The German business returned to Russia

The main business of the EU flocked to Russia in the hope for a speedy recovery of the Russian economy.

The way businessmen and politicians in Germany and then parted again. At that time, as politicians warned the Kremlin about the possibility of introducing new sanctions, businessmen, without advertising their actions, increase investment in the Russian economy. The last two years, economic cooperation between the West and Russia should admit failure. Western businessmen in the vast majority on their own or under the action taken by the governments of Western countries sanctions have left Russia. Now the situation, says the Wall Street Journal, has changed dramatically.

All this is reminiscent of recent Exodus in the reverse direction, albeit not as big as in 2014-15. The head of it just as before, a German company. It should be borne in mind that we are talking about the whole business of Germany, ranging from the type of giants Daimler AG and Henkel AG and ending with, perhaps, little known outside of Germany companies and enterprises.

«For investment in Russia are now very strong economic reasons and grounds»,- said Oliver Hermes, CEO of Wilo SE. This family-run German company has opened in Moscow this year the factory for production of pumps costing 35 million euros.

Direct investments of German companies in Russia increased in the first nine months of 2016 to 2.05 billion euros. This is more than in the entire previous year, not to mention 2014, when the German business, according to Deutsche Bank, in a mass order the withdrawal of assets from Russia.

Reasons to return to Russia enough. This and a weak ruble, which, according to German businessmen, labor costs in Russia are now cheaper than even in China. This and the various attempts of the Kremlin to «lure» the German business back to Russia.

For example, the Medvedev government offers to foreign companies to sign a Special investment contract in which they undertake to invest in the Russian economy not less than 750 million roubles (11 million euros). This will allow them to have the same status as Russian firms, i.e., will give the right to qualify for government contracts and tax breaks.

The first such contract was signed in June, the German company CLAAS KGaA, specializing in the manufacture of machinery and equipment for agriculture. Despite the fact that its sales in Russia after 2014 decreased by 40%, she built last year a new factory worth 120 million euros. For CLAAS’s largest investment outside the borders of Germany for the entire history of its existence.

CLAAS expected in 2017 sales growth in agricultural equipment and machinery. Next year the capacity of the new plant is planned to increase twice.

German businessmen also hope for a warming of political relations between Russia and the West after the election Donald trump, has repeatedly promised to improve relations with Moscow. Siemens, for example, in November said he was ready for the full restoration of the former relations with Russia in case of improvement of relations between politicians. According to Director of Siemens AG Joe Kesara, his company would help «the country (Russia) to restore the economy,» i.e., to upgrade obsolete infrastructure.

German companies long-standing relationship with first the tsarist, then Soviet Russia. So he despite the worsening relations between Angela Merkel and Vladimir Putin left the Russian Federation is not fully. It is enough to recall the dissatisfaction in Berlin caused by the visit of Joe Casera to Moscow in the beginning of the crisis in Ukraine in 2014.

Some German firms are thinking now about the construction of new factories in Russia, others have decided to finish already started and frozen after the imposition of sanctions against Moscow projects. By the way, in Brussels say that in January, when the deadline for the sanctions, they will be extended for another six months. To Ukraine with Crimea now added Syria, which Russia, according to the West, are contrary to international law. However, in relation to the attack on Aleppo European leaders to punish Moscow is still undecided. At least, not yet decided on specific sanctions.

Despite the improvement of conditions for doing business access to financing for foreign companies in Russia, says the WSJ, is still hampered. Foreign businessmen often also complain of unfair competition from the Russian colleagues.

«In addition to the bureaucracy that companies have to face strong pressure,» says Matthias Schopp, head of the German-Russian chamber of Commerce AHK.

But despite all these obstacles the German business returned to Russia. Daimler AG, for example, is currently negotiating with the Russian government on the construction of a new factory. Volkswagen AG began to produce sports Tiguan in Kaluga. In 2013, the German automaker decided to redesign the automobile in this suburban town with the estimate of 1.2 billion euros. Henkel AG opened in June a new factory for the production of detergents in Perm. The project cost is estimated at 30 million euros.

According to AHK survey in October, 22% of companies with German capital are planning to significantly increase investment in the Russian economy in the coming year.

Of course, Russia is not only the German business. Total foreign direct investment in the Russian economy in the second quarter of this year, according to the Central Bank, made up of 7.12 billion dollars. For comparison, in 2015 they amounted to 6.48 bn In the record year 2013 foreign direct investment in the Russian economy was 69,22 billion dollars, and in 2014 fell by two-thirds to 22.03 billion.

This year the amount of investments in Germany was only beaten by China. Chinese businessmen to invest, according to the Russian direct investment Fund of the Russian Federation, 35 new projects.



The German business returned to Russia 09.12.2016

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