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Investigation: Italian company makes sure Russian war machine has the steel it needs

The picture features blast furnaces of the Russian steel manufacturer, Severstal. (Credit: Severstal)
by Krijn Schramade December 16, 2023 9:30 PM 13 min read
This audio is created with AI assistance

Editor’s note: This story was published by the Dutch investigative outlet Follow The Money on Dec. 14. The Kyiv Independent contributed reporting to this story and is republishing it with permission.


Key facts:

  • After Russia seized Crimea and unleashed the war in the Donbas in 2014, the Italian Danieli Group grew to become a major player in the Russian steel industry, the engine of Putin’s war machine. Danieli, which sells and services equipment for steel plants, has since worked with at least 14 Russian metal companies, including six that contribute to the Russian military industry.
  • Danieli didn’t leave the Russian market when Russia started its full-scale invasion of Ukraine in 2022 and has supplied equipment to at least one Russian steel plant since then.
  • The alleged clients of Danieli that produce steel for Russian weapons could include Severstal and Magnitogorsk Iron and Steel Works (MMK), the owners of which are under international sanctions.

Why does it matter?

  • The steel industry is the engine of the Russian military-industrial complex. By the end of the Cold War, Russian steel production capacities had become severely outdated, and foreign companies stepped in to modernize it. Danieli Group was one such company.
  • Through their work for Severstal and others, the Danieli Group has effectively been the first link in the chain of Russian military production since the 2014 Russian attack on Ukraine.
  • The large-scale Russian invasion of Ukraine in 2022 proved no reason for the Danieli Group to immediately cease operations. Half a year ago, the company said it would leave Russia but didn’t elaborate on when and how. By being slow in exiting, Danieli may be indirectly contributing to Russia’s war effort.

How did we investigate this?

Follow The Money and the Kyiv Independent tracked down Danieli’s Russian client base through Russian import data, publicly available press releases, LinkedIn profiles, publications in Russian and Italian media, interviews with those involved, and internal documentation from Danieli, obtained by journalists.


A few weeks into Russia’s all-out war against Ukraine in early 2022, a surprising rumor shook the offices of Danieli Corus, a Dutch subsidiary of the Italian Danieli Group. The rumor said the company was to hold a meeting with representatives of a major Russian steel manufacturer, Severstal, to discuss how to continue business.

Multiple employees wondered whether their company indeed wanted to keep doing business with Russia, which had just invaded its neighbor, Ukraine, an employee of Danieli Corus told Follow The Money on condition of anonymity.

And yet, that proved to be exactly the case, a joint investigation by Follow The Money and the Kyiv Independent later revealed.

Five months into the all-out war, Danieli Corus supplied a furnace cooling element to Russia in a possible breach of sanctions, which attracted the attention of Dutch law enforcement.

A year into the war, the Italian Danieli Group, which includes Danieli Corus, said it would finally leave Russia. Over half a year since the promise, it hasn’t.

While the company was openly doing business with Russian clients for years, this investigation reveals their scale and shows how these long-standing relations have contributed to the Russian military since 2014, when Russia first invaded Ukraine.

Danieli Group and its Russian subsidiary did not respond to Follow The Money’s request for comment.

Danieli’s attempt at win-win

The Italian Danieli Group is a global player in the construction and modernization of steel plants. The company supplies and installs machinery, builds new furnaces and provides ongoing support – like servicing, repairs, and after-sales – to clients all over the world. This includes companies in both Russia and Ukraine.

The war placed Danieli in an awkward position: the same Russian war machine Ukrainians suffer from is built with steel that Danieli was helping Russians produce.

After the start of the Russian full-scale invasion, Danieli has gone shy about its Russia dealings.

Employees of Danieli, Italy's biggest manufacturer of equipment for steel production, attend the opening ceremony of a new mill at Mechel's metallurgical plant in Chelyabinsk, Russia, on Tuesday, July 16, 2013.

The company used to be open about its business with Russia. But last year, the list of clients disappeared from the website of its Russian subsidiary, Danieli Volga.

