In response to the invasion in Ukraine, more than 1200 Russians were sanctioned by the European Union. This includes state officials, propagandists and oligarchs as well as Russian President Vladimir Putin. Antonio W. Romero reports in European Business Review.
Not everyone who is subject to sanctions is included in the regime. However, in early 2022 the EU imposed sanctions on executives and founders at large private companies. They argued that the tax revenue they receive from their businesses funds the government’s actions.
The best-known names in this category include top executives from new and less government-controlled industries such as e-commerce, fintech and internet companies. The sanctions have forced them all to resign.
Many of these ex-executives are now and are reportedly in discussions with the EU regarding the possibility of their sanctions being lifted.
Who are these executives who want to challenge European sanctions? What are their motivations for doing this? And what are their chances of succeeding? Let’s begin by looking at Dmitry Konov’s case, former CEO of Sibur, a petrochemicals company. Konov supported his position and appealed to the EU sanctions against himself. He also regretted the breakup of business ties between Russian companies and European ones.
Konov is also a representative of other executives who are contesting their sanctions. He is a relatively liberal technocrat, with strong ties in Europe and a track record of success building his company to an industry leader.
Konov is a top-flier in Russian Petrochemicals. ICIS, a market intelligence company, named him one of the most influential senior executives within his field. He was placed alongside Shell Chemicals managers in Britain and Solvay in Belgium.
Sibur’s CEO, Konov, has been with the company for 16 years. During that time, he has led a major restructuring of the business. Sibur was close to bankruptcy in 2004, when Konov joined Sibur’s leadership. Konov helped develop a new strategy that included modernizing production facilities. He was promoted to CEO in 2006. Liquefied petroleum gas (LPG), a low-carbon fuel, was a significant export product for Sibur. However, Mr Konov decided that he would further process the residuals from oil and gas production to create value-added materials. With a turnover of $16bn by 2021, Sibur became the country’s largest petrochemicals manufacturer.
Konov was a CEO and had many dealings with the EU during his tenure. It is Sibur’s biggest single market and supplies Russia with much of technology and equipment needed for petrochemical production.
The company’s Zapsibneftekhim location – Russia’s largest petrochemicals facility – was completed in 2020 at a cost of $8.8bn. The construction of the facility involved the participation of Thyssenkrupp and Linde in Germany, as well as LyondellBasell and Technip in the Netherlands.
Sibur, in turn, is a supplier for a variety of large European companies, including Pirelli, Nokian, Michelin and Pirelli.
Konov wrote Article for Association of European Businesses in Russia that cooperation between Russian markets and European markets benefits both sides and that Europe could lose if relations worsen.
“As someone who has completed a MBA in Europe, and has many professional and personal ties in the area.
“The region, I am deeply sorry for what has happened to our partnership business,” he wrote. He was referring to a MBA he received from Switzerland’s IMD Business School. He said that cooperation in the chemical industry between Russia, the EU and China has been “natural and mutually beneficial” due to their geographical proximity and complementary strengths.
Konov wrote that Russia and Europe are geographically close, which means that producers and consumers from both countries will have to find alternative suppliers.
Konov has made the argument that sanctions harm supply chains worldwide and cause damage to consumers at an industry level. “In these difficult times, it is vital for European and Russian businesses to maintain a dialog and continue cooperation where it is still possible. He wrote that he believes that political tensions can be overcome and it will be possible to restore cooperation, trade and collaboration in the future.
Konov said to AFP newswire that, despite economic arguments in favor of sanctions, he did not think it was a fair decision based only on evidence provided and based upon the reasoning set forth in the EU Council decision.
He also stated that Sibur pays the majority of its taxes at a regional level and not directly to the federal government. Therefore, the claim that Sibur provided a substantial source of income for the government was unfounded.
Konov is optimistic about modest improvements in relations between Russia and Europe. One example is the resumption in the Black Sea of grain shipping. Technocrats who are challenging European sanctions (up to 40) will hope that their cases will soon show evidence of cooperation between the two countries.
However, it remains to be seen if Konov and co. will persuade the EU. Bloomberg has cited sources that claim the European Council’s legal services believes some sanctions were imposed for weak reasons. These cases will be closely monitored by the EU.
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