German plantmaker SMS reports that negotiations with Russia for business worth roughly a billion euros have stumbled to a halt because of European sanctions. The Ukrainian conflict has prompted the Commission in Brussels to embargo certain European products and services sold into Russia. It is also having a knock-on effect on business confidence, the company tells Kallanish.

SMS attributes 10% of its group profit to its Russian business, which serves steelmakers as well as some non-ferrous customers. The contracts that have already been signed are still going ahead, but new steel projects across the country have been put on ice, group officials say. The current environment is also deterring the banks from financing these projects, notes Heinrich Weiss, chairman of SMS Group’s supervisory board, and longstanding president of the German-Russian chamber of commerce.

A company spokesman was unable to be specific when asked for more details regarding SMS’s business with Russia’s steelmakers. In 2013, the group’s order intake was €3.3 billion, of which Europe, including Russia accounted for 29%, according to its annual report.

The group has a presence in St Petersburg, Moscow, Magnitogorsk, around Chelyabinsk, and in Vyksa, in the Novgorod region.

Meanwhile, carmakers have also been hard hit, according to Germany’s Handelsblatt, which says Volkswagen stopped production at its Kaluga plant, south of Moscow late August because of the ‘extremely uncertain situation’: VW’s first-half turnover in Russia has fallen by 16% year-on-year, the report adds, noting that VW boss Martin Winterkorn had previously described Russia as the carmaker’s “number one growth market in Europe”.

For carmakers and their component suppliers, the market has shrunk by 25% in H1 2014, Handelsblatt reports. For the plant suppliers, sales volumes are down by nearly 20%, an SMS source concurs.