The company has allegedly supplied at least 14 Russian metal companies since 2014, most of which are major steel producers and processors. Follow The Money and the Kyiv Independent tracked down Danieli’s Russian client base through Russian import data, publicly available press releases, LinkedIn profiles, publications in Russian and Italian media, interviews with those involved, and internal documentation from Danieli.

“Of course, Danieli knows about their clients' contribution to Russian military production,” an employee at the firm told Follow The Money on conditions of anonymity, fearing retribution from the management.

Danieli’s Russian client base

In addition to nine Russian clients that Danieli itself revealed in a rare interview, Follow The Money and Kyiv Independent found five more.

Of those 14 Russian clients, 13 were signed up after 2014, when Russia first invaded Ukraine. According to an internal company document leaked to journalists, those clients are major Russian steel producers: Severstal, EVRAZ, RUSAL, Mechel, Metalloinvest, Novorossiysk Rolling Plant, Ural Steel, Novostal-M, Industrial and Metallurgical Holding, Magnitogorsk Iron and Steel Works (MMK), Novolipetsk Steel (NLMK), United Metallurgical Company (OMK), and Kamensk-Uralsky Metallurgical Works (KUMZ).

Follow The Money and the Kyiv Independent also found that Danieli worked with the Russian steel company Krasny Oktyabr (Red October). It’s unknown whether the cooperation started before or after 2014.

Six of these 14 Danieli clients have contributed to Russian military production since 2014, by supplying the steel used in weapons and vehicles. These are Severstal, EVRAZ, RUSAL, Krasny Oktyabr, MMK, and KUMZ.

Danieli’s rise in Russia

Danieli had ties with the Russian steel industry since the Soviet times, but in 2014, the company took this relationship to the next level and opened its own subsidiary, Danieli Volga, in Russia.

Since the launch of its Russian branch, the Danieli Group has developed into a major player in the Russian steel technology market.

In 2021, the Italian newspaper Italia Oggi dubbed the company “a leader in the steel (technology) market of the Russian Federation,” declaring that the “years of German domination...in the field of Russian steel” are over.

Danieli’s close ties to Russia become apparent when looking at the number of tenders the company won in the Russian steel technology market – some 90 percent in 2019, according to Antonello Colussi, director of Danieli Volga.

“Virtually all major Russian manufacturers have become our clients over the past few years,” Colussi told Russian magazine Italy Living, adding that Russia accounted for some 30 percent of Danieli Group’s total sales.

“We sell everything: design, equipment, technology, automation, and installations,” he said.

Danieli Volga is headquartered in Moscow but is also well positioned regionally with service centers in other cities across the country that are home to major Russian industrial production facilities. One of them is Severstal.

The Russian steel industry welcomes Danieli

Russian steel companies were keen to accept Danieli’s services for a reason.

The steel industry has always been the military-economic engine of Russia, including during the Soviet era.

During the Cold War, the industry not only provided the mainstream economy with raw materials for cars, buildings, and machinery, among other things, but was also vital to military production. The arms race between East and West could not have existed without steel for naval vessels, tanks, artillery, machine guns, and ammunition.

After the collapse of the Soviet Union, Russia was struggling to keep up with high-tech developments.

Foreign companies saw an opportunity and were warmly welcomed.

Italian metal giant Danieli was one of them.

The company had a slew of subsidiaries all across Europe to help the Russian metal industry modernize facilities and increase production.

“Upon completion of the projects, Severstal Cherepovets No. 5 will have an internal volume of 6,117 cubic meters, making it the largest blast furnace in the world,” Danieli’s Dutch subsidiary, Danieli Corus, boasted about the work they were doing for Severstal in a press release in 2017.

Severstal has its steel plant in the city of Cherepovets, some 500 kilometers north of Moscow. The company is among Danieli’s main clients and an outspoken supporter of the Russian war machine.

“We specialize in the production of rolled metal products for the military-industrial complex and have many technical developments necessary for the modernization of the country’s armed forces,” Severstal director Sergei Toropov said in June 2015.

Toropov’s interview, titled “Special Steel for the Army,” was published by a Russian news site. By that time, Russia’s war in the Donbas and the occupation of Crimea had been ongoing for 1.5 years.

