We Believe Pirelli’s Secret Dependence and Close Relationships with Russia Pose a Threat to Western National Security - Grizzly Research LLC

Russian filings suggest Russia generates ~10% of Pirelli's net profit, but company reports only a 6% revenue share for a broader four-region grouping.

Pirelli's own website lists a tire center in Russian-occupied Donetsk where, when researchers called, staff said military discounts were pointless because every customer was a participant in Russia's invasion of Ukraine. That detail sits inside a much larger case: that Pirelli's Russian operations are materially more profitable and far more entangled with Russia's military-industrial complex than its public filings indicate. Grizzly Research, which holds a short position in Pirelli, alleges the company has actively obscured Russia's contribution to earnings while remaining operationally intertwined with a sanctioned Rostec subsidiary that produces tires for Russian nuclear-warhead launchers.

Ticker: PIRC.MI (Pirelli & C. S.p.A.)
Research Firm: Grizzly Research
Report URL: https://grizzlyreports.com/pirelli/?ref=shortreport.fyi
Position Disclosure: Grizzly Research holds a short position in Pirelli and stands to profit if the share price falls.

Thesis

Grizzly Research argues that Pirelli has preserved a Russian business far more valuable and militarily connected than investors can see from public disclosures, and that mounting sanctions exposure could force a recognition of those risks.

• Russia Profit Concealment: Russian entity filings show profit contributions from Russia equal to roughly 10% of Pirelli's overall net income, while Pirelli's FY2024 annual report folds Russia into a "Russia and Middle East, Africa and India" line that collectively accounts for about 6% of revenues. Pirelli has two tire factories in Russia and none in the Middle East, Africa, or India.
• Sole Western Holdout: Nokian, Michelin, Continental, Goodyear, and Bridgestone all exited Russia after the full-scale invasion and accepted significant losses. Continental sold its Kaluga plant and ContiTech operations for €78.0 million against an investment exceeding €250 million; Nokian sold its Vsevolozhsk plant for €286 million against a prior agreed price of €400 million. Pirelli remains the only Western tire manufacturer still meaningfully manufacturing in Russia.
• Exit Cost Trap: Pirelli's Head of Supply Chain for Russia and CIS stated in a July 2023 presentation that Pirelli had invested €470 million in Russia. Per Pirelli's 2022 and 2024 annual reports, cumulative write-downs on Russian property, plant, and equipment from FY22 through FY25 totalled roughly €40 million, around 24% of the €169.3 million fixed-asset base at the start of the period. Current Russian rules require a 60% discount to appraised market value and a 35% federal-budget contribution on any exit by an investor from an "unfriendly state," including Italy.
• Sanctioned Rostec Stake in Russian Business: JSC Scientific Research Institute of Rubber and Polymer Products, fully owned by Rostec (sanctioned by the EU and United States in 2022), holds a 25.005% stake in Pirelli Tyre Russia, the entity that owns the Kirov and Voronezh factories. The Rostec-owned Research Institute does not appear by name in any Pirelli annual report. Rostec manages hundreds of enterprises said to produce more than half of Russia's weapons and military equipment.
• Rostec-Linked Minority Partner: JSC Panaland holds a further 9.995% of Pirelli Tyre Russia. Per Russian corporate data service Checko, Panaland uses the Research Institute's domain for corporate email and shares its incorporation address at 42 Krasnobogatyrskaya Street, Moscow. Panaland financial statements name Vasilios Ziakas, described in the report as "Chemesov's man," as ultimate beneficial owner. Yuri Makeev, the formal minority participant in the Russian Panaland entity, is identified in Rostec materials and a Kirov regional government readout as an advisor to Rostec's deputy general director for economics and finance in the context of the Pirelli Kirov venture.
• Nuclear-Launcher Tire Production at Shared Site: The Research Institute's hiring materials state it produces tires for the Russian military and is scaling large-format military tire output. A call placed by the report's authors to the Research Institute found an employee confirming the VI-178AY tire, used by the RS-24 Yars nuclear-warhead launcher, is "in production" and used "exclusively by the Strategic Rocket Forces," purchasable only with Russian Ministry of Defense authorization. A November 2019 display promoted by Rostec showed the Kirov Tire Factory showcasing tires for the RS-24 Yars, the Tigr armored vehicle, the BTR-82AM, and the BTR-60P.
• Physical Infrastructure Entanglement: A 2023 Russian arbitrage court decision showed the Research Institute's factory receives thermal energy through pipes running from Pirelli's Kirov plant. A Kirov regional government electricity-consumption document lists both factories on a single combined line. The Research Institute's job postings say workers may enter via Pirelli's factory entrance. A 2020 post in the Kirov Tyre Plant's VKontakte group acknowledged the two facilities are interdependent "in some aspects."
• Occupied Donetsk Distribution and Alleged Belarus Sanctions Breach: Grizzly Research alleges that Pirelli openly violates EU sanctions by maintaining a tire center in Russian-occupied Donetsk listed on its official website. When the authors called the listed number, staff confirmed they were based in Donetsk and said military discounts were pointless because "here all are participants of the Special Military Operation." Separately, the Belarusian Investigative Center reported that Pirelli sold tires to Belarus in apparent circumvention of sanctions on Russia; Pirelli did not respond to those reporters' questions.
• Kirov HR Acceptance of Alleged War Criminal Applicant: The report alleges that in an undercover call to Pirelli's Kirov factory HR, a researcher posing as a Russian soldier whose contract was ending and who mentioned a criminal conviction in Ukraine for the Bucha massacre was told that normal hiring procedures would apply despite the conviction, and was provided with a list of required documents and available vacancies.

