Germany cancels Russia deal

Germany's economy ministry on Monday confirmed a report published in the Süddeutsche Zeitung, which said that it had permanently revoked approval for the defense and auto parts manufacturer Rheinmetall to export the field simulator to Russia.

"I can confirm that in the light of the EU sanctions, permission to export a combat training center has been revoked," a spokesman for the ministry said.

The decision to cancel the approval didn't come as a complete surprise, as Economy Minister Sigmar Gabriel had put the deal on hold back in March, after Russia annexed the Crimea region of Ukraine.

The deal, worth around 100 million euros, ($134 million) had been approved by the previous German government made up of Chancellor Angela Merkel's Christian Democrats and the liberal Free Democrats.

According to the Süddeutsche report, the combat training center, with the capacity to train 30,000 soldiers annually, was to be built in Russia's Volga region and go into service later this year.

Beyond EU sanctions

Germany's decision to cancel export approval for the simulator comes almost a week after the EU imposed tougher sanctions on Moscow targeting its energy, defense and finance industries over the Kremlin's alleged support of pro-Russia separatists fighting in eastern Ukraine.

The decision though, goes beyond the scope of those sanctions, as the arms embargo does not apply to existing contracts. This has allowed France to press on with a 1.2 billion euro deal to supply Russia with a Mistral warship.

Rheinmetall has not said whether it planned to seek compensation for the lost revenue, but has said that it was in talks with the government.

pfd/shs (dpa, Reuters, AP, AFP)