To help Airbus, Macron pressed Canada to ease Russia titanium sanctions

US Aerospace

30/05/2024 11:57

* 
      Macron called Trudeau over Canada sanctions on Russian
titanium
    

        * 
      Canada granted waivers to Airbus after diplomatic pressure
    

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      Titanium sanctions spat exposes wider critical mineral
risks
    

  
    By David Ljunggren, Michel Rose, Allison Lampert and Tim
Hepher
       OTTAWA/PARIS, May 30 (Reuters) - French President
Emmanuel Macron personally intervened to persuade Canadian Prime
Minister Justin Trudeau to give Airbus and other aerospace firms
relief from sanctions on Russian titanium, according to three
people familiar with the matter.
    The sensitive request was made during a phone call between
the two leaders in March, weeks after Canada broke ranks with
allies and slapped sanctions on the strategic metal, alarming
France-based Airbus and others that still rely on Russian
supplies in plants located in Canada or elsewhere.
    A source close to the French leader said Macron had made a
"significant effort" to convince Trudeau to grant an exemption
for European companies.
    "Many messages were passed at all levels," the source added,
referring to broad diplomatic and industrial pressure. 
    A Canadian source familiar with the matter said Macron
raised the topic in a call with Trudeau on March 29 in the
run-up to a visit by French premier Gabriel Attal, who also
addressed the issue when he was in Canada.    
    At least one other European government also weighed in to
support the lobbying effort, a separate source said.
    Ottawa initially stood firm, but within days modified its
policy by granting Airbus and others waivers. The climbdown,
first reported by Reuters, triggered a political dispute over
sanctions policy and drew criticism from Ukraine's ambassador.
    "It was not easy to get the sanctions lifted. I think if the
French government had not raised it continuously at that level,
we would have held pretty firm," the Canadian source said.
    Offices of both leaders declined comment and Airbus said it
was "complying with all applicable sanctions related to Russia".
    The sources spoke on condition of anonymity due to the
sensitivity of the matter.    
    
    CAUGHT OFF GUARD
    The high-level scramble to keep Russian titanium flowing
highlights how difficult Western nations are finding it to
punish Russia for its war against Ukraine without damaging the
supply chains of industries that need to plan years ahead.    
    Russia's state-backed VSMPO-AVISMA is historically the
largest producer of aerospace-grade titanium, whose strength and
light weight make it ideal for components that take the heaviest
punishment, like engine parts and landing gear for big jets.
    Weaning industries off Russian titanium, and other critical
minerals produced in countries like China, is proving difficult.
    "The problem is a new titanium mill ... takes years to build
and it could take a year or two to get certified," said Kevin
Michaels, managing director of AeroDynamic Advisory.
    While the West has ratcheted up sanctions on Moscow, it has
previously avoided blocking access to VSMPO's specialist alloys
and forgings for fear of hurting its aerospace industries.
    Canada's unexpected decision to ban imports from VSMPO
coincided with the second anniversary of Moscow's invasion of
Ukraine and caught the aerospace industry off guard.     
    Fraught calls to Ottawa started "immediately, literally the
same day," said a second Canadian source.
    Airbus found itself in the front line. All landing gear for
its premier A350-1000 jet come from a single factory in Ontario.
    "Airbus was one of the larger voices lobbying and they did
it through the French government as well," the first Canadian
source said. Airbus and French officials declined comment.
    Canada's decision rippled down the supply chain.
    
    RIPPLE EFFECT
    U.S. aerospace giant RTX  RTX.N  is responsible for building
A350-1000 landing gear through its Collins Aerospace
subsidiary's Oakville plant outside Toronto.        
    Faced with Ottawa's decision to ban Russian titanium,
Collins halted raw material shipments, the sources said.
    RTX declined comment. In April it took a $175 million charge
to cover new supplies, partly related to the Canadian sanctions.
    Canada's sanctions could also have damaged Airbus' rival
Boeing  BA.N , but the U.S. planemaker was spared disruption
thanks to a separate waiver awarded to French equipment supplier
Safran  SAF.PA , industry sources said.
    Boeing announced in March 2022 it had stopped buying
titanium directly from Russia and is widely seen as less exposed
to the politically sensitive topic than its European rival.
    But like Airbus, Boeing buys landing gear made in Canada for
its 787 Dreamliner. Two industry sources said the Toronto-area
plant run by Safran  SAF.PA  continues to rely on VSMPO titanium
while the company develops new sources in Europe.
    Safran said last month it had won an exemption from the
Canadian sanctions in a move that supply chain experts said
would allow it to keep Boeing supplied with 787 landing gear. 
    Safran declined further comment.
    Boeing referred questions about the Russian exposure of
sub-contractors to its suppliers.
    "Boeing currently sources titanium predominantly in the U.S.
... and we continue to take steps to ensure long-term
continuity," a spokesperson said.
    Airbus, which said in December 2022 it would drop Russian
titanium in "months not years", said it was working intensively
to reduce dependence, but declined to give a target date. 
    "This is already well underway and being carried out as
quickly as possible," a spokesperson said.
    Canada has not said when waivers will expire but a person
familiar with the plan said it gave the industry three years.
Ukraine has urged Western nations to deepen their sanctions.
    Some fear the Canada dispute could aggravate another dilemma
for aerospace firms: complaints against sanctions highlight
their dependence for strategic materials on exporting countries,
which in turn could use that power to hit back at the West.  
    China said on Thursday it would control exports of some
sensitive aviation and space components from July 1.

 (Reporting by David Ljunggren in Ottawa, Allison Lampert in
Montreal, Michel Rose and Tim Hepher in Paris; Writing by Tim
Hepher; Editing by Joe Brock and Mark Potter)
 ((tim.hepher@thomsonreuters.com; +33 1 49 49 54 52; Reuters
Messaging: tim.hepher.thomsonreuters@reuters.net))