Court backs Germany's move to block Rheinmetall Russia deal

FRANKFURT Wed Aug 27, 2014 9:12am EDT

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FRANKFURT Aug 27 (Reuters) - A German court backed a government move to halt the planned export to Russia of combat simulation equipment made by defence firm Rheinmetall.

Berlin had told Rheinmetall not to ship the equipment - including computers, video systems and network components - after the European Union imposed tougher sanctions on Russia over its support of pro-Russian separatist rebels fighting Kiev forces in eastern Ukraine.

Rheinmetall earlier this month said it expected a financial hit of 15 million euros to 20 million euros ($20 million to $26 million) from the decision to block the contract and cut its 2014 operating profit outlook.

Rheinmetall sought to have the government's decision suspended as long as an appeal was pending, which would have allowed it to continue deliveries of equipment for the moment.

But a Frankfurt administrative court said on Wednesday it had denied Rheinmetall's motion because such a suspension would effectively allow Rheinmetall to circumvent Berlin's decision to halt the contract.

"It is in no way to be expected that the delivery of the combat centre and its components to the Russian defence ministry could ever be reversed once the legal process has been completed," the court said in a statement.

Rheinmetall, which was not immediately available for comment, has the right to appeal against the Frankfurt court's decision.

The group's shares have dropped 6 percent since the contract - which it has said was worth around 100 million euros - was revoked in early August, against a 5 percent increase for the German mid-cap index.

($1 = 0.7590 Euros) (Reporting by Maria Sheahan; Additional reporting by Victoria Bryan in Berlin and Anneli Palmen in Duesseldorf; editing by Keiron Henderson)

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