euros ($1.14 billion) in the past decade, saying the relationship would not be sidetracked by "short-term turbulence".

($1 = 0.8780 euros)

(Additional reporting by Andreas Rinke in Berlin, Alissa De Carbonnel in Brussels and Oksana Kobzeva, Anton Zverev and Anastasia Lyrchikova in Moscow; Writing by Georgina Prodhan/Andrew Osborn; Editing by Sabine Wollrab and Philippa Fletcher)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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