Siemens is scaling back its business in Russia after it learned that power generation equipment was being diverted to Crimea.
The German industrial group said it had received "credible information" that four gas turbines destined for a project in southern Russia had been "modified and illegally moved to Crimea against clear contractual agreements."
Russia illegally annexed Crimea from Ukraine in 2014. Sanctions imposed by the U.S., Europe and other Western countries on Moscow in response prohibit companies from supplying energy technology to the disputed region.
Siemens (SIEGY) said the diversion of the turbines constituted a "blatant breach of delivery contracts, trust and EU regulations."
The company said in a statement that it would sell its minority stake in Russia's Interautomatika and pursue legal action against TPE, the Russian company that was supposed to take delivery of the gas turbines.
Siemens also said it is halting deliveries of power generation equipment to Russian state-controlled entities while it figures out how to prevent this from happening again.
TPE said it would not comment on the issue. A Kremlin spokesman declined to comment Friday during a regular briefing with reporters.
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Siemens will continue to do business in Russia via Siemens Gas Turbine Technologies, a joint venture that it controls, and a wholly-owned subsidiary in Moscow. Beyond power generation, the company has a long history of selling and maintaining rail equipment in the country.
Before Russia invaded, Crimea was dependent on power supplies from Ukraine. Frequent power blackouts followed the annexation, which cut the region off from Ukraine's national grid.
Russia subsequently built an "energy bridge" to supply power to Crimea via cables running under the Black Sea.
It was not clear from Siemens' statement whether the gas turbines could be operated without the company's support, nor how the equipment had been modified.
Siemens declined to provide further details.
-- Clare Sebastian and Emma Burrows contributed to this article.
