The head of BASF said that there is “no place” for supporters of the special operation in the company.

Employees who did not condemn the special operation in Ukraine “should not be members of the BASF family,” the HEAD of the concern believes. Publicly, a top manager opposed the ban on oil importsand gas from RUSSIA. What is known about the departure of BASF,

"None of these people should be a member of the BASF family," BASF chairman Martin Brudermüller said of those who support and do not condemn Russia's sting operation in Ukraine. This statement was made in his speech to the company's employees at the end of March and was addressed, among other things, to the employees of the Russian office (RBC managed to get acquainted with the video of the top manager's speech): “... everyone who also condemns what is happening in Ukraine, we welcome both the international community and the BASF family. But let me also say: you have no place in this community if you support the war, and I must say that none of these people should be a member of the BASF family.”

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BASF did not answer RBC's question about how employees, including the Russian office, reacted to this statement, noting only that this "was an internal event" that the company does not comment on.

BASF, the world's largest chemical concern, announced at the beginning of March that it was halting new investments in Russia, and two months later, in April, it was completely shutting down its operations. At the same time, Brudermüller himself, in an interview with the Frankfurter Allgemeine Zeitung in early April, said that in the event of a cessation of imports or a long-term cessation of gas and oil supplies from Russia, Germany would face an unprecedented economic crisis. “This could lead to the worst crisis in the German economy since the end of World War II,” the top manager said. Are we open-eyed and want to destroy our entire economy? (answer in the context of the boycott of energy imports from Russia. -) Everything that we have created over the decades? I think such an experiment would be irresponsible."

Russia launched a special military operation in Ukraine on February 24. President Vladimir Putin called its goal "demilitarization and denazification" of the neighboring country, as well as saving the population of Donbass from genocide by Kiev. The President also noted that Russia was forced to launch a special operation due to security risks. Kyiv then severed diplomatic relations with Moscow and introduced martial law.

In Russia, the German company began to work almost from the moment of its foundation: in 1874, the first sales office was opened in Moscow (the founding date of the concern itself is April 6, 1865), and in 1877, mass production of dyes began in the village of Butyrki near Moscow.

In 2001, Russia and the CIS were separated in the structure of BASF into a separate region with the head office in Moscow. In 2008, the company opened its own plant for the production of paints and varnishes in Pavlovsky Posad. Another eight sites (for example, for the production of fuel additives and flotation reagents) are partner sites. Although the size of the Russian business makes it possible to include it among the largest companies in Russia in terms of revenue, in the structure of income of BASF itself, the results of the markets of Russia and Belarus are insignificant: with an annual revenue of the entire concern in 2021 of € 78.6 billion, their share is less than 1%.

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BASF has taken the decision to end its current operations in Russia and Belarus by early July. The exception is a business that “supports food production because war carries the risk of provoking a global food crisis.” As RBC's source, who is familiar with BASF's plans, clarified, by July 10 all remaining import deliveries should stop, and the Pavlovo Posad plant will be stopped. Until the end of 2022, the company also promised to support approximately 600 Russian employees. How and under what conditions, BASF did not specify.

The termination of BASF's work in Russia affects the production chains of its Russian customers.

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Automobile manufacturing

Since 1993, BASF began to supply to Russia, and then, after the construction of a plant in the Moscow region, to produce paintwork materials that are used in the domestic automotive industry. Localization was based on the rapidly growing Russian market. “When deciding to build this plant, we relied on statistical data on the growth of the Russian economy. In addition, we took into account the fact that by now the factories of many of the largest automotive companies, including those from Asian countries, have already been opened in Russia, and other manufacturers plan to build their enterprises here in the near future, ”explained then at the opening ceremony of the plant Juan Jiménez-Carrillo Gerber, who was then head of BASF Coatings Europe.

BASF has already encountered in Russia the need to assess sanctions risks and their impact on their business. For example, this happened in 2018, after the US Treasury included Russian billionaire Oleg Deripaska and the GAZ group (also a BASF client) on the SDN list. “The head of BASF SE, Kurt Bock, has repeatedly expressed doubts about the effectiveness of economic restrictive measures and publicly advocated the continuation of dialogue and trade with Russia. The sanctions did not affect either goods or raw materials imported by BASF into Russia, ”the German concern said at the time.

