Russia remains an important market for German companies, although German exports have declined in recent years. According to data from 2020, the vast Russia is the 15th largest market for German companies. The total value of exports to Russia, however, did not exceed 23 billion euros, or about 2% of the total. German cars and car parts, products of mechanical and electrical equipment, as well as chemical products remain in demand.
Russia, for its part, exports to Germany mainly raw materials, oil, gas and non-ferrous metals. This is 2% of Germany’s total imports from abroad. Germany’s dependence on Russian gas is particularly evident. Russian Gazprom currently covers almost 50% of the country’s energy needs. What changes in German-Russian relations after the Russian army invades Ukraine?
Entrepreneurs say “shocked”
The Russian invasion also seems to have shocked German companies operating in Russia. Speaking to DW, Peter Adrian, head of the German Chamber of Commerce and Industry (DIHK), said: “The financial consequences of the invasion have not yet been assessed, but they will certainly be significant. As president of DIHK, my thoughts are with German business people. “and the chamber in Ukraine. But also for those who are active in Russia, an era of great uncertainty begins …”
“The Russian attack on Ukraine has shocked us,” said Oliver Hermes, head of the German Economic Committee for Eastern Europe. “This is an unjustified attack on an independent country, its citizens, peace in Europe and in the world as a whole. There will only be losers in this war …” The Commission calls on Russian President Vladimir Putin to end hostilities and return to the negotiating table. At the same time, Hermes appeals to “our many friends and partners in Russia: Raise your voice, help end this war.” Hermes points out that for the past 70 years German companies have been making relentless efforts to build and maintain trade relations with Eastern Europe. According to Hermes, “they had taken on the role of bridge builder, contributing to the efforts for political and social reconciliation in the region. Many times the partners became friends.”
The Russian attack was also condemned by the German Association of Mechanical Equipment Companies (VDMA). “The association and its members are appalled that Russia is starting a war in Europe,” said VDMA President Karl Heusgen, adding that the association supported the decision to impose sanctions on the aggression. According to the German central bank, German companies have so far invested 24 billion euros in Russia and employ almost 280,000 people in that country.
Businesses are closing, activities are suspended
The logistics company HHLA, which since 2001 maintains its own terminal in the port of Odessa, is currently suspending its activities. All 480 employees in Ukraine are safe, says a company spokesman. The commercial giant Metro, which has 93 stores in Russia with a total turnover of 2.4 billion euros, announced that it feels a special responsibility “for its 10,000 employees and 2.5 million customers” in the country. But also in neighboring Ukraine, the Metro group has 26 stores with an annual turnover of up to 800 million euros. Construction company Knauf, which employs 589 people in the Donbas area, is closing its plant for “precautionary reasons”, it said.
German insurance company Allianz has announced that it has stopped trading in Russian bonds for several weeks and now has a very small portfolio of Russian government bonds. A spokesman for Deutsche Bank told Reuters that the largest German bank was “deeply concerned” about the attack on an independent country, but also about the fact that borders in Europe were being challenged. while at the same time he states that “he will certainly respect the political decisions on sanctions”. However, since 2015 Deutsche Bank has significantly reduced its activities in the Russian market.
Deutsche Telekom is moving
Deutsche Telekom has a software unit in St. Petersburg, Russia with 2,000 employees, mainly affiliated with T-Systems, a subsidiary of the Telekom fiber optic group. “Employee care is paramount,” said Tim Hetges, president of the group. Among other things, the company is considering the issuance of visas, but also the transfer of business activities to other areas. “I hope that there will be a de-escalation, we are monitoring the situation very closely,” said Ola Kelenius, head of Mercedes-Benz, which maintains a car plant near Moscow. “For us, the safety of the people precedes, the professional follows.”
In general, many companies seem to be reconsidering their activities in Russia. As of 2011, almost half of the 6,300 German companies that had entered the Russian market have now withdrawn. There remain 3,651 companies, which in 2019 had more than 277,000 employees. In Germany, on the other hand, 164 Russian companies have been registered with 8,100 employees and a turnover of 31.8 billion euros.
What attracts German companies to the Russian market? According to DIHK estimates, Russia has great needs for the modernization of its economy, while Made in Germany has an excellent reputation in the country. In addition, the Russian market promises relatively high profit margins. but also the expanded market of 180 million consumers in the Eurasian Economic Area (EAWU) is an advantage.
As for Ukraine, it remains the smallest trading partner. In 2019, German investments in the country did not exceed 3.6 billion euros. Today there are about 2,000 companies with German participation. After a difficult period, due to a pandemic, trade relations between the two countries are developing again. In 2021, German exports increased by 17.2% to 5.4 billion euros, while German imports from Ukraine increased by an even higher percentage, by 22.9%, to reach 3.1 billion euros. The total trade volume now reaches 8.5 billion euros and is an increase of 20% compared to 2020. This means that Ukraine ranks 41st among Germany’s largest trading partners.
DW – Giannis Papadimitriou
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