Personal calls between German and Russian companies become a problem

When Peter Fenkl heard that Russia had invaded Ukraine, he said the first thing he thought of was not the business his German company could lose in both countries, but the employees he has in the region who have become more than colleagues. over years of transactions and shared drinks.

“They were more than business relationships, they became real friendships,” said Fenkl, chief executive of a company that makes industrial fans. “We’d go to meetings together, go out for beer.”

The family business he runs, Ziehl-Abegg, has 4,300 employees, and Fenkl recalls how teams from Germany, Russia and Ukraine worked side by side on business trips and visits to trade fairs where Ziehl-Abegg showcased its products. .

Now, the company’s four employees in Ukraine have been summoned to defend their country. In Russia, where the company has a production facility and employs 30 people, business has come to a complete halt.

Fenkl said he had spoken with the company’s manager in Russia several times over the past seven days, trying to figure out how to proceed as the gravity of the situation became clearer.

“I called my colleague in Russia twice and he couldn’t speak,” Fenkl said. “I burst into tears”.

German companies do far more business in Russia than any other EU country, exporting goods that exceeded €26 billion last year (Poland ranks second on the list with €8 billion). euros) and invested 25 billion euros in operations there. This involvement in the Russian economy reflects, in part, the spirit adopted by former West Germany when World War II ended – that trade would ensure peace and prevent Europe from descending into a new war.

Russia’s annexation of Crimea in 2014 and the sanctions that followed caused a one-third drop in the number of German companies investing in Russia. But still, the total reached almost 4,000 companies in 2020, and many of them were convinced that their presence there would help to anchor Russia in the democratic sphere.

On February 24, that conviction was shattered, prompting companies of all sizes to start trying to figure out what to do next.

While some have announced their decision to leave Russia and have begun to sever their business connections with the country, others are trying to continue, some out of loyalty to their employees, despite Western sanctions that have raised huge obstacles to banking and international shipping, and the collapse of the ruble. What is left for many companies is a deep sense of sadness, coupled with some disillusionment.

Germany’s main automakers – BMW, Volkswagen, Mercedes-Benz and Daimler Truck – all announced that they would suspend their exports and production in Russia. Family-owned companies like ZF Grupo, an auto parts maker, and Haniel, which runs several independent companies in the country, are doing the same.

“While our options are limited, we can still have an impact,” said Thomas Schmidt, Haniel’s chief executive, in a video statement, announcing that all business activities in Russia and Belarus would be suspended and that all of the company’s commitments to those countries would be cancelled. “I understand that it is difficult from the point of view of the relationship between customer and supplier, but the most important thing is to put people on the streets, protesting”.

That sentiment is present even in the East German Business Association, a group of companies that for decades has advocated deepening economic ties with Moscow, even in the face of Russian President Vladimir Putin’s increasingly undemocratic actions. The organization is celebrating its 70th anniversary this year and several of its members were scheduled to meet with Putin last week in Moscow. The trip was canceled after the invasion.

“We must define things for what they really are. Today the issue is less about sanctions and their consequences and more about whether we will have a meaningful economic relationship with Russia in the future,” said Oliver Hermes, who chairs the organization. In 2014, she campaigned against harsh economic punishments against Moscow, but this time her stance is different.

“The sooner the Russian government stops this war, the more we can save from this relationship,” Hermes said. “There is no question that the German economy will support the sanctions imposed.”

The German oil and natural gas group Wintershall Dea, which has projects around the world, canceled the company’s annual press conference that would have taken place on February 25, the day after the invasion. Instead, its leaders issued a joint statement on Wednesday expressing alarm at the war.

“We have worked in Russia for over 30 years. Many of our colleagues in other locations also work with Russian partners on a day-to-day basis,” the statement said. “We’ve built a lot of personal relationships — which includes our joint ventures with Gazprom,” the Russian state energy giant.

“But Russia’s war of aggression against Ukraine represents a turning point,” they said. “What is happening now shakes the foundations of our cooperation.”

The company also announced that it would suspend its payments to Russia and classify its €1 billion investment in the ill-fated Nord Stream 2 pipeline, which would connect Russia with Germany and whose construction the German government suspended on February 22, as a loss. The company will also not receive revenue from its oil and natural gas operations in Russia, which accounted for nearly a fifth of its 2021 profit.

Not all German companies are leaving. Metro, a food wholesaler that operates 93 stores in Russia, where it had 2.4 billion euros in revenue last year, announced that it had decided to keep operations out of concern over the possibility of that suspending them would harm the food supply for the population. “None of our 10,000 employees in Russia is personally responsible for the war in Ukraine,” the company announced in a statement.

Translation by Paulo Migliacci