Russia and Germany: How Russian is the East? The Russian sanctions and East Germany

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Hans-Ulrich Werner is the managing director of Maveg GmbH, a small, medium-sized company in Chemnitz, Saxony. Because his machine tools could also be used for military purposes, he is particularly affected by the EU sanctions against Russia: there is a strict export ban. Werner had laboriously boosted business in Russia for years: “This development work is gradually developing as a very delicate plant and at some point it bears its first fruits. And then come the sanctions. And then all this development work goes down the drain, which is partly in numbers can not express at all. ”

The Russia sanctions hit Saxony in particular

Many East German entrepreneurs feel like Hans Ulrich Werner. They suffer from the sanctions that the EU imposed on Russia after the annexation of Crimea. The sanctions have damaged the economy in eastern Germany significantly more than the companies in the west. The Russian business of the East German companies has since declined by almost 40 percent. Companies in Saxony were hit particularly hard: a decrease of almost 70 percent. And yet, economic experts are quite unanimous in their assessment that the Russian market no longer plays a decisive role for Germany.

Business in Russia only marginal in East Germany

“Russia is a trading partner in many German federal states. However, the importance for the economy as a whole is relatively minor”, says Oliver Holtemöller from the “Leibniz Institute for Economic Research” in Halle. “In terms of gross value added, that is, the total amount of goods produced in a region, business with Russia only accounts for half a percent to one percent.” According to Holtemöller, in addition to the overall low overall economic importance, it is particularly noticeable that between 2012 and 2013 exports from the new federal states to Russia had already decreased by more than six percent. The decline in exports to Russia therefore began before the sanctions were imposed. After that, the process just continued. “The Russians are a net oil exporter. What happens in the national budget in Russia depends on the oil price,” explains Oliver Holtemöller. “Just before we had the sanctions, there was a dramatic drop in oil prices. And you can see, even before the sanctions came into effect, there was a decline in exports to Russia because there was simply a lack of foreign exchange in Russia.”

Many East German companies are closer to Russia

The East German mechanical engineering companies suffer particularly from the sanctions due to their traditional proximity to Russia. You have little equity and cannot simply switch to other markets. Because they were no longer allowed to deliver their products to Russia, many of them got into existential difficulties, sometimes even bankruptcy. An example: IMO Leipzig GmbH. The company ran well until 2014. Orders came from all over Europe, but mainly from Russia. IMO Leipzig GmbH therefore even opened a branch in Saint Petersburg. However, the EU sanctions broke the neck of the medium-sized company, large orders were lost, and investors’ funds were frozen. In 2017 the company finally files for bankruptcy.

The USSR used to be the GDR’s most important trading partner

Criticism of the sanctions is expressed above all in eastern Germany. “They have led to a dead end,” stated Bodo Ramelow, Prime Minister of Thuringia, in 2019. “You didn’t help Ukraine, but you definitely harmed the new countries.” Some observers from the West attribute this criticism to the close ties between the “brother peoples” of the GDR and the USSR during the socialist era, which supposedly continue to this day. “In the past, and that has little to do with Ostalgie, Russia was of course our number one trading partner. Of the approximately 400 machines that were produced here each year, a good 90 percent went to the Soviet Union,” said Klaus Kräher in the summer of ” Deutschlandfunk “. Kräher is the managing director of the Chemnitz mechanical engineering company “Niles-Simmons”, which was called “Large Lathes May 8” during the GDR. “Today the world looks different. Today, with around 80 percent exports, we are still very active in foreign business. Russia is currently in third place.” Although not a single job was lost as a result of the sanctions, Kräher emphasizes, the workforce was initially unsettled and the management had to quickly look around for new sales markets.

“Nord Stream 2”

In connection with the Russia sanctions and the German Russia policy, the almost completed natural gas pipeline “Nord Stream 2” has become a bone of contention. Many politicians are calling for an end to the project, also because Germany is becoming too dependent on Russia. Manuela Schwesig, Prime Minister of Mecklenburg-Western Pomerania and an East German herself, is massively committed to the continuation and completion of the natural gas pipeline: “This is no small matter for the future of Germany. We need this pipeline for the energy supply. I did not notice that that someone wants to do without electricity and heat. ” The SPD politician doesn’t think much of sanctions against Russia either.

Lifting the sanctions on Russia?

Oliver Holtemöller does not expect any positive effect from an early lifting of the sanctions, however, with a view to the available economic data: “Of course there are individual companies that are very badly affected. They could benefit from using their old business relationships again But in macroeconomic terms one cannot assume that that would be a big push factor if the sanctions were lifted. ”

This year all-German trade with Russia fell by 24 percent to 22 billion euros, the “Eastern Committee of German Business” recently announced. Russia has fallen back to fourth place behind Poland, the Czech Republic and Hungary.

Trade between Germany and Russia in the future

Even after six years of sanctions against his country, Vladimir Putin is making no move to reverse the annexation of Crimea, for example. A noticeable change in views on this conflict is noticeable either in the Russian leadership or in society. On the contrary: on this issue, the majority of Russians are still almost unanimously behind their president.

Meanwhile, EU business representatives are trying to return to normal under the current political framework. Despite the sanctions, large German companies are still doing good business with Russia. In any case, only armaments are directly affected by the European sanctions against Russia. And many East German companies have now come to terms with the circumstances.

One and a half years ago, the “Eastern Committee of German Business” proposed a “New Agenda” for economic cooperation between Germany, the EU and Russia, which has lost none of its topicality. “We live in a century that will not be a European one, but an Asian one,” said Wolfgang Büchele, head of the “Eastern Committee” at the time. “We are all the more dependent on our Europeans to cooperate more closely with one another. Russia is an indispensable partner here.”



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