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Published: Monday August 4, 2014 MYT 9:40:03 PM
Updated: Monday August 4, 2014 MYT 9:40:03 PM

Germany says halts Rheinmetall defence deal with Russia

BERLIN (Reuters) - Germany's Economy Ministry has confirmed it has halted Rheinmetall's export of combat simulation gear to Russia, going beyond recently imposed EU sanctions which block future defence contracts.Economy Minister Sigmar Gabriel, a Social Democrat (SPD), has blocked the deal which was approved by Germany's previous government, the ministry said.

"I can confirm that in the light of the EU sanctions, permission to export a combat training centre has been revoked," a spokesman said.

Rheinmetall said on Monday it was in talks with the German government.

Berlin's intention to stop to the deal, flagged in March, has been delivered in writing, the company said. Rheinmetall declined to comment on the details of the contract worth some 100 million euros, nor on whether it might seek compensation from the government.

The company has repeatedly said that sanctions against Russia would not have a major impact on its business because the combat training centre, its only major contract with the country, has been largely delivered and paid for.

Germany's Sueddeutsche newspaper said the combat training centre, which was to be built in the town of Mulino in the Volga region and was expected to go into service this year, could train 30,000 soldiers a year on high-tech simulators.

Tough new economic sanctions against Russia will hurt Germany's economy but they are necessary for the sake of peace in Europe, Gabriel, who is also German vice chancellor, said in a television interview on Sunday.

In contrast, France is pressing ahead with a 1.2 billion euro (957.6 million pounds) contract to supply Russia with a Mistral warship.

European Union sanctions that took effect on Friday target Russia's banking, defence and energy sectors because of Moscow's support for pro-Russian separatist rebels battling Kiev's forces in eastern Ukraine.

(Reporting by Andreas Rinke and Tom Kaeckoff; writing by Alexandra Hudson; editing by Jason Neely)

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