Military steel in Ukraine

Russia has been extensively using the arms made of steel produced by Danieli clients in its war against Ukraine.

One is the VOG-25 cluster grenade.

It is made of steel supplied by a client of Danieli’s, Magnitogorsk Iron and Steel Works (MMK), according to the Russian investigative journalism outlet Proekt.

When the grenade is detonated, small bomblets and shards of the steel casing fly to a lethal range of up to six meters.

Russian soldiers placed this very grenade, VOG-25, into the piano belonging a 10-year-old Ukrainian girl, Daryna Monko, before withdrawing from Bucha, a city near Kyiv, in early April last year.

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Ukrainian soldiers removed the grenade from the piano before it caused harm.

Another type of weapon that uses steel from Danieli’s clients is the AK-100 Kalashnikov machine gun. It is made of steel produced by Severstal, according to Proekt.

The media publication reported that these very guns were likely used by the Russian soldiers who occupied Bucha in the spring of 2022 and terrorized the civilian population there.

Danieli’s clients, MMK, and Severstal, are also involved in the production of Kalibr missiles that Russia uses to attack civilian targets in Ukraine, Proekt found.

According to the report, the producer of the Kalibr buys rolled steel from MMK. Kalibr carriers, submarines and surface vessels in the Black Sea, are produced and repaired at the shipyards where Severstal and MMK supply hull steel.  

‘International Sponsor of War’

All this time, Ukraine has been well aware of the close relationship between Danieli and the Russian steel industry.

In June last year, Ukraine’s Defense Ministry publicly condemned Danieli for its continued work with Russian clients.

“Supporting the Russian military-industrial complex goes against lawful and moral considerations,” the Ministry said in a social media post.

Two months later, on Aug. 10, 2022, Danieli’s Dutch subsidiary, Danieli Corus, shipped the cooling element to Severstal’s blast furnace, according to trade data from the Import Genius database.

A worker takes sample of iron for further checks. This iron is to be processed into steel. (Credit: Severstal)

When Danieli Corus shipped it, the Severstal’s owner, Alexei Mordashov, was already under EU sanctions. Severstal as a company has been under sanctions in the U.S. since 2022 and in the United Kingdom since May 2023. But the EU is yet to sanction Severstal itself.

In late September 2022, Ukraine labeled Danieli an “international sponsor of war.”

Danieli addressed the accusations only half a year later and called them “baseless and inaccurate” in a March 2023 press release.

“The fact that Danieli did not comment in detail on these specific allegations should not be taken as acceptance of their factual accuracy but simply means that we wished to avoid pointless discussions concerning non-existent facts,” the statement goes on.

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Publically, the company firmly denies allegations, but internally, most workers recognize that doing business with Russia is a problem, according to Danieli’s internal documentation and multiple employees who spoke on condition of anonymity.

According to people involved with the company, it knowingly took risks and continued business with its Russian companies, whose owners are under EU sanctions.

“The company management just didn’t care,” an employee at Danieli Corus told Follow The Money on condition of anonymity.

Doing business despite sanctions

Steel manufacturer Krasny Oktyabr is among the Russian companies that Danieli Group has allegedly kept working with after the all-out war broke out in 2022.

In April 2022, Krasny Oktyabr announced that it would continue cooperating with Danieli.

The company is one of Russia’s largest producers of special steel for military purposes and, according to Russian media, supplied steel for the armor of certain tanks. Krasny Oktyabr also produces steel for the nuclear reactor vessels for Russian submarines.

The company’s owner Dmitry Pumpyansky has been on the EU and U.S. sanction lists since March 2022. According to Proekt, the sanctions prompted him to transfer the ownership of his companies, at least on paper.

A Danieli worker with knowledge of the company's Russia operations, and a person with access to Danieli's finances on its Russian business said independently on conditions of anonymity that Danieli continued to generate revenue on projects for Severstal, MMK and Krasny Oktyabr during the second half of 2022.

