Bankruptcy Threatens Russia’s Gaz Group as U.S. Sanctions Seem Imminent

Russian carmaker Gaz is saying the company will fall into bankruptcy if the U.S. does not abandon plans for sanctions beginning next month, Automotive Logistics writes.

Gaz Group’s owner, Oleg Deripaska, who himself is already on Washington’s sanctions list, warned that July 4, when the existing sanctions are due to come into full effect, could be the last functional day of the company’s production operations.

The U.S. Treasury’s Office of Foreign Assets Control (OFAC), posted an evidentiary memorandum on May 28, explaining why the sanctions against Deripaska and some of his companies, including Gaz Group must be introduced. The main accusations were that the Russian billionaire had acted in support of Russian President Vladimir Putin and was involved in the energy industry.

According to the billionaire businessman, some non-Russian companies, including Daimler, have already started curtailing cooperation with the company. In addition, some automotive components suppliers have torn up their contracts with the carmaker and the company has found itself under some pressure from Russian banks.

Over the past few years, Gaz Group has been putting a lot of effort into developing international business. For example, in February the company started building a vehicle assembly plant in Azerbaijan that was expected to begin commercial operation in 2020 and to export light commercial vehicles (LCVs) to Turkey, Georgia, and Iran. The designed production capacity of the plant is 1,000 LCVs per year.

Gaz Group had earlier set a target that the revenue generated from its export operations should equal the revenue generated from LCVs sales in Russia as soon as 2020. The company has been exporting LCVs to at least 39 countries and the share of export revenue was reportedly close to 25% in 2017. Last year, Gaz Group sold 60,600 finished vehicles on the Russian market, 4% up in 2017, the Russian Association of European Businesses estimated.