VW may stop cooperation with GAZ in case the US sanctions fully come into force

VW may stop cooperation with GAZ in case the US sanctions fully come into force


Finmarket.- German car manufacturer Volkswagen AG has warned GAZ about the termination of cooperation in the event of the US sanctions‘ implementation on the company in full as of November, as told by Oleg Deripaska during an interview with the Wall Street Journal.

Oleg Deripaska, who controls GAZ, has been subject to sanctions since April last year. Companies belonging to his enterprise have also been taken into the SDN List, including GAZ. The sanctions have not fully come into force so far, due to postponements, which are periodically extended by the OFAC regulator. Volkswagen AG, who has a contract with GAZ, has emphasised that cooperation will come to an end with the company, in case the sanctions are implemented, as written in the newspaper, quoting the words of Deripaska. The newspaper has added that Daimler AG, another company cooperating with GAZ, has stopped the joint operations due to the expectation of sanctions. Oleg Deripaska has shared the relevant news with journalists during a meeting with the international media in Nizhny Novgorod in spring this year. Deripaska has stated that GAZ Group has experienced problems with banks and a few suppliers have stopped working with the company due to the risk of second sanctions.

As highlighted by the Wall Street Journal, GAZ currently has no debts to the western banks, however, the debt of the company to the Russian government has risen to $1.4 billion. In the event of the sanctions’ implementation on GAZ, the company will have to sacrifice a part of its workforce, which amounts to 65,000 people. “GAZ already suffers from falling automobile demand in Russia, along with the stagnation of the economy” – as published in the newspaper, citing Oleg Deripaska.

GAZ has fallen into the blacklist of the US Ministry of Finance in April this year, together with Oleg Deripaska himself and all companies controlled by the businessman. At the same time, two deadlines have been set to complete business operations and settle the shares and debt obligations. In due course, within the scope of the development and the implementation of the plan – which proposes Deripaska’s withdrawal from the control of the enterprises – on the removal of the company from the sanctions list, the aforementioned deadlines have been repeatedly extended. OFAC (Office of Foreign Assets Control, a division of the US Ministry of Finance responsible for the enforcement of the sanctions) has announced the postponement of the deadline from 6 July to 8 November, at the end of June. This was the second consecutive postponement issued for the duration of the following four months.

The Deputy Prime Minister of the Russian Federation: Dmitry Kozak has previously commented on the negotiations with the US authorities on the lifting of sanctions on GAZ: “We need to cooperate, in order to save thousands of jobs. For that reason, we have to work with the American authorities and define what needs to be done for the sanctions to be lifted” – Kozak said. The Deputy Prime Minister has neither specified how the ownership structure of GAZ will change nor whether the scheme will include the entry of new investors, such as Volkswagen, making an emphasis on the non-public nature of the information.

The government officials have publicly talked about the state’s readiness to support GAZ several times, particularly through government and municipal purchase of vehicles manufactured by the company.

GAZ Group is formed of 13 enterprises in eight regions of Russia, manufacturing light and medium-size commercial vehicles, buses, heavy trucks, cars, powertrains and automobile components. The head-quarters of the company are in Nizhny Novgorod.