• Germany's news in English
 
app_header_v3
German firms hurting over Russia sanctions
Braking point for Russian car ventures? The BMW plant in Kaliningrad. Photo: DPA

German firms hurting over Russia sanctions

The Local · 2 Jan 2015, 08:00

Published: 02 Jan 2015 08:00 GMT+01:00

Thirty-six percent of 200 firms polled in December by the German-Russian Chamber of Commerce expected to cancel projects due to the situation in Russia.

And 58 percent said they had been hurt by the sanctions, which began in March after Moscow's annexation of Crimea and grew in response to Moscow's support for pro-Russia rebels in eastern Ukraine.

The biggest reverse shift so far for German business in Russia came last week when chemical giant BASF cancelled a deal with Russian energy giant Gazprom involving natural gas extraction and distribution.

Car makers Opel and Volkswagen are also among those now freezing, scaling back or closing Russia operations, including laying off Russian staff.

But the number of firms abandoning the country altogether is still only about three percent of the total, the chamber notes.

"Despite sharp changes to market conditions German enterprises are standing firmly by the Russian market," the chamber's president, Rainer Seele, said on December 18 in a week that saw the ruble fall by almost 20 percent against the dollar.

Since 1992 more than 6,000 German companies set up operations in Russia, which became a major customer for German cars, pharmaceuticals and machinery. Germany is Russia's third biggest foreign trade partner after China and the Netherlands.

'Sanctions won't bring security' 

But opinion remains heavily divided abroad and even within governments about the effectiveness of economic sanctions against Russia.

On the eve of last week's EU summit in Brussels, Chancellor Angela Merkel said sanctions would remain in place as long as Russia continued to violate principles of international law and respect.

Conversely, Frank-Walther Steinmeier, the Social Democrat (SPD) foreign minister in Germany's grand coalition government, warned that inflicting lasting damage to the Russian economy can carry a backlash.

“Anyone who believes that forcing Russia economically to its knees will lead to more security in Europe is very much mistaken,” Steinmeier told Spiegel magazine this month.

SPD chief Sigmar Gabriel has also spoken emphatically against intensifying sanctions against Russia.

And as the falling oil price also threatens Russia with a steep recession in 2015, knock-on negative effects are also likely for Germany's economy.

Story continues below…

Ten percent of all German companies export to Russia, but overall exports in October fell by 22 percent.

Car trouble and more

Including other companies like BMW, Mercedes and the Cologne-based Ford of Europe, German automakers stand to lose 15 billion euros in Russian sales and €600 million in profit through 2017, Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, told the New York Times.

German retailer Metro has also postponed a listing of its Russian unit on the London stock exchange.

The blue chip health care company Fresenius last month cancelled a planned pharmaceutical joint venture with a Russian partner citing “changing political and regulatory circumstances”.

Forty-one percent of German companies in Russia have slowed investment there, while 36 percent said they would cancel projects unless conditions improved. Another 28 percent said they planned to lay off Russian workers.

Meanwhile, some Russian companies are also rethinking their relations with European partners amid the geopolitical.
 
As relations with the West deteriorate, some ten percent of German companies' time-tested Russian partners are reorienting to Asiatic market, the president of the Association of German Chambers of Commerce and Industry (DIHK), Volker Treier, told Bild newspaper on Sunday.
 

For more news from Germany, join us on Facebook and Twitter.

The Local (news@thelocal.de)

Your comments about this article

Today's headlines
Trabi totalled on Autobahn after skidding on snail slime
Photo: Paderborn police

A vintage East German "Trabi" car has come unstuck after its driver hit a snail trail on the Autobahn.

Munich 'to spend extra €2.2m' on Oktoberfest security
Oktoberfest in Munich, 2014. Photo: DPA.

After terror attacks in Paris, Brussels and most recently Istanbul, Munich could spend nearly €3 million more on security and other measures - but terrorism isn't the only concern: the biggest fear is overcrowding.

The Local List
Six ways to make this Munich summer one to remember
The Kocherlball in the English Garden. Photo: DPA

At a loss for what to do with the warm months in Munich this year? These six attractions have to go on your summer bucket list.

Brexit vote
Germans rally on Twitter to show love for UK
Photo: DPA

Twitter was swamped with tributes after Germany's largest liberal newspaper asked readers to show some love for Britain despite its vote to leave the EU.

German kidnaps Swiss child, raising online gaming fears
File photo: Rachel Johnson / Flickr Creative Commons.

A 12-year-old Swiss boy was allegedly abused by a German man he first met online.

'Hero' refugee hands in €150,000 he found in wardrobe
Muhannad and the secondhand wardrobe. Photo: Minden Police.

A refugee from Syria found a huge stash of money in a secondhand wardrobe he bought. But keeping it for himself would have been a betrayal of his religion, he said.

Istanbul airport bombing
Flights from Berlin to Istanbul cancelled after terror attack
Turkish police block the road after an suicide bomb attack at Atatürk Airport in Istanbul. Photo: EPA.

All flights from Berlin's Tegel airport to Istanbul have been cancelled after a suicide bomb attack killed at least 36 people in the city's major airport.

German extremist groups 'getting bigger, more brutal'
A violent demo in Frankfurt in 2015. Photo: DPA

Political extremism rose sharply in Germany last year - among far-right but also far-left and Islamist radical groups - the domestic intelligence agency said Tuesday.

Berlin puts spies on tighter leash after NSA scandal
An installation of the BND in Bavaria. Photo: DPA

Germany on Tuesday approved new measures to rein in the activities of its foreign intelligence agency after a scandal over improper collusion with the US National Security Agency.

Brexit vote
There's no way back for Britain, says 'sad' Merkel
Angela Merkel (r) and David Cameron in Brussels. Photo: DPA

Chancellor Angela Merkel said at the EU summit in Brussels late on Tuesday that she didn't see any way that the British decision to leave the EU could be reversed.

Sponsored Article
Avoid hidden fees when sending money overseas
National
How to get German citizenship (or just stay forever)
Sponsored Article
Why you should attend an international job fair
Technology
Brexit will turn Berlin into 'Europe’s startup capital'
International
'Germany needs to make UK come to its senses'
Sponsored Article
Education abroad: How to find an international school
Features
Six odd things Germans do in the summer
Sponsored Article
Health insurance for expats in Germany: a quick guide
Travel
These 10 little-known German towns are a must see
Features
How two gay dads cut through German red tape to start a family
National
Five things to know about guns in Germany
Sponsored Article
US expats: Taxes are due June 15th
Culture
10 things you need to know before attending a German wedding
National
Eight weird habits you'll pick up living in Germany
Lifestyle
Six reasons 'super-cool' Berlin isn't all it's cracked up to be
Society
Only one country likes getting naked on the beach more than Germany
Lifestyle
23 ridiculously fascinating things you never knew about Berlin
Culture
8 German words that perfectly sum up your 20s
Lifestyle
Can't make it past the door at Berlin's most famous club? Help is at hand
Business & Money
Why Frankfurt could steal London's crown as Europe's finance capital
Features
6 surprising things I learned about Germany while editing The Local
Culture
Five sure-fire ways to impress Germans with your manners
Features
6 reasons Germany's summer is unbeatable for thrill-seekers
National
The future belongs to these 10 German regions
7,924
jobs available
Toytown Germany
Germany's English-speaking crowd