SHARE
COPY LINK

RUSSIA

Cheap oil and sanctions slash Russia trade by 1/3

Leading German companies have lost almost a third of their business with Russia as Moscow's economy struggles with harsh headwinds and sanctions continue to bite.

Cheap oil and sanctions slash Russia trade by 1/3
Happier times: celebrations at Volkswagen's factory in Kaluga, Russia as the 700,000th car rolls off the production line in 2013. Photo: DPA

A study by management consultancy EAC found that 20 firms from the DAX stock market index of Germany's biggest companies had done just €15 billion of business with Russia so far in 2015, compared with €19 billion in 2014 and €22 billion in 2013.

EAC partner Dietmar Kusch told The Local that while the survey only covered 20 of Germany's biggest companies, the analysts believe it is representative of the overall impact of Russia's economic woes on Germany.

“Of course, the German Mittelstand [small- and medium-sized companies] makes up almost two-thirds of the economy. But I think they will have experienced the same thing as the largest companies,” Kusch said.

He pointed out that many smaller companies are suppliers to the biggest ones, such as the car makers, and would therefore have suffered knock-on effects.

Germany's top-performing companies in business with Russia over the past year have been car makers Volkswagen, Daimler and BMW, as well as engineering and high-tech company Siemens, energy supplier Eon and chemical manufacturer BASF.

But EAC expects business to stagnate over the coming year, with a slow recovery only appearing in 2017 onwards.

Particularly hard hit have been German machine tool and medical technology exporters, which used to make up around 50 percent of exports to Russia.

Despite the tough climate, some German companies like Eon, Deutsche Post and Henkel – a home cleaning, cosmetics and adhesives giant – continued to make above-average profits in Russia.

The top German companies in Russia tended to be those operating factories or offering services in the country.

Adidas and Henkel made seven percent of their annual turnover in Russia in 2014.

Sanctions not whole story

Russia has suffered particularly harshly through the 2014 oil price crash when the value of a barrel of oil halved, and has stagnated at a price of $40-45 (€37 – €42) since.

“Russia is very dependent on how the oil price develops,” Kusch said. “It's at a historic low and is dragging the whole Russian economy down.

“There's no indication of recovery in the oil market, and no clear driver for economic recovery in Russia.”

Moscow has also been forced to devalue the ruble as it battles with its economic woes.

Salaries and investment have both fallen with the economy, leaving order books empty for German companies selling to Russia.

Cancelled projects and hard times

The EU imposed sanctions over Russia's illegal annexation of Crimea from Ukraine in March 2014, and is currently targeting 149 people and 37 business entities.

In response, Russia levelled its own sanctions at the EU, hitting parts of Germany – especially the north – hard.

A survey by the German-Russian Chamber of Commerce in January found that dozens of companies were cancelling projects after the sanctions came into effect.

Kusch said that western sanctions had had a harsher impact on the German economy than the Russians' retaliation.

Neither the German-Russian Chamber of Commerce nor the Russian embassy in Berlin would comment on the EAC study when contacted by The Local.

With DPA

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

RUSSIA

Germany arrests Russian scientist for spying for Moscow

German police arrested a Russian scientist working at an unidentified university, accusing him of spying for Moscow, prosecutors said on Monday, in a case that risks further inflaming bilateral tensions.

Germany arrests Russian scientist for spying for Moscow
Vladimir Putin. Photo: dpa/AP | Patrick Semansky

Federal prosecutors said in a statement that the suspect, identified only as Ilnur N., had been taken into custody on Friday on suspicion of “working for a Russian secret service since early October 2020 at the latest”.

Ilnur N. was employed until the time of his arrest as a research assistant for a natural sciences and technology department at the unnamed German university.

German investigators believe he met at least three times with a member of Russian intelligence between October 2020 and this month. On two occasions he allegedly “passed on information from the university’s domain”.

He is suspected of accepting cash in exchange for his services.

German authorities searched his home and workplace in the course of the arrest.

The suspect appeared before a judge on Saturday who remanded him in custody.

‘Completely unacceptable’

Neither the German nor the Russian government made any immediate comment on the case.

However Moscow is at loggerheads with a number of Western capitals after a Russian troop build-up on Ukraine’s borders and a series of espionage scandals that have resulted in diplomatic expulsions.

Italy this month said it had created a national cybersecurity agency following warnings by Prime Minister Mario Draghi that Europe needed to
protect itself from Russian “interference”. 

The move came after an Italian navy captain was caught red-handed by police while selling confidential military documents leaked from his computer to a Russian embassy official.

READ ALSO:

The leaders of nine eastern European nations last month condemned what they termed Russian “aggressive acts” citing operations in Ukraine and “sabotage” allegedly targeted at the Czech Republic.

Several central and eastern European countries have expelled Russian diplomats in solidarity with Prague but Russia has branded accusations of its involvement as “absurd” and responded with tit-for-tat expulsions.

The latest espionage case also comes at a time of highly strained relations between Russia and Germany on a number of fronts including the ongoing detention of Kremlin critic Alexei Navalny, who received treatment in Berlin after a near-fatal poisoning.

Chancellor Angela Merkel’s government has moreover worked to maintain a sanctions regime over Moscow’s annexation of the Crimean peninsula, the scene of ongoing fighting between pro-Russia separatists and local forces.

And Germany has repeatedly accused Russia of cyberattacks on its soil.

The most high-profile incident blamed on Russian hackers to date was a cyberattack in 2015 that completely paralysed the computer network of the Bundestag lower house of parliament, forcing the entire institution offline for days while it was fixed.

German prosecutors in February filed espionage charges against a German man suspected of having passed the floor plans of parliament to Russian secret services in 2017.

Foreign Minister Heiko Maas last week said Germany was expecting to be the target of Russian disinformation in the run-up to its general election in September, calling it “completely unacceptable”.

Russia denies being behind such activities.

Despite international criticism, Berlin has forged ahead with plans to finish the Nord Stream 2 pipeline, set to double natural gas supplies from Russia to Germany.

SHOW COMMENTS