Italy’s PM Conte launches a new factory in Chelyabinsk, emerged on sanctions

The example shows that the sanctions have some positive effects as the state and the major state-owned companies intensified the efforts to foster local manufacturing. But it does not mean that the sanctions have an overall positive impact. They create a lot of uncertainty and deter investments in many areas and projects.

Italian Prime Minister Giuseppe Conte made his first trip to Russia since taking office in June. The overall tone of the visit was that both countries pursue to boost economic ties despite European Union sanctions against Russia. Italy has been a sceptic of the sanctions policy, and Italian companies were playing a notable role in developing of new production capacities in the country in its effort to reduce dependency on imports in recent years, especially in the oil&gas industry.

Following hours of talks in the Kremlin, public officials and business leaders held a meeting, at which Putin and Conte took part in a video call to give a symbolic starting signal  for the launch of a new factory built by Russian Electric Motors (REM) in cooperation with Italy’s Nidec in Chelyabinsk.

REM was set up in late 2015 as a joint venture between Transneft (51%), Russia’s largest oil transportation company, and Konar (49%), a manufacturer of valves and fittings for pipelines, with the goal to localize the production of high-voltage electric motors to be used by the major shareholder Transneft to modernize its pump systems of the existing pipeline network measuring around 80,000 km. 

Nidec was chosen as a cooperation partner based on its capability to design highly reliable motors suitable for oil and gas pipelines in environments with extreme climates as well as the flexibility to undertake custom projects. The contract worth 125 million required specific engineering solutions based on existing high efficiency product families for the manufacture of motors with a capacity of up to 8 MW and the ability to work at temperatures as low as -60°C. Also included was the design of a plant located in Chelyabinsk, and the technical training for the plant staff. In addition, Nidec supplied first 250 motors in the period until the new plant commences operation.

In less than three years a state-of-the art plant was erected, which not only meets the needs of Transneft, but is also competitive in the world market.

Vladimir Putin called the venture a good example of a successful and mutually beneficial cooperation: “The project was the result of a close partnership of the Russian companies Transneft and Konar with the world leader in the field of industrial solutions – the Italian company Nidec. The motors are supposed to be used primarily in the field of pumping oil and petroleum products. They are highly demanded by the domestic oil&gas industry and will, no doubt, be in demand in the markets of other countries. The company’s products will also be used in other key sectors of the Russian economy, primarily in the shipbuilding industry. In years to come, new ships to operate on the Northern Sea Route can be equipped with the motors, as well as the pipelines of the Arctic LNG 2, Baltic LNG and Vladivostok LNG projects. There are further opportunities in mining, metallurgy, wind power generation and transport sectors. I will note that the new enterprise is already the fifth created with Italian participation in the industrial park Stankomash. In fact, the Italians helped to create a whole industrial cluster, where important high-tech industries are located.”

There’s really nothing we could do better

Nidec’s representative stated that his company shared its more than 100 years of experience with the Russian partner. This, in his opinion, will allow REM to become a leading manufacturer not only in Russia, but also in the world.

Earlier YT published an article with impressions of a German delegation from its visit to another Transneft factory established in this cluster in 2016 with the support of Termomeccanica Pompe: “a state giant has built a factory that makes even the most experienced German managers freeze their smiles. In Chelyabinsk, under the pressure of sanctions and localisation policies, Transneft Oil Pumps has emerged as a subsidiary of the state holding Transneft with the sole task to ensure the parent company is supplied with the horizontal and vertical pumps, spare parts as well as maintenance and repairs. With Italian help, a plant was built that could compete with any other pump manufacturer in the world…At this point, I often wrote about the rationality of all-covering self-sufficiency, but in parts this strategy works terrifying well. Chelyabinsk is tangible proof of that. Ultimately, profitability is not the focus of such projects. But in this way production capacities are created, which can become serious competition for German companies as well. Modern technology, the rouble exchange rate and export orientation make this possible. “There’s really nothing we could do better. The production is at the same technological level as in Germany”, says a German manager, both appreciative and frightened.”

Transneft aims to reduce the number of imported supplies to 3% by 2020, after implementing  the company’s current framework for the import substitution counting 26 types of equipment to be produced in Russia.

As both leaders watched the launching ceremony, Russian and Italian business executives signed a package of cooperation agreements in the shipbuilding, automotive, energy and other sectors.

 

Note: Nidec ASI changed its name in 2012 when Nidec acquired the company, Ansaldo Sistemi Industriali (ASI). The company offers customised solutions across the globe for a wide range of industrial applications. Its target markets are petroleum, traditional and renewable energy, steel, marine and industrial automation. The multinational is specialised in heavy applications requiring high power and performance: electric motors and generators with a capacity of up to 65 MW (87,000 horsepower); electronic power inverters and converters; automation and industrial process software; power station and hydro-electric generator retrofitting; integrated systems for the production of electricity from renewable sources and stabilisation of connections to the national grids. In November 2015,  Nidec ASI was awarded a large contract for the storage of energy in Germany in order to stabilise the domestic electric grid, as required when transferring from nuclear to renewable sources following the post-Fukushima referendum.