Russian Court Orders UniCredit to Pay $480 Million for Abandoned Gas Project

UniCredit, an Italian bank, has been ordered by a Russian court to pay $480 million for abandoning a gas project. The ruling has significant financial implications for the bank and could impact its operations in the region.

UniCredit, the Italian banking giant, is embroiled in a legal battle with a Russian court over an abandoned gas project. The St. Petersburg Arbitration Court has ordered UniCricit to pay 448.2 million euros ($479.44 million) in damages to St. Petersburg-based RusChemAlliance [1]. The ruling carries significant financial implications for UniCredit, potentially impacting its operations in the region.

The gas project in question was a joint venture between UniCredit, German chemical company Linde, and RusChemAlliance, a joint venture owned 50% by Gazprom. However, the project was terminated due to Western sanctions imposed on Russia over the conflict in Ukraine [1].

UniCredit was one of the guarantor lenders under the contract for the construction of a gas processing plant in Russia. When the project was halted, RusChemAlliance had made a 2 billion euro advance payment on the 10 billion euro contract [1]. UniCredit had issued part of the guarantee package in favor of RusChem on behalf of Linde.

The court had initially ruled in May that UniCredit's assets, including securities, real estate, and accounts, be seized. However, following negotiations, UniCredit agreed to pledge Russian OFZ treasury bond holdings with a market value of around 50 billion roubles ($574 million) instead [1].

The legal dispute comes at a time when UniCredit is already grappling with the impact of sanctions on its Russian operations. In May, the court had ordered the seizure of UniCredit's assets, affecting only a fraction of the Russian unit's assets, not the entire subsidiary [2].

The ruling by the Russian court is a reminder of the challenges that foreign businesses face in operating in Russia, particularly in the face of geopolitical tensions. As UniCredit navigates this legal battle, it will be important to monitor developments closely to assess their potential impact on the bank's financial performance and broader market sentiment.

References:
[1] MarketScreener. (2024, June 26). Russian court orders Italy's UniCredit to pay 480 mlon over aborted gas project. https://www.marketscreener.com/quote/stock/UNICREDIT-S-P-A-33364083/news/Russian-court-orders-Italy-s-UniCredit-to-pay-480-mln-over-aborted-gas-project-47246174/
[2] Reuters. (2024, May 17). Russian court seizes UniCredit assets, accounts, part of lawsuit documents show. https://www.reuters.com/world/europe/russian-court-seizes-unicredit-assets-accounts-part-lawsuit-documents-show-2024-05-17/