Moscow is weighing whether it should end its $3.4-billion (U.S.) deal with Bombardier Inc. to buy Q400 turboprop planes to be built in a new assembly plant in Russia, the country’s industry minister said.
The political crisis in Ukraine has strained relations between Canada and Russia, and Moscow now appears to be balking at the financial terms of the aerospace joint venture announced last year.
In what was billed as a breakthrough in Russia, Bombardier struck a preliminary accord in August, 2013, to establish a new business with Rostec, a state-owned industrial and defence conglomerate. Rostec and leasing firm Ilyushin Finance Co. agreed to buy at least 100 Q400 planes, valued at $3.4-billion at list price, that would be assembled in a new plant in Ulyanovsk, a special economic zone 900 kilometres southeast of Moscow.
Bombardier acknowledged in March that political tensions between Ottawa and Moscow over the annexation of Crimea had affected talks to formalize its letter of intent with Rostec, as Canada imposed sanctions on Russian and Crimean officials.
“It’s softened up a little bit of the discussions,” Bombardier Aerospace president Guy Hachey said at an investor’s conference in New York at the time.
But Moscow says it is now reviewing the financial terms of the joint venture with a critical eye.
“Regarding the Bombardier Q400, independent of the political situation … is the question of whether to continue or end the project,” Industry Minister Denis Matourov told Russian agency Ria Novosti on Thursday.
“We have reviewed the question of price with Rostec, given that the one put forward by the Canadian party today is high,” he added on the sidelines of the Saint Petersburg International Economic Forum.
Bombardier Commercial Aircraft spokeswoman Marianella de la Barrera reacted cautiously to Mr. Matourov’s comments. “Given the current context and the delicate situation, we are keeping a close eye on the situation,” she said.
“Bombardier remains committed to finalizing the contract with Rostec in 2014,” added Ms. de la Barrera.
While many Western governments retaliated with sanctions to Russia’s annexation of the Black Sea peninsula of Crimea, Canada is one of Moscow’s most vocal critics. Prime Minister Stephen Harper and Foreign Affairs Minister John Baird compared Russia’s actions in Eastern Ukraine to Nazi Germany’s 1938 annexation of Sudetenland.
Canada imposed travel bans and asset freezes on 17 Russian and Crimean officials. In addition to those sanctions, Ottawa recalled its ambassador from Moscow while pledging $220-million in aid to the new Ukrainian government.
“Rostec officials do not appear on the list of people targeted,” Ms. de la Barrera noted.
The Bombardier spokeswoman said she was unaware about a disagreement over the price of the deal with Rostec. “I can’t comment on that,” she said.
However, Ms. de la Barrera surmised that Minister Matourov may have been misinformed. “Maybe he doesn’t have all the information because he is not at the table of negotiations,” she said.
With files from Agence France-Presse