German Building Giant Under Investigation for Helping Russia Rebuild Devastated Mariupol

German prosecutors have opened a preliminary investigation into building materials manufacturer Knauf over allegations that the company's products are being used to rebuild Russian-occupied Mariupol, the Ukrainian city that was almost entirely destroyed during Moscow's brutal siege in 2022.

The Würzburg Prosecutor's Office launched the investigation following a report by German broadcaster ARD's Monitor program, which revealed evidence of German companies participating in reconstruction projects in the occupied Ukrainian port city. The investigation examines whether Knauf's activities violate German and EU sanctions against Russia.

According to ARD's investigation, Knauf-produced cement and plasterboard materials have been identified at construction sites throughout Mariupol, with the company's logo clearly visible in numerous photographs from the reconstruction zones. The report also cited an "official distributor" of Knauf promoting a housing project in Mariupol that was being built with Knauf products on behalf of the Russian defense ministry.

Mariupol, once home to over 400,000 Ukrainians, fell to Russian forces after a devastating two-month siege that killed thousands of civilians and reduced the city to rubble. Since capturing the city, Russia has published reconstruction plans as part of what German officials describe as a propaganda effort to legitimize its occupation.

Knauf, a Bavarian company that operates 14 production sites in Russia and employs approximately 4,000 people there, has denied wrongdoing. In a statement to AFP, the company insisted it "respects all the EU, UK and American sanctions against Russia". The company has cited "responsibility" to its employees as the reason for not withdrawing from Russia, unlike many other major German corporations that exited following the invasion.

However, the preliminary investigation does not automatically mean the company is suspected of a crime. According to Würzburg Prosecutor's Office spokesperson Tobias Kostuch, the investigation "serves to determine whether such an initial suspicion exists at all".

The controversy has intensified scrutiny of Western companies that maintain operations in Russia. Ukraine designated Knauf an "international sponsor of war" in November 2023, citing the company's continued presence in the Russian market and its contribution of over $117 million to Russia's state budget.

Following the investigation's announcement, Knauf announced plans to cease operations in Russia, stating it wishes to "transfer the entire business in Russia, including raw material extraction, production, and sales, to local management in order to preserve the jobs of more than 4,000 employees". The transfer is pending approval from Russian authorities.

Germany's Foreign Ministry condemned any participation in Russia's reconstruction efforts, telling AFP that "any enterprise participating should ask itself at whose service it is putting itself," while describing Russia's reconstruction claims as "propaganda". The German Economy Ministry indicated that authorities need to determine whether German companies' participation constitutes "a violation of sanctions".

The case highlights the complex legal and ethical challenges facing Western corporations with Russian operations, as governments and civil society groups increase pressure on companies to completely sever ties with Moscow's war economy.

Sources:
[1] The Kyiv Independent, "Russian media: German prosecutor's office opens preliminary investigation into Knauf," April 22, 2024
[2] France 24, "German firms help 'rebuild' Russian-occupied Mariupol: report," April 4, 2024