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One of the key partners for BASF in Russia was AvtoVAZ. According to a source close to the German company, the Russian automaker had a "high degree of dependence" on the concern's products when painting cars. BASF, according to its information, sent a notice of termination of cooperation to AvtoVAZ on May 31, and the volume of the remaining paint stocks will be enough for one or two months of work after the resumption of production in full. After the start of the special operation, AvtoVAZ introduced idle days several times, explaining this, among other things, by problems with the supply of a number of components. On Wednesday, June 8, AvtoVAZ resumed production, the first Lada Granta Classic of the 2022 model year rolled off the assembly line. At the same time, according to the president of the company Maxim Sokolov,

AvtoVAZ began production of a "simplified" version of Lada Granta Auto

At AvtoVAZ, when asked by RBC how much the automaker will have enough stocks from BASF and whether the company has found a replacement for him, they noted that "AvtoVAZ is aware of the current situation" and "is negotiating and testing products from alternative suppliers."

Drug production

Another segment affected by BASF's departure is the pharmaceutical industry. According to the analytical RNC Pharma, in 2021 BASF supplied to Russia, for example, ten types of pharmaceutical substances, as well as excipients used in the manufacture of medicines. Already in May, a number of distributors announced a reduction in supplies from BASF and the search for alternatives.

RBC has letters from Biocad, Veropharm (part of Abbott), Pharmasyntez and R-Pharm, in which top management asks BASF to resume supplies of components and substances for the production of vital drugs.

Thus, R-Pharm draws attention to the uniqueness of Collifor R407 micro used in the production of anti-HIV drugs. The letter from Veropharm, in turn, notes that without Kollifor ELP, the production of the anti-cancer drug Paclitaxel is impossible, because BASF is the only supplier. Appealed to the manufacturer of substances and the Swiss Novartis, which needs supplies from BASF for the local production of a number of drugs - in particular, the anticoagulant Rivaroxaban, the muscle relaxant Sirdalud, the anti-inflammatory Ketonal.

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A representative of the Pharmasyntez company confirmed the appeal to BASF, saying that no feedback had been received from the German holding. The materials of the German corporation Pharmasyntez are used in the production of a number of hormonal drugs, drugs for the treatment of infectious diseases, as well as some immunosuppressants. “Since stopping the supply of necessary auxiliary components for some of them, we have already found replacements by contacting other manufacturers, primarily in CHINA, India and Southeast Asia,” a company representative said. Now, according to its own data, it has formed a sufficient supply of raw materials and auxiliary materials for the production of a number of vital drugs.

At the time of publication, Biocad, Veropharm, R-Pharm and Novartis did not answer questions from RBC.

The Ministry of Industry and Trade is aware that a number of manufacturers have approached BASF. The ministry clarified that manufacturers are working on alternative channels for the supply of necessary substances. The representative also noted that the current production of semi-finished products for obtaining analogues of "Kollifor" 407 and "Kollifor" ELP is carried out by the Dzerzhinsk group "Norkem".

At the same time, the reserves of the necessary raw materials, which they formed during the pandemic, will give companies time to look for alternative channels for the purchase of ingredients, excipients and materials, the ministry believes. In this matter, the department is "ready to assist manufacturers."

DSM Group CEO Sergei Shulyak estimates Russia's dependence on international supplies of pharmaceutical substances at 80-85%, while the component base for the production of substances is almost all imported, the expert specifies. Nevertheless, BASF's share in the total volume of Russian imports is minimal, and in recent years it has been steadily declining, says Nikolay Bespalov, DIRECTOR of development at the analytical company RNC Pharma. In 2021, in the total volume of foreign supplies of substances, the share of BASF in volume amounted to 0.81% (corresponding to 136.8 tons) and 0.13% (257.9 million rubles) in monetary terms. The volumes of retinol, calcium pantothenate and levomenthol were relatively significant, but, as Bespalov clarifies, BASF was not the only supplier.

Sergey Shulyak notes that many BASF components can be replaced, but for pharmaceutical manufacturers, the issue of purity and quality of materials is always important. The expert assumes that in the near future Russian manufacturers may try to negotiate with foreign suppliers on the purchase of those components and substances for which there are no analogues through third countries. However, this will most likely lead to an increase in the cost of supplies by about 20-30%.

