It’s not easy to throw us off balance
The German economy believes in Russia, but… This “but” was the main focal point of the meeting with journalists held by the leadership of the German-Russian Chamber of Commerce. The meeting covered another survey regarding the business climate in Russia in the second half of 2019.
141 German companies took part in the survey, including engineering enterprises, consulting companies, enterprises from the construction industry, transportation and logistics companies, wholesale and retail companies, as well as electronics manufacturers and automotive industry representatives. The companies surveyed in Russia employ nearly 112,000 people. The German-Russian Chamber of Commerce has 900 member companies and is the only foreign business association whose membership has grown over the past two years – an increase that amounted to 10%.
So what do the survey results tell us? According to the Chamber’s President Rainer Seele and Chairman Matthias Schepp, German business is growing in Russia in spite of the weakened economy and sanctions.
According to the Chamber’s survey results, the US sanctions cost German companies billions of euros. Specifically, the survey participants estimated that their losses amount to 1.1 billion euros. “German companies are becoming the targets of the ever-more arbitrary US sanctions openly aimed at promoting US economic interests,” the President of the German-Russian Chamber of Commerce Rainer Seele pointed out, “These kinds of sanctions are counterproductive, they don’t accomplish their political goals, drive a wedge between the US and Europe, and damage all sides in the long term.” This is why the Chamber’s president is calling “to drop at least the EU sanctions against Russia as soon as possible.”
The press-conference participants explained the main difference between European and US sanctions. The EU sanctions are clear, and there is at least an understanding of how to navigate them. But the main feature of Washington’s sanctions is that they’re endless. New sanctions keep coming out of the US, which creates instability and irritates business people who work with Russia. Moreover, the US sanctions aren’t put in place by the President, but rather by the congress. Their main goal is not to punish Russia, but to “bring it to its knees.” This is why the US sanctions will go on for a long time.
However, in spite of all the negativity, German companies working in Russia have demonstrated good results in terms of both turnover and profit. According to the survey, 39% of companies plan to invest in Russia in the near future. 29% plan to expand their business in spite of the US sanctions, 63% don’t plan on revising their strategy, and just 8% plan to cut back on business activities.
“It’s not easy to throw German business off balance, especially family-run enterprises and SMEs. Like big companies, they pay attention to the long-term opportunities of the Russian market’s stable growth and potential,” the Chamber’s President Rainer Seele says. According to Bundesbank, direct German investments in Russia, or the difference between the inflow and outflow of German capital, reached almost 3.2 billion euros in 2018 – a record number for the decade.
In the document presented at the latest annual conference on Russia, which was held in February at the German Chamber of Commerce and Industry (DIHK) in Berlin, the German-Russian Chamber of Commerce supports the Nord Stream 2 project. According to the survey, 93% of German-Russian Chamber of Commerce members are in favor of completing the construction of the second line of the gas pipeline along the bottom of the Baltic Sea as soon as possible. 7% of the companies surveyed are participating in the construction directly or as suppliers.
German companies also advocate for a deeper and more multifaceted dialogue between the European Union (EU) and the Eurasian Economic Union (EAEU), which, aside from Russia, also includes Belarus, Kazakhstan, Armenia, and Kyrgyzstan. Almost three quarters of respondents support cooperation on the issues of technical regulation, certification, customs clearance, and visa facilitation. Over 80% of respondents supported the idea of a free trade zone from Lisbon to Vladivostok. “For politicians, the free trade zone from Lisbon to Vladivostok may seem like a matter of the distant future, but for businesses this is an obvious option that we are starting to work on today,” said Rainer Seele.
German plant invests 100 million to expand manufacturing in Moscow
A couple of weeks after the numbers from the survey on business climate in Russia were released, the German-Russian Chamber of Commerce announced some news that further confirmed the results. The German flavor and fragrance manufacturer Symrise expanded manufacturing at its plant in Rogovo. The company invested about 100 million rubles (1.3 million euros) into a new line of liquid fragrances.
Symrise, the leading producer of flavors and fragrances for business customers, has launched a new line for manufacturing flavors to be used in dairy products, drinks, and confectionery. Prior to this, the company only manufactured dry flavoring for culinary products and snacks. The total production volume of the new line will amount to 100-4,000 kg daily, or about 1,800 tons a year.
Dirk Bennewitz, Vice President of Symrise, shared the enterprise’s strategic plans: “Symrise’s global turnover is over 3 billion euros. In the next few years, we plan to double this figure, and the Russian plant will play a key role in implementing these plans,’ Bennewitz said during the opening ceremony.
“‘Made in Russia, for Russia’ is our motto. The new manufacturing line will bring us closer to our Russian clients and enable us to provide a faster, better quality service,” said Stephan Schulte, General Manager at Symrise in Russia.
The company invested 100 million rubles (over 1.3 million euros) into the new production line. Symrise’s total investments into the enterprise, which opened in 2011, total over 12 million euros. In 2018, the company’s turnover amounted to almost 50 million euros. Symrise currently employs 127 people.
Symrise has been on the Russian market for over 25 years, and in 2010 the company built a plant in Rogovo (Podolsk Urban Okrug, Moscow Oblast). The plant specializes in the manufacturing and sales of flavors and fragrances for leading Russian and foreign food industry market players. Aside from food flavors, the company also manufactures fragrances for cosmetics and household cleaners. The average German consumer uses the company’s products 40 times a day.