Knauf: Questions About a Possible Global Transaction

Knauf, a German construction giant with a robust presence in the U.S., is reportedly negotiating the sale of its Russian business with Gazprombank—a state-owned Russian bank sanctioned by the U.S. and E.U. for financing Russia's war against Ukraine. Such a move, if verified, undermines the principles of international sanctions, and jeopardizes the integrity of Western efforts to counter Russian aggression.

According to German investigative reports, Knauf has entered negotiations with Gazprombank to divest its Russian assets. Gazprombank—a financial behemoth on the U.S. Treasury Department’s Specially Designated Nationals (SDN) list—plays a pivotal role in funding Russia’s military efforts, including paying soldiers and purchasing materiel for the war in Ukraine. That Knauf would engage with such an entity raises troubling questions.

First, the deal would contravene the spirit, if not the letter, of Western sanctions designed to isolate Russia’s financial and industrial apparatus. Second, Knauf’s Russian operations have reportedly maintained double-digit profit margins, meaning any transaction would potentially enrich one of the Kremlin’s key financial conduits.

The U.S. Treasury Department has made clear that transactions involving Gazprombank carry significant sanctions risks. In November 2024, Treasury Secretary Janet Yellen emphasized the importance of cutting off channels that Russia uses to sustain its military aggression, warning against facilitating transactions with entities like Gazprombank.

Knauf’s 2018 acquisition of USG Corp., a leading American manufacturer of innovative building materials, for $7 billion—a deal that cemented its status as a major player in the American construction market—places that part of the company within the purview of U.S. regulatory and public scrutiny. Critics are sure to ask: How can a company that benefits so much from U.S. markets simultaneously conduct business with a bank that finances a war antithetical to American values and interests?

Sanctions are a critical instrument of foreign policy designed to pressure aggressors and uphold international norms. A Knauf-Gazprombank transaction could undermine these efforts by signaling to other multinational corporations that sanctions can be skirted.

By engaging with Gazprombank, Knauf might be on the way to entangling itself with a regime that has violated international law. Russia’s invasion of Ukraine is not merely a conflict; it is a campaign marked by atrocities and a blatant disregard for sovereignty. Western sanctions against Russia are not abstract measures; they are direct responses to these actions, intended to constrain the Kremlin’s ability to wage war. Knauf’s willingness to negotiate with Gazprombank undermines these efforts.

Companies operating in the U.S. market should be held to the highest standards of compliance with sanctions laws. Knauf’s significant footprint in the U.S.—and its reliance on American customers and infrastructure—provide leverage to demand transparency and adherence to international norms. Allowing such behavior to go unchecked risks emboldening other firms to prioritize profit over principle.

As the U.S. and its European partners continue to support Ukraine’s resistance against Russian aggression, they must ensure that their economic measures are robust and enforceable. Multinational corporations should not be allowed to undermine these efforts because of business pragmatism.

Knauf’s dealings with Gazprombank deserve to be scrutinized. Sanctioned entities should not easily be allowed to find willing partners among Western corporations. The long-term credibility of the sanctions regime and the integrity of our collective resolve to uphold them is at stake.

Gregory Tosi, a former congressional aide, is an attorney practicing international trade law in developing countries.