Pet food

Despite the exception announced by the company - the continuation of imports to Russia of components involved in the production of food - and it may be reduced in the near future. BASF is a major supplier of products for Russian agriculture: seeds, plant protection products, and feed additives for farm animals. Sergey Mikhnyuk, executive director of the National Feed Union, heard about a possible stop, in particular, of the supply of feed additives to Russia. BASF has not refused to fulfill obligations under contracts already concluded with Russian companies, but it does not plan to conclude any new contracts for supplies to Russia and Belarus, says RBC's interlocutor.

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In the supply of seeds to the Russian market, BASF, according to expert estimates, accounts for about 10%, in plant protection products - about 13%, and the supply of feed additives is primarily for cattle, says Alexei Ivanov, head of the HSE Technology Transfer Center .

If the supply of BASF products stops, this will not be critical for the Russian agro-industrial complex: it may be difficult to replace only certain components that affect niche processes in agriculture, and there are other foreign companies, including European ones, that produce and continue to produce them deliveries to Russia, says Ivanov. At the same time, the expert does not rule out that BASF's withdrawal from the Russian market will affect the development of agriculture: the loss of a major supplier reduces competition, and suppliers that begin to replace BASF may start selling their products more expensive, and this leads to higher production costs and may affect prices for consumers. In terms of reputation, BASF's withdrawal from the Russian food market could set off a chain reaction and increase pressure on other players,

Among the supplements that BASF supplies to Russia is vitamin A: according to the analytical company Feedlot, in 2018 the German corporation was the largest supplier of vitamin A to Russia, with a share of more than 30% of imports. Vitamin A1000 used in animal husbandry, which is supplied by BASF, can be replaced with a Chinese counterpart, but China may not have the volumes necessary for the Russian market, and a lack of the vitamin can lead to an imbalance in feed, Mikhnyuk points out.

Miratorg, the largest beef producer in Russia, declined to comment, RBC also sent a request to the Rusagro group.

BASF and gas

BASF still has partner projects with Russia in the oil and gas sector. In 2019, Wintershall (part of BASF) completed a merger with Dea Deutsche Erdoel AG, controlled by the LetterOne group (founded by Mikhail Fridman and his partners). Wintershall Dea was one of the five European financial partners of the Nord Stream 2 gas pipeline project. But in early March, the Wintershall Dea board decided to write off about €1 billion of investment in this project. “The world we live in today is very different from the world just a few days ago. The President of Russia is waging an aggressive war against Ukraine,” explained the head of Wintershall Dea, Mario Mehren, in a personal address. — Wintershall Dea has been operating in Russia for over 30 years. Many of our colleagues work daily in our company and our joint ventures with partners from Russia. <... > However, the foundation of our work in Russia has been shaken to its foundations.” In early May, Bloomberg, citing sources, announced a possible division of assets between Wintershall Dea partners. “Because of the Russian business, Wintershall is obviously toxic, and it is impossible to bring it to an IPO or even sell it to a strategic buyer,” Oliver Voyan, an analyst at Astler Research, said in an interview with the agency. Wintershall Dea continues to participate in existing joint gas production projects with Gazprom: the companies are developing the Achimov deposits of the Urengoyskoye field, as well as the Yuzhno-Russkoye field. “Because of the Russian business, Wintershall is obviously toxic, and it is impossible to bring it to an IPO or even sell it to a strategic buyer,” Oliver Voyan, an analyst at Astler Research, said in an interview with the agency. Wintershall Dea continues to participate in existing joint gas production projects with Gazprom: the companies are developing the Achimov deposits of the Urengoyskoye field, as well as the Yuzhno-Russkoye field. “Because of the Russian business, Wintershall is obviously toxic, and it is impossible to bring it to an IPO or even sell it to a strategic buyer,” Oliver Voyan, an analyst at Astler Research, said in an interview with the agency. Wintershall Dea continues to participate in existing joint gas production projects with Gazprom: the companies are developing the Achimov deposits of the Urengoyskoye field, as well as the Yuzhno-Russkoye field.

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