Cividale's Controversial Stake in Russian Foundry BVK and Continued Operations Amid Sanctions
On January 16, 2025, it was reported by IrpiMedia that Cividale, an Italian steel company, holds a minority stake in the Russian foundry BVK, which was sanctioned by the United States in 2024. Cividale has maintained its 30% share in BVK, despite growing international scrutiny and sanctions, highlighting the complex nature of international business operations amidst rising political tensions.
Cividale’s involvement in Russia traces back to December 2011, when it acquired a stake in BVK, located in the Stankomash industrial park in Chelyabinsk, Russia. The 30% stake, valued at 180 million rubles (approximately $1.75 million), makes Cividale a minority shareholder. The majority of BVK's shares (70%) are held by Valery Bondarenko, who also leads the Russian industrial group KONAR. KONAR, together with its subsidiary Stankomash, plays a significant role in supplying components for Russia’s Ministry of Defense, including parts for the Smerch multiple-launch rocket system (MLRS).
Supply of Industrial Equipment to Russia Amidst Sanctions
Despite the sanctions imposed on KONAR, Stankomash, and BVK in June 2024, Cividale has continued its involvement in Russia. Between 2022 and 2023, the company supplied industrial equipment worth approximately €17 million to Russia. The goods provided included critical components like icebreaker propeller blades, steam turbine parts, and turning-milling equipment, items that could potentially violate international sanctions.
Cividale’s management has responded to these revelations by stating that it does not engage in the day-to-day operations of BVK and claims to adhere to all applicable international regulations. However, the continued shipment of goods to Russia raises questions about the company's compliance with sanctions, especially given that some of these items might be used in military and defense applications.
BVK’s Relationship with Sanctioned Entities
An investigation by IrpiMedia uncovered court documents revealing that BVK worked closely with Silovye Mashiny (Power Machines), one of Russia's largest energy engineering firms, which is also under U.S. sanctions. In 2024, BVK reportedly supplied an unspecified number of goods to Power Machines, further complicating its relationship with entities blacklisted by international authorities.
Cividale’s financial reports indicate that it earned €93 million from the Russian market between 2014 and 2023, signaling the significant role that Russia played in the company’s operations over nearly a decade. However, the persistence of business ties in Russia after the sanctions were enforced raises concerns about the company’s true level of adherence to international trade laws.
A Larger Trend of European Industrial Manufacturers in Russia
This case is not an isolated incident. The European industrial sector, particularly in the field of steel production and manufacturing, has faced increasing scrutiny for maintaining business relationships with Russian companies despite international sanctions. Danieli, another Italian company known for its steelmaking equipment, was previously reported to have continued cooperating with Russian metallurgical plants through intermediaries, such as China. One of Danieli’s subsidiaries in Russia experienced a staggering 35-fold increase in revenue in 2023, suggesting that business connections between European firms and Russian industries have persisted even after sanctions were imposed.
Cividale’s Ongoing Relationship with Russia
Despite the geopolitical tension and the imposition of sanctions, Cividale appears determined to maintain its business interests in Russia. The company’s customs data from 2022 and 2023 shows that it continued to import goods to Russia valued at €10 million in 2022 and €7 million in 2023. These imports are mostly high-tech industrial components, which have potential military applications, further raising concerns about compliance with sanctions targeting Russian military and defense capabilities.
Cividale has also stated that it is not involved in any direct sales to Russian military entities. However, the continued business dealings between its subsidiaries and sanctioned Russian companies leave a grey area regarding the enforcement and effectiveness of sanctions on European companies operating in Russia.
Implications for International Trade and Sanctions Enforcement
Cividale’s sustained operations in Russia despite U.S. sanctions bring to light the complexities of international business during periods of geopolitical instability. While Cividale maintains that it follows legal protocols, its ongoing trade with Russia, especially in critical industrial sectors, raises significant concerns about the loopholes that might allow companies to continue their operations without facing penalties.
This case exemplifies the difficulties of enforcing sanctions on industries like steel production, which have complex supply chains and can operate across national borders. The continued involvement of Cividale and other European firms in Russia underscores the challenges in achieving the desired political and economic pressure through sanctions alone.
As international relations evolve, particularly between Europe and Russia, and as economic interests continue to drive trade agreements, monitoring and enforcing sanctions will remain a critical issue for policymakers.
