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MH17 tension drives wedge between Bombardier and Russian partners

Bombardier Aerospace employees assemble a Q400 airliner

Darren Calabrese/THE CANADIAN PRESS

Rising international tensions over the shooting down of a passenger jet in the Ukraine are taking their toll on talks between Bombardier Inc. and its Russian joint venture partners for a $3.4-billion (U.S.) turboprop project in the country.

Montreal-based Bombardier struck a preliminary accord in August 2013 for the final assembly of the regional-jet Q400 in Russia and also clinched preliminary deals to sell 100 of the planes to Russian industrial and defence conglomerate Rostec and leasing firm Ilyushin Finance Co.

The deal was set to close before the end of this year, but a Bombardier Aerospace spokeswoman now says that date may have to be pushed into 2015.

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"Given the delicate situation and the timeframe and the difficult context it would be unrealistic for us not to account for a potential movement in the project's timeline," Marianella de la Barrera said in an interview Tuesday.

"There is a chance that the timeline could shift to the right."

As recently as last week, aviation industry reports said negotiations to open an assembly plant in Russia were close to a successful conclusion but that differences over the pricing of the Q400 remained.

Canada announced a fresh round of sanctions against Russia on Monday as criticism mounted over that country's role in supporting separatists in eastern Ukraine, who many critics accuse of shooting down the commercial airliner.

Russia is laying blame for the downing of Malaysia Airlines Flight MH17, which killed 298 people, on the Ukrainian military.

Back in March, the talks between Bombardier and its Russian partners were already showing signs of strain after Russia's incursion into Crimea and the political crisis in Ukraine.

In May, Russia's industry minister was quoted in a Russian press report as saying that Bombardier's price for the 70-to-80-seat Q400 was too high.

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Ms. de la Barrera said at the time that Bombardier "remains committed to finalizing the contract with Rostec in 2014."

She also said that no Rostec officials appeared on the list of Canadian government sanctions against 17 Russian and Crimean officials.

Russia and the Commonwealth of Independent States represent a potentially big market with an estimated 350 turboprops that could be sold there.

The Q400 deal in Russia is intended to solidify Bombardier's presence in the country and the region as well as counter a threat from lower-priced turboprop manufacturer ATR.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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