More German Capital Now Flowing Into Russia Than Before Sanctions
Imagine the volume of investments by now if sanctions never happened
Editor’s note: I wouldn’t get carried away with this news. A big net capital outflow is still a big problem for Russia, and German investments on the order of several billion per annum is not an immense number for either the Russian or the German economy. If anything that in 2018 and the first part of 2019 more investments are being made than before the 2014 sanctions shows what a lost opportunity for both economies they have been. If there is such appetite even with sanctions uncertainty imagine what could have been without — quite likely we’d be looking at even far higher numbers to the benefit of faster growth for both.
German businesses poured more than €1.7 billion into the Russian economy in the first three months of 2019, already exceeding half of last year’s highest-in-decade figures, the Russian-German Chamber of Commerce has revealed.
The volume of German companies’ investment in Russia is up by 33 percent –or €400 million– compared to the same period last year [which was already a record post-2008 year], the German trade lobby said. Results of the first quarter show that German investments in Russia may well, by the end of this year, break a more-than-ten-year record.
“Despite a weakening economic situation, German companies continue to trust in the Russian market and even invest against the trend,” chairman of the chamber Matthias Schepp said in a statement.
Last year’s total investments reached their highest since the 2008 financial crisis, exceeding earlier forecasts and standing at €3.2 billion. However, it was still short of the all-time high of the €7.8 billion reached in 2007.
Investments continued despite anti-Russian sanctions imposed by Washington and its allies although the restrictions cause much trouble for German firms doing business with Russia. More than 140 companies polled by the chamber said that their total sanctions-related losses had exceed €1 billion, the equivalent to what would amount to multi-billion damages for all German enterprises registered in Russia.
However, Western economic pressure has not stopped the growth of Russia-Germany trade turnover, which increased 8.4 percent and reached nearly €62 billion last year.
Moscow and Berlin are also involved in a large construction project, the Nord Stream 2 natural gas pipeline, set to be finished by the end of the year. The project has come under fierce criticism from Washington, which lobbies continuously for the sales of its own liquefied natural gas (LNG) to Europe. The US also threatened to sanction anyone involved in the Nord Stream 2 project, but Russia’s partners on the project –and Germany in particular– have repeatedly defended the pipeline as a way to meet Europe’s growing energy demand.