Annual Report & Accounts 2013
Severstal Annual Report 2013 Home > Governance > Risk report > Political risks
 

Political risks

Severstal’s activities are primarily concentrated in Russia, and the CIS and with additional operations in North America and Europe. We also have licenses for iron ore deposit development in Africa. Severstal has legal entities registered in various jurisdictions and the overall political climates in the countries of our operation differ significantly, as do limitations on business activities and assets expropriation; confiscation rules; monetary systems and their potential for negative change; and potential crisis factors. In addition, governments may establish new trade barriers, which could have a negative impact on our export or import operations. Other political risks that could affect our operations include potential conflicts, terrorist acts, social unrest, and the introduction of a state of emergency. Although to date none of these have directly affected our business, they could have an adverse impact on our business, financial position and operational results. The recent political development in Ukraine where Severstal has a small metalware business titled Dneprometiz may affect these operations. Dneprometiz accounts for around 10% of our total metalware output and less than 1% of the Group’s total EBITDA in FY2013. At the time of this Annual Report’s publication Dneprometiz was operating as normal without interruptions. We will continue to monitor the situation and take necessary mitigating efforts if required.

Due to the recent developments in Ukraine, the USA and EU in March 2014 imposed sanctions on selected Russian individuals and one Russian bank. Statements of the US and EU officials in the media indicate that implementation of further restrictions on select areas of the Russian economy are being considered. Before imposed, it's impossible for us to evaluate the magnitude of downside risks for our business in Russia and the USA. At the time of this Annual Report's publication it remains business as usual for Severstal and Severstal North America. We will continue to monitor the situation and take necessary mitigating efforts if required.

Mitigating factors:

  • The majority of our production facilities and business operations are located in regions and countries with stable political and social systems.
  • Severstal’s investment policy considers regional political risks.
  • All of our operational and investment decisions involve proper on-going risk assessment and monitoring. In those countries experiencing political instability, we undertake additional risk mitigation measures, including specialised types of insurance against political risks.
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