Like the owners of Severstal and Krasny Oktyabr, the owner of MMK, Viktor Rashnikov, also fell under international sanctions after the start of the Russian full-scale invasion.

Steel and sanctions

Although Mordashov and Rashnikov (MMK) are on the EU sanctions list, their companies are not. This is striking because these two companies contribute not only to military production but also to other Russian sectors under sanctions: the automotive and energy.

One possible explanation is the fact that Severstal and MMK not only process iron into steel but also mine and export crude iron, which is exempt from sanctions.

The EU banned finished steel products from Russia, but semi-finished steel products are not subject to sanctions.

Experts say that such loopholes in sanctions are created to protect countries' core economic interests.

In the U.S., Severstal and MMK have been on the sanctions list since 2022; the UK imposed restrictions against the two companies in May 2023.

When the Severstal owner fell under sanctions, it prompted Danieli Corus to seek legal advice on the supply of the furnace cooling element to the Russian company.

In March 2022, Danieli Corus approached the Dutch law firm BenninkAmar, experts in sanctions law.

Danieli wondered whether it was legally safe to ship the cooling element to Severstal if its owner, Mordashov, had divested himself from the company on paper.

“He had transferred his shares through a trust to his wife, a standard way to avoid sanctions,” Yvo Amar of BenninkAmar told Follow The Money. That didn’t fly, though. Not long after, Mordashov’s wife was also sanctioned.

“Severstal is off limits,” Amar recalled saying to Danieli Corus.

The picture features the blast furnace’s iron production for subsequent processing into steel. (Credit: Severstal)

According to Amar, he urged the company to consult Dutch authorities before proceeding with the shipment.

The company claims to have done so, several months later. Danieli Corus told the Italian newspaper Corriere della Sera, it had contacted the Dutch Foreign Ministry at the end of July 2022, 4.5 months after Amar’s advice. When it didn’t hear back for about two weeks, Danieli Corus went forward with the supply to Russia anyway.

On Aug. 10, 2022, Severstal already received the part.

Danieli Corus didn’t reply to Follow The Money’s questions about this shipment.

A Danieli Corus employee anonymously told Follow The Money that the company “took an informed risk” in supplying the cooling element to Severstal.

By December 2022, four months after the supply in question, Danieli had internally recognized Severstal and MMK, among others, as sanctioned by the EU and the U.S., even though only the companies’ owners were targeted, not the entities themselves. It is revealed in the Danieli Group’s partner list, dated Dec. 19, 2022, and shared by email within the company, which was leaked to journalists.

The company’s business with Russia eventually attracted the attention of authorities.

In October 2023, just over a month after Follow The Money had contacted the Dutch Foreign Ministry with questions on the matter, the responsible authorities paid a visit to Danieli Corus, people with knowledge of the visit said on conditions of anonymity.

According to them, officials watching the export of prohibited goods in the Netherlands came in to discuss the company’s business with Severstal.

Danieli Corus’s CEO, Gert-Jan Apeldoorn, confirmed the visit to Follow The Money.

“Danieli Corus, as a part of the Danieli Group, fully complies with the sanction regime of the European Union and carries out specific compliance activities,” he said.

The Danieli Group itself has been insisting that it has done nothing wrong.

“We respect the sanctions,” the company told Corriere della Sera in March this year.

The company, however, did “not have the means to control the use of the raw and semi-finished products that Severstal makes and sells to third parties.”

But a month later, and over a year into Russia’s full-scale invasion of Ukraine, Danieli finally bowed to the pressure and announced its exit from the Russian market.

“The development of geopolitical scenarios has made us realize that commercial relations and presence in the Russian market are no longer possible in the current situation,” Danieli CEO Gianpietro Benedetti said at a conference in Italy’s Udine, where the company is headquartered, in April 2023. “For this reason, we have decided to sell our business located in this (Russian) region.”

More than six months after the announcement, Danieli has yet to disclose concrete plans for the sale of its Russian operations.

The company also failed to explain why it first said that it would pull out of Russia only in April 2023, over a year into an all-out war, while several of its primary Russian customers had been hit by sanctions as early as February-March of 2022.

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