German investments in Russia reach their highest level in the last decade

German investments in Russia reach their highest level in the last decade
German business investments into Russia topped €3bn in 2018, the highest level in a decade, although the number of German firms operating in Russia has fallen from over 6,000 to circa 4,500 in the same period
By bne IntelliNews April 15, 2019

Investments by German business into Russia reached their highest level in the last decade, topping €3bn, although the number of German firms operating in Russia has fallen from over 6,000 to circa 4,500 in the same period, according to the website of the Russian-German Chamber of Commerce (ECP).

German companies' investments into the Russian economy reached a record level since the 2008 financial crisis, an ECP press release reads.

The Bundesbank estimated German businesses' direct investment in Russia in 2018 at more than €1bn. "This figure amounted to €3.2bn, not €2.1bn, as reported in the preliminary results," states the report.

German businesses have been the most active investors into Russia since the fall of the Soviet Union, catalysed at first by former German chancellor Gerhard Schroeder, who was a big fan of Russia and has since remained close friends with Russian President Vladimir Putin and now works for Gazprom.

Since Angela Merkel took over as German Chancellor, relations have cooled somewhat – especially following Russia’s annexation of the Crimea in 2014 – but even Merkel is well aware of the importance of the Russian market to German business.

Most of Germany’s leading retail chains have set up in Russia, but in the last three five years some have started to withdraw, put off by stagnant real income growth and the cooling relations between Berlin and Moscow. The largest exit was the white goods retailer Media Markt’s decision to sell out to local rival M.Video, which has created the largest consumer electronics chain in Europe in a series of mergers.

Russia had also become increasingly attractive to Germany’s Mittelstand companies – firms with less than 40 employees and only a few million at best in revenues – that looked to Russia to expand. But as the environment became more toxic these firms have also been exiting.  

“The possibilities of the Russian market are discovered by German small and medium businesses. Companies that are well aware of the Russian market are not in a hurry to be afraid of sanctions and political problems,” chairman of the chamber Mattias Schepp said in a statement as cited by Vedomosti.

The volume of Russian-German trade in 2018 increased by 8.4% to €61.9bn. The volume of shipments from Germany to Russia compared with 2017 increased by 14.7% and amounted to about €36bn: the volume of deliveries from Russia to Germany were up by 0.6% to €25.9bn, according to the chamber.

According to the German regulator, net direct investments of German companies in Russia in 2017 amounted to more than €1.6bn.

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