Who’s not afraid of sanctions
In 2018, German companies invested over three billion euros in Russia, hitting a new high since the 2008 financial crisis in terms of investment volumes.
The Russian-German Chamber of Commerce reported that, according to Bundesbank records, the volume of German companies investments into the Russian economy reached its peak since the financial crisis of 2008 in spite of the Western sanctions and Russian counter-sanctions. “Along with large-scale projects like Nord Stream 2, small and medium-sized business is also discovering the potential of the Russian market,” says Matthias Schepp, Chairman of the Board at Russian-German Chamber of Commerce. Among other factors, the ruble devaluation that occurred after 2014 contributed to making the Russian economy more attractive for investments.
Bundesbank summarized the 2018 results and adjusted net direct German investments in Russia by more than one billion euros. As a result, investment volumes actually amounted to 3.2 billion euros, rather than 2.1 billion euros, as was initially reported.
The only time this figure was higher was during the period between 2006 and 2008. Investment volumes were at their absolute highest in 2007 (7.4 billion euros). The reason investment volumes were so high that year was due to a major project by the German electric company E.On (now Uniper), which invested 4.6 billion euros into the Russian energy market.
Bundesbank also adjusted direct investment volumes in 2017 from 1.6 billion euros to 2.8 billion euros. Thus, German direct investment volumes in Russia grew by almost 14% compared to the previous year. “Companies that know the Russian market well aren’t afraid of sanctions or political problems,” says Matthias Schepp, Chairman of the Board at Russian-German Chamber of Commerce.
According to Schepp, business interest in Russian-German trade is also reflected in increased membership in the Russian-German Chamber of Commerce. The Russian-German Chamber of Commerce is the only foreign business association in Russia that has had a significant increase in membership over the past two years. The number of members has grown by 10% and now amounts to 900 companies.
Large-scale projects like the construction of the Nord Stream 2 pipeline under the Baltic Sea played a big role in terms of investment growth. Total investment volumes are estimated to be nine million euros. From the German side, two companies – Wintershall и Uniper, which allocated 950 million euros each for the project – took part in the project’s financing. Volkswagen has invested over half a billion euros in expanding production facilities in Kaluga and Nizhny Novgorod since 2014. In early April, Russian President Vladimir Putin and head of the German Federal Ministry of Economic Affairs and Energy Peter Altmaier attended the opening ceremony of a Mercedes-Benz plant outside of Moscow. Investment volumes for the plant amounted to over 250 million euros.
Russian-German trade volumes also increased by 8.4% in 2018, totaling 61.9 billion euros. Compared to the previous year, the volume of imports from Germany to Russia increased by 14.7% and amounted to about 36 billion euros. The volume of imports from Russia to Germany grew by 0.6% to 25.9 billion euros, according to estimates from the Federal Statistics Office of Germany.