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

reuters_tickers

By David Ljunggren, Michel Rose, Allison Lampert and Tim Hepher

OTTAWA/PARIS (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 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, but the U.S. planemaker was spared disruption thanks to a separate waiver awarded to French equipment supplier Safran, 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 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.