Dusseldorf The initial shock gives way to decisive action: the first companies are reacting to the Russian invasion of Ukraine. The British oil company Shell ends its cooperation with Gazprom, BP says goodbye to Russia and accepts high losses in return.
So far, however, the three companies have been the exception – most companies are still reluctant to take radical measures. Although the other German car manufacturers are coming under pressure from the suspension of BMW and Daimler Truck’s business in Russia, local vehicle production in Russia has so far continued. Mercedes-Benz manufactures models such as the E-Class business sedan near Moscow and invested around 250 million euros in setting up production in Russia in 2019.
Volkswagen wants to continue operating the factory in Kaluga with its 4,000 employees. “After all, we have a responsibility for our employees,” says the company. Nobody at Volkswagen knows today whether this will succeed in the long term. Kaluga purchases components from other European countries for car production. It is anything but certain that the existing supply chains can be maintained after the introduction of sanctions.
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Bayer has no plans to withdraw. The group has 1,800 employees in Russia and mainly sells medicines there. “We are doing everything we can to continue to give people in Ukraine, but also in Russia, access to our vital products,” said CEO Werner Baumann on Tuesday at the balance sheet press conference. Bayer makes less than two percent of its sales in Russia, a good 800 million euros. Financial transactions for businesses in the country have gone smoothly so far, despite sanctions on banks.
Compulsory exchange for rubles
It is questionable whether an engagement in Russia makes any economic sense at all any longer. The Central Bank of Russia is currently preparing a decree “on special economic measures in connection with unfriendly actions by the West”. As a result, Russia-based companies have to convert 80 percent of their export earnings into rubles. This applies retrospectively from the beginning of the year, as pointed out by the Russia experts at the major law firm Rödl & Partner.
Not only Russian companies are affected, but also foreign companies based in Russia that export from Russia. In addition, these so-called tax residents are no longer allowed to transfer foreign currency abroad. According to central bank planning, this also applies to the transfer of dividends and profits.
But many companies still consider their Russian business to be too important in view of the high investments to say goodbye within a week. Continental does not yet want to make any statement about the continued existence of the Russian business. The automotive supplier produces tachographs for the Russian market in a joint venture with Mettem-MLLC. The Dax group holds 75 percent of the joint venture.
Henkel is strongly represented in Russia from the ranks of the Dax companies. The Persil manufacturer employs 2,500 people at eleven production sites and makes almost five percent of its group sales in the country. According to a spokeswoman, the group intends to hold on to its Russian business: “The focus of our business in Russia is on products that play an important role in people’s daily needs, such as cleaning or hygiene articles.” “who have no responsibility for the current situation and who depend on their work with us”.
Uncertainty at Stada
After the announcements by BP and Shell, the German energy companies are under particular pressure. However, Eon wants to maintain its stake in the first Baltic Sea pipeline, Nord Stream 1. Uniper is sticking with the financing of Nord Stream 2, as is Wintershall Dea. The oil and gas producer is considered the most important German partner of the Russian state-owned company Gazprom and has a 50 percent stake in the Achimgaz joint venture, which produces gas in Siberia. So far, however, the board has left it with a “careful analysis” of the situation.
The uncertainty at Stada is great. With a sales share of around 15 percent, around 450 million euros, Russia is an important foreign market for the generics manufacturer. Stada employs around 2,100 people there, and another 440 in Ukraine. “The most important thing for us now is the safety of our employees. We are in close contact with our Ukrainian colleagues who, according to our current information, are healthy.”
Bionorica, a manufacturer of herbal medicines in the Upper Palatinate, has generated around a third of its total sales of around 300 million euros in Russia in recent years. The medium-sized company has not yet found a strategy for how to proceed. Apart from the fact that “the situation is confusing at the moment and we have to wait for further developments”, the healthcare company does not want to say anything further.
With an annual turnover of 2.4 billion euros, Russia is the third largest foreign market for the retail group Metro. The wholesaler operates 93 stores in the country and generates almost a tenth of the group’s sales there. Metro felt there as a “domestic company”, confirmed the Düsseldorf.
Claas sticks to activities
The Globus supermarket chain generates almost 15 percent of its total sales in 19 branches in Russia. The company initially wants to hold on to the business, which is currently stable – the Globus Russia division has been organizationally and financially independent of the German mother for years, explains Matthias Bruch, spokesman for the Globus management. “Therefore, even if political relations deteriorate, business operations can safely continue.”
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Agricultural machinery manufacturer Claas also intends to stick to its activities. Over the past five years, the company has quadrupled production using combines in Krasnodar. It was not until 2021 that Claas invested again in the plant that went into operation in 2005. The number of employees was increased to 800. Overall, the investments in the southern Russian location add up to almost 150 million euros.
However, companies like Claas that continue to expand their commitment are the exception rather than the rule. Since the first Ukraine conflict eight years ago, the presence has been falling continuously: in 2021 the number of German companies fell by eight percent compared to the previous year. According to the knowledge of the German-Russian Chamber of Commerce Abroad, 3651 companies with German capital are registered in Russia. This is based on data from the Russian tax authorities. In 2011 there were still 6,300 German companies in the country.
Net investments also fell accordingly: According to the Bundesbank, the German economy invested almost three and a half billion euros in Russia in 2018, in 2019 it was two billion and in the first three quarters of 2021 a good 1.3 billion euros.
Collaboration: M. Brüggmann, B. Fröndhoff, A. Höpner, F. Hubik, F. Kolf, S. Menzel, R. Tyborski, K. Witsch
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