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Reinmetall Drops as Germany Halts Russian Army Contract

Rheinmetall AG (RHM) fell the most in more than four months after the German government halted the defense company’s deal to build a military training center in Russia’s Volga region in response to the annexation of Crimea.

Rheinmetall dropped as much as 5.1 percent in Frankfurt, the biggest intraday decline since Nov. 8, and retreated 4.9 percent at 12:12 p.m., valuing the Dusseldorf, Germany-based company at 2.02 billion euros ($2.8 billion).

“The government deems the export of the combat training center to Russia as not acceptable, given the current situation,” Sigmar Gabriel’s Economy Ministry said in a statement. “The government is in contact with the company. No exports are currently planned. The company will notify the government when exports are planned so that the government will be able to act as it may then be appropriate.”

Russian President Vladimir Putin’s takeover of Crimea has set off the worst confrontation in two decades with the West. European Union leaders are gathering today in Brussels to try to formulate a unified position on punishing Russia amid concerns that trade curbs would do self-inflicted damage to Europe’s economy.

Rheinmetall spokesman Peter Ruecker said the company is in close contact with the government, and declined to comment further. On March 7, Rheinmetall said it foresaw no risk to a timely completion of the facility, which is was set to go into operation this year, built under a contract valued at more than 100 million euros.

German Chancellor Angela Merkel said today that Russia has isolated itself by seizing Crimea and if the country doesn’t reverse the action it will “without a doubt” face economic sanctions. Merkel made the comments in a speech to parliament in Berlin before the European Union summit today and tomorrow.

Focus magazine reported the halt earlier.

To contact the reporters on this story: Angela Cullen in Berlin at acullen8@bloomberg.net; Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Kim McLaughlin, Tom Lavell

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