Halliburton equipment worth over $7 million imported into Russia after company exited country, report says

By James Rogers

Halliburton is one of a host of companies that exited Russia following the invasion of Ukraine

Oil-services company Halliburton Co. is in the spotlight following a report that more than $7 million of its equipment was imported into Russia following the company's 2022 exit from the country.

Citing Russian customs records, the Guardian reports that more than $7.1 million worth of equipment manufactured by Halliburton (HAL) was imported into Russia after the company announced the end of its operations in the country.

On Sept. 8, 2022, the company announced the sale of its Russian operations to a Russia-based management team made up of former Halliburton employees. The company had announced the suspension of business in Russia in March 2022, following Moscow's invasion of Ukraine.

Related: Halliburton's stock edges lower as second-quarter revenue falls short of estimates

But the Guardian reports that, in the six weeks following Sept. 8, 2022, Halliburton subsidiaries exported equipment worth more than $5.7 million to the company's former operation in Russia. The shipments mostly originated from the U.S. and Singapore but also came from countries including the U.K., France and Belgium, according to the report.

While most of those exports ended by Oct. 6, 2022, the records show the shipment later that month of a sealing element from Malaysia to a firm called Sakhalin Energy, whose investors include Russian energy giant Gazprom, the Guardian reports.

In December 2022, imports of equipment were made from two companies unrelated to Halliburton. The imports, from Turkey, took the value of Russian exports to at least $7,163,317 since Halliburton's Russian sale announcement.

Related: Unilever CEO vows to look at Russian operations with 'fresh eyes' as pressure to exit the country mounts

Halliburton has not yet responded to MarketWatch's requests for comment.

The Economic Security Council of Ukraine, which was set up to develop expertise in identifying and counteracting internal and external threats to Ukraine's economic security, told MarketWatch that overseas companies need to be aware of Russian efforts to acquire critical products.

"The Russian demand for the high-end equipment in oil and gas extraction industries persists, so does the inability of Russian oil servicing companies to satisfy this demand," said Olena Yurchenko, an adviser to the Economic Security Council, in a statement emailed to MarketWatch. "Therefore, even in the situation of a complete shutdown, the foreign companies must be vigilant for the evasion schemes and grey import which are buoyant around Russia nowadays."

Related:Heineken is the latest Western corporate giant to exit Russia

"The fact that Halliburton equipment ended up in Russia clearly demonstrates that the current export control regime and monitoring of dual use goods distribution is fundamentally flawed," she added. "And Halliburton is not a singular case."

Other companies have also been wrestling with the impact of so-called gray markets, where products are purchased outside of a manufacturer's authorized distribution channels. Earlier this year, Cisco Systems Inc. (CSCO) Chief Financial Officer Scott Herren described his frustration at the gray markets that have reportedly facilitated the shipment of the company's tech gear into Russia despite the networking giant's exit from the country. The Wall Street Journal reported that Cisco hardware entered Russia via a network of vendors in areas such as Turkey and Asia that have not been authorized by Cisco and are beyond the reach of U.S. enforcement.

A number of major Western corporations, including Apple Inc. (AAPL), Alphabet Inc. (GOOGL)(GOOGL), Amazon.com Inc. (AMZN), International Business Machines Corp. (IBM) and McDonald's Corp. (MCD), have left Russia in response to Moscow's February 2022 invasion of Ukraine.

Related: Russia's Mir payment system increasingly isolated, but concerns linger about possible stealth links to the outside world

Last month, beer giant Heineken N.V. joined the list when it announced the sale of its Russian operations to Arnest Group for one euro.

-James Rogers

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09-18-23 1545ET

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