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Global Economy

German companies worried about Russia

A few years ago, Russia's President Vladimir Putin was still a welcome guest in Germany. At the Hanover Fair in 2013, he walked through the halls with the then Chancellor Angela Merkel and top German managers. The only protests he witnessed first-hand came from activists from the Femen movement.

Hardly any German businessman now dares to pose publicly with Putin. Even the annual German-Russian business meeting between high-ranking German managers and Putin, which is scheduled to take place via video conference in early March, is now becoming a political issue.

hope for a peaceful solution

German companies in Russia – from VW, Siemens to Claas Landtechnik – are concerned about the Ukraine crisis. They hope for a peaceful solution to the conflict and warn against breaking off relations with Russia. "Where will it lead if all contacts are broken and all projects frozen, as some carelessly demand?" asks Rainer Seele, President of the German-Russian Chamber of Commerce Abroad. For weeks he has been committed to maintaining German-Russian trade relations. Economic contacts secured peace and prosperity, he emphasizes. Even in the dark times of the Cold War, the German economy was always a bridge to the Soviet Union.

Despite EU sanctions due to Russia's annexation of Crimea and corona restrictions, the German economy has invested more than seven billion euros net in the largest country on earth over the past five years. "Russia remains a lucrative market for our companies because of the population's willingness to spend, even if the weak economy and the Corona crisis are slowing down development," says Matthias Schepp, Chairman of the Foreign Trade Chamber (AHK) and delegate of German business in Russia. Large corporations and medium-sized companies invest strategically and long-term in Russia.

Compulsory tests for foreign top managers

However, the investment climate has recently deteriorated noticeably. German entrepreneurs were particularly annoyed by the compulsory medical tests introduced at the turn of the year for foreigners working in Russia. "Foreign managers and engineers are subjected to discriminatory and time-consuming procedures, which is detrimental to the investment climate, even though they are promoting investments in Russia in their home countries," complains Schepp.

Individual German companies are already withdrawing from the Russian market. According to the AHK, the number of German companies fell by eight percent to 3,651 last year. "Even more companies will pack their bags in 2022 if solutions are not found soon to stabilize the business climate," says Schepp. In 2011 there were still 6,300 German companies in Russia.

15th among export partners

Russia is still an important sales market for German companies, even if it has lost importance. According to the Federal Statistical Office, the giant country ranked 15th among foreign trade partners for German exports in 2020. At 23 billion euros, Russia's share of total German exports was just under two percent at the time. The preferred German export goods include machines, cars and car parts, chemical products and electrical engineering.

Conversely, Russia primarily delivers raw materials, crude oil, gas and non-ferrous metals to Germany. Russia contributes a good two percent of all German imports. This puts the country in 14th place among foreign trade partners. Germany is particularly dependent on Russia for natural gas. A good half of the natural gas that Germany purchases comes from Gazprom & Co. With the new Baltic Sea pipeline Nord Stream 2, the proportion would increase. The natural gas pipeline has been completed but is not yet in operation.

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