BERLIN — When Peter Fenkl heard that Russia had invaded Ukraine, he said his first thoughts were not for the business his German company would lose in both countries, but for the fate of his employees in the region, who had been involved in years of business dealings. and shared get-togethers had become more than just colleagues.
“These are more than just business relationships, they’re real friendships,” said Mr. Fenkl, the president of the company, a maker of industrial fans. “We sat side by side in meetings, drank beer together.”
The family business, Ziehl-Abegg, has 4,300 employees and Mr. Fenkl recalled how the teams from Germany, Russia and Ukraine worked side by side, on business trips and at trade fairs where Ziehl-Abegg would show his wares.
Now all four of the company’s employees in Ukraine have taken up arms to defend their country. In Russia, where the company has a production facility and employs 30 people, business has ground to a halt.
Mr Fenkl said he had spoken to the manager of his company in Russia several times over the past week, trying to figure out how to proceed as the seriousness of the situation became clearer.
“Twice I called the colleague in Russia and he could not speak,” added Mr Fenkl. “He kept bursting into tears.”
German companies do much more business in Russia than any other country in the European Union. Last year they exported goods worth more than 26 billion euros ($28.4 billion) (Poland was second with 8 billion euros) and invested another 25 billion euros in operations there. This commitment to the Russian economy partly reflects an ethos embraced by the former West Germany emerging from World War II — that trade could bring peace and prevent Europe from entering another war.
Russia’s annexation of Crimea in 2014 and subsequent sanctions reduced the number of German companies investing in Russia by a third. Still, the figure was just under 4,000 companies in 2020, and many were confident that their presence could help anchor Russia in the democratic sphere.
On February 24, that belief was shattered, leaving businesses of all sizes wondering what to do next.
While some have decided to back off and have begun severing business ties, others are trying to stay on, some out of loyalty to their employees, despite Western sanctions that have created massive barriers to banking and cross-border transportation, and the collapse of the ruble. What remains for many companies is a deep sense of sadness, coupled with disillusionment.
Germany’s leading car manufacturers – BMW, Volkswagen† Mercedes-Benz and Daimler Truck – all announced last week that they were ceasing exports and production in Russia. Family businesses, including ZF Group, an auto parts manufacturer, and Haniel, which runs several independent companies in the country, are doing the same.
“While our options are limited, we can still make an impact,” Haniel CEO Thomas Schmidt said in a video statement, announcing that all business activities in Russia and Belarus would be halted and obligations dissolved. “I understand it’s difficult from a customer and supplier relationship perspective, but it’s more important that we get people on the streets to protest.”
That sentiment even comes from the German Eastern Business Association, a group of companies that has been cheerleading for decades for deeper economic ties with Moscow, even despite President Vladimir V. Putin’s increasingly anti-democratic actions. The group is celebrating its 70th anniversary this year and some of its members are said to have met the Russian president in Moscow last week. The journey was cut short after the invasion.
“We should call a shovel a shovel: it’s less about sanctions and their impact at the moment than about whether we will have significant economic relations with Russia in the future,” said Oliver Hermes, president of the business association. In 2014, the group had campaigned against severe economic penalties for Moscow, but this time it is different.
“The sooner the Russian government ends this war, the more of these relations can still be saved,” Hermes said. “There is no doubt that the German economy will support the sanctions imposed.”
Years ago, Martin Daller, the director of Seebacher, a manufacturer of special lighting controls, was not interested in investing in Russia. But it’s a huge, attractive market for the products developed by his family-owned company based in Bad-Tölz, and when a Russian manager left a rival company and approached him about setting up a Russian division, he decided to give it a shot. to give. attempt.
That was just before the outbreak of the coronavirus pandemic, but this year things picked up again. Then came the invasion.
The war between Russia and Ukraine and the world economy
“Now we are wondering what to do. Cut off contact and just let him go,” says Mr. Daller, whose company has an annual turnover of 2.5 million euros. “From a financial point of view, it wouldn’t be that dramatic for us. But he is the father of three children and the whole family depends on his job.”
It’s not just the smaller companies that face tough decisions.
Wintershall Dea, a German oil and gas company with a global portfolio of projects, canceled its annual corporate press conference to be held on February 25, the day after the invasion. Instead, the leaders issued a joint statement on March 2 expressing their concern about the war.
“We have been working in Russia for over 30 years. Many of our colleagues at our other locations also work with partners from Russia on a daily basis,” it said. “We have built many personal relationships – including in our joint ventures with Gazprom”, the Russian state energy giant.
“But the Russian war of aggression against Ukraine marks a turning point,” they said. “What’s happening now is shaking the foundations of our partnership.”
The company separately said it would halt payments to Russia and write off its $1 billion investment in the ill-fated Nord Stream 2 natural gas pipeline between Russia and Germany, which the government in Berlin had suspended on Feb. 22. received no income from its oil and gas operations in Russia, which accounted for nearly one-fifth of its operating profit in 2021.
Not every German company is withdrawing. Metro, a food wholesaler with 93 branches in Russia, where it had sales of €2.4 billion last year, said it had decided to continue its operations over concerns that withdrawal would disrupt the food supply to the population. “None of our 10,000 employees in Russia are personally responsible for the war in Ukraine,” the company said in a statement.
Metro said it also tried to operate some of its 26 stores in Ukraine, depending on the security situation, and supported efforts to provide for people forced to flee their homes.
Aside from the impact on companies that had invested in Russia, analysts predict that the wider German economy will be hurt by energy and food price hikes as a result of the war. Since the invasion, politicians have been calling on the public to see their sacrifices through a wider lens.
“My country, Germany, will be the country that will bear the brunt of the sanctions adopted by the European Union and the US,” said Emily Haber, German ambassador to the United States. said on Twitter† “We are ready to bear the burden. Freedom is priceless.”
