The Dax group is suspending new business in Russia, but wants to fulfill existing contracts if the sanctions allow this.
(Photo: lime tree)
Munich The Dax group Linde has stopped new business in Russia. In view of the current situation, the development of new projects is being suspended, Linde CEO Sanjiv Lamba wrote in a personal email to the employees, which is available to the Handelsblatt. The group will also adhere to the sanctions for existing contracts without exception.
In the past few weeks, many other German companies have already taken action of their own accord. BMW stopped production in Russia, Siemens and Siemens Energy stopped new business.
But Russia, with its raw materials, is a particularly important market for Linde plant construction, and Gazprom has been one of the most important customers in recent years. The step is therefore seen internally as a “fundamental decision”, according to industry circles. Projects like pipelines and gas processing plants would take years to develop.
Business affected by sanctions has already been stopped at Linde or will be shut down in the near future. Linde intends to fulfill the existing contracts if this is permitted under the sanctions. In the environment of the company it was said that the energy supply was a critical issue. Politicians must decide here which activities, for example in gas liquefaction, are still desired and which are not.
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Companies that still have long-term contracts in Russia are currently facing difficult decisions. The chairman of the Committee on Eastern European Economic Relations, Oliver Hermes, said on Wednesday that the sanctions policy was expressly supported. “Unsanctioned business relationships are and will remain legitimate.”
There are “often good reasons” such as maintaining the supply of food and medicine as well as the technical safety and functionality of systems. A complete break in economic relations would, in his estimation, “destroy any foundation for a possible new beginning in the future”.
Lamba also emphasized in his email that the sanctions had been carefully structured by the governments in order to put pressure on Russia. But some channels were deliberately kept open. Linde is a company with values and supports refugees and encourages employees to do the same.
Large orders worth six billion dollars
Last autumn, Linde had two major orders worth six billion dollars from the Russian energy group Gazprom. “We are very happy with these projects,” said Lamba at the end of 2021 when presenting the nine-month figures to analysts, then as Chief Operating Officer. They have “excellent relations” with Gazprom.
The group was awarded the contract for a gas processing plant and an LNG liquid gas plant in a large industrial complex near Ust-Luga. In addition, based on previous orders, the Group is involved in a plant as part of the “Power of Siberia” pipeline project with several orders; the pipeline is intended to connect natural gas fields in eastern Siberia with northeastern China. The plant was to be built in five construction phases by 2024.
Whether all of these projects will be completed remains to be seen. Elsewhere, Linde could benefit from the geopolitical turmoil. In order to reduce dependence on Russian gas, Europe wants to focus more on liquid gas. A new LNG terminal is planned in Brunsbüttel. A Belgian group of investors is planning a terminal in Wilhelmshaven. The LNG specialist and plant manufacturer Linde could possibly use this to compensate for some of the potential failures in Russia.
Business continues to be good in the rest of the world. Last year, sales rose 13 percent to $30.8 billion. Operating profit even improved by 50 percent to five billion dollars. “The best times are still ahead for Linde,” said ex-CEO Steve Angel, who moved to the top of the board of directors on March 1.
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