VINACHEM

Sanctions imposed on Russia are necessary, justified, and the only option to stop the war in Ukraine, the CEO at German chemicals major Evonik said on Thursday.

Christian Kullmann put the blame squarely on what he described as Russian President Vladimir Putin’s autocratic regime, and not on the Russian people.

The CEO added, however, that  higher energy costs due to the war and potential supply disruptions from Russia would “clearly go beyond the threshold of pain” for energy-intensive companies like chemicals.

Kullmann was speaking to reporters from Evonik’s headquarters in Essen, Germany following the company’s 2021 financial results publication earlier on Thursday.

“In order to stop this war sanctions are necessary. They affect western companies where Russia has become an important market, but sanctions are without alternative,” he said.

Kullmann pointed out that the Russian market was of limited importance to the wider European chemicals industry, with only 2.4% of its exports going to Russia, compared with 4.5% to Ukraine.

It is a very different picture for Evonik; sales in Ukraine amounted to around €10m, and was “not an impairment”, according to Kullmann.

Evonik’s sales in Russia amounted to 1% of the total, said the CEO.

Asked about the company’s plans to continue selling material to Russia, Kullmann said Evonik would follow sanctions that have been implemented, which have not covered many chemical products so far.

“In view of sanctions … we can still do business with Russia [and it] will continue. These are businesses with feedstock which are needed by the population of Russia and they are not our enemy: that is the Russian regime,” he said.

“We will continue to care for and deliver goods to the Russian population to the extent it is allowed.”

Although Evonik has not been affected by changes in the SWIFT banking system after sanctions on some Russian banks were imposed, the company’s CFO said the rouble’s depreciation was a potential challenge.

“Bear in mind the rouble has decreased and can no longer be transferred and, with future potential business, we will have to take that into consideration,”  said Ute Wolf.

ENERGY: ‘BEYOND THRESHOLD OF PAIN’

Although Russia may not be a key market to sell chemicals to, European companies rely heavily on energy from Russia to keep production going, and the potential scarcity of supply presents a real challenge going forward.

“Another energy cost increase would now clearly go beyond the threshold of pain if, in the aftermath of war, there were bottlenecks of supply severe economic damage may be looming for many companies here in Germany,” said Kullmann.

The CEO welcomed German Vice-Chancellor Robert Habeck’s initiative to shore up energy supplies to ensure that industry could continue to run.

“Supply security takes precedent over climate protection, so he can rely on our full support. Does this mean climate protection ranks second? No, it is about concrete action for the best of ideology, people, and industry,” he said.

“If you take a long-term view, climate protection will take a special role.”

Kullmann was in favour of looking at lengthening the lifespan of coal-fired power plants, assessing the continued use of nuclear power plants, and evaluating how quickly gas storage facilities can be filled.

Previously a firm advocate of the Nord Stream 2 pipeline, Kullmann agreed that it could not be commissioned given the current situation.

“The pipeline Nord Stream 2, which I defended time and again in the past year, would have been a good thing – would have. Clearly, in such a situation we cannot talk about commissioning it,” said the CEO.

“It is about life and death, and against this backdrop any sanctions imposed by the west are justified.”

The CEO also voiced support for German Chancellor Olaf Scholz and his view that the crisis was a watershed moment, that times are changing dramatically in European politics as well as for military alliances and globally-operating companies like Evonik.

“When it comes to supplies it is crucial we don’t become dependent on single suppliers, whether it is natural gas microchips or vaccines,” said Kullmann.

“This is now truer when free world trade is threatened like never before.”  - ICIS-