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Despite Sanctions, Germany Authorizes Russian Energy Deal

Angela Merkel and Vladimir Putin in Deauville, France, in July 2013. Source
Angela Merkel and Vladimir Putin in Deauville, France, on June 6, 2014.
  • Why it matters

    Why it matters

    Germany is letting utility RWE sell energy operations to a Russian investor, even as it enforces sanctions against the country over the Ukraine.

  • Facts

    Facts

    • The United States and European Union ban exports of oil exploration technology and weapons to Russia.
    • But deals can still be permitted if they were signed before sanctions went into effect in July.
    • Germany receives more than a third of its natural gas and oil from Russia.
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    Audio

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Germany is grappling to balance its objections to Russia’s role in the Ukraine crisis with its own economic interests.

While pushing for economic sanctions against Russia, the German government on Friday said it will approve a €5.1 billion ($6.9 billion) energy deal that will allow German utility company RWE to sell an oil and gas business to the Russian consortium LetterOne, led by Russia’s second-richest man, Mikhail Fridman.

Germany’s economy ministry will allow the sale of RWE oil and gas unit DEA, including stakes in about 190 oil and gas licenses or concessions in Europe, the Middle East and North Africa.

Only two weeks ago, Germany cancelled construction of a military training facility near Moscow to be built by the German defense firm Rheinmetall amid the Ukraine sanctions.

The European Union and United States have imposed sanctions against Russia for its backing of pro-Russian separatists in Ukraine and annexation of Crimea.

Sanctions include the sale of certain high technology equipment to the Russian army, special technologies for oil extraction, and financial market restrictions for Russian companies. Dozens of high profile Russian policymakers, businesspeople and companies have also been put on a sanctions list, facing, for example, asset freezes.

However, transactions that were signed before the sanctions were put in place are being permitted to go ahead. For instance, the French sale to Russia of two military assault ships, worth €1.2 billion, is going through.

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