Support for Russia's War Economy? A German Auto Parts Supplier Raises Eyebrows
It was a "challenging year," says Klaus Rosenfeld, CEO of German industrial and auto parts manufacturer Schaeffler, when he presented the company’s latest numbers in a recent teleconference. Profits plunged by 14 percent in 2022 for this vast corporation with 83,000 employees. Yet Rosenfeld still described it as a "solid performance." In other words: It could have been worse.
The article you are reading originally appeared in German in issue 11/2023 (March 11th, 2023) of DER SPIEGEL.
The Russian invasion of Ukraine hit the German automobile industry hard. Supply chains were threatened as parts from the east could no longer be delivered, and the massive sanctions imposed by the West on Russia meant that German companies could hardly keep their Russian factories up and running. And Moscow, for its part, has made it extremely difficult to sell those production sites due to a complicated approval process.
It's a problem that has beset Schaeffler as well, with the company currently seeking to complete its exodus from Russia. A few days before Rosenfeld announced his company’s latest numbers, he told the weekly newspaper Welt am Sonntag that it had "divested its Russian activities, but hasn’t yet been able to finalize it." Schaeffler, he said, is still waiting for the necessary permits.
Rosenfeld didn’t say who the buyer is. Nor did he mention the sale with even a single word during the recent conference call.
The deal is, after all, a rather sensitive one, as becomes clear from documents that DER SPIEGEL has obtained. Once the sale of the company’s factory in Ulyanovsk is complete, the new owner intends to contribute to the production of the GAZ Sadko, a four-wheel-drive cargo truck used by the Russian military to transport troops and materiel. Schaeffler’s Russian subsidiary is to be sold to Siegfried Wolf, an Austria businessman who also has excellent contacts in the German automobile industry. The 65-year-old is a member of the board at Schaeffler, Porsche SE and drivetrain supplier Vitesco Technologies – a key player in Germany’s key industry. And he is thought to have close ties to a Russian oligarch.
An instrument mechanic and engineer by training, Wolf can look back on an eventful career. He was hired in 1995 by auto parts supplier Magna, where he went on to became head of the company’s European operations and, ultimately, CEO of the entire corporation. In 2007, he met influential oligarch Oleg Deripaska when the Russian purchased a stake in Magna.
A tight relationship: Deripaska and Wolf in 2014Foto: photonews.at / IMAGO
Around three years later, Wolf joined the Deripaska empire, where he rose to become a member of the supervisory board at carmaker GAZ Group and at Russian Machines, a company that produces trucks, airplanes and railcars.
The fact that Deripaska’s long-time business partner Wolf now wants to acquire Schaeffler’s Russian factories has, according to information obtained by DER SPIEGEL, alarmed the Ukrainian anti-corruption agency NAZK. A strictly confidential investigative report describes the Austrian as a "proxy" of Deripaska, who has been targeted by multiple sanctions. Investigators suspect that Wolf is acting as the Russian’s behalf. Kyiv has launched an investigation into both men.
"Integral Component of the Putin System"
Oleg Deripaska is one of the richest men in Russia, with Forbes recently estimating his net worth at close to $3 billion. Following the collapse of the Soviet Union, he became involved in metal trading and built up an empire, including mines, factories, refineries and airports. And the vast GAZ Group.
Deripaska has consistently denied having particularly close ties to Russian President Vladimir Putin. But experts like Janis Kluge from the German Institute for International and Security Policy (SWP) consider the oligarch to be an "integral component of the Putin system." There are numerous photos from the last 10 years showing the two together, their heads often close together.
Deripaska, Wolf and PutinFoto: Sasha Mordovets / Getty Images
In 2018, the U.S. imposed sanctions on the billionaire in response to suspicions that he had illegally wiretapped a government official, engaged in money laundering and ordered a murder, among other suspected offenses. As a consequence, assets belonging to Deripaska's in the U.S. were frozen. Since then, those who engage in business with him or companies connected to him, including the GAZ Group, can be penalized. Deripaska rejected the evidence presented by the U.S. in support of the sanctions, saying that it was a "poorly researched report riddled with false statements and factual inaccuracies."
The EU also imposed sanctions on the oligarch last year. One of his companies is suspected of delivering weapons and equipment to the Russian military, while another allegedly produces vehicles used by the Russian army in Ukraine. When contacted for comment, he insisted that he neither owns an armaments manufacturer nor does he supply military equipment.
The sanctions are a problem for Denipaska. European companies like the Schaeffler Group are likewise no longer allowed to do business with him. The automobile parts supplier, however, has now chosen to sell its Russian subsidiary to Deripaska’s partner Wolf. Documents that DER SPIEGEL has obtained outline what the factory is to be used for in the future – and just how dubious the acquisition deal is.
Only Putin's Approval Is Still Needed
A 44-year-old Russian named Roman Vovk, who apparently worked as Wolf’s personal assistant and translator at the GAZ Group, is playing a key role in the purchase. On January 12, he wrote a letter to a former Russian economy minister who today is Putin’s economic adviser. Vovk is the director of a new company called PromAvtoKonsalt, which provides consulting to the automobile industry. The Russian company that is now supposed to take over the Schaeffler stake was only founded by Vovk himself last September. But in October, he already initiated the transfer of 100 percent of the company stake to Siegfried Wolf.
His letter reads: "We hereby request special permission from the president of the Russian Federation." That permission was for the purchase of Schaeffler’s Russian subsidiary, the letter stated, also noting that negotiations with the owner had already been held and a deal signed.