Catalysts

• Segment disclosure scrutiny, next annual filing cycle: If analysts or regulators press Pirelli to restore standalone Russia disclosure (discontinued from FY2023), any restatement of Russia's profit contribution could reprice the market's view of the company's sanctions exposure and earnings quality.
• Forced exit write-down, no fixed date: An attempted exit from Russia under current rules requiring a 60% discount to market value and a 35% federal-budget contribution would force Pirelli to recognize losses on a €470 million investment base; Russian rules governing "unfriendly state" exits make this eventuality binary and potentially very large.
• EU 20th sanctions package implementation, April 2026 onward: The package restricts rubber and vulcanised rubber products used in tire production for Russia's military. Over 50% of Pirelli Tyre Russia's imports previously came from Pirelli factories in Germany and Romania; any enforcement action on those flows would directly threaten Russian production continuity.
• Donetsk tire center sanctions referral, no fixed date: Pirelli's official website listing of a service center in Russian-occupied Donetsk is alleged to constitute an active sanctions breach. Any regulatory referral or enforcement action arising from this listing would carry immediate legal and reputational consequences.
• Belarus sanctions investigation, no fixed date: The Belarusian Investigative Center's reporting on alleged Pirelli tire sales to Belarus as a sanctions-circumvention route has not been resolved publicly. Regulatory follow-up in any EU jurisdiction would create direct enforcement risk.
• Reputational event trigger, ongoing: The undercover findings, the Bucha-conviction hiring call, and the Donetsk center are each capable of generating mainstream media coverage independently. Any single major outlet picking up these details could accelerate investor and sponsor scrutiny of Pirelli's Formula 1 contract and broader brand.

Company Response

The Belarusian Investigative Center reported that it sent questions to Pirelli regarding alleged tire sales to Belarus in apparent breach of sanctions; per that reporting, Pirelli did not respond. No other formal request-for-comment process to Pirelli by the research firm or any other outlet is described in the source report.

Notable Details

• Pirelli's 2017 calendar featured Anastasia Ignatova, stepdaughter of Rostec chief Sergey Chemezov. EU officials reportedly argued her inclusion was plausibly linked to Pirelli's partnership with Rostec, and the episode was cited in the EU's refusal to lift sanctions on her on the basis that she benefited from Chemezov's position.
• In May 2014, two months after Russia's annexation of Crimea, Rosneft chief Igor Sechin bought 13% of Pirelli for €552.7 million in the presence of Vladimir Putin. After the full-scale invasion, several Russian oligarchs close to the Kremlin still held small stakes in the company.
• The Russian Antimonopoly Service found that the Ministry of Defense had violated Russian law by limiting a public tire tender to specific models produced within Russia exclusively at Pirelli's Kirov and Voronezh factories, meaning Pirelli effectively held a domestic monopoly on supplying certain tires to the Russian military.
• By February 2026 the Kirov Tire Factory's website domain had lapsed and was being used to sell drugs, yet the factory name and logo continued to appear in active job postings recruiting workers who could enter via Pirelli's factory entrance.
• March 2025 photos published by Kirov Oblast authorities from a visit to the Kirov Tire Plant appear to show continued production of tires for Russian military platforms, including those used by nuclear-warhead launchers, though the report treats this as circumstantial given the nature of the photographic evidence. [CIRCUMSTANTIAL]

"In my experience, disclosure that narrows without explanation almost always tells you the underlying numbers moved in a direction management would prefer not to highlight."

A former Big Four auditor with 17 years' experience, including engagements at Russian subsidiaries of Western multinationals, offered this assessment of Pirelli's decision to fold Russia into a broader regional reporting line from FY2023 onward.

FAQs

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