Vovk wrote in his letter that "deliveries to the GAZ Group and other producers of clutch parts, which the Schaeffler Group discontinued in 2022, would be resumed." That, he insisted, would secure the "technological independence of Russia’s largest automobile manufacturers." Vovk also wrote that the purchase of the Schaeffler factory would furthermore support the production of the GAZ Sadko four-wheel-drive cargo vehicle – words that the Kremlin was surely pleased to read.
Putin visiting a GAZ factory in 2017 in Nizhny Novgorod, RussiaFoto: Mikhail Klimentyev / ITAR-TASS / IMAGO
The GAZ Group, after all, badly needs domestic production sites to avoid becoming dependent on foreign suppliers. In addition, the company also appears to be strategically important for the Kremlin: Vehicles from the company are used by the Russian army in Ukraine and elsewhere. The European Commission recently took the step of adding a company from the GAZ Group to its sanctions list. The GAZ Group insists on its website that it only builds vehicles for civilian use and says it is not responsible for the conversion of its products by others for military use.
Shortly after the war started, Georg Schaeffler, chairman and majority owner of the family firm, told the German business magazine Wirtschaftswoche that Wolf has been known "for many years as a straightforward man in whom we have complete trust," adding that he sees "no reason whatsoever to doubt his integrity." Despite his closeness to Deripaska.
The Austrian newsmagazine Profil once referred to the duo as "the small and the big oligarch." In 2016, Putin even awarded Wolf the Order of Friendship. Wolf, in turn, once lobbied then-Austrian Chancellor Sebastian Kurz to help grant Deripaska, who was already the target of U.S. sanctions at the time, some leniency. A few months ago, Wolf made clear in comments to the German weekly Die Zeit what exactly he thinks about the EU sanctions regime: "People who have invested a lot here are being stripped of their assets."
In response to a query from DER SPIEGEL, Wolf stated that he does not work together "with people or companies that are affected by international sanctions." He added that he had long since "withdrawn from all previous operational activities in Russia."
Sale Almost Complete
Vovk’s petition arrived at the Ministry of Industry and Trade in early February. After a brief interval, the ministry announced that it had reviewed the request to allow PromAvtoKonsult to purchase the Schaeffler factory. It "considers it expedient to issue a special presidential resolution." The approval of the sale, the ministry noted, would ensure "consistent supplies for companies in the automotive industry."
In other words, the sale is essentially a done deal. Which has alarmed the Ukrainian anti-corruption authority.
Kyiv investigators aren’t just skeptical due to the striking closeness between Deripaska and Wolf. The authority has also uncovered suspicious money flows, a discovery that has likely solidified their suspicions that Wolf is acting as a strawman for Deripaska in the Schaeffler sale. At issue is a loan worth 25 million rubles – the equivalent of around $400,000 – that the Russian company PromAvtoKonsult received in December from an import company based in Moscow. That company is owned by a Netherlands-based firm called Optitech Distribution Holding, whose shareholders are not listed in Dutch public records.
One thing, though, does catch the eye: The director of the company is an employee of the GAZ Group, and at the time the loan was made, three executives of the Russian automobile conglomerate were on the supervisory board. Did the group that is so closely connected to Deripaska provide funding to a company that is supposed to belong solely to Wolf?
It isn’t clear who the GAZ Group belongs to today. The company did not respond to a query from DER SPIEGEL and Deripaska says that he has "given up control of the company." Wolf said that "as far as he knows," Deripaska no longer holds a stake in the company, having transferred it to his more than 40,000 employees. U.S. officials, however, don’t appear to be convinced and the GAZ Group remains on the sanctions list. And the statements from Deripaska and Wolf cannot be independently verified: Since the beginning of the war, many companies in Russia no longer have to make information about their ownership structures public so that they can circumvent sanctions.
Wolf has been paid well for his past services to the oligarch’s company. In a Russian income tax return for 2021, the Austrian recorded his earnings from the GAZ Group as the equivalent of 10 million euros. He also continues to hold a roughly 10-percent stake in the Group, though he says that he hasn’t received any dividends since the beginning of the war. He also says that he stepped down from the supervisory board last year and stated that he has "never participated in the production of military equipment" nor has he "earned money from such equipment in any manner."
Wolf and Deripaska did not provide answers to specific questions about the sale of the Schaeffler stake or the loan received from the Optitech subsidiary. They also declined to comment on accusations that Wolf is acting as the oligarch’s strawman in the purchase of the stake.
Schaeffler doesn’t appear to be bothered by the close ties between the indicted oligarch and their supervisory board member Wolf. In response to a query from DER SPIEGEL, Schaeffler confirmed that a deal had been signed with PromAvtoKonsalt in December 2022. An analysis of the transaction, the company said, found that it was "consistent with applicable U.S. and EU sanctions laws."
Schaeffler said, however, that it was unaware of the "details" of the financing structure of the purchaser, nor was it aware that Director Vovk is an employee of the GAZ Group. The company said it does not know who the economic beneficiary is behind the company that made the 25-million-ruble loan. The auto parts supplier also said it was unaware that PromAvtoKonsalt had sought approval for the deal by claiming to the Russian president that it would be supplying the GAZ Group. Schaeffler says it does not anticipate legal difficulties with the deal.
The group is, however, certain about one thing: A prerequisite for the transaction is that PromAvtoKonsalt be incorporated into an EU holding company belonging to its supervisory board member. This would ensure that "the existing sanctions regime would continue to apply."
For Siegfried Wolf, that means that the deal could soon be successfully concluded.